Financing Presidential Electoral Campaign in Serbia 2004

Vladimir Goati Nemanja Nenadić Predrag Jovanović

FINANCING PRESIDENTIAL ELECTORAL CAMPAIGN IN SERBIA 2004

A blow to political corruption or preservation of status quo?

This book is a part of the project Promoting Democracy and Preventing Corruption implemented with the support from Westminster Foundation for Democracy. The stated views belong to the authors and do not necessarily present the opinions of Westminster Foundation for Democracy.

Transparency - Serbia, Belgrade 2004 Financing Presidential Electoral Campaign in Serbia 2004

A Blow to Political Corruption or Preservation of Status Quo?

Translators: Olivera Ristanović (Introductory notes, chapters 1,2) Nebojša Naumović (chapters 3,4,5) Transparency Serbia (tables and annexes)*

Publisher: Transparency Serbia 29. novembra 36/I Belgrade tel.: +381 11 303 38 27 fax: +381 11 322 81 96 [email protected] www.transparentnost.org.yu

For publisher: Branislav Miletić

Layout: Transparency Serbia, Belgrade

Printing: Arteast, Belgrade

Circulation: 200

ISBN: 86 - 84711-07 - 6

* Translation of some legal documents, presented in Documentation Annex was made by, or in consultation with OSCE Mission to Serbia and Montenegro - legal translation unit.

iii TABLE OF CONTENTS

List of abbreviations ...... ix

Introductory Notes ...... 1

Vladimir Goati Scope of research...... 5

Increase in election costs ...... 7 Financial violation and misuse...... 9 Reduced tolerance to corruption...... 11 Two periods...... 12 Period after 5 October...... 15 Subject and aim of research...... 17

Nemanja Nenadić Normative basis ...... 21

Review of the regulations on party financing in Serbia and of their application (1990-2003) ...... 21 Allocation of the budget funds...... 23 Financing sources outside the budget...... 24 Sanctions ...... 24

iii Process of adopting the Law from 2003...... 25 Innovations brought about by the Law from 2003...... 32 Financing sources limitations ...... 32 Amount and allocation of the funds from the budget ...... 33 Regulations on keeping records of income and expenditure ....35 Reporting, inspection and public ...... 36 Sanctions ...... 37 Increasing the scope of financing from the budget funds...... 37 Role of state organs in applying the law...... 38 Ministry of Finance...... 38 Assembly Finance Committee ...... 39 The Republic Electoral Commission ...... 40 Coordination ...... 41 Are the Finance Committee and the Republic Electoral Commission adequate bodies for the assigned tasks?...... 42 Approach in regulating presidential campaign financing...... 43 The manner in which the Law regulates the financing of the campaign for the election of the President of the Republic ...... 43 Financing from the budget General rules...... 44 Squandering a part of the budget funds...... 46 Conflict of rules on the funds allocated to the nominator of the winner ...... 46 Funds must initially be raised from private sources ...... 48 Special account for campaign financing ...... 49 Loan and deferred payment...... 50 Other public sources of financing ...... 52 Raising funds from private sources...... 54 Types of private sources ...... 54 Prohibited sources of financing are as follows...... 54 Private sources – ambiguities and possible misuse ...... 55 Membership dues...... 55 Income from promotional activities ...... 56

iv v Contributions ...... 58 Free work of party activists ...... 58 Who is allowed to give contribution?...... 60 Limitation on contribution amount to be given by one donor...... 61 Does the Law specify the limitation on expenditure? ...... 62 Limitations regarding the time of incurring the expenses ...... 63 Are there any limitations in terms of expenditure type? ...... 63 Narrower interpretation of campaign costs ...... 64 Keeping records and submitting reports...... 65 Accessibility of information on campaign costs...... 67 Report control ...... 67

Nemanja Nenadić Regulations And Life...... 69

The beginning of Law implementation – the obligations of political parties from January 2004...... 69 Reports on assets of political parties ...... 70 The adjustment of political party statutes...... 71 Presidential elections from June 2004 "The baptism of fire" of the new Law ...... 72 The confusion surrounding the interpretation of campaign financing regulations...... 72 Media and election campaign financing...... 78 Reports on nominators’ collected revenues and campaign expenses ...... 79 The filing of reports ...... 79 Adherence to correct form of the reports...... 80 Altering of report forms ...... 80 The seals of nominators and signatures of authorised persons ...... 80 The structure of expenses and submission of unsolicited information ...... 81

iv v Discrepancies between revenues and expenses pages ...... 82 The time of collection and spending of funds ...... 83 Abuse claims ...... 84 State expenses in elections...... 84 How did the nominators manage to cover their expenses?...... 85 Claims pertaining to violations of campaign financing regulations...... 86 Campaigns by organisations that are not taking part in the elections...... 87 Use of state resources ...... 88 The indicators of level of expenses ...... 89 Data on expenses in the reports ...... 90 Expenses for presentation of candidates in newspapers and on TV ...... 91 Activities by presidential candidates during the campaign ..... 94 Newspaper headlines on level of election campaign expenses ...... 95 Estimates of level of expenditures based on collected data ...... 96 What can be expected from financial report audits? ...... 99

Predrag Jovanović Nemanja Nenadić Election success and campaign spending ...... 103

The analysis of reports on presidential campaign financing ...... 103 The relationship between state and private funding ...... 103 The types of private sources used for campaign financing .....106 Membership dues...... 106 Income from party assets...... 107 Contributions ...... 109 Received contributions and chances for election success...... 110 The relationship between election success and invested funds...... 111 Candidates’ activities and election success ...... 114 vi vii Connection between election success and available financing ...... 115 Influence of governing status on election result ...... 117 Election success of candidates and media advertising ...... 118

Nemanja Nenadić Vladimir Goati Conclusions and recommendations ...... 121

Conclusions and recommendations for amendments to the Law ...... 121 A blow to political corruption or preservation of the status quo? ...... 135

Documentation annex

Annex 1: Results of elections for president of the Republic June 13th 2004 (I round) and June 27th 2004 (II round) ...... 139 Annex 2: Reports on the origin, amount and structure of the funds raised and spent on electoral campaign (1-15)...... 141

Annex 3: Relations between the amount of raised and spent funds on electoral campaign...... 157 Annex 4: Expert opinions of Ministry of Finance on the application of certain provisions of the Law on political party financing...... 159 Annex 5: Review of candidates’ TV slots ...... 163 Annex 6: Review of candidates’ print media advertising ...... 165 Annex 7: Review of candidates’ paid programming TV slots ...... 167 Annex 8: Review of payments to the members of electoral boards at polling stations in certain municipalities ...... 169

vi vii Annex 9: Law on financing of political parties ...... 171 Annex 10: Council of Europe, Committee of Ministers, Recommendation Rec(2003)4 ...... 181 Annex 11: Presidential Elections, 13 and 27 June 2004 Republic of Serbia (Serbia and Montenegro) OSCE/ODIHR Final Report ...... 187

viii ix LIST OF ABBREVIATIONS (in alphabetical order)

APV - Autonomous Province of Vojvodina BDSS - Bosniac Democratic Party of Sandzak CEMI - Centre for Monitoring of Elections CESID - Centre for Free Elections and Democracy CoE - Council of Europe DC - Democratic Centre DHSS - Demo – Christian Party of Serbia DOS - Democratic Opposition of Serbia DS - Democratic Party DSS - Democratic Party of Serbia DZVM - Democratic Union of Vojvodina Hungarians FRY - Federal Republic of Yugoslavia G17 plus - Group 17 plus, Political party G 17 plus GG BK - Citizens’ group "Common presidential candidate Bogoljub Karić" GG ILS - Citizens’ group "Initiative for more beautiful Serbia” GSS - Citizens’ Alliance of Serbia JS - United Serbia

viii ix JUL - Yugoslav Left KV - Coalition "Vojvodina” LPS - Labour Party of Serbia LSV - League of Vojvodina Social – Democrats MF - Ministry of Finance (2004), Ministry of Finance and Economy (2000 - 2004) MF Publication - "Implementation of law on political party financing”, Ministry of Finance and Economy, 2003 MF Rulebook - Rulebook on the Records Content and Compiling Reports on the Political Parties’ Property and Contributions ND - New Democracy (now: Liberals of Serbia) NDS - People’s Democratic Party NRS SD, EB - People’s Radical Party, Serbia and Diaspora, European Bloc NS - New Serbia NSS - People’s Peasants Party OSCE - Organization for Security and Co-operation in Europe OSCE/ODIHR - OSCE/Office for Democracy Institutions and Human Rights PS - Revival of Serbia PSD - Patriotic Party of Diaspora PSS - Movement Force of Serbia RB - The Republic of Serbia Budget (reduced for the transfers to other levels of government and social security and medical insurance funds) REC - Republican Electoral Committee RV - Reformists of Vojvodina SCG - State Union Serbia and Montenegro x xi SD - Social - Democracy SDP - Social - Democratic Party SDrS - Party of Serbian Citizens SDU - Social – Democratic Union SKS - League of Communists (Serbia) SLPS - Social – Liberal Party of Sandzak SLS - Serbian Liberal Party SNS - Socialist People’s Party SPO - Serbian Renewal Movement SPS - Socialist Party of Serbia SRS - Serbian Radical Party SRS-NP - Serbian Radical Party - Nikola Pašić SSJ - Party of Serbian Unity SSO - Socialist Youth Alliance SSRN - Socialist Alliance of Working People

xi 1 PILOT – PROJECT: PROMOTING DEMOCRACY AND PREVENTING CORRUPTION

Introductory Notes

Establishing democracy in Serbia is a slow process facing more obstacles than was the case in the majority of other post-communist countries in Central and South Eastern Europe. In the period 1990-2000, democratic forces in Serbia were focused on ensuring equal conditions for the candidates in the elections and on establishing regular electoral procedures, which proved to be an unreachable goal, since SPS having, under the name of SKS, achieved a monopolistic position before 1990 in the regime of “socialist self-government”, continued after the establishment of pluralistic institutions to act as a monopolistic party. A thorough political change was achieved only on 5 October 2000, when autocratic regime of Slobodan Milošević was overthrown, and SPS became just another political party, equal with the others. After this fundamental change, transparent financing of political parties became one of the priorities of the public interest. Such interest is understandable, because if sources of financing political parties and candidates in the elections are not known and limited, democratic institutions may turn into high finance service and the place of trading in influence. The situation in this field, based on the legacy from the nineties, has a considerable effect on the implementation of the new legal solutions. Regardless of the regime change (2000), the participants on the political scene remained mostly the same until mid 2004, and it is unrealistic to expect that their behaviour would significantly change in a short period. The discussions in Serbian media today on financing political parties, particularly when mutual accusations of political opponents are in the background, are, as a rule, superficial and biased. They do not help in understanding the problem, but, as a rule, lead to a general disappointment in political parties, or even to

1 lack of trust in all key democratic society institutions. Democracy has its economic “price” and public should be acquainted with it. Legislator in Serbia has, since the beginning of 2004, accepted the standpoint that generous financing from the state budget may result in a reduced need of political parties to seek or accept private, frequently suspicious sources of financing. Frankly speaking, such an attitude reduces the mentioned risk, but increases the danger of parties, guided by their partial interests, providing for themselves unreasonably high amounts from the budget, thus burdening the taxpayers. That is why the assessment1 that enabling party leaders in the parliament to determine the amounts to be allocated from the budget for the party purposes is like giving alcoholic an opportunity to enter a bar with free drinks, may somewhat be exaggerated, but not entirely without foundation. The approach of generous financing of electoral campaigns (and parties) was, for the first time, implemented in Serbia in the presidential elections in June 2004, therefore it is necessary to analyse thoroughly its effects. It is particularly important to examine the correlation between the electoral success of the parties and their financing from the state and private sources. Furthermore, it is impossible to avoid the question – dilemma whether in these elections, in spite of generous financing from the budget and from legally permissible private sources, the money and other resources from illegal sources were used as well. The central point of this pilot – project is observing and analysing funding of the campaign for the election of the President of the Republic of Serbia (June 2004). Within this project, Transparency – Serbia has insisted on clari- fying all ambiguous issues regarding the regulations governing financing of the campaign for the election of the President of the Republic, pointing out the shortcomings of the regulations and giving concrete suggestions for their improvement. This project is particularly important because of the fact that, for the first time in Serbia, it has been attempted to carry out a complete monitoring of financing an electoral campaign. For that reason alone, this pioneer work may be useful to future researchers in, hopefully, continuous critical monitoring of one of the key processes both for combating political corruption, as well as for the development of a democratic society.

1 Lösche, according to: Robert Williams, “Aspect of Party Finance and Political Corruption” in “Party Finance and Political Corruption”, 2000, London, Macmillan, p.7

2 3 We would particularly like to express our gratitude to Westminster Foundation for Democracy that has understood these reasons and made implementation of this research possible.

Transparency – Serbia September 2004

2 3 5 Vladimir Goati

SCOPE OF RESEARCH 11

For performing most varied activities, one of the most important being partaking in elections, parties need a constant inflow of money, the amount of which depends on the party size and type, the number of inhabitants and the country’s area, “vertical decentralisation”, that is the number of levels on which political representatives are elected, the number of party organisational levels, the type of electoral system and the like. Regardless of tremendous differences in all the important spheres of life between the stable democracy countries and post-communist countries, including Serbia – whose “experience in democracy” began only in 1990 - these two groups of countries have at least one common feature: in both of them, public knows very little about the manner in which political parties acquire and spend the funds for electoral campaigns and for their own functioning. This subject, as a rule, becomes the focus of public’s attention only if and when financial scandals break out in which party officials play central role. Attempts by researchers to reveal the secret, but extremely important sphere regarding the manner of acquiring and spending the funds by the parties, have always been confronted with persistent refusals by party high officials to publish any information on that, and even if they would doit, the published information was short, incomplete and outdated. That is why the researcher, even when in possession of the data on financial income and expenditure of a certain party, is usually unsure about their credibility, the period they refer to, as well as about whether the data refer to the entire party, some of its levels, (parts), or only to the organisation (organisations) being under the party’s control. As a rule, most easily accessible is the information on income and expenditure of the central level of party organisation, whilst it is more difficult to acquire information on financial operations of the other party

5 levels and party institutions. It is assumed that parties are unwilling to publish updated and complete data on their financial operations, because money is an important resource in political process and because the party, by revealing the source, scope and manner of acquiring and applying the funds, would provide important information for its opponents. That is the reason why many authors believe that there are permanent ties between party financing and corruption.2 Martin Walecki rightfully points out that in post-communist countries the connection between the two variables has specific characteristics.3 Party funding is terra incognita not only for the public, but also for party members. Financial issues are seldom discussed in party organs, and even more seldom among party members and supporters. Bearing that in mind, we shall not be wrong to assume that this sphere of party life lies behind a veil of secrecy. In one of the rare empirical researches of parties’ financial operations, in which interviews were made in 2001 with the leaders of 11 Latvian parties, majority of the interviewed leaders assessed that only 2-4 top party leaders4 are intensely engaged in the funds-collecting campaign and that, furthermore, 3-5 persons are regularly informed about that. The findings from the stated research completely correspond to Pentus’ evaluation regarding the situation in Estonian parties, which, it appears, has a broader meaning: “An ordinary party member does not know anything about the party funding… In most cases, only the Secretary General or the President know all about the party’s funding plans. It may be unnecessary to point out that it is practically impossible to get some interesting or important information from these people. Not even the gold-making recipe was guarded with more attention than the secret regarding party funding”.5 It would be exaggerated and wrong to reduce the causes of difficulty in acquiring a complete insight into party funding exclusively to the party leaders’ aspiration, for the needs of political struggle, to keep this sphere far from the public’s eye and from the other rival

2 E.g. Robert Williams, “Aspect of Party Finance and Political Corruption” in “Party Finance and Political Corruption”, 2000, London, Macmillan, p.8 3 “Political Finance in Central Eastern Europe”, In: Foundation for Democracy, Approaches to Comparative Political Finance, 2001, Ed. Karl-Heinz Nassmacher, Baden-Baden: Nomos Verlagsgesellschaft, p.412 4 Ikstens, Janis 1991, “Party Funding in Latvia”, presented at the Conference on the funding of political parties in the countries of Central and Eastern Europe, Open Society Institute/ COLPI, page 2. 5 Pentus, Keit, “Party Funding in Estonia”, presented at the Conference on the funding of political parties in the countries of Central and Eastern Europe, Open Society Institute/ COLPI, page 7.

6 7 parties. Furthermore, the reasons for that should surely be sought in the fact that a complete insight into the “money flows” is made more difficult by the increase in complexity of party structure and increased autonomy of certain party organisation levels. The stated evaluations fully apply to the relevant Serbian parties, whose Statutes, if the regulations on membership dues are exempt, do not contain any regulations on financial operations.6 Insufficient and unreliable information on income and expenditure of political parties permanently evokes suspicion that parties and party leaders essentially depend on the financiers and not on their members and electors. Based on the supposition that it is money and not the will of citizens that plays a decisive role in the political life, it is often uncritically assumed that political systems in the countries with the functional democratic institutions are only ostensibly democratic, but in reality plutocratic.7 Money surely is an important resource in electoral and political strug- gles, but it is not- as will be shown later- the decisive resource.

Increase in election costs

The problem of providing the funds for party functioning became evident in the Western European countries at the beginning of 1960’s when the parties, instead of classical forms of electoral campaign (“door-to-door” agita- tion, public meetings, posters, advertisements in the newspapers, etc.), started relying on electronic media, primarily on television, which is, as explained by Ware, different from daily newspapers. “First of all, television enables politicians to establish a somewhat “more direct” contact with the voters than it is possible with the printed media; it is believed that by explaining (on TV-VG) their actions or views in such a way, they have more effect on the voters’ decisions than if the public only read about it. Second, television enables a competition among politicians for the voters’ attention. In most countries, television stations are neither owned by the parties, nor are they under the strong influence of some parties – a situation different from the one regarding newspapers. In some liberal democracies, mostly circulated newspapers are owned by parties, while in other democracies, many newspapers have tight connections

6 More on the subject: Goati, Vladimir. 2004. Parties and Party System of Serbia, Niš: OGI 7 On insufficient grounds of such allegations, see: Goati, Vladimir, ibidem pg. 73-74.

6 7 with certain parties. This means that in communication with their voters, parties need worry less that their voters also listen to the opinions of their opponents. Furthermore, even when parties can influence television stations, they are not in the position to control the behaviour of their voters who can easily switch to another channel, meaning that they would be exposed to other at- titudes. On the other hand, majority of people do not buy several newspapers, which makes it less likely that they would be aware of the rival views”.8 Constant lack of money is even more characteristic for the parties in European post-communist countries, because they were mostly established in 1989/1990, when, in addition to large expenditure for electoral campaigns, they were faced with the necessity to solve a difficult task of establishing “cap- illary organisation” on the territory of the entire country. In these countries, at the time of establishing multi-party system in 1989/1990, considerable difference was evident in the financial position of ex-communist parties, who had tremendous property available, and newly established opposition parties deprived of the basic conditions for political activity (premises, electronic equipment, vehicles). Financial situation of newly established parties was improved in those post-communist countries in which these parties won the elections in 1990 over the reformed communists. In these countries, the state has, after the first peaceful change in power, started to provide a systematic financial support to parties, but this only alleviated their financial problems, without solving them. Contrary to the most post-communist countries of Central and South Eastern Europe, change in power did not take place in Serbia in 1990, since the previously ruling SPS won the first pluralistic elections. After these elections, the state has, nevertheless, compensated the elected representatives, a part of the electoral campaign costs from the Republic Budget (1991). The Law adopted in the National Assembly of Serbia in 1992 guaranteed financial assistance to the parties – nominators of electoral lists, as well as the funds to the elected candidates, which was accepted by the next law adopted in 1997. However, the amount of funds provided for the parties for electoral campaigns and their functioning has not at all met their requirements. Finally, a new “Law on Financing Political Parties” was passed in 2003, significantly increasing the funds allocated from the budget to the parties both for their electoral campaigns and for their functioning (this is to be discussed more thoroughly in the Chapter by N. Nenadić).

8 Ware, Alan. 1996. Political Parties and Party Systems, Oxford: Oxford University Press, p.290

8 9 Financial violation and misuse

Previously stated interest of parties to keep at least a part of the funds in “grey area”, under control of only few or even only one official, provides the explanation why party leaders played an important role in big financial scandals that, in the previous period, upset some of the stable-democracy countries as well as the post-communist ones. Regardless of the endless variety of shapes and forms, the mentioned scandals have one property in common: leading party officials used their political power and influence to cause certain state decisions to be made, or to impede their making, and in return, they would get private and (or) group economic benefits, which in fact is the essence of corruption. Michael Pinto-Duschinski (2002, p. 71-72) lists the following forms of party corruptive financing: (1) illegal gifts, (2) using the funds obtained in corruptive ways for party campaigns or for party purposes, (3) application of state resources (employees, premises) for party purposes, (4) accepting funds in order to provide or promise certain advantages (benefits), (5) accepting funds from dishonest sources, primarily from criminal circles and (6) spending money for forbidden purposes, such as buying votes.9 But in addition to these mostly incriminated forms of financing, transfer of money to party funds and to the accounts of party leaders may be performed in more subtle ways, including skilful utilisation of incompleteness and gaps in legal acts. In this case, not a single regulation in force is violated, but the principles, such as universality, equality and transparency, being the foundation of these regulations, are violated.10 Corruption involving the parties and their leaders often (not always) consists of two, and not only one illegal act; first, certain financial means go into the party “black fund” as a return favour for some other “favour”, and then certain party official transfers a part of the money acquired in such a manner to his personal bank account or he takes cash. Of course, it is difficult and sometimes impossible to prove corruption, because it is, as a rule, implemented in compliance with all the rules according to which the decisions are

9 “Financing Politics: A Global View”, Paper presented at the Conference on Party Funding and Finance in Central and Eastern Europe, Journal of Democracy, 2000, Vol 3, No 4 (October): 69:86. 10 Of course, violation classification is conditional, which is explained in : Goati, ibidem, p. 97- 102.

8 9 made. One author explains this in the following manner: “Formal compliance with the procedure and essentially bypassing it in corruption is the same as mafia money laundry and recycling”.11 Frequent financial scandals with political parties in their centre had one latent effect: faster reforms and establishment of new institutions, procedures and mechanisms, as well as more stringent sanctions in order to prevent rep- etition of such events. More numerous obstacles to illegal money flow between political parties and other relevant social factors established in the previous decades, have not, of course, made financial machinations impossible, but have reduced their scope. Unlike the countries with stable democracy in which standard for parties’ financial operations has been developing for decades, Serbia and other European post-communist countries are only beginning to develop in that direction, which is surely facilitated by the fact that these countries can use the normative solutions (mechanisms, procedures) previously “tried out” in the countries with stable democracy in Western Europe and USA. Forms of corruption differ largely in the countries with stable democracy and in post-communist countries. Furthermore, corruptive action has its unique characteristics in individual countries belonging to one of these two groups. In spite of these differences, one important common feature is evident, at the beginning of the third millennium, in both of these groups of countries: public opinion has become extremely sensitive to misuse of funds by the party leaders, which indicates a strong consolidation of the modern world. Electoral success of the parties all over the world depends greatly on whether the citizens see them as persistent fighters against corruption. In that way, public opinion has started having effects not only post festum uncompro- misingly revealing the cases of corruptive behaviour, but also as a preventive factor, since party leaders became aware that corruption significantly jeop- ardises electoral chances of their party.

11 Meny, Ives. 1992. La corruption de la Republique, Paris: Fayard.

10 11 Reduced tolerance to corruption

Serbia is not excepted from the global trend of reducing tolerance to using public positions for acquiring private benefits, or as Reynauld Van Rumbeke defined it, for “trading in influence”12. Public’s severe reaction to the information announced in July 2003 that the Minister of Transport and Telecommunications in the Republican Government had registered (2002) a private company within her Ministry’s field of activity only proves this point. Although at the time the “Law on preventing the conflict of interest when performing public functions” has not yet been passed, and the mentioned member of the Government has not violated, by her actions, a single legal rule, media and other civil society participants persistently demanded her resignation, pointing out that her actions have violated ethical principles of proper public duty performance. Since the Minister has refused to resign, the President of the Government has, in accordance with Article 93 of the Constitution of Serbia, suggested that she be relieved from duty. Parliament did not have an opportunity to discuss this, since it was dismissed on 13 November 2003, when parliamentary by-elections were officially announced. The presented case il- lustrates an extreme critical attitude of Serbian public towards cumulation of functions by individuals in high political positions that almost inevitably leads to corruption. The results of an empirical research, conducted in November 2003 by “Medium Galup International” agency, also prove the widespread awareness of the dangers from corruption. According to this research’s results, corruption and crime are the third-place problem Serbia is facing (the first being financial situation, and the second political conflicts). Research Conflict of Public and Private Interest and Free Access to Information, conducted at the beginning of 2003 for the needs of “Transparency – Serbia”13, has also pointed to the extreme importance of corruption in the public’s eye. This was also pointed out by the poll on corruption in public services that had been organised by the Centre for Policy Studies (JMS 04/02) in 2002. We can assume that Serbian parties with different programmes, adapting to the “spirit of the times”, tried before parliamentary elections in December 2003 and before presidential elections in 2004 – which are the

12 “Trading in Influence and Illegal Financing of Political Parties – General Report”, Third European Conference of Specialised Services in the Fight Against Corruption”, Madrid, 28- 30 October 1998, p.15. 13 “Conflict of Interest and Free Access to Information”, Transparency – Serbia, 2003.

10 11 subject of this research – to convince the voters of their uncompromising attitude in the fight against corruption. This, in fact, has become a common feature in their electoral programmes and in every-day appearances of the leaders, which only proves the following assessment by Nassmacher, based on the party funding comparative analysis: “Whenever political money becomes the topic of political debate, the parties shall try to improve their reputation with the voters.”14

Two periods

From establishment of the multi-party system in Serbia until the beginning of 2004 – when “Law on Financing Political Parties” came into force – parties received from the budget relatively small funds and they were forced to make up for it from some other sources. Before the fundamental political turn on 5 October 2000, this, of course, was most easily achieved by the ruling SPS. Using arbitrarily considerable state funds, the ruling SPS would, when it was in its interest, corrupt the leaders of opposing parties. There are two characteristic cases in that respect. The first one took place in 1993, after an open political conflict between SPS and its former ally, ultranationalistic SRS. In order to prevent attempts by SRS to block the legislative initiatives on the federal level, SPS has induced the split of SRS, resulting in five federal representatives leaving the party and establishing “Serbian Radical Party – Nikola Pašić” (SRS-NP). SPS provided each of these representatives with DEM 100,000 or with an apartment in Belgrade, as a reward for supporting SPS proposals in the Federal Parliament. Another example are the claims made public and not denied, that the ruling SPS gave in the course of 1993 (before the conflict) considerable funds to SRS president in order for that party to at- tack the democratic opposition parties. The stated examples are only “tip of the iceberg” under which, before the collapse of Milošević’s regime on 5 October 2000, a wide system of arbitrary utilisation of state resources for party purposes was hiding in Serbia. Until then, the ruling SPS disposed of the budget funds as their own, because of

14 Nassmacher, Karl-Heinz 2003, “Introduction: Political Parties, Funding and Democracy”, In: Funding Parties and Elections Campaign: A Handbook, Eds: Karl-Heinz Nassmacher and Daniel.

12 13 which Serbia of that time can be called “a party state”. This is clearly shown by the results obtained from the inspection of the budget funds expenditure for the year 2000, which was conducted by the Ministry of Finance of the Republic of Serbia. In the report published at the end of October 2001, the Ministry discovered, among other things, that approximately EUR 26 million was spent illegally, and that another EUR 44 million was spent without specific purpose. The inspection also showed that a great part of budget funds was used for purchasing cars or for the loans (never returned) to the companies whose owners (or directors) were the ministers in the coalition republican government (SPS-JUL-SRS), and that the other, although significantly smaller part of the funds, was directly paid to the ruling parties. Thus, Minister of Science paid EUR 11,335 to SPS, and EUR 3,060 to SRS. Minister of Trade transferred to SRS account EUR 8,330, while Ministers of Ownership Transformation, Trade, Tourism, Transport and Environmental Protection gave to SRS EUR 20,160 in total. Because of the drastically illegal spending of the budget funds, the Ministry of Finance brought criminal charges against 25 former ministers in Serbian government (out of total 35), as well as against some ten Deputy Ministers and directors of republican organs. We have stated the inspection results of the budget funds expenditure in Serbia in 2000, conducted by the new authorities, and it is probable that the inspection results of the budget funds expenditure would be similar for the previous years. Maybe the proportions of the budget funds misuse for the year 2000 would have been even greater had the “old regime” lasted for the entire year, instead of only 9 months, more precisely until 5 October. Frankly speaking, before 5 October, not even the Serbian opposition parties have “resisted” violating the legal regulations on financing. Many rich businessmen in the country dared not, for fear of reprisal by the regime in power, give the opposition parties donations in the legal manner, but gave them in secret, directly to the party leaders. It is not hard to assume that the opposition parties, in return, ensured the selection of “party benefactors” into the leading party organs, or/and into the parliament, which surely presents political corruption. Of course, there is no specific information on this, but it can be concluded from the cases of rich individuals, after a short (or even without any) time spent in the party, becoming the representatives in the National Assembly. Furthermore, opposition parties, being in conflict with Milošević’s “party state”, were forced to rely on the donations from abroad, although these donations were prohibited by laws (1992, 1997). The funds came from two types of sponsors: the first being emigrant organisations and rich individuals, and the second international organisations and funds. In the

12 13 first half of 1990’s, the most important financial sources for the opposition parties were the donations from emigrant organisations and individuals from Western European countries, USA, Canada and Australia (Serbian Diaspora). According to one of SPO leaders, the money collected in Serbian Diaspora from 1990 until the end of 1993 was sufficient to settle more than half of this party’s expenditure. Later on, the importance of the donations from Diaspora lessened, which was partially caused by continuous lack of success of SPO (and the entire Serbian opposition) in the elections in 1990, 1992 and 1993. Another reason why financial aid from this source was reduced was probably because a part of that aid ended up in the bank accounts of opposition leaders. This can be concluded from the mutual accusations of these leaders that the funds received from the Diaspora had been spent without specific purpose, all of which was thoroughly broadcasted by the officially controlled media. Generally speaking, the insight into the real monetary flows of the parties at the time is only partial; it is still only the “tip of the iceberg”, greater part being hidden and inaccessible to the public. In the second half of the nineties, the opposition parties started relying more on the international organisations and funds for financial support than on Diaspora, which is also prohibited by the law. Since these are illegal funds which can not be traced in party documentation, in evaluating the amount of these funds we are forced to rely on the testimony of certain leaders of the parties that were in opposition until 5 October 2000 (the leaders wished to remain anonymous). According to this testimony, DOS campaign for the federal parliamentary and presidential elections in FRY held on 24 September 2000 was financed with approximately EUR 2 million from the international organisations and funds. We are pointing out that this is only a partial insight; the total sum of financial support from the stated source is probably considerably larger. A part of the funds from the international organisations and funds was given to DOS in the form of technical assistance (computers, faxes, mobile phones). The other part presented an indirect assistance; these are the funds allocated to non-government organisations in order for them to carry out a part of the electoral campaign for DOS. These include: education on elections, persuading the citizens to go to the elections and vote “for changes” (in reality for DOS), as well as systematic assistance to DOS in the electoral campaign. This assistance, for example, was manifested in organising 37 concerts (with the motto: “It’s time!”), which preceded the meetings by the opposition coalition politicians. Finally, the third part of the funds was used for paying experts, organising research of the public’s attitude towards elections, or it was given directly to trustworthy party officials in order for the electoral campaign

14 15 costs to be paid. It can be concluded from the previously stated that, before 5 October 2000, legislator in Serbia tried to control the sources of income to political parties, but in practice had little success regarding the two most important sources of party income: state financial assistance and donations. After 5 October 2000 until the end of 2003, identical regulations in this field were effective, which made it possible for the party campaigns and party activities in general to be financed in the “grey zone”, far from the public’s eye and control.

Period after 5 October

Although the collapse of Milošević’s regime on 5 October 2000 brought about a fundamental political change in Serbia and initiated a quick establishment of democratic institutions and procedures, it would be naive to assume that it eradicated illegal party funding altogether. All the more so since the law from 1997, according to which parties were provided with insufficient funds, remained effective until 1 January 2004. Bearing in mind that there were presidential elections held in Serbia in 2002 (twice) and in 2003 (once), as well as parliamentary elections in December 2003, in which the parties, striving to achieve the best possible result, used enormous funds, particularly for buying time on TV15, it may be assumed that in this period the parties continued to collect the funds illegally, because, as previously mentioned, according to the law (1997) effective at the time, the funds for electoral campaigns were extremely small. Extreme disproportion between the budget funds allocated to Serbian parties and actual expenses of their activity, which lasted until the beginning of 2004, is well illustrated by the fact that the annual rent for the building in which DS headquarters are located amounted to CSD 2,376,000 (or EUR 349,411) in 2003, while this party received from the budget the total of CSD 2,570,000 (EUR 370,000) in the same year for its functioning. The rental fee for DS premises on the level of the province of Vojvodina, towns and in 161 municipalities in Serbia, can only be speculated. Similar disproportion between the budget funds and the rental fee for the premises is evident with

15 More detail on the subject in CESID publication “About elections” No. 9, 10 and 12 (2002) 13 (2003).

14 15 DSS, G17+ and SPO as well. In that respect, SPS is in a much more favourable position, being the owner of the building in which its headquarters are located and of several other buildings in other towns for the party premises. The same holds true for SRS, which has, several years in advance, rented the premises (in Zemun) for the central organs, at a very low price. Of course, paying the rent is only one of the party expenses, the others being salaries and fees for the full-time and part-time employees, maintaining the car park and the functional expenses (meetings, conferences, cooperation with the other parties in the country and abroad, etc.). Suspicion is aroused by the data – although partial – that it was mostly technical staff (secretaries, drivers), receiving modest salaries, who were employed full-time in the relevant Serbian parties at the end of 2003. For example, G 17+ payroll included 26 people, which is presumably, less than is the case with DS, DSS, SRS and SPS. According to the official statements by the parties, which are hard to check, their officials, including the party leader, were only volunteering (DS, DSS, G 17 plus, SPO, SRS, SPS), while they receive regular income as state officials, representatives in the parliament, university professors, writers (from selling books), as employees in institutions and companies and as businessmen. Some officials in DS (the president of the executive committee and the party secretary) and G 17 plus (the president of the executive committee) are exception. On the lower levels of party organisation (outside Belgrade), the selected officials, again according to the official party statements, only have the right to compensation for some functional expenses, such as those for fuel and hotel bills. (Blic newspaper, 7 February 2004). It can be assumed that the parties, faced with insufficient funds, provided their officials with secret financial means, avoiding at the same time to pay high taxes and fees, which was surely facilitated by the absence of control regarding the parties’ financial operations. The new law on financing political parties, the application of which began on 1 January 2004, increased the budget funds to the parties manifold, both for the regular functioning and for their electoral propaganda costs, but it also obligated the parties to make their financial operations known to the public, and it also set stringent sanctions for failing to fulfil these obligations.

16 17 Subject and aim of research

In the centre of this research’s attention are financial operations of the parties that took part (through their candidates) in the presidential elections held on 13 and 27 June 2004. In these elections the new law was applied, which for the first time obligated the parties to inform the public fully on their financial operations. Implementation of this principle faces many obstacles even in the stable-democracy countries, therefore difficulties in implementation are to be expected in Serbia as well, where the process of huge transfer of state into private property is in full swing, which is very difficult to “keep under control”. Furthermore, a great part of economic activities in Serbia (production, trade, consumption) takes place beyond the legal course (“grey economy”), which surely makes it easier for the parties and their leaders to “indulge in scheming”. This research should be understood as an attempt to penetrate into the insufficiently known field of activity of the parties in electoral campaigns, applying the regulations of the current “Law on Financing Political Parties”. The essential question – dilemma we want to find an answer to in the research is whether, and to what extent, the stated law, applied in the presidential elections in June 2004, “has passed the test” and ensured transparency of monetary flows and responsibility of party leaders regarding collection and spending of money in the electoral campaign. It should be mentioned that the political “stakes” in these presidential elections were extremely high, since the minority coalition government (DSS, G 17+, SPO, NS) supported by SPS, tried vehemently to strengthen its insecure position in the parliament through the victory of their own presidential candidate, while the opposition parties (most of all DS, SRS) tried to challenge the ruling coalition’s legitimacy even more. Although this paper does not analyse the results and political effects of the presidential elections, but regularity of the electoral campaign financing, we are pointing out that the candidate of DSS and the other ruling coalition parties (G17 plus, SPO and NS), Dragan Maršićanin, suffered an absolute defeat already in the first round, and that the leader of the opposing DS, Boris Tadić, became the President of Serbia in the second round, after the victory over SRS candidate, Tomislav Nikolić (see Table No. 1 in the Documentation Annex). In the presidential elections in 2004, there was a powerful ascent of the opposing DS, erosion of the ruling coalition parties’ influence and appearance of a new political force in Serbia – PSS. In these elections, a new parallelogram of political forces in Serbian po-

16 17 litical life was established in relation to parliamentary elections in December 2003. This paper is divided in four thematic units. The first unit presents briefly the evolution of legal regulations regarding electoral campaign funding from the beginning of establishment of the multi-party system in Serbia (1990), until the calling of presidential elections in June 2004. We shall try in this analysis to explain the reasons why the legislator, at certain points of the analysed period, opted for particular solutions and thus favoured certain political figures on account of others. This chapter thoroughly analyses the regulations of the current “Law on Financing Political Parties” (2003) referring to the presidential campaign funding, in order to indicate their possible interpretations, effects and potential dangers on the way of achieving transparent and purposeful financing. The second unit (third chapter) is focused on the analysis of actual financial flows in the electoral campaign 2004. In this analysis we shall rely not only on the officially published data by the parties themselves and state organs, but also on the information which indirectly points to the campaign financing scope and courses, such as: appearance of the candidates in media advertising, activities performed by the candidates during the campaign, the manner of campaign coverage in the media, availability of state resources, as well as on the information published by some media, but whose credibility is hard to verify. The focus of the fourth chapter (third unit) is the relation between the invested funds and the candidates’ achievement in the elections. In this part of the paper, we shall test three hypotheses based on the results from the comparative analyses of electoral campaign financing. According to the first hypothesis, the ruling coalition parties’ candidate shall be supported more by the donations from natural persons and corporations than is the case with the opposition parties’ candidates. This hypothesis – confirmed by the data provided by Ikstens16 in Latvia – is based on a realistic presumption that donors usually expect from the party a political return favour that can only be provided by the party (parties) in power. The second hypothesis to be tested in this paper includes the expectation that the candidates of relevant parties, particularly the candidates shown in the systematic researches conducted in the preelection period to have widespread support in the electoral body, will have higher financial support than the candidates of miniature parties, who

16 Ibidem, page 4

18 19 are only the “decoration” in the electoral competition. In other words, it is expected that the donors would rather help the candidate who, after the elections, is more likely to have influence in the formation of state policy. Finally, the third hypothesis refers to the relation between the amount of spent funds and the electoral results of the presidential candidates. Bearing in mind the knowledge obtained so far regarding the effect of money on the electoral outcome, we assumed that in these elections the amount of spent funds in the electoral campaign will determine the success of candidates up to a certain level, but “above” that level, other factors will have a decisive effect on the electoral success of the candidates. In a recently published book, we have stated this hypothesis in the following manner: “As a matter of fact, the relation between the amount of spent money and electoral success can not be represented as a straight line, and it can be graphically presented as a curve resem- bling an inverse letter J. In the initial stages of the electoral procedure, there is a tight positive correlation between the two variables, but later this relation is lost and electoral success of a party (candidate) is influenced by other factors: previous achievements and the related credibility in the electoral body, the size of “electoral clientele” whose interests the party represents, selection of the appropriate electoral strategy and the like”17. Robert Williams wrote the following about the important but not decisive effect of money on the election results: “Money clearly does not guarantee political succes for minor parties but, if not a sufficient condition (of success-VG), it certainly appears a necessary one”. (2000, 200)18. In the fifth, final chapter (fourth unit), we shall try to answer whether the “Law on Financing Political Parties” has been applied in the adequate manner in the presidential elections in 2004 and whether and – possibly to what extent – its application has ensured the principles of transparency and accountability in collecting and spending the funds in the electoral campaign. In this chapter, we shall, based on the previously identified weaknesses and inconsistencies of the legal solutions and/or their implementation, suggest certain corrections and improvements in the “Law on Financing Political Parties” (2003) and the accompanying by-law texts. At the end of the paper, there is the Documentation Annex, where the results of two rounds of presidential elections in June 2004 are presented, the official reports of the candidate nominators (parties, “groups of citizens”) on

17 Ibidem, page 73 18 “Aspect of Party Finance and Political Corruption”, In: Party Finance and Political Corruption, 2000, Durham University of Durham, page 200.

18 19 the funds they have collected and spent in the electoral campaign, the data on the appearance of the candidates in the media advertising in the preelection period, the “Law on Financing Political Parties” itself and the other data useful for comprehending the findings of this research.

20 21 Nemanja Nenadić

NORMATIVE BASIS 22

Review of the regulations on party financing in Serbia and of their application (1990-2003)

The issue of financing political parties and electoral campaigns, particularly in the period 1990-2000 (“the regime of Slobodan Milošević”), remained constantly in the background, behind the topics considered to be more important. Inequality with respect to the opposition parties and the parties’ in power misuse with regard to financing presented some of the means used by the regime to preserve its political power. As far as elections are concerned, the first criticism referred to their basic regularity (determining the electoral system and electoral units, pressure on the voters, theft of votes, inadequate control, openly biased public media); concerning regular work of political parties, major battle was first fought for the freedom to organise and establish the multi-party system in Serbia, and then for the freedom to establish the parties and ensure their equal treatment in the media. Although opposition to communist “uniform thinking” started in Serbia together with the aspirations to re-establish the democratic tradition from the period before the communist dictatorship (1903-1914 period in particular has often been referred to), the model of proper financing of political parties or electoral campaigns could not have been found in that period. Even in the world, today’s significance of this topic was only recognised after World War II, when Serbia was already out of the major democracy development trends. The experience from the self-government/socialist period (1945-1990) had its effect on the events after 1990. At the time of one-party system, the ruling SKJ

20 21 had at its disposal large property, receiving income from at least two sources – subventions from the state budget and regular membership dues collected in the amount not at all negligible. In addition to that, as a monopolistic party, it used to apply arbitrarily the budget funds for its own needs. Although the number of members today in all the political parties in Serbia is similar to the number of members in the former SK, the income SK used to receive based on the membership dues was incomparably larger.19 On the other hand, the so-called socio-political organisations used also to be financed from the budget. In these organisations (SSRN, SSO) as well SK used to play the key role, but they also had at their disposal considerable property. The opportunity for this property belonging to the organisations that became meaningless with the advent of multi-party system, to be given to political organisations established in the new circumstances and chosen by the citizens to articulate their social aspirations, was missed in the months preceding the multi-party system legalisation. While the regime was delaying democratisation using as an excuse the need to change the Constitution20, it was also engaged in “fixing” its economic supremacy before the beginning of the new period. After “integration” of SK and SSRN of Serbia in July 1990, the newly formed SPS acquired control over the property of both organisations. Until the local elections in December 1992, SPS acquired absolute or significant control over almost all public resources, including the major part of the country’s economy that was “socially” owned. Exception to this were several local radio stations, Belgrade television station “Studio B” and a certain number of newspapers, whose editorial staff, although originating from the structures of power from one-party period, tore away from the regime’s control and used for a long time the “benefits” inherited from the self-government concept, as well as hesitation by the regime, because of possible reactions, to apply legal means it had at its disposal.

19 Not only were the membership dues larger than is the case with the majority of political parties today (since it had been determined in relation to the personal income, it had not been fixed), but the payment collection was also extremely efficient (the employees in state companies, who formed the majority of members, practically had no possibility of evading the dues payment since it used to be deducted from their gross earnings). 20 While the opposition parties not yet legalised required in June 1990 that multi-party elections be held, the regime and many intellectuals supported publicly “preservation of national interest”, believing that multi-party system, with 1974 Constitution conditions, would only make actual independence possible for the Albanians in Kosovo. That is how introduction of multi-party system was postponed by the referendum with the slogan “first the Constitution then elections”.

22 23 At first, the regime hesitated to regulate financing of political parties and electoral campaigns, but then, probably encouraged by the electoral success at the beginning of 1990’s, decided to regulate this field in the manner that would be more acceptable from the aspect of democratic standards. In brief, key fields were regulated in the following manner:

Allocation of the budget funds

The Law on the Republic’s participation in financing political organisations from 1991 can be considered as the beginning of financing from the budget. Based on that law, political parties used to receive a monthly sum amounting to one average salary in Serbia for each deputy in the National Assembly. The Law on Financing Political Organisations from 199221 doubly increased this amount. Financing from the budget was also provided for the parliamentary elections in the total amount of 1500 average salaries. That amount was paid before the elections, based on the previous electoral success. The Law on Financing Political Parties from 1997 increased the campaign financing amount (2500 salaries) and changed the distribution formula (half based on the number of deputies in the old composition of the National Assembly and half based on the number of seats won in the new one). For financing the presidential elections, total of 1000 average salaries in Serbia used to be provided.

21 This Law contained many specific solutions arising from the moment when it was passed. It was published in the Official Gazette only two weeks before the so-called “May” elections in 1992. These were the first elections for FRY Assembly Council of Citizens, and on the same day, the first province and local elections in Serbia, and the referendum on state symbols, were held as well. The system of money distribution was very complex, which was the consequence of introducing the “mixed” system for the election of deputies for the Federal Assembly Council of Citizens (this system was applied in these elections only). Already at the time when the law was passed, it was evident that it would bring financial benefit mostly to the parties close to the regime, because it had already been known that the opposition would boycott the “May elections”.

22 23 Financing sources outside the budget

The Law on Political Organisations from 1990 specified, as the sources of financing, income from the following: membership dues, contributions, gifts, legacies, testaments, budget and other sources, in accordance with the law; performing economic and other public activities. Acquiring the funds from foreign persons used to be one of the reasons for prohibiting the operation of a political organisation. The Law from 1992 explicitly includes, among other the financing sources, “income from party’s own property” and credits. Financing by the state organs, the local self-government organs, companies and all the other legal entities, except citizens’ associations, is strictly prohibited. Anonymous donations were limited to 3% of the annual net income, while financing by foreign persons remained prohibited, but did not present any more the reason for closing the party. The Law from 1997 contained similar regulations.

Sanctions

Inspection of law application was, according to the laws from 1990’s, conducted by Social Accountancy Service (which in the meantime has changed its name). The law from 1992, in addition to violation fines, also contained the possibility of denying the budget funds for the regular work of a party, which was eliminated in 1997 Law. However, the application of these regulations was only partial. Only those regulations on financing political parties from the budget were fully affirmed, where the funds were allocated according to the set formulas. On the other hand, regulations on keeping the records and on permissible financing sources, regardless of the specified rules and limitations, were not the within the scope of inspection authorities’ attention. It is interesting to point out that the inspections and sanctions were not even selectively applied – e.g. for persecution of political opponents, although legal basis could have been found for it. Namely, as already stated, relevant opposition parties have, since their establishment, relied on financial assistance from abroad, which, since the beginning of multi-party system, was prohibited (from 1990 to 1992 it was a reason for prohibiting the operation of a political party). The regime used to exaggerate these facts and use them abundantly for political anath-

24 25 ematising of opposition and non-government organisations that supported the opposition’s campaign22, but it never turned to legal sanctions. It is hard not to notice that the new authorities seem “to have returned the favour” by acting in the similar manner – not sanctioning the cases of illegal financing of the parties that were in power in Serbia before 5 October 2000.

Process of adopting the Law from 2003

When the experience from the previous period is taken into consideration, it is clear that one of the reasons why the regulations on financing political parties (1990-2003) were only partially applied in practice, was the deficiency of those very regulations. Besides, it has been realised among the experts, even before the change in power at the end of 2000, that the regulations do not provide sufficient transparency of political parties’ financing and protection of political processes from corruption. Not only did the Law from 1997 receive such negative assessments, but there were also actual suggestions regarding the manner in which this field could be better regulated.23 In the new balance of power, which appeared after 176 (out of 250) deputies were elected from the list Democratic Opposition of Serbia – Vojislav Koštunica in the Republic elections in December 2000, 18 parties (and one trade union) constituted parliamentary majority and almost all of them participated significantly in the executive power of Serbia. Majority of these parties has not previously been in the position to participate in power, and number of those parties that in the previous period entered the elections independently was small.24 In such a situation, there was a natural aspiration of “small” parties that their position in the power be “capitalised” by strengthen-

22 One of the examples is the following piece of news: “As broadcasted by the Radio-Television of Serbia, Marković (Ivan Marković, a high ranking official of JUL-NN) said that DOS candidates were “determined in NATO headquarters” and stated that “NATO candidates and mercenaries” were grouped in “the so-called Democratic Opposition of Serbia, moral trash called G17 and, in terrorist phalanx “Resistance” and in the so-called non-government organisations...”- source: website B 92. 23 See for example “Model Law on Political Parties and Model Law on Financing Political Parties”, CESID, 1999. As the members of the team working on these model laws, the signatories are Vladimir Goati, PhD, Marijana Pajvančić, PhD, Slobodan Vučetić, Zorica Radović, PhD, Snježana Milivojević, MSc, Slobodanka Nedović, PhD and Miloš Todorović.

24 25 ing the party. Considerable additional funds were necessary for enlarging the parties with new members, for establishing new committees, employing personnel in party headquarters and organising party promotion. This was true even for “larger” parties within the “original DOS”, such as DS and DSS. In the second half of 2000 and at the beginning of 2001, these parties enlarged their membership considerably and completely covered the country territory by their municipal committees. Such a development of situation logically led to political parties striving to increase the amount of available funds for their operation. Although due to non-transparency of the financing system that was effective in the period 2000-2004, there is no confirmed information on the financing from private sources, it could be claimed with certainty that member parties of DOS became in that period more attractive to private donors, and there is no doubt that, due to inadequate control mechanisms, they were in the position to use for party purposes state resources on all the levels of government. At the same time, donations from abroad were significantly reduced or completely stopped, after eliminating the essential reason why they had been started in the first place – deposing of Milošević’s regime. By voting for the new Law on Financing Political Parties in 2003, the parties chose to significantly increase the funds that would be available to them the following year (the commencement of the law application was postponed for 1 January 2004). The funds to be allocated form the Republic Budget have been increased manifold. Furthermore, party financing from the budget of the province of Vojvodina, municipalities and towns was introduced, which did not previously exist or was left to the decisions by the local self-governments. According to the projection given in the publication “Implementation of the law on political party financing” by the Ministry of Finance and Economy in 2003 (hereinafter referred to as “MF Publication”), based on the example of Parliament composition in November that year, increase in financing the parties’ regular work, from the Republic Budget alone, would vary between 2,1 and 7,5 times with respect to the previous one, the parties with only one deputy benefiting most from the introduction of the new system.25 Since early

24 The only exception being DS that independently won seats in the parliament in 1990, 1992 and 1993, DSS that did the same thing in 1993, as well as the parties of Hungarian national minority, SVM and DZVM. ND, GSS, RV, LSV, KV were also parliamentary parties in the period before 2000, which they became as the members of coalition with bigger parties or by mutual uniting (e.g. “coalition Vojvodina” from 1997). 25 At the moment there were 29 parties represented in the Parliament!

26 27 parliamentary elections were held in December 2003, there were considerable changes in the structure of those who got the chance to use the “benefits” of the new law. If the entire procedure of passing the law were observed in a cynical manner, it could be claimed that the party income increase was, in fact, the main reason why the party representatives supported the passing of the new law. On the other hand, it should not be forgotten that the new law made it possible for the parties to increase their legal, and by definition neutral income (from the budget of the Republic, territorial autonomy unit and local self-government unit). Had not the Law been passed, the funds for the increased requirements would inevitably (still?) have been sought in other places. That is why the question of passing this law was observed as a part of wider activities in fighting against corruption. The process of writing and promoting the act took place within MF 26. In the Government of Serbia, this ministry was responsible for the greatest part of work regarding anticorruption reforms.27 It should also be stated that, among other (para)government institutions, the Anti-Corruption Council also took part in the process of passing this law. This Council initiated the passing of the law, and had certain influence in introducing some new solutions.28 The text by the former Minister Đelić, given as an introduction to MF Publication29, from which the most important parts are extracted here, il- lustrates well that the question of passing this law was considered important in fighting against corruption: Financing political parties is the central issue of democracy development... Attempt by financially powerful persons to control a part or the entire political scene is as old as the political process

26 At that time, Božidar Đelić was heading the ministry. 27 For example, Aleksandra Drecun, the Ministry Secretary General, was at the same time the national coordinator of the Stability Pact Anticorruption Initiative. 28 Financing political parties was recognised as a particularly problematic field of the existing corruption-fighting system in the analyses conducted in the course of 2001. For example, non-transparent financing of political parties was determined as one of the generators of political corruption in the research prepared by Transparency International Serbia at the end of 2001. The main suggestions given at the time were: passing a new law on financing political parties, which would bring about that political parties be financed mainly from the budget depending on the number of seats in representative bodies of the federal state, republic and local assemblies; prohibiting political parties from founding companies, agencies, etc, and from acquiring money in such a way. (Group of authors: National Integrity System – Serbia and Federal Republic of Yugoslavia, Belgrade, 2001, page 44 (text by Z. Vacić)). 29 Belgrade, 3 December 2003.

26 27 itself. But, in Serbia... this problem presents a much greater danger than in richer and more organised societies. The risk is too high... that party finance be fully left to the cruel market of mutual favours and secret agreements... The time is right for the community... to offer as a dominant solution the use of public funds... It (the new law- comm. by NN) is fully in accordance with the recommendations by the Council of Europe which were passed in April 2003. Prohibition of anonymous donations and strict limits of the amounts to be spent,... shall prevent the so-called tycoonisation of our political scene... The punishment for not observing the law, in addition to being deprived of budget financing, shall also be the loss of credibility in the public. It would be hard to dispute the words of the former minister on the meaning of budget financing of political parties. Unfortunately, it shall be seen in the following chapters that the predictions regarding the effect of certain legal solutions were, at least when Serbia in 2004 is concerned, too optimistic. In addition to this one, MF prepared several legal texts which had been believed to be effective in the fight against corruption (e.g. Law on Budget System from 2001, Public Procurement Law from 2002, draft law on the pre- vention of the conflict of public and private interest, on anticorruption agency, on tobacco and games of chance, etc.). Although there is no doubt that some legal solutions could have been better than the ones adopted (which shall also be proven later by the example of the Law on Financing Political Parties), we believe that the deficiencies in these regulations do not originate from the desire to make the issues unclear and incomplete, but from insufficient ca- pacities to carry out the great reform attempts, and from “skipping” the usual checks of legal texts, wishing to use the favourable moment of political accord and start reforms in this important sphere. That is how Serbia got the new Law on Financing Political Parties, which presents a significant step forward in reducing the possibility of political corruption through corrupting political parties. At the same time, a great number of important issues was left to be solved in the period after passing the Law. Unfortunately, it was a year after passing the Law that all those issues started to be tackled, at the time when implementation of the project Promoting Democracy and Preventing Corruption was commenced, the result of which is this book. Passing and application of the new law was assisted by OSCE Mission in Serbia and Montenegro. This organisation organised in October 2002 (together with the Government of Serbia) an international conference on the issues of fighting against corruption in Serbia30. Financing political parties was one of the four thematic units, and participants had the opportunity to have discus-

28 29 sions with some of the most renowned experts from this field.31 Furthermore, after passing the Law this organisation organised the training for accountants in political parties,32 and it financed the promotion of the Law and printing of adequate publications (together with MF), at the end of 2003. Not much is known about the process of writing the law and its passing within the executive power. Occasionally, some of the issues that apparently were the subject of dispute became known to the public, one of them being anonymous donations. Namely, there had been some aspirations within the ruling structure to keep the anonymous donations as the legal source of party income, but finally they were forbidden. Law authors tried to include some of the good solutions from experience of others into the law text. For example, in the quoted text Minister Đelić mentions compliance with the recommendations given by the Council of Europe in April 200333. Review of solutions from other countries34 with brief explanation of legal standards can be found in MF Publication, and these solutions were obviously taken into consideration at the time of writing the text. However, there is no proof indicating direct transfer of legal solutions from some other systems into Serbia35. On the other hand, it is evident that some of the provisions of the Model Law from 199936 were literally copied37, and that some were inspired38 by the solutions from the Model. Similarity with another later version of the same text is even greater39.

30 Conference “Establishing efficient mechanisms for preventing and fighting against corruption in Serbia”, Belgrade, Sava Centre, 25 and 26 October 2002. 31 At the conference, the speakers were Michael Pinto-Duschinsky, Brunel University, Great Britain, Gene Ward, an expert on finance in the field of politics, Office for democracy and management, USAID, Paul C.R. Flather, Secretary General of Europeum, Mansfield College, Oxford University, Great Britain, and professor Josip Kregar from Zagreb Law Faculty. 32 Training of accountants and bookkeepers in political parties took place in OSCE premises, on 12 December 2003, and lecturers were the officials of Public Payments Administration. 33 Documentation Annex No. 10. In this research we have not investigated compliance of legal solutions with the CoE Recommendations. 34 “Review of the Law on Financing Political Parties” (Aleksandra Drecun), within MF Publication. 35 Which was not rare in Serbia at the beginning of this century. 36 CESID, 1999. 37 E.g. Articles 7 and 17, para. 1 of the Law. 38 E.g. Article 6 of the Law, provision on maximum individual donation of a natural person and legal entity, provision on a special account for financing a campaign. 39 Model law of Montenegrin non-governmental organisation CEMI from 2002.

28 29 Financing political parties is a matter in which there are no uniform “best solutions”, and each solution has its advantages and disadvantages; it is the matter of political choice and political will which system shall be adopted and how it shall be coordinated with the other regulations. That is why a professional public discussion was absolutely necessary for passing an adequate regulation and for selecting the most suitable financing concept based on a broader public agreement. However, this public discussion never took place.40 The fact that public discussion had not been held before sending the draft law into the Parliament41 was surely not a good thing and its consequences can now be felt in the law application. On the other hand, there can be a certain justification for such actions by the ones writing the law. Considering that the Government itself was heterogeneous and that in order to vote for important decisions, political parties demanded within coalition a reward on some other side, it could be claimed with much certainty that, at least when limitations and responsibilities of political parties are concerned, it was most of all the enthusiasm of MF promoters of the law that caused the Law to be passed. Once it had been proposed by the Government, it was not difficult to pass the Law. Not only did the Government provide majority for passing the Law, but the opposition parties as well showed no animosity towards this bill. This matter simply became sufficiently known to the public and nobody wanted to run the risk of being criticised as having something against the anticorruption law.42 Finally, at the time of passing this Law, there were intense political disagreements regarding other issues43, which presented an introduction to a final disintegration of the Assembly majority in 2003. The Law

40 Trying to raise the issue and to achieve exchange of experience and information, Transparency-Serbia organised together with Konrad Adenauer foundation on 11 June 2003 a meeting with the topic “Financing Political Parties – norms and practice in Serbia”. The meeting participants had an opportunity to hear about the experience from Germany, Holland and Slovenia, and then political parties’ representatives, in dominantly tolerant atmosphere, expressed their opinions on how this field could be regulated in Serbia. Finally, MF representatives presented practically ready text solutions soon afterwards adopted in the National Assembly, and which until then have not been known to the representatives of many parties. 41 In the Assembly there were many amendment proposals by political parties, and some of them were incorporated into the final text, regardless of whether they came from the deputies of the parties in power or of the opposition parties. 42 Even the opposition deputies voted in favour of this Law, except SRS representatives who did not take part in voting, probably not wishing to support the proposal that came from the Government, or to vote against it.

30 31 was passed in the National Assembly on 17 July 2003, and it was published in the Official Gazette of the Republic of Serbia No. 72, 2003.44 The Law was complemented by the Finance and Economy Minister’s by-law, Rulebook on the Records Content and Compiling Reports on the Political Parties’ Property and Contributions45, the attachment of which contains model forms of reports parties are obligated to submit. According to the Law author, the new law that regulates establishment and operation of political organisations was supposed to be complementary to it.46 Although the Law came into force on 26 July 2003, its application was postponed until 1 January 2004. This solution was explained by the fact that the Law would increase the scope of budget funds allocated to financing the operation of political parties and financing electoral campaigns, and that the budget would be burdened if these unexpected expenditures were imposed on it in the course of the budget year. This argument can not be disputed when the regulations on budget financing are concerned. However, application of the regulations not connected to budget financing was also started on 1 January 2004. Although there could be arguments against such a solution, it could have had one positive consequence – that the political parties and organs responsible for implementing the law get prepared for fulfilling the new obligations and duties. Unfortunately, as will be shown in the third chapter, this delay has not been used nearly as much as it should have been.

43 On the same day when the Law on Financing Political Parties was passed, the Law on the National Bank of Serbia was passed as well, which caused the beginning of intense conflicts between G17PLUS and the Government of Serbia. 44 In an unusual manner, the Law was changed a week later, and “corrections” were published in the Official Gazette of the Republic of Serbia No. 75. These “corrections” provided for the Assembly Finance Committee some competences that, according to the original text, belonged to REC. 45 Rulebook was passed on 2 December 2003 and published in the Official Gazette of the Republic of Serbia No. 119, 2003. 46 That proposed law was not, however, adopted, although it had been in the procedure, because the National Assembly was dismissed in November 2003.

30 31 Innovations brought about by the Law from 2003

The new Law, compared to the one previously in force (the Law on Financing Political Parties from 1997)47, brought about innovations in all the fields that this document regulated, and included some of the fields that have not been regulated previously or have been “covered” by the provisions of other documents.

Financing sources limitations

Prohibition of financing by “the governments, other organs and organisations of foreign states and other foreign persons” (article 2, paragraph 2, item 1, Law 1997) was taken from the old law, except that it was defined as “prohibition of material and financial assistance from...” (article 6, paragraph 1, Law 2003). While the old Law contained the prohibition of financing by the state organs and local self-government organs, (except for the funds allocated in accordance with the law regulating budget financing)48, the solution from the new law has a similar effect, and financing from public sources is limited to the funds that are appropriated from the budget for financing the regular work of a political party, that is its electoral campaign.49 However, significant differences appear in financing by the other legal entities that can be considered to be under strong control by the state. In the old law, financing by public companies or by the companies in which the share of the state owned or socially owned capital exceeded 20 percent, was forbidden. In the new law, this prohibition is extended to all public institutions and companies in which there is any share of government capital whatsoever. When other domestic legal entities are concerned, their donations in the old law were limited only in terms of amount, while in the new law, in addition to the donation amount, a whole list of potential donors is entirely excluded.50 In the old law, anonymous donations were only limited (to 3 percent of

47 “Official Gazette RS”, No. 32/97 48 Article 2, paragraph 2, item 2, Law 1997 49 Articles 3, 4 and 9, Law 2003 50 Article 6, paragraph 1, Law 2003

32 33 the total net income of a political organisation in the previous year, while it was not clearly specified whether this was the sum of all anonymous donations or the limitation for the amount of an individual donation); these are entirely prohibited by the new law.51 As far as permissible “private financing sources” are concerned (stated in 2003 Law terminology), the following were listed in the old law: membership dues, contributions, income from political party’s own property, income based on the proprietary rights in companies, loans, gifts, legacies, testaments, and other sources in compliance with the law. Stated in this way, political parties could have income of another kind if it was legal according to the regulations of other laws. Contrary to this approach, the new law adopts the principle of itemised lists regarding the sources of income considered to be permissible. These are: membership dues, contributions by legal entities and natural persons, income from political party’s promotional activities, income from political party’s property and legacies. In addition to that, the new law specifies very important definition of certain types of funds that are included in the so-called “private financing sources”, as well as their maximum allowable amount, depending on the source, or on the share in the total financing scope. These defi- nitions and limitations shall later be discussed in more detail.

Amount and allocation of the funds from the budget

The approach in determining the budget funds allocated to parties was completely changed, so the data on the degree of the budget financing increase can only relatively be compared (depending on the observed year or elections). The decision remained that only the parties represented in the parliament may receive the Republic Budget funds for their regular work (similar principle was also applied on the other levels of government, i.e. local self- government in the new law). Based on the former solutions, the parties had for their regular work the right to two average salaries in the Republic per month for each deputy they have in the Republic Assembly.52 According to the new solution, the total amount of the funds to be allocated to the parties is determined in relation to the size of the budget, and not in relation to the average salary in the Republic.

51 Article 2, paragraph 2, item 3, Law 1997, i.e. article 6, para. 1, Law 2003

32 33 Furthermore, the distribution principle has also been changed. Only 70 percent of these funds is distributed proportionally to political parties based on the number of seats they have won in the representative body. The other 30 percent is distributed evenly to all the parties that have at least one deputy or councillor. High percentage of equal distribution (30 percent), rare in con- temporary practice, was obviously adopted as a consequence of that political moment – the influence of “small” parties at the time of passing the law. When financing of electoral campaigns is concerned, there have also been significant changes with regard to the previous regulations. Not only has the basis for determining the amount of funds been changed (proportionate part from the Republic Budget, territorial autonomy unit budget or local self-government unit budget, instead of a number of average salaries in the Republic), but also the manner of the funds distribution. In the past, parties could count on five average salaries per each deputy they have in the Assembly before the elections and on the same amount per each deputy seat they win in the new composition of the National Assembly. Now, however, the funds are allocated to the nominators of lists, i.e. the nominators of candidates (not only the parties, but also “the groups of citizens”) that participate in the elections (regardless of whether they are represented in the Assembly) in equal amounts, and that is how 20% of the funds appropriated from the budget are allocated. The remaining part is distributed according to the old principle – proportionally to the number of seats won.53 When financing presidential campaign (Republic president) is concerned, according to the former regulations, all the nominators shared the amount of 1000 average salaries in the Republic, and the purpose of these funds was exclusively to provide equal conditions for presenting the candidates.54 The new Law treats this issue exactly the same as financing the MP campaign. This shall be discussed more thoroughly in the text.

52 It should be pointed out here that before Constitutional Charter of the State Union of Serbia and Montenegro came into force (4 February 2003), political parties from Serbia (as well as their colleagues from Montenegro) also received considerable funds from the budget of former FRY (but practically on the account of Serbian budget), based on the number of seats in the Federal Assembly, and based on FRY Law on Financing Political Parties (Official Gazette No. 73, 2000). 53 And it is allocated to the list nominators, and not to all the political parties in the list. For example, had this Law been applied to the parliamentary elections in December 2003, DSS, DS, and G 17+ would have had the right to these funds, depending on the number of seats won by their lists, regardless of the fact that there were representatives of some other political parties (SLS, NDS, DC, GSS, SDU, BDSS, SLPS and SDP) on those lists. 54 This matter was governed by the Law on Presidential Elections, Article 13 a.

34 35 Regulations on keeping records of income and expenditure

These regulations were insufficiently defined in the Law from 1997. Article 9 stipulated that political parties should keep accounting records of their income and expenditure, that the sources of political parties’ income should be public (which only had declarative meaning), that income records should be expressed by type, amount and origin and that political parties were obligated, in keeping accounting records, to present particularly the funds used for financing their electoral activities. It could be claimed that, in everything else, regulations from the other laws governing the legal entities’ operations, which, for example, included submitting the annual statement of accounts, were applied with respect to political parties. The new law defines this matter in much more detail. It is important to point out that many issues related to campaign are governed by special provisions. Furthermore, the following is stipulated by the new Law: a political party shall have an account, and its organisational entities may have subaccounts “to which funds are remitted in accordance with this Law”; “The Statute of a political party ... shall set out relations between organisational entities of a political party in respect of remittance of funds.” A political party shall keep accounting records of all income and expenditure; The accounting records shall be kept according to the origin, amount and structure of income and expenditure in compliance with the accounting regulations; A political party is required to keep special records of contributions received and of its property (Article 16, para. 1, 2 and 4 of the Law from 2003). These provisions are similar to the ones contained by the previous law, with the question of content of the reports to be submitted by political parties and the manner of keeping the accounting records that should precede these reports, defined more thoroughly in by-laws by the Ministry of Finance. The innovation is in the form of obligations stipulated in Article 17 thereof, which, it seems, rightfully penetrate into the internal organisation of finance management in political parties. Thus, it is prescribed that the Statute should regulate the manner of performing “the internal inspection of financial operations” and “the right of party members to be informed of income and expenditure of the party.” Both of these obligations (for now only potentially) present powerful preventive mechanisms in the fight against corruption.

34 35 Reporting, inspection and public

While in previous regulations party finance reporting was contained within general regulations governing reporting of other legal entities, this issue has been treated separately in the new law. We are pointing out as particularly important the provision of Article 17, paragraph 3, stipulating that political parties shall, through the Statute, set out the officer responsible for financial operations, reporting and bookkeeping, and for contacts with the Finance Committee, and paragraph 5 thereof, specifying that “the responsible officer shall sign all reports and is responsible for all records relating to reports...” Inspection authorities are now divided. Instead of the old regulation that “auditing of material-financial operations of political parties shall be performed by an administrative body responsible for the public revenue operations”55 and that “supervision of the law implementation shall be performed by the Ministry responsible for finance and an administrative organ responsible for public revenue”56, now it is stipulated that parties are obligated to submit reports to the National Assembly Finance Committee, i.e. REC (financing of electoral campaigns). In addition to the possibility of these organs performing party financing inspection, auditing procedure also has an important place among the new solutions. Thus, a political party is required to submit the annual statement, together with a certificate of a certified auditor (Article 16, para.5), and REC may, in checking of the report on the funds raised and spent on the electoral campaign, engage certified auditors (Article 14, para. 3). Parties’ operations are now made more public by this Law than was the case earlier, considering that not well defined regulation according to which “the sources of political parties’ income are public” has been replaced by accurately specified publicity elements: publishing the reports submitted by political parties and making the reports available to the public (“typical” example of the regulation on the access to information right).

55 Article 9, para. 4 of the Law from 1997. 56 Article 10, the Law from 1997.

36 37 Sanctions

For violating the Law provisions, only pecuniary fines are still prescribed. These fines have significantly been increased57, and so has the number of reasons for which fines can be passed, which results from a greater number of prohibitions, limitations and obligations. Furthermore, the new Law specifies the possibility (or obligation?) for Finance Committee to pass the decision that a political party has forfeited the right to public funds for the following calendar year, if the party has “effectively been penalised” for an offence stipulated under the Law on Financing Political Parties. Possible effects of taking such a measure are much more dangerous for a political party than violation fines, considering the importance of budget financing in the new legal framework. It should be borne in mind that neither former nor present regulations derogated in any way a possible criminal liability of the persons that had committed criminal acts (violating at the same time both the regulations on financing political parties and electoral campaigns) – for example, the criminal act of forging official documents.

Increasing the scope of financing from the budget funds

As previously pointed out, the budget fund amount appropriated for political parties has been increased manifold. Since before passing of the Law in 2003 the public was not familiar with the amount of funds necessary to be appropriated for financing regular work of political parties and their electoral campaigns, it is difficult to assess to what extent the new Law provides “reasonable balance between financing from the public and private sources”58 and to what extent it introduces financing from the budget as dominant.59 In the manner stipulated in Article 4, paragraph 1 of the Law from 2003, political parties are allocated for regular work (in 2004) the funds amounting

57 Compare: Article 11 of the Law from 1997 and Articles 19 and 20 of the Law from 2003. 58 A. Drecun: Review of the Law on Financing Political Parties, page 4 (in the text), MF Publication

36 37 to CSD 341,671,000 (about EUR 4,7 million) from the Republic Budget and CSD 5,364,953 (about EUR 73,5 thousand) from the budget of Autonomous Province of Vojvodina. For the sake of comparison, had the Law from 1997 still been in force, the parties would, on this basis, be allocated from the Republic Budget about CSD 129 million (about EUR 1,77 million)60. The reasons stated for such an increase of the budget financing were as follows: “In this way, equal political race is ensured, dependence on private donors and the possibility of corruption are reduced... The budget financing level should not exceed the level strictly required for achieving these objectives, since excessive reliance on financing by the state could lead to weaken- ing of the ties between the parties and their electoral body.”61

Role of state organs in applying the law

Essential state organs in terms of applying the Law are Ministry of Finance of the Serbian Government, Serbian National Assembly Finance Committee and the Republic Electoral Commission. Functioning of legal solutions significantly depends on the relation they have with parties and among themselves, considering that these solutions, as will be shown later, particularly in the procedure, are not entirely in accord.

Ministry of Finance

This state administration organ has the following significant roles in ensuring the functioning of legal regulations:

59 It could not be claimed that the “truth is somewhere in the middle” between these two standpoints, but rather that the matter can not be observed in a uniform manner, and that with each party, or at least with each party type (depending on the number of members, influence in the political system, etc.), the new Law had various effects. 60 This is just a rough estimate, since it is based on the average salary of one month. According to the data for July 2004, average salary in the Republic was CSD 21,495. According to the Law from 1997, political parties were disbursed annually 6000 average salaries in the Republic. 61 A. Drecun: Review of the Law on Financing Political Parties, page 4 (from MF Publication)

38 39 1. Providing expert opinion on the application of certain regulations of the Law and Rulebook62

2. Preparation of the budget (inclusion of predictable expenditure for financing electoral campaign and the funds for financing regular work of political parties, as well as taking into consideration the possibility of early elections, when determining the level of budget reserve).

3. Transfer of monthly amounts for regular financing of the operation of political parties until the tenth of each month for the previous month.

4. Distribution of the funds for financing electoral campaign based on the data obtained from the electoral commission (the amount that is distributed in equal parts, 10 days after participants in the elections have been determined; the amount allocated to those whose candidates have won seat(s), 10 days after the completion of electoral process).

All these items, except the first, in appropriate way also refer to province, town and municipal organs responsible for finance in terms of elections in their territory.

Assembly Finance Committee

The Law stipulates that the Committee shall do the following:

1. Receive the annual statement of accounts from political parties, report on contributions exceeding CSD 6000 (EUR 85,7) and report on political party’s property.

62 Based on the provisions of Article 67, para. 2 and 70 para. 3 of the Law on State Administration from 1992.

38 39 2. Contact with political parties regarding fulfilment of their obligations, the change of the authorised person, and the like.

3. Make the reports submitted by the political parties available to the public and ensure copy of the reports at the expense of the interested citizens of Serbia.

4. The Committee’s president files charges with competent authorities if he determines irregularities related to collection, use or recording of the funds.

5. Pass the decision that political party has forfeited the right to public funds for the following calendar year (if the party has effectively been penalised for an offence stipulated under this Law).

The Republic Electoral Commission

This organ was established on the basis of the Law on the Election of People’s Deputies63, with the tasks significantly differing from the ones it was assigned by the Law on Financing Political Parties.

63 In Article 34, REC tasks have been determined in the following manner: 1. ensuring that the elections are carried out legally, 2. organising technical preparation for the elections, 3. monitoring the application and providing explanation regarding the application of this Law, 4. determining uniform standards for electoral material, 5. specifying the model and rules for performing electoral activities stipulated by this Law, 6. specifying the type of spray from Article 68, paragraph 4 thereof, 7. determining and publishing in the “Official Gazette of the Republic of Serbia” the number and address of polling places, at least 20 days before the date set out for the elections, 8. establishing electoral committees and appointing the president and the members of electoral committees, 9. determining the number of ballots for the polling places, verifying them and together with the verified extract from the voters’ list, delivering them to the electoral committees, 10. determining electoral acts to be submitted to it, 11. determining whether the electoral list has been compiled and submitted in accordance with this Law, 12. passing the decision on announcing the total electoral list, 13. determining the manner of preserving and handling the electoral material, 14. determining and announcing the election results, 15. determining the number of seats belonging to each electoral list, 16. reporting to the National Assembly of the Republic of Serbia on the implemented elections, 17. submitting the data to the organs responsible for collecting and processing of statistical data, 18. performing other activities specified by this Law, making its operating procedure.

40 41 Within electoral campaign financing, REC should do the following:

1. Submit to the Ministry of Finance the data on the verified participants in the elections and on those who won seat(s) in the elections.

2. Receive reports by the nominators of candidates and nominators of electoral lists on the origin, amount and structure of the funds raised and spent on electoral campaign.

3. Check the data contained in the report within 90 days of receipt of the report (obligation) and engage certified auditors to perform specific tasks of this audit (possibility).

Coordination

The Law itself has not specified the mechanisms of coordinating the operation of these three organs, although there is no question that the cooperation is obligatory. For example, when effecting payments from the budget to the nominators of candidates and nominators of electoral lists that have won seat(s), it has not been specified to compare the data on how much these nominators of candidates and nominators of electoral lists have previously spent. Namely, the Law specifies that the budget funds be appropriated for covering the electoral campaign costs, in the amount of those costs, and not over the legally prescribed maximum. If there is no comparison of the data between REC (which receives the reports on the funds raised and spent) and MF, it may happen that MF effects payment of legally prescribed maximum to the nominator of list or the nominator of a candidate that has not spent the funds in that amount, or has not even submitted the report.

40 41 Are the Finance Committee and the Republic Electoral Commission adequate bodies for the assigned tasks?

As already pointed out, question may be raised whether REC can perform the assigned tasks if its scope of activity is so narrowly defined, as we know it is, by the act that established it. It is obvious that both in case of REC and the Finance Committee, the greatest part of operative work may fall on the National Assembly Service that is at the disposal of both organs. The next problem is (in)capability of these organs, due to their structure and the assignments they have on other matters, to engage themselves properly in implementing the Law on Financing Political Parties. What is particularly conspicuous is lack of expertise. In some aspects it is made up for by the fact that the parties are obligated to submit reports that have already been au- dited, or by the fact that REC may engage certified auditors to perform specific tasks of this audit. On the other hand, the competence of the Finance Committee president to determine “irregularities related to collection, use or recording of funds in terms of this Law”, based on which he files charges with competent authorities, is very controversial. Furthermore, if this rule were interpreted restrictively, it could be interpreted that the Finance Committee president is not obligated to determine in each and every case whether there have been any irregularities in terms of collection, use or recording of the funds, but that his obligation ensues only if such a discovery has been made. This, however, would enable selective application of the Law (e.g. filing charges only against political opponents of the Committee president, with the excuse that in the activities of the party he comes from or its political allies, he simply has not determined any such irregularities – because he did not review them at all, did not know to recognise them, or for any other reason). The situation is not much better even with the Republic Electoral Commission. In saying that REC may engage certified auditors to perform specific tasks of this audit, it is overlooked that REC is not competent enough to formulate the tasks for these auditors, or to determine where auditing is no longer necessary. Auditing is a specific activity in which true conclusions can be reached only by checking all the relevant circumstances and facts. REC is not an institution that must know how auditing functions, and there is a constant danger that it may not notice all the operations that would be necessary or useful to be included in the audit. With both of these institutions there is another big problem regarding control of financing parties or electoral cam-

42 43 paigns. Namely, they can hardly be considered to be independent institutions. Distribution of power (among political parties) in the National Assembly has a decisive influence on their composition, and it is usually a true reflection of the number of seats political parties have in the parliament. Such institutions may reasonably be expected to act differently depending on whether the omission has been made by a parliamentary majority party or not, or it may be expected to make a “compromise” satisfying everybody – not performing audits at all, or not performing sufficiently thorough audits.

Approach in regulating presidential campaign financing

The manner in which the Law regulates the financing of the campaign for the election of the President of the Republic

Regarding electoral campaigns, the provisions refer equally both to political parties and to “groups of citizens” that appear in the function of nominators of candidates (for the president, mayor), or nominators of registered electoral lists (candidates for people’s deputies, councillors). The Law specifies that certain rules effective in financing regular work of political parties shall apply to financing electoral campaign (e.g: Article 11, paragraph 4 specifies that provisions of Article 5, paragraphs 2 and 3 shall accordingly apply to collection of funds from private sources for financing of election campaign costs. In terms of this Article 5, para. 2 and 3, a contribution implies all gifts and services under conditions deviating from market conditions, and the entities providing such services or products shall make out an invoice to the political party.) The next feature of financing presidential campaign is that the rules are determined in exactly the same way as for financing parliamentary elections.

42 43 Financing from the budget General rules

The Law on Financing Political Parties specifies in Article 9 the percentage appropriated from the budget of the Republic, the territorial autonomy unit, towns and municipalities for the financing of electoral campaigns. Introductory Article of this Law indicates the ones financed from these sources: “This Law governs financing ... nominators of registered election lists and nominators of candidates for president of the Republic of Serbia, municipality presidents and town mayors.” The Law does not explicitly state which election candidates are financed from which sources. This makes possible two consistent and by far greater number of inconsistent interpretations. The consistent ones are: a) that all elections be financed in the stated amounts from each of the stated sources (e.g. that the nominators of presidential candidates be financed from the budget of the Republic, the territorial autonomy unit, towns and municipalities), or b) that the electoral campaign be financed only from the budget of that territorial unit for whose organs the election takes place (that the presidential elections be financed only from the budget of the Republic, elections for the mayors only from the town budgets, and so on). The latter solution seems far more logical, and it appears that the law authors had that solution in mind. In event of early elections, the funds would be provided from the budget reserve in the amount prescribed by the law (since in forming the budget for the current year, such elections often can not be predicted). The funds for early elections are appropriated in the same amount as for the regular ones. It is believed that each of the listed types presents special elections for which the funds are provided in the prescribed amount. The Law does not stipulate the possibility that the prescribed amount be divided in several parts, if two types of elections were held at the same time for the organs on the same level of government (e.g. elections for the president of the Republic and for the National Assembly). The following argument can be given in favour of this allegation: after having determined the level of appropriations from the budget in the amount he considered necessary for achieving the objectives of such financing, the legislator limited financing from private sources in relation to the prescribed rate of budget appropriations. Already at first sight it is not logical that limitations for financing presidential campaign should be on one level when presidential elections are held separately, and that they should be twice as stringent when electoral campaign takes place in parallel with the

44 45 one for parliamentary elections. On the other hand, it is clear that campaigns of political parties when they have a double role (that of nominator of electoral list and of nominator of a candidate) are often managed in such a way that it is hard to determine whether a certain advertisement, poster or meeting serve the promotion of a candidate for president or of electoral list (the candidate often being the bear- er of the list). It is obvious that such a campaign is proportionally cheaper for the political party, and that it is made possible for it to a) achieve double effect with the same funds (promotion of the presidential candidate and electoral list) or b) provide double funds for the electoral campaign by collecting the prescribed maximum based on its double role (the nominator of a candidate and the nominator of electoral list). According to the Law, nominators of candidates receive a certain amount from the budget for the election campaign costs. As far as elections for the Republic organs are concerned, it is 0.1 percent “of the Republic of Serbia budget, reduced for the transfers to other levels of government and social security and medical insurance funds” (hereinafter referred to as RB).64 According to Article 10, paragraph 1 thereof, the total amount is divided in two parts that are intended for different purposes. One fifth of the amount appropriated from the budget is distributed among all the candidates that participate in the elections, and four fifths to the nominator of the elections winner. As previously pointed out, one of the purposes of financing campaigns by the state is minimising the possibility of political corruption flourishing, in such a way that elected people’s representatives can be more independent with regard to private donors. In that sense, allocation of the greatest part of the budget money to those who win the elections and who shall have influence in creating the state policy is entirely logical. That is why after parliamentary elections the greatest part of money from the budget is allocated to all the nominators of electoral lists that pass the prescribed limit, proportionally to the number of deputy seats won (theoretically, proportionally to their future influence in creating the state policy), and in presidential elections only to one – to the nominator of the winning candidate (since only the winner shall have the opportunity to run state affairs). On the other hand, the budget amount nominators are entitled to before the elections are held does not have the anticorruption component – it is merely aimed at providing the opportunity for the candidates disposing

64 This year, it is approximately CSD 227 million (at the beginning of the presidential election campaign, about EUR 3,25 million).

44 45 of modest funds to make their programmes known to the voters. It should always be borne in mind that the funds are not allocated to the nominators of candidates unconditionally. The Law stipulates that in case the paid funds “exceed the amount of funds spent for the election campaign up to election day, the difference shall be returned to the budget of the Republic of Serbia ... within 10 days from the day of payment.”65 Such a concept (that the payment itself is not conditioned by justification of expenses) caused certain difficulties in case of payment to the nominator of the winner in presidential elections in June 2004, which shall be discussed more thoroughly in Chapter 3.

Squandering a part of the budget funds

The main shortcoming of the above mentioned concept is the fact that the Law does not set sufficient limitations regarding the part of the budget funds allocated before the elections. Consequently, such allocation indirectly stimulates participation in the elections of those candidates that do not have serious chances to win and that do not even aim at winning those elections – but at personal or party promotion. In order for the budget funds not to be spent for such purposes, whose social benefit is questionable, there have been various solutions in practice, (e.g. down payments by candidates that are not returned in case of poor election results). The solution from Montenegrin Law on Election of the President of the Republic from 2003 is also interesting, according to which (Article 23, paragraph 2), “candidates for the president of the Republic, who win at least 5% of the votes in the elections, are entitled to an equal compensation of the electoral propaganda costs.”

Conflict of rules on the funds allocated to the nominator of the winner

Based on the provision of Article 10 of the Law, nominator of the winner is entitled to the greatest part of the funds that are, in accordance with Article 9 paragraph 1, appropriated from the budget.66 It should, however, be borne

65 Article 10, paragraph 3 of the Law on Financing Political Parties from 2003.

46 47 in mind that this amount is to be allocated in accordance with the law later on, i.e. after all the costs have already been incurred. If the funds paid pursuant to this provision exceed the amount of funds spent for the election campaign up to election day, the difference shall be returned to the budget of the Republic of Serbia. Therefore, no nominator of a candidate, including the one nominating the winner in the elections, if the Law is observed, can not “earn” this money. Since the funds are intended to “cover the election campaign costs” (Article 9, paragraph 1 of the Law), and since the nominators of candidates are entitled only to the amount already spent (Article 10, paragraph 3), it can be concluded that the money appropriated from the budget after the elections may be used only to cover the incurred costs. This actually means that it would be possible to return contributions to the donors, pay the volunteers, return the funds collected through membership dues into the permanent account of a political party and the like. The second provision that directly influences the application of the previous one, is stipulated in Article 10, paragraph 2 thereof. It is stated that the amount that nominators of candidates may raise for financing the election campaign costs shall not exceed 20 percent of the amount from Article 9.67 Raising and spending the funds contrary to the set provisions or raising a greater amount than is allowed is subject to violation liability (Article 19). Therefore, it can be concluded indirectly that no nominator of candidates could present the election campaign costs to be greater than the amount he was allowed to raise68, without making himself liable for violating the Law! Considering that all provisions on the amount of funds that may be raised refer to “the amount from Article 9, paragraph 1”69, maximum amount of the funds that may be raised from private sources can be expressed through formula “0.02% RB”, and maximum amount of funds that may be spent in an election campaign through formula: 0.02% RB + (0.02% RB/number of candidates)70. It can be concluded from the previously stated that the amount allocated in accordance with the provision of Article 10, paragraph 1 to the

66 In presidential elections in June 2004, this amount should have been CSD 182,124,000. 67 In case of presidential elections in June 2004, it should have been CSD 45,531,000. 68 To raise from private sources, i.e. a part of public ones appropriated before the elections. 69 0.1% of the Republic of Serbia budget (reduced for the transfers to other levels of government and social security and medical insurance funds). 70 E.g. when there are two presidential candidates, maximum allowable expenditure would be 0.03% RB, when there are five of them, 0.024% RB, and when there are 10 of them, 0.022% RB.

46 47 nominator of the candidate that won in the elections (0.08 RB), becomes a kind of “accounting category”, and not the real amount that the nominator of the winner could be entitled to. The need of such an “accounting category” results merely from the fact that financing of all types of elections is specified in the Law by one provision. If financing the campaign for the president of the Republic, municipality president, and mayor were treated separately by the Law, such need of “accounting category” would not exist.71

Funds must initially be raised from private sources

The costs incurred from the moment of calling the elections up to the election day may be presented as election campaign costs.72 Once the elections have been scheduled, the nominators submit candidacies to REC; REC verifies them and determines the list of candidates. Within 10 days from determining the candidates list, the first part of the budget funds is allocated (0.02% RB/ number of candidates). At that moment, greater part of the electoral campaign has already passed. Therefore, in order for the nominators of candidates to be able to finance the electoral campaign at all, they have to raise the funds from the private sources defined by the Law. The Law does not include loan among the permissible private sources of financing. On the other hand, political parties have not explicitly been forbidden to take loans, nor to effect deferred payments, so that they actually can use these possibilities when entering election campaign. On the other hand, they surely can not present a loan as such in their report on financing sources. This issue is very complex considering the other provisions of the Law on Financing Political Parties, which shall be discussed later.

71 It is important to point out that for the same reasons there may be confusion with regard to financing parliamentary elections. Namely, if more than 1⁄4 of deputies are elected from a list, there would be a conflict of rules governing the allocation of the funds from the budget and limitation on raising the funds from private sources. Had the Law on Financing Political Parties been in effect at the time when the last parliamentary elections were held (December 2003), this problem would have appeared because there was 32.8 percent of deputies elected from one of electoral lists. In that case 0.08% RB would be allocated according to the number of deputy seats won. Nominator of the list that in December 2003 won most seats (SRS) would have been “entitled” to 0.02624% RB based on its electoral success, while it could have raised, spent and later claimed from the budget maximum 0.02% RB. 72 Article 8 of the Law on Financing Political Parties.

48 49 Special account for campaign financing

The Law stipulates that all the funds intended for financing the election campaign costs should be paid into a special bank account that “may not be used for other purposes”73. Furthermore, the legislator has predicted the possibility of using cash, but only during raising the funds. In that case, the cash (e.g. contribution by a natural person) must be paid within three days into a special bank account74; on the other hand, payment of election campaign costs in cash is not permitted at all. The Law also specifies the possibility that nominator of a candidate may raise more funds than is permissible, and in that case it stipulates that the surplus should be transferred into the permanent account of a political party75 (by analogy it can not be concluded where “groups of citizens”, appearing as nominators of candidates, would transfer their surplus of raised funds). Special account is of temporary nature. This is indicated most of all by its purpose. The Law has not stipulated any firm obstacle76 for this account to be opened even before the calling of elections. It is possible to imagine that a political party would, while waiting for the elections to be called, start with raising the funds for financing the campaign. What is certain is that before the calling of elections, payments should not be effected from that account. Only those costs incurred from the calling of elections until election day are considered to be the campaign financing costs. Therefore, it may seem strange that the Law does not explicitly prohibit that, after the completion of campaign, funds be raised for its financing, i.e. that, after the elections, payment of costs be effected.

73 Article 12, para. 1. In fact, already in paragraph 2 of the same Article, entirely logical “other purpose” of using the special bank account is stated: “all payments of election campaign costs shall be made from this account. “ 74 Article 12, paragraph 3. 75 Article 12, paragraph 4. 76 The term used (“nominator of a candidate”) for the subject opening the “special account” may be understood as obstacle. Thus it could be claimed that nobody may be the nominator of candidates (but only a possible nominator of candidates in possible elections) before the elections have been called. The same logic, however, implies that it is possible to become the nominator of candidates only after REC has accepted the candidacy (and that only then the account for financing campaign may be opened), which would unjustly limit the time for raising the funds and implementing the campaign.

48 49 Loan and deferred payment

This makes it possible for the nominators of candidates to undertake certain financial obligations towards other entities (e.g. towards advertisement emitters or activists pasting posters), although at the time of undertaking these obligations, they do not have available funds for their payment. On the other hand, although loan has not been specified as a financing source, nominator of a candidate has limited possibilities to use the loan funds77 de facto for these purposes.78 Delay in meeting these obligations can not be unlimited. In this case, limit is not set by the creditor’s good will or by the obligations specified in the contract, but by the deadline for submitting report to REC. Practically, the entire financial structure of campaign financing should be “closed” before the nominator of a candidate submits the report on the raised and spent funds. Any other interpretation would lead to a complete discrediting of the principle of financing electoral campaign from an account that is separate from the party’s permanent account, and it would render the later campaign financing regularity control meaningless.79 Additional argument in favour of this assertion can be found in the principles of equality of the participants in the elections. While political parties are legal entities with continuity, it can not be claimed for the “groups of citizens” that have an equal right to nominate a candidate for the president. “Groups of citizens” need not have a formal structure, nor be a legal entity, and they present a kind of ad hoc organisation on a common project. Once the project is completed (with the completion of the elections), the reasons for the existence of this group cease. The entities responsible for financing the campaign, after fulfilling legal obligations as authorised by the “group of citizens”, have nowhere to draw their legitimacy from. They remain

77 Of course, if political parties may take loans at all, which is questionable considering the content of legal solutions on financing. 78 For example, if party A has in its permanent account CSD 10 million from membership dues, but needs those funds both for regular work and for campaign costs, it could take a loan in the amount necessary for its regular work, and transfer the income from membership dues into a special account for the purpose of financing electoral campaign. 79 REC examines the reports on the raised and spent funds within 90 days from submitting. If it had been accepted that undertaken obligations for campaign costs could be settled after submitting the report, that would mean that REC (and auditors it may engage) could not check within the legal deadline if those costs would be paid from the permissible financing sources.

50 51 personally responsible for possible omissions in operation, but the “group of citizens” on whose behalf they have acted does not have to exist any more, and account opened in its name may not be used any longer. Such group of citizens must settle its account in terms of financing electoral campaign before submitting the report to REC, and it would be unjust from the aspect of equality in the electoral race, if political parties were left the possibility to do it later. Once the above mentioned is accepted, there still remains the question of the amount the payment of which may be postponed, without violating the Law. As already stated before, nominators of candidates may count on receiving certain budget funds for financing their campaigns. The exact amount, however, is not known until REC verifies the exact number of candidacies, which happens only in the final phase of the campaign. That is why deferring payment on account of expecting the funds presents, to a certain extent, a risk to the nominator. However, it can with considerable certainty be expected that the number of candidates shall be within a certain range, and that in such a way, minimum amount to be received by the future candidates from the state may be assessed. For example, not in a single election for the president of Serbia, held after passing the requirement that the candidacy be supported by at least 10.000 citizens of age, did this number (of candidacies) exceed 16. Of course, from the moment of determining the final list of candidates, the exact amount of the funds to which the nominators are entitled to becomes known as well. Contrary to these funds ensured at least by the Law, there are the funds intended to cover the costs of the nominator of the elected president. Nobody is entitled to them nor can anybody with certainty count on them while the election process is underway. All the election campaign costs are incurred before the elections (mostly before the beginning of “preelection silence”80). That is why in planning campaign financing, nominators of candidates must have reliable private sources of financing. These imply the sources that shall be easily and quickly accessible to the nominator, even in case his candidate loses the elections. Such sources surely do not include contributions by natural persons and legal entities, which may be unreliable and may depend on the electoral success, but only permissible financing funds that already are in the party’s permanent account and that can be immediately transferred into a special account – such as membership dues and income from property.

80 See below the part in which it is discussed which costs are considered to be the electoral campaign costs.

50 51 Of course, another view is possible, which the author of this text does not agree with, and which would be based on a justified assumption that all the nominators of candidates have legitimate hopes (and all but one wrong predictions) that they shall win the elections, which in fact is the objective of electoral campaigns. According to this view, nominators of candidates, hoping to win, could incur costs up to the amount appropriated from the budget for settling the costs of the elections winner (0.08% RB). Thus, nominators consciously run the risk of exceeding the maximum prescribed by the Law in case their hopes do not come true. In such a “scenario”, candidate campaigns are equal (in terms of invested funds), but after the elections, losers are strictly sanctioned. Another scenario based on the same assumption takes place when there is a distinct favourite in the elections. Nominator of such a candidate may with great confidence incur greater expenses (e.g. in the amount of 0.1% RB, i.e. 0.08% RB he expects to receive from the state and 0.02% RB he raises from private sources) and in such a way make his victory even more certain, since, on the other side, the nominators of candidates who assess that their chances are weaker, would, under the threat of sanctions for exceeding the limit, reduce their expenditure to almost five times smaller amount. As the Law implicitly stipulates that the total expenditure of electoral campaign is limited (which shall be discussed more thoroughly further on), it is necessary to ensure that this limitation is equal for all the nominators. If the funds for covering the costs of the nominator of the election winner were included in the permissible expenditure amount, this equality would not exist.

Other public sources of financing

In addition to allocating pecuniary funds, public sources of financing may be in the form of providing free use of state property. These public appropriations have not been regulated by the Law on Financing Political Parties, although that would be adequate. Some of these have been regulated by some other provisions, such as those ensuring equality to the participants in the electoral process. Thus, media having the public service status (or at least striving to acquire one), provide election participants with the opportunity to present their political views certain number of times, but commercial value of that time is not booked as the budget subsidy. It is interesting here to point out that according to the Law, free promotion of candidates in “public service” institutions could be considered as a kind

52 53 of “material and financial assistance” by “public institutions and public enterprises”, which is prohibited by Article 6. This creates conflict between this provision and the one from Article 49, paragraph 1 of the Law on the Election of People’s Deputies81, which should be settled in favour of the latter. Furthermore, free use of municipal premises for the candidate promotion in the elections or use of other state facilities for similar purposes, is quite frequent. What is most important is that all nominators of candidates are provided with equal possibility to use state resources in such a way. This matter, however, has not been regulated by the Law on Financing Political Parties, but by possible decisions by the organs disposing of public property (e.g. decision by municipal executive committee to allow municipal premises to be used by nominators of candidates free of charge or at reduced rate). By reviewing the Law82, it can be concluded that public funds allocated for financing the campaign costs are interpreted solely aspecuniary funds. In this way, from the aspect of democracy, legitimate forms of financing (such as providing public premises to candidates under equal conditions) are made legally questionable. As there is no general prohibition of using public resources (except in a way prescribed by the Law) for campaign financing, such misuses can be sanctioned on the basis of other (criminal) laws, but not always on the basis of the Law on Financing Political Parties. Thus, for instance, it would be considered as punishable misuse of state resources if a Minister, whose party participates in the elections, utilised the work of a designer employed with the Ministry for the preparation of promotional material for the party. However, question could be raised whether an obvious misuse, such as using the Ministry car by that Minister to go to a party meeting or using the Ministry phone for arrang- ing preelection meetings, is covered by provisions of the Law on Financing Political Parties, and whether it would be possible to pronounce a sentence for it based on this Law. The basis for this dilemma is current interpretation of the phrase “election campaign costs”, which shall be discussed more thoroughly further in the text.

81 Provisions of this Law apply to presidential elections as well. 82 Definition of public funds from Article 3, paragraph 2 and the manner of distributing these funds from Article 10, paragraph 1.

52 53 Raising funds from private sources

The Law does not recognise any other sources of preelection campaign financing except public and private ones. Funds from public sources have been discussed in the pervious section. Private financing sources have been determined as follows:

Types of private sources:

Private sources83 include membership dues, contributions by legal entities and natural persons, income from political party’s promotional activities, income from political party’s property and legacies. Membership dues imply the amount in accordance with the provisions set out in the Statute of a political party. A contribution implies all gifts, free services or services paid below the market price. Income from promotional activities is the income from sale of publications, symbols and other tokens of the political party or the candidate. Legacy as such has not been determined in the Law on Financing Political Parties, but in hereditary laws.

Prohibited sources of financing84 are as follows:

Accepting “material and financial” assistance from foreign states, foreign legal entities and natural persons, anonymous givers, public institutions and public enterprises, institutions and companies with government capital share, private companies performing public services pursuant to contract with government bodies and public offices, for the duration of such contract, enterprises and other organisations exercising public authority, trade unions, humanitarian organisations, religious communities, organisers of games of chance, importers, exporters, merchandisers and manufacturers of excise goods and legal entities and entrepreneurs with due but unsettled payments to public revenue.

83 Article 5 of the Law on Financing Political Parties. 84 Article 6 of the Law on Financing Political Parties.

54 55 Private sources – ambiguities and possible misuse

As in case with every law, this one as well has not completely “closed” all the possibilities of evasion, and it has initiated certain dilemmas, which demand additional efforts by the organs implementing the Law, as well as adequate interpretations.

Membership dues

This source of financing is available only to political parties and not to “groups of citizens”. Political parties’ membership dues are not high in Serbia, and it could be stated that it corresponds to economic situation of the country. Furthermore, long-lasting practice of Serbian political parties, wishing to at- tract as many citizens as possible, was not to collect even the obligatory party membership dues, so as not to irritate the members with this issue. However, there is a tendency of changing this practice, and of membership dues becoming in the future an important source of financing political parties in Serbia. Financing from membership dues can also be used for evading the legal limitations. This can be achieved in at least two ways, both of which aiming at presenting anonymous or donations from other prohibited sources as the membership dues funds. One form of misuse is setting out high membership dues (e.g. for certain member categories), and the other, presenting party members who have not paid their membership dues as if they have. The first form of misuse can be performed quite legally if, for instance, the Statute of a political party stipulates that membership dues shall depend on the payment capability of its members and that those members making profit of a certain level are obligated to pay membership dues amounting to, for example, a million dinars per year. In such a way it would be possible to evade the regulation on the maximum allowed donation by natural persons for the electoral campaign costs.85 The other possible way of evading regulations, when presenting party members who have not paid their membership

85 For example, a person wishing to contribute a larger amount than allowed for electoral campaign becomes a member of that political party, pays high membership dues for the entire year (if defined by the Statute), and then the party transfers this amount into a special account for campaign financing.

54 55 dues as if they have, the money actually originating from some illegal source (e.g. contribution by foreign natural person or legal entity) presents, in fact, a criminal act, because it entails forging of documents.86 There is no doubt that in an auditing procedure such actions could be discovered, and discovery of one such case could actually indicate that a more comprehensive inspection should be performed in order to determine to what degree this occurrence has spread.

Income from promotional activities

In the world, this method of raising campaign financing funds is used far more than is the case in Serbia, although it is possible that, even here, the practice may change. The term “promotional activities” may lead astray, because as specified by the Law, these activities actually imply the sale of publications, symbols and other tokens of a political party.87 Judging by the Law definition, this as well is the source of income available to political parties only, and not to “groups of citizens”, although it could be interpreted by analogy that “groups of citizens” as well may raise the funds for campaign by selling their “publications, symbols and other tokens”.88 This actually means that supporters of political parties are sometimes willing to assist a political party in acquiring additional funds by paying for publications published by the party or for products with party symobls89 more than the production and sale of such objects cost. Market value of such objects is difficult to assess – for some (for instance, the members of rival political camp), these are worthless, while for the others, these may have powerful emotional value (sense of belonging to a group that shares the same ideas and the like).

86 However, the risk of such a scheme being discovered depends on many factors, the most important being: whether the member allegedly paying the membership dues knows about this forgery, reliability of the officials who would perform such activities and possibility of auditors discovering such violation of Law. 87 Article 5, paragraph 5 of the Law on Financing Political Parties. 88 The basis for such an interpretation could be the principle of equality of participants in the elections. 89 Of course, not for the “symbols” alone, as the Law states incorrectly.

56 57 However, it is more important for the application of this Law to determine what exactly “income” from the sale of such material means. In other words, is it net income that remains after paying the costs of production, transportation, sale, possible duties, and so on, or is it the entire amount earned by the sale of such material. In the latter, all costs are directed to the permanent account of the political party or are paid from some other income within electoral campaign. It appears that formulation used by the legislator rather supports the latter solution. This type of income has, therefore, a hybrid nature: on one hand, party raised funds from the sale of, for example, badges at party meetings; on the other, conceptual design for that badge was maybe prepared by a designer supporting that party (thus providing a free service to the party – which is considered to be a contribution by a natural person), party paid for the production of that badge from the funds raised for the electoral campaign (e.g. obtained from the budget), and sale was performed by party activists (free service – contribution by natural person).90 “Income from promotional activities” can also be used to evade legal obligations. Namely, it is known that in practice this material is usually distributed for free in candidate promotions and in other situations (e.g. pens, cigarette lighters, balloons, leaflets) or it is distributed to the activists in the campaign (shirts, badges, caps and the like). The party that might want to receive a donation from a prohibited source, may decide to introduce this illegal income into legal flows, by reporting it as income from the sale of objects with party tokens. It seems that it would be difficult to reveal such a deceit, provided of course that fictitious sale of promotional material was “covered” with accounting documentation.91

90 When objects that have not been made in connection with the electoral process are sold (e.g. a book presenting party history), the party shall practically be completely free (unless obligated in some other contractual or legal respect) to decide which part of the obtained price it shall pay for financing electoral campaign. 91 It also seems that the sale of promotional material could be used for legal financing from the sources otherwise prohibited (e.g. from abroad). Strictly speaking, sale can hardly be considered as “material and financial assistance” (Article 6 of the Law) if implemented in accordance with the market conditions (e.g. a donor from abroad “purchases” a million pens with a symbol of a party from Serbia, and then he distributes them to potential voters of that party at his expense). Or, an international political organisation buys all the reamining printed copies of party monograph, thus increasing the party solvency at the time of campaign. Of course, such activities would be contrary to what was desired to be achieved by the Law, i.e. to the spirit of the Law, but it would be difficult to pronounce them illegal.

56 57 Contributions

Provisions of the Law defining contributions for financing electoral campaign are very important. These provisions are as follows:92

In terms of this Law, a contribution implies all gifts presented to a political party, free services or providing services to a political party under conditions deviating from market conditions. The authorised officer of a political party is required to issue a receipt for the received contribution. The shareholders’ assembly and managing bodies of the legal entity shall be informed of the contribution to a political party.

A legal entity or natural person providing services or selling a product to a political party shall make out an invoice to the political party, regardless of who shall be liable for payment for the services or product, and/or regardless of whether the services were provided or product given free of charge.

The purpose of these provisions was to prevent indirect violation of the limitations specified by the Law. In such a way, exceeding the maximum permissible contribution amount given by one entity is made impossible; thus it is prevented that through non-market discounts (e.g. in the media) one candidate gets favoured and that this remains unnoticed; thus it is ensured that contributions given by the persons that do not have the right to do so do not remain unrecorded. Finally, this provision makes it possible for the public to get an insight into the real cost of an electoral campaign by presenting engagement of activists and services by legal entities and natural persons in terms of money. However, no matter how well they might have been intended, these provisions may create great difficulties in application, some of which are as follows:

Free work of party activists

The Law does not make it possible for volunteering and free engagement of the members and supporters of candidates, which undoubtedly take place, to be excluded from the income of a party (or of nominator of a candidate),

92 Article 5, paragraphs 2 and 3 of the Law on Financing Political Parties.

58 59 and it must be declared. In order to clarify this issue, Transparency – Serbia asked for MF’s expert opinion. Here is what, among other things, has been replied93:

“... with respect to your question “whether volunteering by the supporters of a certain presidential candidate (e.g. engagement in pasting the posters, distributing promotional material, organising meetings) is considered as “free service”, subject to liabilities specified in Article 5, para. 2 and 3 of the Law”, we believe that, according to the manner in which the Law specifies the obligation to issue receipts (imperatively and unconditionally) to legal entities and natural persons that provide a service or sell a product to a political party (and/or nominator of a candidate), with the Law not defining the types of services in terms of this Law, in the stated case, regardless of whether the services are free or not, the stated provisions of the Law shall apply.”

To put it more simply, MF also believes that, according to the current legal text “volunteering” can not be excluded from the general regime of “free services”. It may be discussed whether this engagement should be presented as an electoral campaign cost, but the main problem is that it is extremely difficult to assess the contribution of volunteers engaged in various ways during preelection campaign, and even to determine their number94. According to the Law, this problem should be solved if party activists make out invoices for providing services. Of course, it need not even be mentioned how hard it would be for auditors to determine whether all the volunteers made out invoices for their engagement in the campaign. Such a situation can be misused in at least two ways – those who in the campaign raise and spend the funds that are close to the maximum as specified by the Law, may decide not to present the work of volunteers as contribution, so as not to exceed that maximum; those nominators who spend less funds than is appropriated from the budget for electoral campaign costs, may decide to pay the volunteers (really or fictitiously), so that they would not have to return the unspent funds to the budget.

93 Republic of Serbia, Ministry of Finance, Opinion Number 011-00-313/2004-08 of 29 June 2004. 94 Volunteers may be engaged 1 or 16 hours per day, depending on their will to carry out the task they have undertaken – and political party and the persons responsible for the legitimacy of income and expenditure of electoral campaign can hardly keep the record of the degree of their engagement.

58 59 Who is allowed to give contribution?

Limitations regarding the contribution sources may present a real difficulty for the parties, i.e. nominators of candidates. These provisions95 actually actively discourage collection of contributions for electoral campaign or regular work of the parties. For instance, if a domestic legal entity wished to give a contribution (in cash, objects, free services...), responsible person in the political party would face the following choice:

a) to ask from potential donor for adequate proof that in the ownership structure of the legal entity there is no government capital share, that it is not performing public services pursuant to contract with government bodies and public offices, that it is not exercising public authority, that it is not organising games of chance, that it is not importer, exporter, merchandiser and manufacturer of excise goods and that it does not have due but unsettled payments to public revenue.

b) to accept the contribution and run the risk that the contribution giver belongs to one of the listed groups of entities.

In the first case, political party may, by asking for the proof on meeting the requirements, repel potential donors, even if they are permitted by the Law to give contribution. In the second case, the responsible person in political party takes responsibility for an action that may lead to difficult consequences both for himself and for the party he represents. Considering the content of the above mentioned prohibitions, it may appear that they refer only to legal entities, which mostly is true. However, the Law once again is unrelenting: the provision also refers to natural persons (entrepreneurs). This in practice means that a political party can not accept contribution without risk (cash, free service, object, discount...), even from a citizen who, for instance, has not paid his property tax. It would obviously be very difficult to control the compliance with this provision, and, needless to

95 Article 6, paragraph 1 of the Law on Financing Political Parties.

60 61 say, even more difficult for the responsible persons in political parties to ensure that it is complied with.96

Limitation on contribution amount to be given by one donor

The Law also sets limit on the contribution that may be given by one natural person and one legal entity. Considering that the maximum amount of an individual contribution is, in final instance, determined with respect to the funds that are according to the Law appropriated from the budget for campaign financing (0.1% RB), it may be expressed quite accurately. According to the given criteria that is 0.0004% RB for legal entities, and/or 0.0001% RB for the citizens of Serbia and Montenegro. For example, in presidential elections in Serbia in June 2004, according to this formula, the maximum for a contribution was CSD 227.655 (about EUR 3000) for a natural person, and CSD 910.620 (about EUR 12000) for a legal entity. There is no obstacle for the same entity to finance several candidates in the elections. The maximum amount is applied for all donors. There is no provision that would, for example, make it possible for the presidential candidate himself, or the members of his family to finance the campaign to a greater extent than any other citizen. This, however, can be considered an omission, originating probably from the fact that the matter of financing presidential campaigns has not been treated separately (only together with parliamentary elections97). The legislator’s intention was to limit the inappropriate influence and dependence of a possible future president on one or a small number of financiers. Considering that such an argument is entirely justified, itcould surely be claimed that the society would not be jeopardised if the candidate depended on himself. It should be pointed out that the Law does not specify any limitation on donations given by related persons. Therefore, it seems not to be prohibited,

96 Of course, this prohibition is entirely justified, because it would not be right for debtors to give contributions, instead of settling their own debts, the only question is how to implement it. 97 In parliamentary elections, proportional electoral system is applied, in which voters mostly select among political parties (nominators of lists). Nominators of lists are completely free in terms of determining which of the candidates from the list shall go to the parliament, which makes the role of candidates in electoral campaign marginal.

60 61 for example, for all the adult members of a household to pay to a political party CSD 220 thousand each or for a company to pay CSD 900 thousand and 100 employees in that company additional CSD 200 thousand each. Of course, in the given examples evidence would appear that the money actually originated from the same donor and that the Law was violated, but that, of course, would have to be proven irrefutably. If donation amounts are high, auditor can relatively easily98 discover the attempts to evade the limitation, and the “donor’s” risk would be increased by the threat of sanctions for violating the Law on Preventing Money Laundry or tax regulations.

Does the Law specify the limitation on expenditure?

The only place where the Law specifies limitations on expenditure during a preelection campaign is in the penal provisions. Thus, Article 20, paragraph 1 specifies: “A political party spending funds in an electoral campaign exceeding the amount set out in this Law shall be fined double the amount of the sum in question.” This provision is problematic in several ways: first of all, because nominators of candidates and nominators of lists (which usually are political parties, but not always) take part in the elections. It is possible that there has been an omission, and that the provision referring to political parties equally refers to nominators of candidates (which would be in accordance with their equal position in the campaign). On the other hand, it is possible that the legislator has realised that the stated provision could not be applied when “groups of citizens” are concerned, because they need not have the status of a legal entity, nor property and income from which they could be fined, therefore he simply left them out of the introductory part of the provision and stipulated the fine for political parties only. In any case, adequate interpretation of this provision is necessary. It would be contrary to the objectives of the Law on Financing Political Parties, as well as to the principle of the candidate nominators’ equality before the Law, if the sanctions for violations were applied to political parties only. The following is in favour of the interpretation that the fine should be

98 In Latvia, where limitation on individual donations exists, auditors of campaign financing encountered in some party reports that tens of citizens had paid into a party bank account the allowed contribution maximum, at the same time and in the same bank.

62 63 applied to the “groups of citizens” as well – namely, the rules specifying the prohibitions, violation of which is fined as set out in Articles 19 and 20 of the Law, always mention “nominators of candidates” and the responsible persons appointed by them. However, contrary to this attitude, there is a general legal rule that penal provisions should be interpreted restrictively. The mentioned provision is problematic also because the Law does not explicitly specify the amount of funds that may be spent on an election campaign. That amount can be determined at a certain moment in preelection campaign, as shown earlier, but it is hard to claim with certainty that it is set out in this Law. It is to be expected that, due to restrictive interpretation of the rules determining sanctions, magistrates courts would be hesitant to pronounce sanctions for such an offence. Finally, formulation “of the sum in question” in the mentioned provision is also insufficiently clear. It may be interpreted in various ways, but it would be most logical that the fine be paid in the amount equal to double value of the excess with respect to the allowed limit (the difference between the actually spent funds and the amount that is allowed to be raised and spent).

Limitations regarding the time of incurring the expenses

There is a general provision in the Law specifying that preelection campaign costs are considered to be only those incurred during the period of calling elections until the election day (Article 8). This provision specifies a definite time limit and reference dates are such that may be precisely determined.

Are there any limitations in terms of expenditure type?

The Law only specifies (as examples of election campaign costs?) advertising costs (posters, advertisements, media shows, commercials, publications “and similar related activities”). There is no doubt that campaign costs may be of other nature as well – ranging from promotional meetings’ costs (rent of the premises and equipment, travelling, security...), through communicational (phone, internet), to administrative costs (rent of premises, administrative staff, bookkeeping). Extremely important question is whether these costs as

62 63 well can and should be presented as campaign costs. The question of campaign costs – if these also include the costs other than advertising ones – is particularly important with political parties, because they have their regular expenditure that should be separated from campaign costs. It seems that it would be logical to interpret increase in costs compared to the party’s regular ones as campaign costs (e.g. rent of additional premises, temporary employment of additional staff or extra pay for the full- time employees working overtime...), but it would be hard to make this sort of distinction and implement it, as far as certain expenditure categories are concerned (increase in telephone and heating bills, higher consumption of internet time and the like).

Narrower interpretation of campaign costs

If campaign costs are considered to be only the ones listed in Article 8 of the current Law (in fact only advertising costs), the matter changes funda- mentally. In that case, legal limitations regarding the amount of contribution, the amount of funds that may be raised from private sources, the amount of expenditure that may be covered from state sources, and the like, refer only to the costs listed in Article 8 of the Law. In fact, MF is inclined to such an interpretation (see Documentation Annex No. 4). Such interpretation (for which interpreter can not be blamed, but the legislator for not being accurate enough), opens new dilemmas. First, there is a great deal of legal uncertainty, because it has not been determined what exactly the raised funds may be used for, but that it should be “assessed in an actual situation”. For example, since preelection meetings have not been stated in Article 8 and posters have, it can be concluded that printing and pasting the posters that announce the meeting is considered as campaign cost, while rent of the premises, installation of the sound equipment and security for the same meeting are not! Or that transportation of a candidate to a municipal council in the country in order to prepare preelection activities is not a campaign cost, but that it becomes one if the candidate is visiting the local radio station on the same day. Payment of other (non-promotional) costs concerning preelection campaign presents a special problem. Among these, duties for court verification of the signatures necessary for nominating candidacy are particularly significant.

64 65 Keeping records and submitting reports

Provisions referring to keeping records of income and expenditure are insufficient. Article 13 specifies that “the nominator of a candidate shall appoint two persons who will be responsible for lawful raising and assigned spending of funds for electoral campaign financing and for reporting.” The obligation to open a special bank account has already been discussed. Although it has not been explicitly stipulated, it seems that here as well it could be interpreted that for transactions, accounting records shall be kept in the similar manner as the ones referring to regular financing of political parties. Otherwise, for political parties – nominators of candidates, one set of rules would apply, and for “groups of citizens” the other. At any rate, in order to fulfil their obligation regarding lawful raising and assigned spending of funds, responsible persons shall, among other things, keep records of income, in terms of its origin, amount and structure, as well as records of the purpose of spending the funds. The content of this report is determined by the Law and Article 5 of MF Rulebook, specifying the following (comments in parentheses are given by the author):

A political party shall prepare report on the origin, amount and structure of the funds raised and spent on electoral campaign. [This definition is incomplete: The Law stipulates that reports be submitted by the nominators of candidates, who may or may not be political parties. If this provision were interpreted literally, it would not be clear what the reports submitted by the “groups of citizens” should include.] The report from paragraph 1 of this Article should include the data on all the funds paid into a special account, i.e. the funds collected from that account, for the purpose of financing electoral campaign costs, according to Article 12 of the Law.[The provision refers to the Law Article which determines the rules on making payments from a special bank account and on payments into a special account.] The data on raised and spent funds are to be entered into columns 2, 3 and 4 of the report from paragraph 1 of this Article, by type (public and private sources) and by amount. [The form made in accordance with this paragraph has various income sources listed.] The data on the amount of the raised and spent funds per Article 9 of the Law are entered under Items 1.1, 1.2 and 1.3. [This refers to income from the budget of the Republic, territorial autonomy unit, town or municipality.]

64 65 The data on the raised and spent funds from private sources, in accordance with Article 3, paragraph 3 of the Law, are entered under Items 2.1, 2.2, 2.3 and 2.4. [The provision refers to the one in the Law determining various kinds of permissible sources of financing political parties.] Within Item 2.2, the funds raised from legal entities and natural persons are presented separately, and so are presented the spent funds. [It has been determined that total amount of contributions by natural persons and total amount of contributions by legal entities be stated under separate Items – see MF Opinion in the Documentation Annex No.4] The data are entered into the report based on reliable documentation (reports on changes and statement of account, cash payment orders, contracts, invoices, etc.) regarding the raised and spent funds for financing electoral campaign. Article 9, paragraph 2: Report from Article 5 of this Rulebook is signed by the responsible persons from Article 13, paragraph 1 of the Law. [There are two persons responsible for correct financing of electoral campaign. These do not have to be the candidates, nor even members of political parties nominating the candidates, but the persons authorised by the nominator of candidates (party or group of citizens).] Article 9, paragraph 4: Reports are verified by the official seal of a political party. [The provision applies to all the reports stipulated by the Rulebook. That is why it is unsuitable for the report on campaign financing, considering that “groups of citizens”, as well as political parties’ coalitions nominating candidates, are all obligated to submit this report.]

First of all, it should be pointed out that the quoted MF Rulebook, as by-law, is many times in conflict with the law provisions. In addition to stating incorrectly the responsible persons for submitting the report, it also inad- equately regulates the content of the report. For instance, the Rulebook states that the data on the funds paid into a special bank account or collected from it should be included in the report, and it also specifies that the amount of raised funds should be expressed by various financing sources. As previously discussed, according to the Law on Financing Political Parties, the funds may also be raised by way of free services, non-payment of the full price for the goods or services, etc. Such contributions, however, due to their nature, are not placed into a special account (therefore, they should not be, according to the Rulebook provisions, presented in the report), but they are included in the funds raised for electoral campaign (and according to the Law they should be reported).

66 67 Accessibility of information on campaign costs

Essential question regarding control and monitoring of regularity of financing presidential campaigns is the question of access to information on income and expenditure. As previously explained, the report on raised and spent funds contains only the data on the income in an electoral campaign, which is logical, since the Law does not limit the amount of individual types of expenditure within the permissible categories99, but only the total amount of campaign costs. The manner in which the report structure has been determined in MF Rulebook significantly reduces the positive effects of the Law provisions. Namely, the data on the raised contributions presented in the reports are collective and categorised (natural persons and legal entities), therefore they do not indicate the givers of contributions, and their amounts. In such a way, although it has been prescribed that reports shall be published, the public is deprived of the knowledge of campaign financiers, and for the auditor it is difficult to determine whether contributions come from permissible sources and in permissible amounts. Such a solution is not coordinated with the other provisions of the Law either: a political party has to enter in its annual report the data on persons who have contributed more than CSD 6000,00 (EUR 85,7), but it does not have to do so when reporting on the funds raised for campaign financing.

Report control

The Law gives REC considerable authority regarding the control of the legality of raising and spending the funds, which has already been discussed. However, since the passing of the Law, REC role or structure has not been changed, being based on the Law on the Election of People’s Deputies. It is obvious that the legislator has also realised that REC is not capable of fully implementing control, therefore allowing it to engage authorised auditors for certain activities. It seems that engagement of auditors is really necessary for an efficient control of campaign financing regularity. Such a control is sensible only if the

99 Article 8 of the Law and MF Opinion (Documentation Annex No.4).

66 67 auditors, in addition to the reports, inspect also the records based on which the reports have been made, interview the responsible persons, compare the data on income and expenditure with the other relevant documentation (data on employees, data on regular party financing, activities during campaign...) and perform the other usual auditing activities. However, question is whether REC may provide the engaged auditors with the authorisation to perform such activities.

68 69 Nemanja Nenadić

REGULATIONS AND LIFE 33

The beginning of Law implementation – the obligations of political parties from January 2004

The obligations that political parties must fulfil under the law have been established through transitional provisions in the Law (Articles 21 and 22). Somewhat unusually, one of these obligations – a duty to submit a report on all assets owned by a given political party is listed in a by-law as well – the MF Rulebook100. In addition to prescribing the content of reports and various forms, the Rulebook mandates that reports must include the balance on December 31, 2003. Another legal requirement for which the deadline expired on the same day (January 26, 2004) was the obligation to adjust the statutes of political parties with the regulations outlined in the new Law. This obligation primarily targeted provisions that aim to regulate internal organizational forms within political parties in terms of handling financial matters (Article 15, Section 2), ways of conducting internal controls of financial activities (Article 17, Section 1), the right of political party members to find out information about expenses and revenues of the political party (Article 17, Section 1), as well as the appointment of individuals that are responsible for financial ac-

100 The Article 8 of the Rulebook states that “political parties have an obligation to file a report on its assets with the Finance Committee in the Serbian Parliament by January 26, 2004, which is prescribed by the Article 22 of the Law,” even though this obligation is already specified in the Law (“… within six months from the time this Law is adopted”, Article 22)

68 69 tivities, the filing of reports and bookkeeping, and authorized for maintaining contact with the Finance Committee in the parliament.

Reports on assets of political parties

At the time when deadline for the submission of asset reports expired, only 36 out of around 280 registered political parties fulfilled this obligation, while some filed their reports late after the Finance Committee reminder. It should, however, be noted that all political parties with representation in the parliament filed asset reports on time.101 The content of some of these reports has been, at least in part, made public through the media and judging by the available information it would appear that political parties by and large do not own assets or property of significant value. Likewise, the Law has prescribed two additional mechanisms for the protection of the public, none of which has been put into practice at the time of writing of this document (September 2004). Namely, the Law stipulates that asset reports must also be published in the Serbian Official Gazette (at the expense of the political party), but the lawmakers failed to establish a deadline for meeting this obligation, name a responsible party or specify sanctions for failure to adhere to the adopted regulations. According to the information presented by the media, political parties own assests as follows (in addition to the precise figures, some other information selected by journalists has been included for completeness):102

DSS - CSD 22,099,233 (around EUR 300,000) (does not own real estate), at the time the report was filed the bank account balance stood at CSD 2,661,989

DS - CSD 16,402,012 (around EUR 230,000)

DHSS - CSD 12,419,453 (around EUR 160,000)

101 A large number of registered political parties exist only “on paper” and further delays in the adoption of the new law on political organizations, which proposes renewed registration procedures for many of them, kept them afloat until the time the reports had to be filed, and even now when this text went to print. 102 From the daily newspapers “Blic” dated April 3, 2004 and “Glas Javnosti” from April 5, 2004.

70 71 SPO - real estate worth CSD 8,570,255 (around EUR 120,000), the equipment valued at CSD 2,137,241 (around EUR 30,000), financial assets of CSD 105,675 (around EUR 145,000) (SPO also reported the Spomen-Dom (Memorial) real estate on Ravna Gora, including a little over 1.5 hectares of land. As well, it owns two passenger vehicles (“lada” and “lada niva”))

G17+ - CSD 9,070,081 (around EUR 130,000), CSD 8,678,499 (around EUR 125,000) of which represents various equipment

SRS - the equipment worth almost CSD 13 million (around EUR 180,000) (considering how old the equipment is the value of it fell to CSD 2,471,979 (around EUR 35,000) of net reported assets). The SRS also owns four passenger vehicles, including “Chrysler Cherokee” and “Audi 80”, which after the CSD 2,700,000 deduction is practically worthless according to the report, whereas “Yugo Tempo” and “Yugo Koral” have a joint value of CSD 624,512 (around EUR 8,5oo).103

The adjustment of political party statutes

The provisions for the enforcement of the obligation imposed upon political parties to adjust their statutes are even more lax than the regulations in the Law on financing of political parties, as there are no sanctions for failing to abide by the law. Furthermore, it remains unclear who is actually responsible for administering the law. At the moment, the potential for establishing an effective internal financial control and allowing party members to gain access to the information on the associated expenses and revenues of the political party remains largely unused. Moreover, it should come as no surprise that the state, which has still not fully established the mechanisms for internal financial controls in its own institutions or guaranteed a right of access to information to the citizens, did not undertake corrective action against political

103 According to the value of their assets, the list goes on as follows: GSS – CSD 1,333,772, NDS – CSD 1,021,368, DC – CSD 1,082,372, bank accounts totalling CSD 894,945, RV – no real estate, equipment worth CSD 645,450, SVM – CSD 610,000, LPS – CSD 280,009, SD – CSD 118,000 and OTPOR – CSD 80,517 (which mostly consists of computers).

70 71 parties that failed to abide by regulations of similar nature.104 An additional obstacle in implementing the new regulations stems from the fact that political organizations are not obliged to have a “statute” under the Law on political organizations from 1990 (a term “Basic General Act” is used), nor do they have to submit the text of this Act or its amendments to a particular state body. Despite not being the main subject of this research, the examination of statutes of political parties that fielded candidates in the June presidential elections showed no indications that this legal obligation was met.

Presidential elections from June 2004 – "The baptism of fire" of the new Law

The confusion surrounding the interpretation of campaign financing regulations

Over the course of making the 2004 budget105 an error was made that set aside only CSD 12 million for financing candidacies for the upcoming presidential elections, in accordance with the law on presidential elections106 that ceased to be valid on January 1, 2004107. Since the new law108 projected a much higher payment of around CSD 227 million109, the additional financing was provided from budgetary reserves, but not in its entirety. The explanation for this unusual “twist” lies, at least in part, in the fact that almost immediately

104 The organization of internal financial controls became a legal obligation for budgetary users under the Budget law from 2001, but that process has yet to be finished; the law on free access to information was sent (again) to the parliament for adoption at the time of writing of this book (August 2004). 105 Parliamentary elections in December 2003 delayed the adoption of this bill, as did the subsequent wait for the establishment of the new government until March of 2004. 106 The Article 13 of the Law on presidential elections has been cited as a basis for determining the level of funding. In fact, if that article was fully observed (although it should not have been taken into account at all, because it ceased to be valid in the meantime), the amount would be halved since this was a case of presidential elections that had to be repeated. 107 This article ceased to be valid from the date when the Law on financing of political parties had taken effect. 108 The Article 9, Section 1, of the Law on financing of political parties.

72 73 before presidential elections were called the new government was sworn in110 (in March of 2004), which had an obligation to table the new budget proposal in a short amount of time. What’s even worse, there was no willingness to own up to the obvious mistake that could have been explained with a desire to limit an already substantial budgetary deficit. Instead, the government representatives111 chose to strongly criticize earlier regulations on financing presidential candidacies from the budget (adopted by the previous government112), insisting that projected payments were too high. Naturally, in the beginning of the campaign there was enormous confusion over the nature of financing that presidential candidates would receive from the budget. Deputy Prime Minister113 even publicly interpreted existing regulations by stating that this funding would represent an award and objecting to the amount as too high, whereas one of the presidential candidates began detailing his future investment plans based on the financing that he would receive from the budget after winning the elec- tion114. Adding to the disarray, the government even tabled an amendment to the Law on political party financing, expressed in a single Article: a ten-fold reduction in the proposed budgetary payment!115 However, that legislative proposal had been swiftly withdrawn, since it could be disputed on several grounds: a) the intention to change important campaign legislation after the elections were called, b) the reduction of the proposed budgetary payment would automatically trim down prescribed limits for collecting additional funds from private sources (if that were the case, all major candidates would

109 The fact that the article in the new Law on financing of political parties was used to set the level of funding for financing of regular activities of political parties shows that this was an obvious oversight, and not a mistake carried out on purpose during the creation of the budget. 110 This is a “minority coalition government” comprising the DSS, G17 PLUS, SPO and NS. 111 Deputy Prime Minister Miroljub Labus and Finance Minister Mlađan Dinkić. 112 The conflicts between former Finance Minister Božidar Đelić and current Finance Minister Mlađan Dinkić escalated in the period before the fall of the government led by Zoran Živković and during the election campaign in particular, even though they were close associates during 2001 and 2002. 113 Miroljub Labus 114 NSS candidate Marijan Rističević. 115 The Serbian government agreed on amendments to the law on April 16, sending it to the parliament for urgent adoption. In providing its rationale for the decision, the government specified that setting aside CSD 227.6 million for the presidential campaign, as initially projected, would unduly burden the budget, insisting that the maximum deficit of CSD 45.3 billion must not be exceeded.

72 73 have been forced to finance their campaigns through illegal means or give up their usual campaign strategies). After proposed amendments were withdrawn116, the government representatives hinted that the distribution of the available funding could be changed, dividing one portion in equal share across all candidates, and giving out the rest in proportion to their election results117. This new funding distribution concept, however, was not officially proposed during the presidential elections campaign. Nevertheless, many possibilities for the distribution of the campaign funding exist and this new model would be as legitimate as the current one. Moreover, such a system would distribute state funding more evenly across the political spectrum, in line with garnered voter support. But, as we have stated before, in terms of fighting corruption the state interest is much better protected with the current distribution system – since only the election winner has the opportunity to take part in efforts to shape future policies, his independence from financial powers should be assured and protected to the maximum possible degree. The government decided to set aside CSD 45,531,000 for campaign financing in the presidential elections at a session held on May 6, 2004, but never fully explained its rationale for the move to the public. Considering that this figure matches the sum that the state must pay to the candidates in

116 The news of amendment withdrawal was published on April 21. At the same time, Deputy Prime Minister Miroljub Labus announced plans to amend the legislation, adding that the current campaign would be financed according to the new law (See, for instance, “Večernje novosti” on April 21, 2004). As well, governing coalition MPs provided contradictory statements on the amendment withdrawal, further clouding the issue and making it unclear who initiated this process in the first place. 117 An interesting, albeit unofficial, information was published in the Glas Javnosti daily newspaper citing the Serbian government as a source. Based on that information it can be inferred that the initial intention was to make an advance payment to the candidates by splitting the available financing into equal parts of CSD 22.5 million, while apportioning the rest of the funding according to the number of votes won in the election. In case there was no election winner in the first round, the candidates would not have received payments based on the number of collected votes, rather the nominators of candidates that advanced to the second round would receive an additional advance payment of CSD 1.125 million each, whereas the remaining amount (CSD 20.25 million) would be divided based on election results in the second round. This information could serve as a reliable indicator on the government’s plan to amend the existing law. We have decided to devote substantial attention to this information despite the fact that it rests on claims by unnamed sources, because it listed for the first time the actual amount that the government was prepared to set aside from the budget for presidential elections financing – CSD 45 million, which had been established at the government’s session two weeks later, even though such level of financing could not have been determined based on the current legislation.

74 75 equal measure prior to the elections (0.02% RB), it could be inferred that the government secured sufficient funding to meet its initial financial obligation and that it would act in similar fashion to pay the winner after the elections were over. Consequently, such an interpretation would be a lot more plausible and reliable, had the government refrained from calling into question existing regulations that covered budgetary payments to presidential candidates. But, since they were so vehemently criticized and opposed, the uncertainty over correct legal interpretation persisted throughout the following month. Among others, there were explanations claiming that this would be a final amount provided by the budget for campaign financing in presidential elections, noting that all other legal limitations would be calculated against it (for instance, the sum an individual can contribute to the campaign, the total amount a presidential candidate is allowed to collect from private sources, etc)118. Such interpretations went in the wrong direction, since the Law strictly prescribed these limitations by linking them directly to the percentage of the budget that the government is supposed to set aside for the purpose, and not to the government’s decision how much funding it would effectively provide. On the other hand, some government officials stated in early June before the first round of the elections (held on June 13) that current regulations would be ad- hered to (!), even though proposed payments were deemed to be too high.119 As the Election Day approached, the time for resolving this campaign- financing quagmire was running out. The deadline for payments was June 8, 2004, but the finance ministry announced a delay in making disbursements because some presidential candidates failed to submit relevant information on a special bank account that was necessary for the payment. It also noted that the payment could not be made to individual candidates, claiming that the available funding had to be paid in a lump sum because it provided financing for all candidates.120 However, judging by the statements from the finance

118 See articles in the “Danas” daily newspaper dated May 8 and 25. 119 A statement by Miroljub Labus to the BETA news agency on May 31, 2004. “Labus reiterated once again that this was not a matter of covering expenses, but the case of providing an award to the “election winner”, which according to him “misses the goal of campaign financing”. 120 Finance Minister Mlađan Dinkić stated on June 11 (two days before the first round of the elections) that he signed the payment order for presidential campaign financing two weeks ago, but that the money could not be transferred because only nine candidates provided the necessary documentation. He explained that the order was given for a full payment, and not a selective one, in a bid to avoid discrimination among the candidates, noting that the payment was not made solely for technical reasons. (“Večernje novosti” dated June 12, 2004.)

74 75 ministry, it appears that the government later found a way to make payments only to those candidates that actually submitted the necessary documentation.121 Nonetheless, the government quickly overcame these obstacles and completed payments to the candidates, although not in the amount that they had hoped for. Already on June 19, eleven candidates held a press conference claiming that they did not receive the entire payment that they were entitled to under the law. At the same time, the group announced plans to launch law- suits with the Supreme Court against the finance ministry for failing to make a full payment to the candidates and Finance Minister Mladjan Dinkic charging “the abuse of power and inappropriate use of state funds”122. The reaction of the finance minister was just as harsh. He accused some of the “unsuccessful candidates” (see: Documentation Annex, Table I) of caring more about receiving “the taxpayers’ money than their votes”.123 If this Dinkic sentiment seems to have been borne out in the case of several presidential candidates, his other remarks do not appear to have a similar basis in fact. Namely, the finance minister interpreted the Law in such a fashion as to suggest that candidates who have spent CSD 3 million for the campaign, while receiving five times less in funding from the state actually broke the law and should be held to account with a CSD 5 million fine, which would effectively translate into a “legal execu- tion of the majority of presidential candidates”.124 This interpretation (if not used solely for waging a political battle with a “high-calibre weapon”) points to flawed understanding of the legal concept pertaining to the maximum amount of expenses allowed under the Law. The two candidates that entered the second round refrained from lodg- ing similar complaints, as did the government-coalition candidate and a contender from the Socialist Party of Serbia (SPS), which supports the minority government in the Serbian parliament. Now, the lack of demands from the two frontrunners for a just financial compensation from the state could be explained with a desire not to alienate the voters by showing that they cared about receiving “the taxpayers’ money”, whereas the other two candidates probably kept a low profile due to their special relationship with the government that made such a decision.

121 See the statement by Finance Ministry Spokesman Marija Belić in the “Politika” daily newspaper from June 17, 2004. 122 BETA news agency report on June 19. 123 BETA news agency report on June 19. 124 BETA news agency report on June 19.

76 77 As one would expect, the candidates probably had different motives when they decided to begin fighting for their rights. Aside from the need to protect their guaranteed rights, which should neither be justified nor explained, they had additional reasons. After the government illegally withheld some of the projected financial resources, most of them were faced with obvious financial difficulty, which is well documented in subsequent reports (Documentation Annex, number 2). On the other hand, a candidate whose campaign cost the most (at least according to the reports) and who is widely recognised as a wealthy man won the argument in a protracted battle with the finance minister.125 After the second round of elections (the results of which are available in the Annex number 1), the whole situation was completely different: not only was there no fuss regarding the payment to the winning candidate, but for a long time it remained unclear when the actual financial transfer had taken place. Moreover, there is a realistic possibility that the Democratic Party (DS), which nominated the election winner, suffered financial loss as a result of un- lawful state action. The amount that the DS received from the state for covering expenses incurred during the presidential campaign was apparently smaller than what the party was entitled to under the Law, based on the election of its candidate Boris Tadic for president. According to official statements, the state paid CSD 36 million (approximately EUR 514,142) to the DS for nominating Mr. Tadic who won the election. But, as we have shown in earlier paragraphs, the DS had a right to receive CSD 45,531,000 (approximately EUR 650,442) on the account of Tadic’s election win, provided it had spent as much during the campaign. On July 7, the DS filed its financial report with REC, which suggests that the party spent CSD 36 million it received from the budget and the additional CSD 6,337,000 it collected in individual donations from citizens. It follows then, provided that the DS financial report is accurate – and there are a lot of reasons that make us believe that the collected amount and associated campaign expenses were not less than what the party specified in the report – that the DS had a strong case in seeking the extra CSD 6,337,000 from the budget (approximately EUR 90,528). However, the DS never made a request

125 This dispute has been going on for several years. It is far too complex to be explained here and it had no clear outcome at the time of writing of this text. Essentially, it is a conflict involving, on one side, the G17+ political organisation (now a party of which finance minister is a member), which was most active in extra profit tax collection from companies that are owned in part by Mr Karić. On the other hand, Mr Karić actively opposed the G 17+ policies even before entering political arena, but since announcing his presidential candidacy this political party became the main target of his criticism.

76 77 to that effect and the reasons for such inaction are probably similar to those that several weeks before prevented the candidates close to the government to seek what was rightfully theirs. The report by the OSCE/ODIHR mission also dealt with the issue of state funding distribution, and a summary of its findings is available in the Documentation Annex number 11.

Media and election campaign financing

The media reported at length on the issue of election campaign financing. In the print media alone (not counting local media), the articles on the subject published during April, May, June, and July of 2004 were almost twice the size of this book. A small portion of these articles represented in- vestigative journalism with a research component, whereas the media mostly covered politicians’ statements and subsequent reactions by analysts and other politicians to these remarks. Likewise, press conferences that were held as part of this research attracted substantial media attention, wherein various interpretations of existing regulations covering campaign financing and the information on presidential candidates in the media were provided, along with recommendations for related legislative changes and necessary actions prior to the local elections in September 2004.126 Understandably, erroneous interpretations of the Law proliferated in the newspapers as well, as various dailies published articles citing different, but mostly inaccurate information on financial resources that are supposed to be provided from the budget for the campaign, including the nature of state funding and revenues that those who nominate presidential candidates are allowed to collect. A preferential treatment in the media, as part of indirect election campaign financing, has been noted in several instances. The BK television station has been the target of intense scrutiny during the campaign, since one of the presidential candidates owns it.127

126 The texts are available in electronic form on the www.transparentnost.org.yu website, as is this book.

78 79 Reports on nominators’ collected revenues and campaign expenses

As we have previously stated, the first round of presidential elections was held on June 13, whereas the second round took place on June 27, 2004. The Serbian Election Commission ended the elections with its announcement of the official results on June 29. From that date, those who have nominated presidential candidates in the election had ten days to file Reports on the origin, amount and the structure of collected revenues and incurred expenses during the election campaign.

The filing of reports

Even though the deadline for the submission of reports expired on July 9, the nominators began filing reports only a few days after the first round of presidential elections was over128. The fact that all reports were filed within the prescribed deadline is encouraging, especially after bad experiences with asset reports from political parties, and it speaks to heightened public awareness about the issue of financing of political parties and election campaigns. However, the content of the reports (Documentation Annex number 2 – reports by nominators) suggests that, at the very least, there was substantial misunderstanding about what these reports should contain, which contributed to a number of irregularities, even in cases where it was obvious that there was no intent to breach the regulations. Besides, in some instances it led to a cavalier attitude about meeting the simplest of procedural demands, as well.

127 One of the reports by the “Media team for presidential election campaign monitoring” from the Belgrade Media Centre states the following: “Even in its prime-time newscast before the election bloc on May 12, the BK TV broadcasted a report on a “business” meeting between Bogoljub Karić and the Italian SCG Ambassador, showing an additional report 2-3 minutes later on his election campaign activities. The preferential treatment of the “BK” (television – NN) owner is further corroborated by the fact that only reports on his campaign carried the visuals, whereas the list of activities of other presidential candidates was simply read out to the viewing public (from the report for a week from May 10 to 16). 128 NSS dated its report June 15, 2004.

78 79 Adherence to correct form of the reports

The reports contain many deficiencies pertaining to form, which become obvious on first viewing. They can be separated in several categories.

Altering of report forms

The altering of forms has been noted in two cases. In the case of DHSS a new item titled “financial resources from the main party bank account” was added to the revenue page, despite not being defined in the Law or the Rulebook. Over the course of the campaign a political party can use some financial resources from the permanent party bank account that were present prior to the campaign, but they are strictly defined – membership dues and income from party assets. The DHSS amended the expense page in this report, too, in a bid to show total expenses (commendable in terms of financing transparency) together with a debt incurred during the campaign. Glaringly though, the total debt exceeds the shortfall that resulted from the government’s reduction in projected state funding by around CSD 1 million (approximately EUR 14,000). The BK Citizens’ Group modified the “revenues from political party assets” title on the revenues page by appending “and the candidate” in its report. On a curious note, after expanding the title of its income page the nominator failed to list any such income (nothing was collected from the candidate), while detailing CSD 42,149,596.79 in expenses based on the amount collected! This information clearly shows that cited financial resources were never deposited in the special bank account for campaign financing.

The seals of nominators and signatures of authorised persons

In two cases, several political organizations comprised a nominator, but respective financial reports contained the seals of only one of them. This happened with the NRS, SD, and the EB who nominated Mirko Jović for president, but submitted only the NRS seal in their financial report. A simi-

80 81 lar deficiency was discovered in the financial report of the nominator of the government-coalition candidate - Dragan Maršićanin. The financial report contains only the seal of his DSS, even though the G17 PLUS, SPO, and the NS also nominated him. As well, the financial report of the BK Citizens’ Group does not carry a seal either, but since this is not an organization it cannot be treated as a mistake. In the report by one nominator of candidates, the SDrS, a procedural deficiency stems from the fact that only one of the authorised individuals signed the document.

The structure of expenses and submission of unsolicited information

The Law, as we have already shown, does not mandate the submission of expenses’ structure specification. Certainly, a detailed account of the expenses is important for their examination and it would have been a useful tool for auditors, had the lawmakers imposed an obligation on nominators to present the structure of the expenses along with the total amount to the public and supervisory bodies. To a certain extent, it appears that specifying the exact structure of expenses might also be necessary in a bid to enable the auditors to determine whether listed expenditures were used for activities that are permitted under the law or not. It is obvious that at the time when there was growing confusion over the interpretation of the Law, existing regulations and the nature of the report, some nominators failed to complete financial reports in a proper fashion129. Those that actually understood what they were required to specify, including how collected funds were used (even those that were not collected), found themselves in uncharted territory since they had to put the information in arbitrary places in the report. Such action, because of its transparency and the fact that makes some useful information available to the public, ought to be commended despite pointing to other deficiencies contained in the report. According to the Serbian parliament personnel that helped REC in its operations, several nominators filed copious amounts of other documentation (copies of bills, etc) in addition to their financial reports. This documentation

129 See the JS and PS reports in the Documentation Annex number 2.

80 81 reveals a number of irregularities in election campaign financing, both in terms of payment methods and the structure of their expenses. Since, however, that documentation was neither submitted in its entirety nor properly examined, we intend to only make a few general comments without going into details. On the other hand, we remain convinced that certain pieces of this information, after they become public, will make it abundantly clear how colourful Serbian political scene used to be, while serving as a joyful reminder to the new gen- erations once the rule of law is firmly established in this country.

Discrepancies between revenues and expenses pages

As we have already noted, the reports were supposed to show the structure of collected funds, while declaring how much of the available financing was actually spent. Considering that none of the reports showed that some of the available financing had not been used during the campaign, there is no reason for returning portions of allocated state funding to the budget or transferring it to the permanent bank account of the political party, which the law prescribes, at least until financial controls have been completed. On the other hand, ten (two-thirds) nominators130 claimed to have spent more money than they had collected. The expenses exceed amounts which have been declared as collected several times over: Ljiljana Aranđelović (JS) 3.5 times, Vladan Batić (DHSS) 3.5 times, Milovan Drecun (PS) 4.9 times, Dragan Đorđević (SDrS) 5.3 times, Mirko Jović (NRS, SD and EB) 5 times, Jelisaveta Karađorđević (GG ILS) 3.3 times, Bogoljub Karić (GG BK) 5.3 times, Zoran Milinković (PSD) 5.7 times, Borislav Pelević (SSJ) 5.7 times, and Marijan Rističević (NSS) 5.6 times. A report filed by Branislav Ivković (SNS) could be added to this collection, since it is only balanced in form and shows the disparity of 2.9 times in favour of expenses over collected resources, once the outstanding debt131 has been accounted for.

130 See the reports filed by Jedinstvena Srbija, Demohrišćanska Stranka Srbije, “Preporod Srbije”, Stranka Državljana Srbije, Narodna Radikalna Stranka coalition, Srbija and Diaspora and the European bloc, citizens’ group “Initiative for nicer Serbia”, citizens’ group – joint candidate Bogoljub Karić, Patriotska Stranka Dijaspore, Stranka Srpskog Jedinstva, and Narodna Seljačka Stranka. 131 “Election campaign expenses of CSD 2,443,000 that became due, but remained unpaid.”

82 83 The notes from one of the reports132 speak of possible causes for the imbalance for the majority of nominators: “Because the finance ministry failed to abide by the law on financing of political parties, we were not able to pay our outstanding financial obligations in the amount of CSD 2,818,580”. Judging by the amount of the imbalance, one can infer that the discrep- ancy was mostly the result of unexpected government action which withheld a portion of projected state funding, and inadequate handling of the new situation by various nominators (reporting the total amount of expenses instead of declaring what was collected and how much of it was spent). An exception to this pattern was a report filed by the BK Citizens’ Group, which acknowledged receiving CSD 607,080 (approximately EUR 86,725) from the budget, but created a financial difference by failing to disclose funds invested by the candidate himself on the revenues page in addition to the expense listing, as well.

The time of collection and spending of funds

The two reports also showed a timing inconsistency, stating that the funds were collected (or both collected and spent) from the budget before they were actually transferred. This deficiency is more of substantive than procedural nature, but we are detailing it here because it represents an irregularity that does not require a deeper analysis (provided that basic information upon which the judgment on the irregularity rests, is correct). So, the NSS dated its financial report June 15, 2004, while media reports reveal that the first group of nominators received their cut of allocated state funding “in the afternoon of June 16”.133 The DS financial report suffers from similar contradictions. Namely, the DS filed its report on July 7, noting that it spent CSD 36,607,080 (approximately EUR 522,958), which was received from the Serbian budget. But, according to the available information, most of this funding (CSD 36 million that the DS received as a nominator of the election winner) has been transferred to the DS only on July 12, 2004, a full five days after it was “spent”!

132 See the Jedinstvena Srbija report. 133 See the Politika daily newspaper on June 17, “Campaign funding on the way after REC session row”.

82 83 Abuse claims

The analysis of nominators’ revenues based on their official financial reports will be presented in detail in Chapter 4 (Election success and invested funds). In this section, we will provide some background information on abuse claims in the revenue collection process along with several other points of contention, for which we are not certain that fall within the realm of election campaign financing.

State expenses in elections

The payments to the members of electoral boards at polling stations represented by far the largest state expense in the elections (not campaign financing). Moreover, these elections were the most expensive for the state to date, because registered voters had an opportunity to vote at selected loca- tions abroad for the first time, which required substantial financial resources for travel and other expenses. The expenses – payments to the members of electoral boards at polling stations are of special interest in examining the issue of financing of political parties. Namely, there were indications that certain nominators used some of the funding earmarked for payments to their observers at polling stations to partially finance the campaign of their presidential candidates. Supposedly, the abuse of this financing took place in the following fashion: some municipal commissions made payments to the nominators instead of giving the money directly to the electoral boards’ members; the nominators did not pay members of electoral boards in full, keeping some of the money to themselves and thus covering some of the expenses incurred during the election campaign.134 A statement by Srđan Božanović from the SDrS confirms this: “Since it was obvious that there would not be sufficient funds available to cover all campaign expenses, we made a proposal calling on members of electoral boards at polling stations to give up their entire remuneration or a portion thereof for the benefit of presidential candidates. However, REC sent a letter to all municipalities in early June, recommending that the money should be given

134 “Blic News”, “Elections are a lucrative business “, July 7, 2004.

84 85 exclusively to the board members in cash, and warning the members that the practice of giving it away to political parties would constitute a criminal offence. That scared away even those board members that were initially prepared to donate some of their money to the presidential candidate.”135 The members of electoral boards at polling stations are entitled to receive CSD 1,500 (approximately EUR 21.4) each. Now, even if suspicions of improper funding distribution prove to be unfounded, the fact remains that many nominators did not have adequate party infrastructure that would enable them to “cover” all polling stations throughout Serbia with their own observers, which made some of them want to broaden their influence among the constituents by offering those selected as board members a one-time opportunity to earn some extra cash. The Documentation Annex number 8 contains information on funding distribution for this purpose broken across nominators for several municipalities in Serbia that were kind enough to provide us with the requested data.

How did the nominators manage to cover their expenses?

We have already stated that the reports on financial resources that were collected and spent provide sparse information on the structure of nominators’ revenues and expenses during the election campaign. The lawmakers failed to impose a clear obligation on the nominators in terms of submitting specific information in their reports, making it practically impossible to determine who had actually furnished the contributions for financing of a particular election campaign based on the reports that were provided. Besides, other irregularities in the filing of financial reports that were noted in earlier paragraphs withheld additional relevant information from the public. Some of this information could, however, be hinted at based on print media reporting. For instance, one of the hotly debated issues was the question of how did the nominators bridge the gap between the amount of financial resources that was collected and spent, which resulted from the government’s decision to reduce its election campaign funding? Obviously, some of them have not done so immediately after the elections. Additionally, the JS presi-

135 The daily newspaper “Balkan”, July 16, 2004

84 85 dent stated “that the party concluded contracts for the provision of various services with different people during the campaign, but failed to pay them because they did not receive the money from the budget in the amount that they should have”.136Other information on covering losses in the case of the JS political party is available, too.137 A statement by Srđan Božanović from the SDrS also appears to be lending weight to claims that the difference was covered “through other means”138, since he insisted that the their financial report is “100 percent correct”, because the difference was financed with the money from presidential candidate Đorđević (the report makes no note of any income collected from private sources).

Claims pertaining to violations of campaign financing regulations

Many nominators made a lot of claims about the supposed violations of campaign financing regulations before and after the elections, accusing the state or each other of some wrongdoing. The majority of these accusations centred on breaking the law on funding distribution from the budget, which has already been covered in this book. On the other hand, the recriminations between the candidates were much more abstract. Here is one of the most characteristic accusations, lev- elled after one nominator’s report was published: SPS presidential candidate Ivica Dačić said that the law is pushing political parties towards the “grey economy”, claiming that most of the reports filed with REC do not paint a realistic picture of actual expenses and revenues, and noting that more money was spent than shown in the reports. In contrast, Dačić also insisted that the report on his campaign expenses truthfully reflected the actual situation.139

136 The daily newspaper “Balkan”, July 15, 2004 137 “The Jedinstvena Srbija political party led by Dragan Marković Palma acted wisely by declaring that the nominator spent around CSD 3 million for the campaign and justifying the expenditures solely based on the financing that they had received from the budget. Since they knew that they would be asked how the rest of the campaign was financed, they stated in the report that the nominator has an outstanding debt towards the Palma television station in Jagodina – said Jasminka Jakovljević (assistant to the Serbian parliament secretary – NN). “Balkan”, July 8. 138 The daily newspaper “Balkan”, July 16, 2004.

86 87 Naturally, there were doubts about supposed misuse of state funds in the campaign, both centrally and on a local government level. For example, at a press conference shortly after the second round of presidential elections, the representatives of the SRS election headquarters claimed that local government resources were exploited for the benefit of election winner Boris Tadić140, but stopped short of providing any details then and until the time of writing of this text (September 2004)! Of course, the abstract nature of accusations that flied back and forth between presidential candidates serves to show primarily how lightly the nominators treated the campaign financing issue, instead of proving that no concrete acts of abuses or regulation breaches had taken place. Some examples will be provided later in the text.

Campaigns by organisations that are not taking part in the elections

An important place in claims that the election law was broken belongs to the issue of neutral (or “neutral”) campaigns. Such campaigns, especially before the second round of presidential elections, consisted of TV commercials, print media advertising and billboards, which called on the voters to come out and cast thier ballots. The campaigns of this nature were conducted by non-governmental organisations and, in some cases, by local governments. However, some of these public invitations contained messages that were interpreted as disguised support for one of the candidates, because they were associated with his name, pre-election messages or campaign slogans.141 If these claims that were most often articulated by the election head-

139 According to him, his campaign cost around EUR 100,000. It was impossible to spend more than that and the associated information has been noted in the SPS financial report. Dačić also said that the campaigns of rival candidates who ended up below him on the scoreboard cost up to 10 times as much as his, claiming that it was easy to arrive at such a conclusion after taking a better look at the campaigns. He went on to say that one billboard cost between EUR 300 and EUR 500 per month, one second on the RTS national television CSD 1,500 with special pricing of CSD 4,000 per second immediately before and after the second Evening news, while a half-hour TV show on the Third Channel cost a full CSD 1 million. (“Danas” from July 15, 2004) 140 “Generally speaking, the local governments won the election. They spent a lot of money on campaigning for Boris Tadić, while engaging a large number of public sector employees from state enterprises and various municipalities.” – Tomislav Nikolić, June 28, at a press conference after election results were announced.

86 87 quarters of presidential candidate Tomislav Nikolić142 have some basis in fact, it cannot be established with certainty whether such action constituted a breach of the campaign financing regulations, media blackout, or something else. The law on financing of political parties does mandate that all expenses incurred during the election campaign must be paid for from a special bank account and imposes fines for doing otherwise, but it does not prescribe a mechanism for preventing or sanctioning an organisation that might conduct a parallel campaign for or against a specific candidate at own expense.

Use of state resources

The world over, suspected irregularities pertaining to campaign financing are mostly connected with the illegal use of state resources. Potential abuses range from visiting or hosting meetings with important foreign state officials during the campaign, the use of official vehicles, telephones, and the employees for campaign purposes to using enforcement mechanisms to per- secute political rivals and their financiers. In the context of the June elections, the public scrutinized campaign activities by the government-coalition candidate Dragan Maršićanin the most, because top government officials took part at various gatherings in support of his candidacy. As before (and as is the case in many countries around the world), the government activities were also indirectly used to promote its candidate in presidential elections. Mr Maršićanin, who entered the campaign as an economy minister, resigned from his post over the course of the campaign. The new minister, however, was not elected, diluting somewhat the effect of his commendable act. Nevertheless, it was obvious that Mr Maršićanin rarely appeared in public in the capacity of the economy minister after his resignation. On the other hand, the broadcasting of ads that highlighted the successes of particular government ministries in the first 100 days in prime-time

141 The author of this text noted one of the more subtle forms: for instance, a TV ad in which the Belgrade city government invites Belgraders to come out and vote via the local television station “Studio B”, also carried a comment that “Belgrade was always a forward- looking city”, which could have been associated with a campaign slogan of the presidential candidate that was nominated by a party that dominates the Belgrade city government - “ Strictly Forward”. 142 Additional information: the SRS conferences and press releases are available on their website www.srs.org.yu

88 89 slots on national television can easily be construed as veiled support to the governing-coalition candidate and therefore, as an abuse of state resources. Moreover, these ads were broadcasted even before 100 days had passed since the government was sworn in (!), probably in efforts to leave a stron- ger impression during the campaign. At last, even though the government’s achievements in the first few months were not pure propaganda, the entire undertaking, at least in terms of the election outcome, failed to yield expected results, as Maršićanin managed to secure only a fourth place in the first round of presidential elections (Documentation Annex number 1).

The indicators of level of expenses

The Law does not explicitly mandate that nominators must show the structure of their campaign expenses, nor does it require that they reveal the total amount of expenses incurred during the campaign. Considering that an obligation to report the amount of collected funds and how much of it was spent has been imposed, the information available in the reports can, under certain conditions, be treated as data on total expenditures. The complete analysis of this information, however, is not possible, because it is not clear which kinds of expenses some nominators listed as campaign expenses. The most controversial issues, for reasons explained in the second chapter, are: a) were all expenses shown or only those that were paid for by the time the reports were filed; b) did financial reports include expenses related to pre-election gatherings or only so-called “commercial” ones (media slots, posters and billboards, promotional material); c) were other organisational expenses accounted for (phone bills, transport, secretariat); d) do the reports include expenses for court notarisations; e) do the reports show the full value of services that were either free or paid below market rates. Because of these unknowns, it is impossible to give a definitive answer as to what the real expenses of election campaigns of some candidates were, and whether they had broken some rules in the process. In this analysis, we will only point out items that deserve special attention of auditors during financial controls, along with matters that should be followed closely and, perhaps, further regulated in the future.

88 89 Data on expenses in the reports

The reports of two political parties present interesting information about campaign expenses, although it should be noted that they cover campaigns that were smaller in scope. Their structure is as follows:

Table 1: Structure of expenses in two reports

Expens JS PS

Court notarisation of signatures 650.000 (16.5%) 603.104 (20,25%) Printing of advertising materials 700.000 (17,8%) 1.656.000 (55,6%) TV marketing 1.900.000 (48,4%) 720.000 (24,15%) Fuel 675.660 (17,2%)

Both parties included the amount that was necessary to certify signatures used to support the candidacy of respective presidential candidates in their expenses’ reports. According to already cited opinion of the finance min- istry143, this expenditure does not fall in the category of campaign expenses allowed under the Law. The majority of the expenses of these political parties cover media endorsements and printing of promotional material. The following sections also discuss how much media promotion figures in campaign expenses of other nominators. Unfortunately, the information on resources used for TV advertising that were specified by these nominators cannot serve as a basis for further assessments, because substantial evidence seems to suggest that the majority of their advertising was placed with the local media, which was not followed by analysts.

143 The Documentation Annex number 4.

90 91 Expenses for presentation of candidates in newspapers and on TV

For purposes of this research project, the Transparency Serbia collected the information about nominators’ presentations on largest TV stations144, along with the reports in the daily newspapers and weekly magazines145. It remains unclear to what extent media presentations influenced election results. Still, judging by the intensity of this type of marketing and the amount of money invested in the process, it would appear that politicians in Serbia believe it wields great power. The following chapter examines the correlation between the intensity of media presentation and the election success in greater detail. The data from the tables located in the Documentation Annex numbers 5, 6, and 7, represent only an indirect indicator of nominator’s expenses, and not their actual investment. Where nominal amounts are shown, the information relates to the unit value of certain media space, calculated under the least attractive commercial terms. The information in the tables also took into account the specific nature of advertising in certain time-slots on television, or special pages in the newspapers and magazines. The price does not include the 20% sales tax (on the net amount) that nominators are obligated to pay. On the other hand, the commercial discounts that can significantly reduce the actual price of the service were not included in our calculation. The media houses provide these discounts on several grounds – for instance, a discount for large quantities, a discount based on a marketing contract concluded via an agency that has an established cooperation with a particular media outlet, a special discount for advertising during election campaigns (if such a discount exists), discounts for advance payments or for full lump sum payments, and others. In countries where marketing budgets are strictly limited, the trans- gressors use various “justifications” for breaching the regulations. And so, the non-governmental observers in one Latin American country determined that a number of allowed advertising clips had been exceeded judging by the total

144 The research covered RTS 1, RTS 2, Pink, BK, B92, Studio B, Politika, and TV Novi Sad. The AGB Strategic Research Serbia collected the information. 145 The research included 9 daily newspapers and 8 weekly magazines – Kurir, Blic, Politika, Večernje novosti, Glas javnosti, Danas, Balkan, Inter nacional, Politika ekspres; Evropa, Nin, Vreme, Ekonomist, Pregled, Nedeljni Telegraf, Svedok, and the Reporter. The Strategic Marketing agency collected the available data.

90 91 number of broadcasted ads. But, the election headquarters of the candidates in question countered these claims by stating that they had received a 90% discount for their marketing campaigns!146 The issue of discounts that media outlets provided for the campaign of presidential candidates in Serbia is important for at least two reasons: number one is equal treatment of all candidates in the elections, or more precisely, did all interested nominators have the chance to obtain the available advertising space under the same conditions. The second reason stems from the provisions in the law on political party financing, which stipulate that any service rendered below market rates constitutes a contribution by the service provider with all of the ensuing consequences (for instance, the obligation to declare this contribution in the financial report, the limitation on company contributions, etc). The real challenge, however, lies in determining the exact market rate of media advertising space in this case, and the only reliable measure could be the equal treatment of all nominators who have expressed interest in taking up advertising space in a particular media outlet. In this case, granting special discounts or preferential treatment to any one of them could be construed as a contribution. Paid programming slots on TV stations also played an important part in the promotion of candidates in the elections. The length of these slots is not to be underestimated by any means, but extenuating circumstances in ascertain- ing their actual value lie in the fact that TV stations usually do not have regular pricing policies for such broadcasts. We found a useful reference at a Belgrade TV station well known for its attractive marketing rates, which revealed that a 45-minute broadcast in evening time slots costs CSD 80,000 (approximately EUR 1,142). The estimates for broadcasts in prime time on most popular television stations increase ten-fold (see the following paragraphs). At any rate, the competition among Serbian media is enormous and advertising market limited, which makes political marketing during election campaigns a rare opportunity for local media to earn a healthy profit. Yet, such fierce media competition leads to lower advertising rates, bringing the estimates of real marketing expenses compared to projected prices listed in the tables (the Documentation Annex number 7) to between 10 and 70 percent. The value of TV ads without discounts on Belgrade TV stations stood at

146 From a presentation by Christian Gruenberg: Control of the political party finance flows in Central and Eastern European states, TI Latvia (Delna) and Open Society Institute, Riga, February 2002.

92 93 CSD 190 million (approximately EUR 2.6 million) in these elections alone, tax included, whereas newspaper advertising was worth around CSD 40 million (approximately EUR 550,000). Even though real marketing prices cannot be established based on this information, it can provide a fairly accurate reading of the investment level ratio among various nominators.

Table 2: Ratio: funds needed for advertisements / used funds for whole campaign Paid Ratio: programming Used funds advert. Cost in 000 CSD slots / 000 Candidates advertised (overall) / used 147 CSD rough in monitored media and 000 € 149 funds estimation 150 148

29.009+ 29.053= 19/ 1.900 1. Boris Tadić 42.944 1,35 58.062 – 8.500 829 € 8.263+ 13.115= 15,2/1.500- 2. Tomislav Nikolić 4.496 4,75 21.378 7.500 305 € 54.663 14/ 1.400 3. Bogoljub Karić 51.861 1,05 790 € – 7.000 47.159 10,3 / 1.000 4. Dragan Maršićanin 29.97 1,57 673, 7 € – 5.000

21.707 1,25 / 125 5. Ivica Dačić 7.482 2,90 310,1 € – 625

941 1,20 / 120 6. Vladan Batić 4.863 0,19 13,45 € – 600

1.166 7. Mirko Jović 0 3.025 0,39 16,66 €

1.080 8. Ljiljana Aranđelović 0 3.926 0,28 15,43 €

395 9. Zoran Milinković 0 3.458 0,11 5,65 €

17.454 10. Jelisaveta Karađorđević 0,45 / 45 – 225 3.484 5,01 249,34 €

2.271 11.Borislav Pelević 0.5 / 50 – 250 3.458 0,66 32,44 €

1.828 12. Branislav Ivković 0 3.700 0,49 26,11 €

92 93 Activities by presidential candidates during the campaign

As part of this research, we have collected various data on activities by presidential candidates during the campaign, since they represent an important indicator of expenses that had to be incurred in the process. The information was collected based on daily media reports, websites of different nominators, or directly from them. Additionally, the information has been categorized according to price: outdoor gatherings (rallies), indoor meetings, city tours, and visits to foreign countries. Taking into account the MF interpretation of Articles in the Law that cover election campaign expenses, this review carries only minor significance in efforts to establish potential violations of financing limits (expenses related to the organisation of rallies and leasing of premises for promotional purposes are not treated as campaign expenses according to the MF interpretation). On the other hand, it is obvious that such expenses in a real, if not normative context, must be covered and it would be important to know their amount. Aside from that, it is quite likely that the nominators treated these expenditures as campaign expenses and showed them in financial reports on resources that were collected and spent. Of course, we are aware that a more comprehensive analysis would be required to gain a better understanding of this kind of expense, which would have to include a large number of observers in all loca- tions where the campaign is taking place. Even though the exact magnitude of expenses for rented premises cannot be established due to the inaccessibility of relevant information, it is clear that gatherings, especially at indoor arenas, represented a significant election campaign expense.

147 For candidates Tadić and Nikolić, the data shows the total amount along with information for both rounds of the election. 148 The estimate was calculated based on the information presented in this research. 149 The amounts have been taken from nominator’s financial reports. 150 The factor represents a ratio between the price of rented advertising space without taxes and discounts, and the amount that nominators of candidates listed in their reports as “used funds”.

94 95 Newspaper headlines on level of election campaign expenses

The discussions about financing of election campaigns in Serbia pushed the journalists-researchers to attempt to determine how much does an election campaign in Serbia actually cost. Consequently, the BETA agency journalists arrived at a figure of CSD 13 million (EUR 185,714), as the necessary amount to present one candidate in a “decent” fashion without “boring the voters151”. The journalists (BETA researchers) took into account various aspects of campaign financing for one candidate, including: Media advertising: around 30 ads in the daily newspapers152, twenty days of advertising on local radio stations and one with national coverage, three daily ads during a two-week period on most popular TV stations, three half-hour paid programming slots on TV stations – price estimate: CSD 2 million for newspaper advertising, CSD 500,000 for radio ads, CSD 3 million for TV commercials, CSD 1.9 million for paid programming TV slots; Billboards and posters: 100 billboards over a one-month period, 250,000 posters – price estimate CSD 3.3 million for printing and billboard leasing, and CSD 1 million for printing of posters (unpaid distribution); Visiting voters: a 10,000-kilome- ter trip over a 30-day campaign (gasoline for 3 cars, daily wages for ten team members) – price estimate CSD 300,000; Two press conferences in Belgrade, leasing of premises – price estimate CSD 30,000; The certification of signatures – price estimate: CSD 700,000. As can be seen, BETA journalists did not include expenses related to the rental of premises for promotional indoor meetings or other associated expenses that were not listed here in the price of the campaign (campaign planning, communications expenses, expenditures for making other promotional material, office expenses, leasing of equipment for public gatherings). Likewise, it is noticeable that the journalists did not even attempt to calculate the price of volunteer work, which according to the Law figures as a campaign expense, choosing to only look at expenses that had to be paid in full. Admittedly, the journalists conceded that their projected cost represented

151 The research was published in several daily newspapers on June 10, 2004, while citing the BETA news agency. 152 The cost of a one-page ad in black-and-white that runs four times was listed as CSD 850,000 in two reputable daily newspapers with substantial circulation, whereas a half-page ad that runs ten times costs CSD 1.12 million in the same newspapers.

94 95 only a fraction of the cost incurred by campaigns of leading presidential candidates. The sources of these estimates are unnamed individuals from marketing agencies. Other media also discussed the cost of the election campaign. So, “Nedeljni Telegraf” published an interview with Žozef Lončar who was presented as one of the most experienced SCG marketing experts. Mr Lončar compared the expenses related to marketing campaigns for commercial products with the cost of political campaigns, reaching a conclusion that a two- month “solid political campaign – and not an extravagant one by any means” cannot be executed without associated financing in the range of EUR 800,000 to EUR 2.5 million (at the time of the interview, it translated to CSD 60 million and CSD 175 million153). He also claimed that politicians regularly reduce their actual campaign expenses several times over when speaking to the public. Without a desire to counter the final calculation by Mr Lončar, we note that the article itself contains a few inconsistencies that make further analysis of his claims, based on provided information, impossible.154 It is also interesting to note that former Serbian Finance Minister Božidar Đelić said that an election campaign for a single candidate costs between EUR 1 million and EUR 1.5 million (CSD 37 million to CSD 74 million), hinting that political parties previously spent much more on campaign financing than they had reported.155

Estimates of level of expenditures based on collected data

Although this analysis did not take into account the exact data about the number of rented billboards and printed posters, it was evident that top four candidates made ample use of them in their campaigns. Based on what

153 Published in the issue on June 2, 2004. 154 So, a claim is made in one sentence that the total number of billboards in Serbia is around 3,500 and that one modest campaign requires the rental of about 1,600 billboards, which would mean that two “modest” candidates would take up the entire advertising space of this nature. 155 In “Glas Javnosti” on April 15, 2004.

96 97 could be observed on the streets of Belgrade during the election campaign, it can be concluded with considerable certainty that the scope of campaigns by these four candidates either matched or exceeded the estimates provided by the journalists – BETA news agency researchers that we already talked about. If the information that the journalists-researchers had provided is correct, then we can conclude that, at least in the case of top four candidates, millions were used to cover expenses on this basis alone. The media presentations, on the other hand, offer a lot more insight into the campaign financing. In a bid to estimate the discount that nominators received for media presentations, we will analyse the data shown in Table 2 as- suming that all nominators submitted financial reports on collected revenues and campaign expenses detailing their total expenditures for media presentations. The highest ratio between the estimate of advertising expenses and declared campaign spending has been noted in cases of nominators for the Citizens’ Group ILS (J. Karađorđević) and the SRS (T. Nikolić). Adding the sales tax to advertising expenses that the nominators have a duty to pay, we conclude the following: If above-mentioned nominators reported all of their expenses and if they did not use the available funding for purposes other than paying for TV commercials (not counting paid programming slots) and newspaper ads, then they received average discounts of 83.37% (GG ILS) and 82.47% (SRS), respectively! Since it is widely known that they incurred additional advertising expenses (a modest estimate of SRS paid programming slots stands at CSD 1.5 million, which along with already noted cost estimate for billboard rental and printing of posters covers their total declared campaign expenses almost in its entirety, whereas the GG ILS spent less on such media promotions, but because of their comparatively smaller campaign leads us to the same conclusion), the discount for media presentations would have to be even higher (close to 100%) if that information is to match declared campaign spending data. Bearing in mind that no valid reasons exist to make us believe that these two nominators deserved preferential treatment from media owners together with such enormous discounts, we are free to decide that they simply did not declare the total amount of their expenses for media presentations in financial reports, and/or that they failed to declare some other campaign expenses in these reports. We are also indirectly drawn to such a conclusion by comparing the data across presidential candidates. For instance, the value of media advertising was approximately the same for nominators of the SPS candidate (I.Dačić)

96 97 and the SRS contender (T.Nikolić). However, the length of paid programming slots was much smaller in the case of SPS, whereas the number of billboards and posters promoting the SPS candidate equalled those of his SRS rival, at best. Still, the SPS reported much greater advertising spending than the SRS – CSD 7,482,000 compared to CSD 4,496,000! A similar comparison can be shown for the GG ILS, as well. Aside from these two nominators (the SRS and the GG ILS), the SPS also has a high ratio between the estimated cost of media presentations and reported campaign spending – If we were to take what Ivica Dačić said at face value, claiming that the SPS “reported everything”, we would have to include that advertising discounts are extremely high. Namely, even if this political party used all of the available funding (according to the report) to pay for TV and newspaper ads in the Belgrade media (which, of course, is not true), then the average discount would have to be 71.3% in order to match this spending with reported income! Hence, we are convinced that very interesting findings would result from a similar analysis of campaign spending by the DS, DSS156, and the GG BK. The financial reports from these three nominators, which undoubtedly invested the most in media presentations (almost double the amount than the other group of nominators comprising the SRS, SPS, and the GG ILS spent), also show reported campaign spending to be insufficient to pay for the TV and newspaper ads without discounts. Knowing that these presidential campaigns included a large number of billboards, pre-election rallies, and posters for which rental and printing costs cannot even be approximated, it would be difficult to provide a credible answer on the level of discounts that these nominators received for their media presentations. Nonetheless, by comparing ratios from the Table 1 for these nominators, whose campaigns were among the most expensive ones according to both criteria (media presentations and financial reports on collected revenues and campaign spending) we can conclude, based on the assumption that we cannot verify – that they used the same calculation methodology and showed all campaign expenses. Therefore, it would appear that out of these three campaigns, the one for D. Maršićanin had the strongest media component (factor 1.57), while other kinds of expenses figured in more prominently in spending patterns reported in campaigns for B.Tadić (factor 1.35), and especially B. Karić (factor 1.05).

156 Dragan Maršićanin was a joint candidate of the DSS, G17 PLUS, SPO and the NS, but since the report contains only the DSS seal we have no evidence to claim that declared financial resources were provided by other parties comprising the governing coalition, as well.

98 99 We will end our analysis here. It is possible that some nominators did not show their total campaign spending in their reports, but without more reliable indicators about other expenses and knowledge of the methodology that was applied in their calculations, we cannot draw more substantive conclusions.

What can be expected from financial report audits?

Not long after REC decided to disclose financial reports submitted by the nominators, its representatives stated that report audits would be finished even before the 90-day deadline (which expired on October 9, 2004) and that an auditing house would be called upon to complete the task.157 They stated that the reports make no indication of payments being made from temporary accounts, adding that ten financial reports contained irregularities pertaining to the information on funds that were collected and spent. Only a review of nominators’ bookkeeping documentation can provide answers about the legitimacy of June presidential elections campaign financing, along with other vital issues for establishing the money trail in politics and further development in terms of financing of political parties. According to the information presented thus far, it appears that nominators did not include the contributions based on services that were either free or paid below market rates together with similar items in their financial reports, which was probably aided by the problematic regulation outlined in the MF Rulebook (see Chapter 2 of this book). The REC and the selected auditors will face a number of important tasks during their review of financial reports. We will enumerate only several of them based on our research of election campaign financing thus far. The auditors have to establish:

1. Whether payments were made from accounts or in cash.

2. Whether all payments were made from a special account. This can only

157 For instance, the statement by REC Secretary Marko Danilović, “Politika”, July 15.

98 99 be verified partially by examining the nominator’s documentation, because neither did they report all of their expenses, nor can the information about them be ascertained through other means. For instance, taking a look at the bookkeeping documentation of a given political party can reveal whether an invoice was paid from that account, but there would be no proof if it were paid from an account of another company. The auditors could conduct their examination from another angle, establishing for instance where the nominator made media presentations, rented billboards, and conducted other promotional activities, and subsequently demanding from those companies the information about accounts from which these services were paid. The question remains, though, whether the auditors have the authorisation to perform such controls.

3. Whether contributions provided in cash were transferred to the special bank account for campaign financing on time.

4. Whether there is documentation for every contribution listing the name and the amount (The Law prohibits anonymous donations.)

5. The origin of financing. This includes such data checks as: whether funds collected from membership dues really came from members (for instance, by checking payment invoices and lists of party members) and whether the amount of the funding remained within the limits prescribed by statutory provisions on membership dues; how did the political party gain income based on party assets, which was used for campaign financing; whether businesses that contributed to the campaign fulfilled all necessary criteria under the Law, both negative (that they were not foreign companies, enterprises with state capital, or outstanding debts toward the state etc.) and positive (that shareholder assemblies were aware of the contribution); whether individuals really donated money for campaign financing, whether they were SCG citizens, whether they had any outstanding public debt at the time they made the contribution; whether contributions stayed within the maximum limit for individuals and businesses alike.

6. The structure of expenses. This implies the examination of the structure of collected funds that were used for campaign spending, in

100 101 accordance with the regulations outlined in the Article 8 of the Law on financing of political parties.

7. The “market price” of advertising space.

It is obvious that for some of these checks examining only the bookkeeping documentation of political parties that figured as nominators will not be enough. For many of them, participants on the other side (marketing agencies, media outlets) along with persons listed as contributors in the bookkeeping documentation will have to be checked, too. While completing this daunting task, which becomes all the more challenging because it is taking place in Serbia for the first time, the auditors can also rely on the data about activities of presidential candidates that has been presented in earlier sections of this text. The REC has already faced some of the inconsistencies expressed in the Law when it contemplated the filing of charges against nominators that were deemed to have broken the law. So, warning of inadequate regulations in the Law, REC Secretary Marko Danilović stated the following: “Basically, if we were to sue Bogoljub Karić for ‘exceeding’ the financing limit by CSD 6 million, we would not achieve anything because in this case the Law prescribes fines only for political parties, and not for citizens’ groups.”158 Speaking on the same issue, Mr. Dejan Mileković, spokesman for the newly established PSS political party, said: “The citizens’ group that nominated Karić for president, in fact a team that was entrusted with the task, filed a financial report in accordance with the law without hiding anything, and if there is a legal provision about surpassing prescribed campaign financing limits we will abide by it as well”.159 The media also reported on opinions claiming that the effect of sanctions imposed under the Law would be negligible.160

158 The daily newspaper “Politika” on July 15, 2004. 159 The daily newspaper “Danas” on July 15, 2004. 160 So, Belgrade lawyer Sava Anđelković said in a statement to the daily newspaper “Balkan” on July 16, 2004, that every political party, should it be called to task over deficiencies in the financial report, can simply say: “We do not have enough money to pay the fine between CSD 200,000 and CSD 1 million “, explaining that the payment of such a penalty could easily be avoided considering that the statute of limitations expires in just two years.

100 101 103 Predrag Jovanović Nemanja Nenadić

ELECTION SUCCESS 44 AND CAMPAIGN SPENDING

The financial resources are necessary not only for regular activities of political organisations, but also – comparatively speaking – for increasingly expensive election campaigns. Admittedly, the use of money in politics that hinges on the economic strength of those that aspire to top political positions often clashes with the democratic principle “one man, one vote”, which makes money use in election campaigns subject to many limitations that were discussed at length in the previous chapter. In countries with stable democracies, and especially in post-communist countries, the public strongly believes that money is not only necessary, but often sufficient to guarantee one’s election success. The experience, however, does not bear this claim out, as many opposition parties won the first multiparty elections in 1990 over their eco- nomically superior communist rivals in former countries of the so-called “real socialism”.

The analysis of reports on presidential campaign financing

The relationship between state and private funding

As it has been noted, all nominators received CSD 607,080 for election campaign financing with a notable exception of the DS, which received the additional CSD 36 million for nominating the election winner.

103 Table 3: Realtionship between state and private funding

Source Public Private Candidate Amount Amount Share (%) Share (%) (in 000 CSD) (in 000 CSD) Ljiljana Aranđelović 607 55 500 45 Vladan Batić 607 44 769 56 Milovan Drecun 607 100 0 0 Dragan Đorđević 607 100 0 0 Mirko Jović 607 100 0 0 Jelisaveta Karađorđević 607 58 444 42 Bogoljub Karić 607 6 9.104 94 Zoran Milinković 607 100 0 0 Borislav Pelević 607 100 0 0 Marjan Rističević 607 100 0 0 Ivica Dačić 607 8 6.873 92 Dragan Maršićanin 607 2 29.363 98 Tomislav Nikolić 607 14 3.889 86 Boris Tadić 36.607 85 6.337 15 Branislav Ivković 607 48 650 52

The DHSS did not make a clear distinction between the state and private funding in its financial report, as prescribed in the Rulebook, since the “Resources from the permanent party account” category accounts for 45% of the total amount of funds that were used for election campaign financing. If we were to assume that this category could be attached to private funding, then public sources in collected revenues for election campaign financing of the DHSS presidential candidate figure in with 44%. Almost half of the nominators, six of them to be exact (PS, SDrS - the NRS, SD and the EB - PSD, SSJ, NSS), listed state funding from the Serbian budget as the only source of financing for presidential campaigns of their candidates. If we also consider that three other nominators (JS, SNS, and the GG ILS), declared that CSD 607,080 received from the Serbian budget represented roughly one half of their total campaign budget, it follows that 9 out of 15 nominators relied heavily on state funding to finance their presidential campaigns. As for the remaining five nominators and citizens’ groups, the DS collected the largest total funding in the amount of CSD 42.9 million with CSD

104 105 36.6 million (or 85%) coming from the Serbian budget. This party, however, does not belong with the first group of candidates, because most of this funding for incurred expenses arrived after the fact, based on the election win of its candidate. Moreover, we are inclined to believe that, had their candidate lost the election, the party would have found a way to cover election campaign expenses with the money from its permanent account (for instance, from membership dues). The DSS ranked second in this regard with collected revenues of CSD 30 million, whereas the GG BK came in third with CSD 9.7 million, followed by the SPS with CSD 7.5 million and the SRS with CSD 4.5 million in generated income. Out of these five nominators, the DSS relied the most on private sources of election campaign financing (98%) followed by GG BK with 94%, SPS with 92%, SRS with 87%, and the DS with a modest 15%. This confirms the assumption formulated in Chapter 1, which said that private funding (gifts, “enrolments”) would go mostly towards the ruling party, but it is also true that opposition parties received an unexpectedly high proportion of funding from private sources. Two possible explanations for such an outcome exist: the first one (a conjecture) rests on a premise that Bogoljub Karić took part in the election campaign and invested some of his own money. An alternative explanation considers a certain level of “identification along party lines” among the sympathizers of various political parties – the nominators of presidential candidates. Bearing that in mind, it becomes clear why the SPS collected a large percentage of private funding since it has a considerable number of true believers who are helping their party out of conviction, and not because they expect to receive some kind of favour in return. The truth be told, the information on revenues collected by the GG BK cannot be treated as having a high degree of veracity, because the nominator also declared spending the additional CSD 42 million from private sources (candidate’s assets) – which in all likelihood, means that this money was not garnered in a legal manner (through the special account for campaign financing), although it was definitely collected (because it was spent). Counting this sum as well, it follows that the GG BK collected the largest amount of funding (even more than the prescribed legal limit!), with financing from private sources figuring with around 99% in the total.

104 105 The types of private sources used for campaign financing

Table 4: Structure of private sources

Income from Membership dues Contributions party assets Candidate in 000 in 000 in 000 (%) (%) (%) CSD CSD CSD Ljiljana Aranđelović 0 0 500 100 0 0 Vladan Batić* 0 0 150 100 0 0 Jelisaveta Karađorđević 0 0 444 100 0 0 Bogoljub Karić 0 0 9.104 100 0 0 Ivica Dačić 0 0 6.873 100 0 0 Dragan Maršićanin 0 0 29.363 100 0 0 Tomislav Nikolić 0 0 0 0 3.889 100 Boris Tadić 0 0 6.337 100 0 0 Branislav Ivković 150 23 500 77 0 0

*Note: resources from the permanent party account 619.470 CSD

Membership dues

According to the data listed in Table 4, it seems that only the SNS, a party with no representation in the Serbian parliament, used membership dues as a traditional and least controversial source of funding for financing the presidential campaign in the amount of CSD 150,000. It remains unclear why other political parties, especially those with substantial party membership such as the SRS, DSS, SPS, and the DS failed to make any use of it. The reasons could range from difficulties in collecting membership dues to the long-standing practice of not collecting these dues from members at all, considering its low value. In other words, political parties do not insist on membership payments from members for fear of pushing them away and risking a substantially reduced number of registered members, all in exchange for a truly modest financial gain that can easily be compensated through other income sources such as contributions, to name one of them. A better under-

106 107 standing of the actual value of membership dues can only be gained after taking a look at their 2004 annual reports, which political parties have an obligation to file with the Finance Committee in the Serbian parliament. Then, it will be possible to make a more reliable assessment in what measure political parties were actually able to count on this source of income for financing their presidential campaigns, regardless of the size of their membership. On the other hand, there is no reason why, the SNS for instance, which reported this form of income, would be more successful at collecting associated dues than other parties with larger membership base. It appears that one of the reasons for the “lack of popularity” of this source of financing could be that members pay these dues in cash, thus creating an opportunity for funds to be diverted before reaching permanent party accounts. Another explanation could lie in the difficulty of identifying “membership dues” on the party account, because they are not handled separately (“money has no name”).

Income from party assets

As part of the private sources, only one party (SRS) relied fully on income from party assets. This is unexpected, especially in view of public knowledge about the value of assets held by political parties (based on party reports from January 2004 – see the second chapter of this study). Namely, according to the information published in the media, five political parties in Serbia have more assets than the SRS. Three of those parties fielded candidates at the elections161, but did not finance presidential campaigns with “income from party assets”. Since the Law established legal limits for annual income of political parties based on party assets162, it might be useful to ask whether this party abided by prescribed limits. First of all, the SRS declared that CSD 3.9 million (approximately EUR 55,714) was collected for campaign financing based on income from party assets. Moreover, the 2004 annual report by the SRS is not necessary to reach a valid conclusion on the matter, since it is already

161 According to the data from January reports, richer than the SRS are the DSS, DS, DHSS, G 17 Plus and the SPO, which nominated Dragan Maršićanin together with the DSS. 162 The Article 5 of the Law on financing of political parties mandates that “ annual revenues of a political party stemming from party assets cannot exceed 20% of the total party income for that year”.

106 107 clear that cited amount will be within the legal income limit because the SRS has a right to receive substantial funds from the Serbian budget for financing of regular party activities (around CSD 85 million annually, according to the current makeup of the Serbian parliament). A better question would be whether the SRS could generate such level of income based on “party assets” at all. When we say this, we think of the value and the structure of SRS assets. Knowing that the SRS (much like other political parties) has still not published its asset report in the Serbian Official Gazette, as the law stipulates163, the information given to the “Glas Javnosti” journalist164 by the SRS vice-president and executive council president could serve as an indication on the total worth of SRS assets. According to them, the party owns the following: “office furniture, telephones, and computers in all municipal offices, as well as three “Jugo” passenger vehicles. The nominal value of this property is CSD 13 million, but because most of it is now outdated its value depreciated substantially over the years, bringing the estimate of its current value down to around CSD 2.5 million. As far as real estate is concerned, the party owns one building in Valjevo.” The issue is whether income based solely on this building (because other items are obviously not capable of generating substantial revenue) could be so great as to provide CSD 3.9 million for presidential campaign financing? Of course, it is possible that party assets were greater before the report was filed (and then sold prior to January 26, 2004) or that they rapidly increased generating revenues between January 26, 2004, and June of the same year. But, since no evidence to that effect exists, the information contained in the report on funds that were collected and spent in the presidential campaign (the Documentation Annex number 2) loses credibility. Bearing in mind that predictions about possible chances of the SRS presidential candidate to win the election were highly favourable (one of the two top spots), it would be realistic to expect that certain companies and individuals might want to provide financial support to the election campaign of Tomislav Nikolić. By excluding the contributions by businesses or private persons as a source of financing for the presidential campaign (despite a high probability that he had them at his disposal), the nominator apparently

163 The Law does not name an entity responsible for publishing, but drawing on experience from other regulations it can be inferred that the obligation rests with political parties. On the other hand, the deadline for meeting this obligation cannot be established in a similar fashion. 164 Published in “Glas Javnosti on February 3, 2004.

108 109 wanted to send a clear message that it does not want to “owe” anything to the donors, while its presidential candidate, in case of an election win, would have no outstanding debts to pay back. In other words, by choosing the source of financing for the presidential campaign the nominator aimed to emphasize that no lobby group would be able to exert undue influence over its candidate (if he was elected) for financially assisting his success in the presidential elections.

Contributions

In a large number of countries, the contributions represent the most important source of income for election campaign financing. Its flexibility is one of the reasons for such state of affairs, because this source of income does not depend primarily on election chances, but on the party’s ability to collect funding. In so doing, however, the doors open to undue influence by lobby groups that have “invested” in a particular political party or its candidate, hoping that he would later “return the favour”. Hence a need to carefully regulate the issue of contributions (who, how much, and under what conditions is allowed to contribute to the campaign) in a bid to prevent “buying of influence”. As we have already shown, Serbia has introduced income limits and restrictions on the types of donors. The contributions, as a category within the private sources framework, had a dominant role in campaign financing for two (Dragan Maršićanin and Bogoljub Karić) out of four presidential candidates, which according to the majority of public surveys conducted before the elections, had a considerable chance in succeeding. In terms of contributions from individuals, as part of income from private sources, the DSS and SPS relied on them in full. The absence of contributions from companies for most of the nominators can be explained with important limitations under the Law (Article 6 – more details on the subject has been provided in the second chapter). An uncharacteristic relationship between financing through contributions from private persons and predictions on a possible election success has been discovered in case of the SPS presidential candidate. Namely, even though pre-election polls showed that presidential candidate Ivica Dačić had virtually no chance of advancing to the second round, the level of income collected from individuals was high, bettering both election winner Boris Tadić and Bogoljub Karić, whose rating soared during the campaign reaching a very

108 109 high level (ranked third in most of the polls completed before the elections). The gap between almost no chances for Ivica Dačić election win and a high level of financial support from individuals was noticeable. No clear relationship can be established between the level of financial support and the popularity of the SPS candidate (he won 4% election support). Thanks mostly to these contributions, the SPS ranked fourth according to the total amount of funds collected for campaign financing right after the DS, DSS, and the GG BK, but staying ahead of the nominator of Tomislav Nikolić, one of the most serious contenders in these presidential elections. The rationale behind this paradox could lie in the difference between campaign-financing strategies among the nominators, the unwillingness of other nominators to report income collected in this fashion (which, of course, we are unable to claim in the absence of reliable information), and a previously noted desire by “devoted followers” to help their candidate, even when he has only minimal chances of winning. The GG BK citizens’ group recorded largest company contributions by far (CSD 2.9 million), while other nominators managed to collect much less in donations from businesses (CSD 500,000 and below). It is interesting to note that election campaigns of the two most successful candidates who entered the second round were financed from other sources, and not from contributions: the campaign expenses for the promotion of Boris Tadić were covered mostly with funding from public sources, which the DS had a right to receive only after his election win, while the SRS as a nominator of Tomislav Nikolić, the first runner-up, used income from party assets to pay for expenses incurred during the campaign.

Received contributions and chances for election success

The candidates that advanced to the second round were odds-on favou- rites to win the election during most of the campaign. The polls gave fourth- placed Dragan Maršićanin considerable chances of winning the election only in the first few weeks after the elections were called.At first glance, this seems to disprove our earlier claims that candidates with greater chances of an election win would be able to count on more campaign contributions. The election campaign for Mr Maršićanin could have constituted an exception, had individual contributions that were the primary source of campaign fund-

110 111 ing in his case according to the financial report, been received at the time when his ratings were higher, of which we have no knowledge. This conclusion should, however, be taken with a great deal of caution. In short, the nominator of the election winner, the DS, declared state funding which it received for nominating the election winner (we have already discussed this issue) after the elections were over, as part of the income collected for campaign financing. In fact, finding out if the contributions would figure more prominently as a source of campaign financing or if the nominator would resort to using other sources of income to cover the expenses, would be possible only if the DS candidate had been defeated in the election.

The relationship between election success and invested funds

The final results of candidates on presidential elections held on June 13, 2004, and June 27, 2004, are available in the Documentation Annex (number 1), based on the REC reports. If we assume that collected revenues specified in nominators’ financial reports represent the total amount of funds invested in the election campaign (even though many arguments point to the fact that, at the very least, the nominators did not use the same methodology while preparing the reports – see previous chapter - Regulations and Life”) we arrive at the following conclusion: The election results show that there is no direct correlation between the level of invested funds and the election success of presidential candidates. So, the presidential campaign for Tomislav Nikolić (who won 30.6% of the vote in the first round and 45.4% in the second) cost almost ten times less (CSD 4.5 million) than the election campaign for Boris Tadić (CSD 43 million) who won 27.4% support in the first round and 53.24% in the second. Still, when comparing the data for these two candidates with campaign-financing information for other candidates, one should bear in mind that their campaigns lasted 14 days longer, while respective financial reports detail revenues and expenses over the entire period, and not just until the first round of elections. Judging by the information on media advertising (Documentation Annex numbers 5, 6, and 7), the DS and the SRS spent over 50% of their election “budgets” in the second round.

110 111 Coming third in the elections was Bogoljub Karić with 18.2% of the vote, whose campaign, according to the reports, cost the most (CSD 51.9 million) while apparently being financed to a large extent by the candidate himself165. One of the reasons for his increased investment in this campaign could be that it was his first appearance as an active participant on the Serbian political scene. The campaign for governing coalition candidate Dragan Maršićanin was nominally166 third in terms of its value with CSD 30 million, with Maršićanin occupying a fourth place in the elections by collecting 13.3% of the votes. The greatest gap between invested funds and the election result was registered in the case of fifth-placed Ivica Dačić who won only 4% support, while spending CSD 7.5 million for the campaign, which earns him the fourth place on a list of candidates with largest campaign expenses, even ahead of the first-round election winner Nikolić who won seven and a half times more votes167. Sixth-placed in the elections was Princess Jelisaveta Karađorđević (GG ILS) who won 2% of cast ballots, whereas every one of the other nine candidates won less than 1% of voter support. The nominators of almost all of these candidates, including the sixth-placed GG ILS, spent less than CSD 4 million for their campaigns, which seems to suggest that the sum larger than CSD 4 million represented a unique “critical mass” of funding necessary to achieve a respectable result in the presidential elections. The only exception to this rule was registered in the campaign of presidential candidate Vladan Batić, wherein the DHSS spent CSD 4.9 million and Batić ended gathering only 0,5% of the votes. However, knowing that this research has already called into question the assumption that some nominators reported all of their campaign expenses in the “spent” category of their financial reports (primarily the GG ILS and the SRS), the calculated lower limit for campaign expenses necessary for a decent election result should be taken with a great deal of caution and substantially adjusted – although we cannot say with enough certainty by how much – in the upward direction. In all other cases, (except the DHSS), the nominators that spent more

165 The largest amount of reported campaign spending, according to the GG BK report, stems from “income based on candidate’s assets”. 166 In fact, considering that election campaign for Tadić lasted 14 days longer and taking into account the data on media presentations, it can be said with almost complete certainty that campaign for D. Maršićanin cost more than in the case of Tadić until June 13 (provided, of course, that the data in nominators’ reports had been presented using the same methodology). 167 The information on funds that were collected and spent in cases of both candidates should be taken with a great deal of caution for reasons explained in the previous chapter.

112 113 than CSD 4 million achieved significantly better election results than those that failed to meet this financing threshold – but their results were not directly linked to the level of funding over that amount. In other words, the level of campaign spending represents a key factor for election success until a certain cut-off limit (in this particular case it was CSD 4 million, with all of the above-noted warnings), making any election success after crossing this financial threshold dependent on other factors (for instance, candidate’s ideas and election platform, his or her charisma, presentation methods, nominator’s organizational structure, etc). Such a conclusion confirms our initial hypothesis in this research that above certain financial limit, the level of campaign spending no longer determines the outcome of the elections. (Chart 1).

112 113 Candidates’ activities and election success

The data collected as part of this research points to the following: the information about four presidential candidates is extremely sparse (Jović, Drecun, Đorđević, Milinković), either because they conducted “low intensity” campaigns (the absence of promotional rallies), or because these campaigns did not receive adequate media attention. At the same time, these are the candidates that won the least amount of votes in the elections (all of them except Mr Đorđević collected less votes than the number of signatures required to support one’s presidential candidacy). Governing coalition presidential candidate Dragan Maršićanin visited the largest number of towns before the first round of the elections (often with an entourage of coalition leaders and government ministers, 96), followed by elected president Boris Tadić (84), fifth-placed in the elections Ivica Dačić (66), Branislav Ivković (57), Bogoljub Karić (50), and taking up the sixth spot, first-round election winner Tomislav Nikolić (46). The next five candidates toured between 17 and 26 towns across Serbia. It becomes obvious then, that the number of visited towns did not play a major role in their elections results. The visits to towns and rural areas do not necessarily carry increased expenses168, unless they include the transport of a large number of candidate’s supporters from one town to another as part of the organization of rallies, which was the case with some presidential candidates in these elections.169 It was noted that six candidates held rallies in city squares, a trademark tool of political promotion during the 1990s in Serbia. The top two candidates that advanced to the second round of presidential elections – Tomislav Nikolić (24) and Boris Tadić (20) – held the largest number of such gatherings. The governing coalition presidential candidate addressed the public in this manner 14 times, whereas others seldom reciprocated, including Ivica Dačić (7), Bogoljub Karić (4), and Ljiljana Aranđelović (2). On the other hand, the campaign for third-placed Bogoljub Karić was characterised with a host of indoor meetings (rented?) (sport arenas and congress halls). The total number of such gatherings was 21. The promo-

168 We are led to such a conclusion by BETA journalists’ estimates, outlined in the previous chapter. 169 The author of this text witnessed the arrival of buses with Bogoljub Karić supporters to the election campaign rally in Nis.

114 115 tions in (rented?)170 halls were also held by Borislav Pelević (17), Ivica Dačić, and Branislav Ivković (8 each), and to a lesser degree by other candidates (Maršićanin, Batić, Aranđelović). It would be very difficult to ascertain if holding large promotional rallies helped the candidates achieve better election results.

Connection between election success and available financing

The election results of some presidential candidates certainly could have been influenced by increased financial power of their political parties, which won the right to sizable state financing from the budget based on their representation in the Serbian parliament. The total sum set aside for this purpose in the 2004 budget was CSD 341,671,000, although 30% of it is currently171 distributed in equal measure to fifteen parliamentary parties (CSD 6,833,420 each), while splitting the remaining 70% in proportion to the number of their respective MPs (CSD 956,680 per MP). Actually, the amounts are determined and paid on a monthly basis, and the nominators had 5/12 of the sum at their disposal before the elections. The funds from the Serbian budget that belong to parliamentary parties for financing of their regular activities are listed in Table 5. The analysis of indirect influence by the level of nominator’s cut of the state financing on his election result leads us again to the conclusion that there is no firm positive correlation between the level of funding a nominator receives from the state (which certainly facilitates campaign implementation) and the election success of its candidate. Namely, the DS, which nominated the winner in presidential elections, received around CSD 12.8 million in state funding in the first half of 2004 for financing regular party activities, whereas political parties that nominated Dragan Maršićanin (who collected half as many votes as the DS candidate) received CSD 52 million at the same time. A fact that a candidate who received no funding from the state (Bogoljub Karić) came in third serves only to reinforce this conclusion. The exception to this

170 We did not consider promotions on party premises here. 171 This state of affairs can be changed in case an MP decides to switch his party affiliation!

114 115 rule, and a significant one at that, is the success of Tomislav Nikolić (won the largest number of votes in the first round of the elections) that could have been influenced to a large extent by substantial state funding of the SRS in the specified period (around CSD 35 million).

Тable 5: Allocation from Serbian budget for regular work of political parties with deputies in National Assembly

In In equal proportion Projection Amount paid before Political Number of amounts to the for year elections party deputies (30%) number of 2004 (CSD / €) deputies SRS 82 6833420 78447662 85281082 35533784/507625,5 DSS 49 6833420 46877261 53710681 22379451/319706,4 G17 31 6833420 29657043 36490463 15204360/217205,1 DS 25 6833420 23916970 30750390 12812663/183038 SPS 22 6833420 21046934 27880354 11616814/165954,5 SPO 13 6833420 12436824 19270244 8029268,5/114703,8 NS 9 6833420 8610109,2 15443529 6434803,8/91925,77 GSS 5 6833420 4783394 11616814 4840339,2/69147,7 DC 4 6833420 3826715,2 10660135 4441723/63453,19 NDS 3 6833420 2870036,4 9703456,4 4043106,8/57758,67 SDP 3 6833420 2870036,4 9703456,4 4043106,8/57758,67 SLPS 1 6833420 956678,8 7790098,8 3245874,5/46369,64 BDSS 1 6833420 956678,8 7790098,8 3245874,5/46369,64 SDU 1 6833420 956678,8 7790098,8 3245874,5/46369,64 SLS 1 6833420 956678,8 7790098,8 3245874,5/46369,64 TOTAL 250 102501300 239169700 341671000 142362917/2033756

Source: Transparency Serbia. The estimate of state funding was made based on the articles in the Law of financing of political parties without further checks as to whether there were any devitations in practice.

Relatively high amounts of financing that certain political parties received from the Serbian budget (the parties are also entitled to state financing from the APV, city governments and the municipalities according to their representation in those bodies, albeit to a somewhat lesser extent172), give rise to assumptions that this funding, even though it is meant to be used for financing regular party activities only, was at least in part used for election campaign financing and, perhaps, some other purposes as well. Naturally, the available information does not provide sufficient evidence for such a claim.

116 117 Influence of governing status on election result

The comparison between the December parliamentary elections and June presidential elections reveals that governing coalition candidate (Dragan Maršićanin) and a candidate of a party that supported the minority government (Ivica Dačić) achieved much poorer results in June than in December, whereas candidates whose parties neither took part in the government nor supported it (Tomislav Nikolić, Boris Tadić, and Bogoljub Karić) occupied top three spots in the elections with a sizable lead over the governing coalition candidate. Thus, it can be said that some nominators may have somewhat negatively affected election results of their candidates by taking part in the government or by simply backing it. In a wider context, this data also disproves the assumption that the possibility of using public resources (which are managed by central government authorities) may have influenced candidates’ results in the presidential elections.173

172 The DS, DSS, and the SPS collected the largest amount of income of this nature (which reflects the successes on local and provincial elections in December 2000) among the nominators of candidates in the presidential elections, but we did not establish the exact amounts. 173 Because of diversified coalition arrangements on a local level at the time of theJune presidential elections (even though the DS participation was noticeably higher than that of the DSS, SPO, NS, and the SPS, while the SRS was almost excluded from such power sharing agreements), and relatively modest financial resources of local governments across Serbia, we did not make a separate analysis of possible influence by local governments on election results of presidential candidates.

116 117 Election success of candidates and media advertising

Тable 6: Advertisements* of presidental candidates - TV stations and press**

Round I - 10.05.2004. - 10.06.2004.

Candidate Amount in 000 CSD*** 1. Boris Tadić 29.009 2. Tomislav Nikolić 8.263 3. Bogoljub Karić 54.663 4. Dragan Maršićanin 47.159 5. Ivica Dačić 21.707 6. Vladan Batić 941 7. Mirko Jović 1.166 8. Ljiljana Aranđelović 1.080 9. Zoran Milinković 395 10. Jelisaveta Karađorđević 17.454 11. Borislav Pelević 2.271 12. Branislav Ivković 1.828

Round II - 16.06.2004. - 24.06.2004.

Candidate Amount in 000 CSD*** 1. Boris Tadić 29.053 2. Tomislav Nikolić 13.115

Source: Transparency Serbia

* Includes TV commercial of presidental candidates, without paid programming slots; since there are no regular prices for paid programming slots it is impossible to make a reliable estimate as in the case of TV commercials; the data can be analysed without them, because the structure of paid programming slots is similar to that of TV ads (the candidates with the most amount of TV ads also had the largest number of paid programming slots)

** The research included seven television station from Belgrade and one from Novi Sad

*** The prices were calculated without discounts and the sales tax.

According to the presented data, it becomes clear that six candidates that invested the most in advertising occupied top six places in the first round of presidential elections. Other presidential candidates, whose rented adver-

118 119 tising space “cost”174 fewer than CSD 2.5 million, won less than 1% of votes in the elections. It follows that this sum represented the “critical mass” for investments in advertising that was necessary for achieving even a moder- ate election success. This also bears out the hypothesis from the first chapter claiming that a positive correlation between the level of invested funds and the associated election result exists only until a certain threshold, at which point many other factors begin to have considerable effect on the election success. The SRS invested least in advertising for its candidate Tomislav Nikolić (CSD 8.3 million) among the nominators of all six candidates that exceeded this amount, representing only a half of the GG ILS advertising expenses, which nominated Princess Jelisaveta Karađorđević (CSD 17.5 million) who won 2% of the votes (compared to 30.6% won by Nikolić). Another oddity in terms of investments in advertising for Tomislav Nikolić during the presidential campaign is a complete absence of advertising in the print media. The most active candidate in terms of advertising before the first round of elections was Bogoljub Karić with the estimated cost of CSD 54.7 million (and 18.4% of the votes), followed by Dragan Maršićanin with CSD 47.2 million (13.3% of the votes), Boris Tadić with CSD 29 million (27.4% of the votes), and Ivica Dačić with CSD 21.7 million (4% of the votes). With a high degree of accuracy, the structure of expenses for TV and print media advertising points to the target group that candidates wanted to reach the most. As we have already stated, the minimum investment in the print media advertising (expressed in percentages showing the proportion between print advertising expenses and the total amount of advertising spending) was recorded in cases of nominators of Tomislav Nikolić (0% total media campaign) and Ivica Dačić (6%). On the other hand, those that relied the most on print media advertising include nominators of Boris Tadić (29%), Dragan Maršićanin (23%), Jelisaveta Karađorđević (19%), and Bogoljub Karić (18%). The additional analysis of this subject could be performed according to the structure of various media and time slots that the nominators chose in their campaigns, but it would require a deeper sociological study that goes beyond the scope of this research. In the second round of elections, the DS (Boris Tadić) invested more money during the eight-day period (June 16 – June 24) than over the course of the entire previous month of the presidential campaign (May 10 – June 10):

174 It refers to the price of paid programming slots and advertising space without discounts and tax, based on the information shown in the Documentation Annex numbers 5, 6, and 7.

118 119 the projected cost stands at CSD 29,053,000 and CSD 29,009,000 in the second and the first round of elections, respectively, with a greater number of paid programming slots in the second round. That was more than double what the SRS invested in the second round (Tomislav Nikolić), which also significantly increased its spending in that period – the projected investment for Nikolić campaign in the second round of elections amounts to CSD 13,115,000, a 40% rise compared to the advertising expenses in the first round of elections. The SRS steered clear of print media advertising in the second round of elections, too, whereas the nominator of their rival candidate, the DS, decided to boost the share of TV commercials in advertising spending, bringing down print media advertising expenses in its campaign for Tadić from 29% to 16% of the total advertising budget. Considering how both candidates that advanced to the second round substantially boosted their advertising spending, it would be logical to assume that their heightened presence in the media contributed to the increase in the number of voters that supported them, although it would be very difficult to estimate to what extent the increase in spending and the associated activities improved their chances of election success175, and how much other factors played a part in the eventual election win by Boris Tadić.

175 In the case of SRS candidate Nikolić, the increase in the number of votes received in the second round was slightly higher than the boost in media advertising spending (50% compared to 40%), whereas growth in the number of second-round votes for DS candidate Tadić was much larger than the respective increase in media promotion expenses.

120 121 Nemanja Nenadić Vladimir Goati

CONCLUSIONS 55 AND RECOMMENDATIONS

Conclusions and recommendations for amendments to the Law

The first elections under the new system of financing of political parties in Serbia (elections for Serbia’s president, June 2004) are over, but the definitive assessment on the quality of existing legislation cannot be provided with a high degree of certainty. What can be said, however, is that in contrast to earlier regulations (1991, 1992, 1997), the new Law on financing of political parties aims to comprehensively regulate this important and above all po- litically sensitive matter, which is vital for further development of democracy. The principle of transparency embodied in the Law (despite not being always consistently applied), helped increase the awareness and the level of aspiration among the democratic public, which acquired a legal right to be informed about financial activities of political parties. Surely, that was one of the reasons why “political money” piqued public interest, generating critical opinions on the matter in much greater numbers compared to the period before the June presidential elections. The Law on financing of political parties (2003), aside from limiting manoeuvring space for corrupt behaviour and various machinations by political parties and their leaders (by putting an end to anonymous donations with rigorous sanctions), also introduced another positive and far-reaching change compared to the previous legislation. It has imposed an obligation upon po-

120 121 litical parties to establish mechanisms for internal financial controls with their statutes, while proclaiming the right of party members to be informed about financial activities of their party (which we discussed in the second chapter). In so doing, the lawmakers jeopardized an important right of the party leader- ship and especially the party leader, to arbitrarily decide key financial matters without participation from “party membership”. The intention of legislators to include the disenfranchised and thus far mostly marginalized party membership in the discourse about vital financial issues could have serious consequences for the internal party democracy, while contributing to reduce the power of invincible and untouchable party leaders. This trend of party leader invincibility in Serbia is without precedent compared to political parties in other post-communist countries of Central and Southeast Europe.176 Naturally, even a rather good law on financing of political parties is only a first step in the fight against corruption, but the outcome of this battle depends in large measure on a consistent application of that law. Moreover, it would not be an exaggeration to claim, generally speaking, that consistent application of the law is the “Achilles heel” of the justice system, not just in Serbia but in most other post-communist countries, as well. Here, we are talk- ing about the implementation of properly written laws without inconsistencies and legal loopholes, which are also accompanied with adequate by-laws. Therefore, the issue of law implementation is all the more relevant to the Law on financing of political parties, which – despite being (as we have already underlined) a big step forward compared to the previous legislation – suffers from various weaknesses and deficiencies. We will briefly outline only the most important ones pertaining to the issue of election campaign financing (which we covered in-depth in the second chapter).

1. Campaign financing for all elections has been regulated in the same manner.

The justification for current regulations is of dubious nature andit has created many problems in the implementation of the Law (most of all in terms of allocating financial resources from the budget), which we discussed at length in the third chapter of this study. There is no doubt that some election campaign expenses are constant, regardless of whether they involve di-

176 Goati, Cit. work, page. 131-137

122 123 rect elections to individual government posts (the president of the Republic, municipality president, city mayor) or the election of members to collective state bodies (MPs and councillors). However, the elections for president of the Republic and MPs are conducted according to different “election formulas” (in the former case there is a two-round majority system, compared to the system of proportional representation in the latter), but the Law does not seem to take these various aspects into account, even though they directly influence the collection of funds and associated spending patterns during an election campaign. Aside from that, as already shown in the second chapter of this book, the amount that a winning presidential candidate should set aside to cover his campaign expenses in accordance with the law is several times higher than what he is permitted to collect and spend, according to other regulations specified in the same law. Bearing that in mind, the regulations covering campaign financing in elections for the president of the Republic, city council presidents, and mayors ought to be separated from campaign financing regulations in elections for members of representative bodies. In that case, we are of the opinion that the legislator should reduce the amount of financial resources given to participants in presidential elections (and direct elections on local level) to the level that the current law prescribes (in total, 0.04% of the RB), or propose a different distribution system for funds that are allocated under existing regulations (0.01% of the RB). The distribution should be handled in three stages: payments to all nominated candidates before the first round of the elections – disbursements to nominators of candidates that advanced to the second round (thus ensuring equality in the election race) – compensation to the nominator of the election winner (which ensures winner independence from donors).

2. The Law does not have a clear provision about the total amount of funding (“ceiling”) that can be used for election campaign financing.

Not only is there a need to limit campaign expenditures, but such action would also be in accordance with the recommendations provided by international organisations. The existing stipulation, which establishes the “ceiling” for expenditures only after determining the limits on the revenue side, under- mines legal security. Hence, we believe that the limits on total election campaign spending should be defined in a clear and unambiguous fashion.

122 123 3. The Law does not take into account special circumstances that may arise while simultaneously holding several elections (presidential, parliamentary, local).

In such a case, it would be realistic to assume that political parties, which plan to nominate a presidential candidate and submit an election list of deputies for the parliament, would conduct their campaigns from a single centre. At the same time, holding of the elections carries important financial ramifications as well, because these same parties would certainly be able to use most, if not all of their campaign activities to achieve the same kind of election promotion on both fronts, thus saving a substantial portion of their funding. That is precisely why the distribution of funds from the budget earmarked for election activities in such a situation should be clearly defined instead of resorting to cumulative payments. For instance, the state could set aside 2/3 of the total funding that would otherwise be paid through cumulative approach. At any rate, care should be taken to ensure equal treatment of all participants in the elections, while adopting adequate regulations that govern the obligation to keep appropriate documentation, naming responsible persons or entities, and establishing clear mechanisms for conducting efficient controls of such “joint” campaigns.

4. The Law does not adequately regulate the status of “citizens’ groups” which are legitimate nominators of candidates in elections.

The decision to enable “citizens’ groups” to submit election lists is a result of a tendency to prevent political parties from usurping this function, thus significantly damaging active and passive rights of citizens. In addition to this, to a large extent justified fear of “almighty parties” (partitocraty), other factors also influenced the decision to grant “citizens’ groups” the right to take part in the election process such as international treaties and documents to which SCG is a signatory, which mandate that a citizen, and not just political parties, should be a part of all phases of the election process. This equality, however, requires that political parties and “citizens’ groups” be equal in their respective rights and obligations covering campaign financing, too. But, such equality is seriously undermined by current regulations that have been “tailored” to political parties, because they impose one set of rules on “citizens’ groups” and completely another on political parties. Moreover, this dual treatment becomes glaringly obvious in cases wherein “citizens’ groups” are exempted

124 125 from certain sanctions as ad hoc associations. For that reason, the law needs to be modified and amended in a bid to make these groups, as legitimate participants in the election process, equal to political parties in terms of responsibility for their actions, as well.

5. The legal definition of campaign expenses is not clear enough, and the adopted interpretation is far too restrictive, because it reduces expenditures to advertising expenses alone.

The insufficient clarity introduces legal insecurity and hinders efforts aimed at uncovering abuses, while the adopted interpretation in many ways contradicts existing regulations on the collection and spending of funds, as specified in the law. There are many reasons why other expenditures in addition to advertising costs (for example, the cost of organising a rally) should be included in campaign expenses. This is especially important in cases where candidates are nominated by citizens’ groups, which take on the form of an organisation only for election purposes and by definition cannot incur expenses that are not campaign-related. Hence, campaign expenses need to be redefined in such a fashion as to encompass all campaign-related activities, while acknowledging certain expenditures that become due after the elections as campaign expenses, as well (the obligation to pay for publishing of the financial report on funds that were collected and spent in the “Official Gazette”).

6. The Law entitles the nominators of candidates to receive a portion of state funding from the budget based on their participation in the elections, but the amount is not determined in advance.

The purpose of this state funding is to provide a minimum of financial resources for the presentation of candidates in the elections. There is no justification for making the amount unreasonably small or high, depending on the number of election participants, as is currently the case. Therefore, the total funding should be clearly defined and determined in advance, according to the minimum estimated cost for the presentation of candidates.

7. The laws that regulate election candidacy tend to turn away candidates with negligible chances of election success by increasing “transactional

124 125 expenses” (by charging court fees for the certification of 10,000 signatures), but the Law on financing of political parties guarantees state funding from the budget to all candidates that manage to reach that threshold.

This has the capacity to effectively thwart the initial idea by the legislator to allow the citizens the choice of serious candidates. Generally speaking, nobody should be prevented from running for office, but by the same token the state should not encourage election runs by those who, despite knowing that they cannot seriously expect to win substantial voter support, decide to enter the election process regardless. Likewise, this somewhat dilutes the effect of state financing from the budget under the current legislation, because the increase in the number of candidates reduces the amount of financial resources that will be at their disposal before the elections. The number of candidates that won more than 5 percent of the votes in earlier presidential elections177 was small (2 to 3), and it was a regular occurrence that one of the candidates receives less votes than the number of signatures required for launching an election bid (ten thousand). Nevertheless, they duly received their equal share of state funding from the budget along with candidates that won the largest number of votes, and therefore had enormous political influence. Not even the June 2004 presidential elections succeeded in becoming an exception to this rule: three candidates won less than 10,000 votes, and only four out of fifteen candidates crossed the 5% “threshold” (Documentation Annex, Table 1). It appears entirely plausible that making the entitlements to a portion of state funding contingent upon a certain level of election success would reduce the number of candidates in the elections, while at the same time increasing op- tions for adequate representation of political programs of those that do decide to run. That is why the law should stipulate that funding from public sources would only be provided to nominators of candidates that win a certain percentage of votes in the elections (or demanded back from those that fail to meet the criteria).

8. The Law does not allow the nominators of rival candidates to take out loans in a bid to overcome obstacles stemming from current campaign financing regulations that make state funding from the budget available near the end

177 Five percent of the votes cast is a legal threshold for entering the parliament in elections for MPs in Serbia and the threshold for receiving budgetary compensation in presidential elections in Montenegro (Article 23 of the Law on electing the president of the Republic).

126 127 of the campaign.

This explains why the nominators of candidates must initially collect funding from private sources, even though they are entitled to financial resources from the budget. Having that in mind, it would be rational to enable the nominators of candidates to take out loans up to a certain limit and under strict conditions (up to the amount that the nominators are entitled to receive from the budget, increased by interest payments for a given period until the loan becomes due).

9. The Law does not impose an obligation on the nominators to cover all campaign expenses before filing financial reports.

This deficiency along with inadequate legal interpretation could make subsequent audits of financial reports on funds that were collected and spent impossible, creating in the end a complete lack of transparency of campaign financing sources. Taken in a somewhat wider context, such a conclusion appears to be corroborated by the experience of Central and Eastern Europe, which Martin Valecki sums as: :”...Theoreticaly well-intentioned regulations requiring the production of financial statements are not necessarily effective if they fail to cover all aspects of party funding. It is of little value to demand disclosure only of particular categories of political financing. This will merely encourage the use of sources of money not subject to disclosure.”.178 Bearing that in mind, it would be important to mandate that all election campaign expenses must be paid before the reports are filed.

10. The Law fails to prevent the nominator of the election winner from practically concealing its campaign financing sources from the public, or receiving more money from the budget than it managed to spend for campaign purposes under the law.

If the Law contained a provision making budgetary compensation contingent on a prior control of the legality of election campaign financing,

178 “Political Finance in Central Eastern Europe”, In: Foundation for Democracy, Approaches for Comparative Political Finance, 2001, Karl – Heinz Nassmacher, Baden – Baden, Nomos, p. 414

126 127 the nominator of the election winner would have to “balance its financial structure” before filing the report, without being able to include budget funds that have yet to arrive in a listing of collected revenues in the report. Such a regulation would thoroughly incorporate the principle of transparency in election campaign financing, enabling the authorities to conduct an efficient control of financial statements in the reports. Consequently, we believe that the budget compensation should be awarded to the nominator of an election winner only after a credible control of its report on campaign revenues and expenses has been completed.

11. The Law does not require the nominator of the election winner to return previously collected revenues to donors after receiving financial compensation from the budget.

Providing budgetary compensation to the nominator of the election winner serves to make the future maker of important decisions independent from campaign financiers. For that reason, we think that returning financial contributions to donors should be an obligation and not a mere possibility, compelling the nominator of the election winner to give back all such contributions after receiving financial compensation from the budget.

12. The Law imposes an ambiguous obligation on the nominators of candidates asking them to submit a report on “funds that were collected and spent”.

The existing legal formulation created substantial confusion among the majority of nominators in the June presidential elections. Besides, if legal limitations on campaign expenses exist, then it would be logical for them to be su- pervised after the election participants have filed the reports. For outstanding ambiguities to be eliminated, it would be necessary to force the nominators of candidates to file two reports – one revealing the structure of collected revenues for campaign financing and the other detailing the make-up of their election campaign expenses.

13. The Law does not create an obligation to reveal the names of election donors.

128 129 Not only would the creation of an obligation to report the names of individual donors and the amount of their contribution, which can easily be achieved based on the current legislation, make financing more transparent, but it would also increase the possibilities for subsequent financial controls. The goal of limiting individual contributions by private persons and companies can be accomplished only if the information on the value of contributions provided by donors is listed in the reports. As well, legislative efforts to clearly define who is allowed to make campaign contributions will only have the desired effect if the information on various donors is also included in the reports. Moreover, the obligation by political parties to submit annual reports on all contributions over CSD 6,000 (EUR 85.7) further substantiates this claim. Since such an obligation already exists for regular party financing, there is no reason why it should not apply to election campaign financing, as well. In short, the nominators ought to be compelled by law to include the information on persons and companies that have provided campaign contributions in the reports – their names and the amount of the contribution.

14. The legal categorization of revenues is not entirely functional, and it is overly restrictive in terms of using private funds of the candidates in the elections.

The Law creates differences in income structure that are not important for election campaign financing. As it has been shown in the second chapter, the revenues from promotional activities can be classified under other income categories (contributions, income from assets). The membership dues and income from assets owned by a political party, when used for campaign financing, are transferred from a permanent party account to a special account for the purpose. At the moment of the transfer it cannot be determined whether these funds represent membership dues or income from party assets, nor is it significant in terms of the legality of financing. On the other hand, it is important to ensure that political parties do not use this method to transfer funds that were received for regular party financing. The Law has also failed to allow the candidate himself to finance his own campaign in greater percentage than other individuals. The inclusion of such a provision would not adversely affect main objectives of the Law, provided there are efficient controls attached. It should always be checked to establish whether the funds have come from the candidate himself or from some anonymous donor, but possible ways to put in practice an efficient control mecha-

128 129 nism remain in dispute179. In case there were no control mechanisms in place, there would be a real danger of circumventing the law by channelling funds from illegal sources towards campaign financing via candidate’s personal account.180 This is why the introduction of such financing mechanisms in our legal system requires careful implementation along with special measures for protection from possible abuses (for instance, evidence of the origin of funds, and the documentation showing that financial obligations were paid). In short, the private sources of campaign financing allowed under the law should be declared as: contributions, funds from the permanent account of a political party (if they do not originate from private sources), and funds from the private account of the candidate along with other assets owned by the candidate (with evidence of the origin of funds, and the documentation proving the payment of outstanding financial obligations under the law).

15. The Law does not mandate checking donors for “solvency”.

With a goal of protecting conscientious political parties from accepting donations from entities that are not eligible to make such contributions, the law should allow them to vest this responsibility with those who are making the contributions by taking a written statement from them, which confirms that the donor does not have any outstanding financial commitments towards the state. To achieve this goal, a donor should have on obligation to sign a statement about fulfilling legal criteria for making a campaign contribution.

16. The Article 6 of the Law on financing of political parties remains at odds with provisions in other regulations.

The Article 6 calls into question the possibility of free presentation for

179 As a private person, the candidate does not have an obligation to keep bookkeeping records on his own property and income, nor does he have to leave a paper trail for his financial transactions. 180 For instance, an operator of the games of chance (who is not allowed to make a campaign contribution because of his special status) provides the candidate with the money on the account of an “old gambling debt”, a “loan”, or some other fictitious arrangement that cannot easily be refuted. The candidate then transfers this money in a completely legal fashion to the special account for campaign financing.

130 131 candidates via public media services that has been provided through other regulations, so this exception from the rules prohibiting financing “by state institutions and companies” should be explicitly stated.

17. The Law on financing of political parties does not regulate the right of use of non-financial resources from public sources, not does it specify ways to exercise this right.

The Law has omitted to clearly define conditions for using assets from public sources for campaign financing, except in the case of transferring portions of state funding to the special accounts of nominators of candidates. The Law should be modified through adequate amendments toguarantee the right to the use of public premises, free time slots for presentations in state- owned media, and other uses of public resources under equivalent conditions for all candidates, and specify ways to exercise this right.

18. The Law limits the length of the campaign, but it does not specify sanctions for those who breach this regulation.

The campaign has been confined to the period from the time the elections are called until they are held, but there are no sanctions for those who “start out early” or carry on after the elections are over. Other regulations allow broadcasting of TV ads only during election campaigns, but do not prohibit political advertising in the print media, or via billboards, posters… The experience of the June 2004 presidential elections strongly suggests that it is necessary to introduce penalties for campaigning before the elections are called and after they had been completed, both for those who carry on with such behaviour and those that make it possible (print media, agencies that rent advertising space, printers).

19. The legislation does not consider relations between state institutions that are engaged in campaign financing.

Even though the law prescribes that unused funds allocated by the state must be returned to the budget, there is no reason why payments, to which the nominators of candidates and those who file election lists are not

130 131 entitled, should not be prevented. This could be accomplished by making REC and the MF compare and balance the information on time (the return of unused funds, as a corrective mechanism, would be applied only if subsequent controls reveal that reported expenses were inflated).181 In order to avoid a needless loss of time and energy, it is necessary to thoroughly regulate the communication mechanism between state institutions that are engaged in campaign financing.

20. The Law does not impose an obligation on REC to use auditors, leaving it up to this state body to make a final determination.

The documentation foundation for this research lends weight to the conclusion that REC should not have “free rein” in deciding which reports or parts thereof should be subject to audits. Instead, the law should impose an obligation on REC to conduct thorough controls of the entire campaign financing process in one efficient way or another. So, it would be useful to force REC to use authorised auditors for a comprehensive control of the documentation that was used by the nominators of candidates to make the reports.

21. A simple control of the reports filed by the nominators of candidates, as prescribed by the law, reveals almost nothing about the legality of financing.

The reports show only summary data that cannot be used to reach a well-founded conclusion on the legality of campaign financing. As a result, it is necessary to authorise auditors that are examining the documentation related to campaign financing not only to review the documentation of the nominators of candidates, but also to question all other entities (TV stations, advertising agencies, party members, etc) that might have knowledge about the process of collecting and spending of funds in the election campaign.

181 This refers to the distribution of financial resources that takes place after the elections, based on election results. The payment of equal shares of one portion of allocated funding before the elections cannot depend on the submission of expenses’ reports, because the deadline for payments expires before the deadline for filing financial reports on funds that were collected and spent.

132 133 22. The Law does not state when REC must initiate proceedings for regulation violations.

Even the act of authorising REC to initiate the proceedings for regulation violations is subject to the analogous interpretation of other articles in the Law. Under no circumstances should filing of charges for campaign financing regulation breaches constitute a voluntary act. For that reason, the law should oblige REC to initiate such proceedings against all violators of the rules on campaign financing.

23. The absence of regulations covering campaign activities by organisations that are not official nominators of candidates or election lists increases suspicion of irregularities in the campaign financing process.

Many countries have established strict rules in this regard. Conducting an election campaign aimed at encouraging voters to cast their ballots (or not) is a legitimate activity in a democratic society, but if potential misgivings by one or more candidates are to be avoided, then every organisation planning to engage in such a campaign ought to check with all election participants whether they have any objections to their neutrality. The experience of the June 2004 presidential elections speaks to the need to clearly define in the law the issue of election campaign participation by organisations that are not the nominators of candidates or election lists.

24. The Law does not adequately ensure that the reports on funds collected and spent during the campaign would be available to the public.

It is obvious that the article in the Law on financing of political parties that regulates the obligation to publish this report lacks vital elements necessary for its implementation in practice – the unambiguous stipulation that the nominators of candidates have the obligation to publish the report (instead of general statements such as “are to be published”), the specification of a deadline for publishing along with punishments for failing to publish the report within a prescribed deadline, and vesting certain state bodies with a responsibility to conduct adequate supervision of the process and initiate proceedings for regulation breaches, should they occur. Since the reports by political parties are subject to review, it might be

132 133 worthwhile to make subsequent REC findings about possible irregularities in the reports accessible to the public in order to gain a more complete understanding of the matter. In short, the obligation of the nominator to publish the report should be unambiguously assigned, while imposing a clear deadline and fines for failing to act on it. The REC itself ought to present its report on a completed review to the public, as well.

25. Prohibited sources of financing are not regulated in adequate manner.

The spirit of the Law would be much better maintained if the ban from Article 6, Section 1 of the Law (which applies to campaign financing, too) referred to “generating income” from foreign countries, individuals and companies, state enterprises and so on, instead of “receiving material and financial assistance from”. Accordingly, the regulations covering the ban on certain sources of election campaign financing should be redefined.

26. The state body that controls election campaign financing has neither sufficient independence nor expertise.

The deficiencies in existing regulations in terms of assigning RECto monitor the legality of election campaign financing have been discussed in the second chapter of this book. When Serbia establishes a supreme auditing institution (a “court of audits” or an “auditor general”), the jurisdiction that currently rests with REC ought to be transferred to that body in a bid to assign monitoring of the legality of election campaign financing to an independent and expert institution.

134 135 A blow to political corruption or preservation of the status quo?

The fate of the new election campaign-financing concept has been in the hands of those charged with the implementation of the Law from the moment it left the parliament. Regardless of vagueness or incompleteness of existing regulations, election participants and state institutions that are supposed to enforce the law can take a decisive step towards significantly improving the current situation. At the moment182, all eyes are focused on REC, which is conducting a review of the reports on funds that were collected and spent by the nominators of candidates. This review, a first of its kind in Serbia, is important not only for punishing those who flouted provisions in the Law, but also in terms of further analysis of existing regulations aimed at amending the law, or improving its implementation and the practice of election campaign financing. The stakes are high. The nominators that might have broken the law in the process should be exposed as such to the voters, in addition to suffering financial consequences in the following fiscal year. The concept of a fight against corruption that served as one of the plat- forms for the Law has been the target of fierce attacks and its fate remains uncertain. The fact that the campaign for local elections in September of 2004 was also conducted according to the disputed set of financing rules that left a number of ambiguities in the Law, raises doubts about the existence of critical mass of political will to make election campaign financing truly and entirely transparent. However, although it might appear that Serbia could return to a state of affairs before 2004 as a consequence, we remain convinced that increased public interest in these issues will serve to steer forthcoming events in a decidedly different direction. The experience of presidential elections teaches us to employ the highest level of precautions possible. In particular, dangerous claims about an “excessive burden to the budget” (brought upon generous financing of election participants from the budget) could on the heels of public animosity towards political parties in general183, bring an end to the concept adopted in 2003, which would, to a large extent, strip the Law on financing of political parties from its anti-corruption effects. It is also evident that insufficient clarity of certain articles of the Law, whose interpretation is too complex for a wider

182 At the time when this book went to print, the 90-day deadline for the REC review of the reports was set to expire (October 9, 2004).

134 135 public audience, created an atmosphere where the citizens and the media are not fully aware of all relevant information, thus making violations of the law less noticeable and obvious. The impression we are left with after these presidential elections is that most segments of the structure of revenues of political parties, and especially details of associated party expenses, have remained secret. Such an outcome is a direct consequence of incomplete regulations, insufficient ability to implement the law, and inadequate control mechanisms. These factors will pose additional problems in the future, making it more difficult to understand the true significance of legal and transparent financing of political parties ina developing democracy, such as Serbia is today. Spreading the knowledge that a democracy has a “price” along with a willingness to pay it are the tasks that stand before all of us in the future. Perhaps, helping the Law on financing of political parties to “pass the test” and “survive” its first year of implementation could have been a decisive step on that path. It can be said that the Law has yet to pass this test (regardless of achieving undeniable progress compared to the earlier state of affairs), but it was given another chance in “overtime” (auditing of reports, publishing the results of those reviews, creating a consen- sus on fundamental goals, the modifications and amendments to the law after election results were announced) to earn a better grade. Nonetheless, the media can certainly make a much greater contribution by ensuring that such an important process as the financing of political parties and election campaigns is followed in a more appropriate manner in the future. As well, providing additional legal guarantees for openness and transparency of this process should help advance that goal. We expect to see a broad public debate about a number of issues after REC announces its findings, including ways to better regulate campaign financing in the future and avoid the same mistakes committed during this “baptism of fire” of the new Law. At the same time, we hope that findings, which resulted from this research, would serve as our humble contribution to that debate.

183 Numerous studies have already hinted at such animosity, which was further corroborated, albeit indirectly, by a major success of candidate Bogoljub Karić in the presidential elections, whose campaign was in essence “anti-party”. A substantially reduced interest of the electorate to take part in democratic processes exemplified by constant decline in voter turnout in elections over the last year bears this sentiment out.

136

Documentation annex

136 139 ANNEX 1

Results of elections for president of the Republic – June 13th 2004 (I round) and June 27th 2004 (II round)

% of total Number number Nominator (party, of votes No. Candidate of voters coalition, citizens’ groups) received by entered in candidate the roll 1. Ljiljana Aranđelović United Serbia (JS) 11.796 0,38 Demo – Christian Party of 2. Vladan Batić 16.795 0,54 Serbia (DHSS) Socialist Party of Serbia 3. Ivica Dačić 125.952 4,04 (SPS)

4. Milovan Drecun Revival of Serbia (PS) 16.907 0,54

Party of Serbian Citizens 5. Dragan Đorđević 5.785 0,19 (SDrS) Prof. dr Branislav Bane Socialist People’s Party 6. 13.980 0,45 Ivković (SNS)

People’s Radical Party, 7. Mirko Jović Serbia and Diaspora, Eu- 5.546 0,18 ropean Bloc (NRS SD, EB)

Citizens’ group “Initiative 8. Jelisaveta Karađorđević for more beautiful Serbia” 62.737 2,01 (GG ILS) “Common presidential 9. Bogoljub Karić candidate Bogoljub Karić” 568.691 18,23 (GG BK)

Democratic Party of Ser- bia, G 17 Plus, Serbian 10. Dragan Maršićanin Renewal Movement, New 414.971 13,30 Serbia (DSS, G 17 Plus, SPO, NS)

Patriotic Party of Diaspora 11. Zoran Milinković 5.442 0,17 (PSD) Serbian Radical Party 12. Tomislav Nikolić 954.339 30,60 (SRS) Party of Serbian Unity 13. Borislav Pelević 14.317 0,46 (SSJ) People’s Peasants Party 14. Marijan Rističević 10.198 0,33 (NSS)

15. Boris Tadić Democratic Party (DS) 853.584 27,37

ANNEX 1 139 % of total Nominator (party, Number of number of No. Candidate coalition, citizens’ votes received voters en- groups) by candidate tered in the roll Serbian Radical Party 1 Tomislav Nikolić 1.434.068 45,40 (SRS)

2 Boris Tadić Democratic Party (DS) 1.681.528 53,24

Source: REC

140 ANNEX 1 141 ANNEX 2

Reports on the origin, amount and structure of the funds raised and spent on electoral campaign (1-15)

Political Party: ______Seat: ______Registry number: ______Code of аctivity: ______Tax indentification number: ______Account number: ______

Report on the origin, amount and structure of the funds raised and spent on electoral campaign for ______

Funds raised Funds spent No. Type Amount Amount 1 2 3 4 1 Public sources 1.1. Republic Budget 1.2. Territorial autonomy unit budget 1.3. Local self-government unit budget TOTAL 1 2 Private sources 2.1. Membership dues 2.2. Contributions 2.2.1. Contributions from legal entities 2.2.2. Contributions from natural persons Income from promotional activities of a 2.3. political party 2.4. Income from property of a political party 2.5. Legacies TOTAL 2 TOTAL 1+2

Place : ______Seal Responsible persons

Date : ______

140 ANNEX 2 141 Ljiljana Aranđelović (JS)

Note: please see translation of the form (page 141) and text on pages 83 and 90

142 ANNEX 2 143 Boris Tadić (DS)

Note: please see translation of the form (page 141) and text on page 83

142 ANNEX 2 143 Vladan Batić (DHSS)

Note: please see translation of the form (page 141) and text on page 80

144 ANNEX 2 145 Ivica Dačić (SPS)

Note: please see translation of the form (page 141)

144 ANNEX 2 145 Milovan Drecun (PS)

Note: please see translation of the form (page 141) and text on page 90

146 ANNEX 2 147 Dragan Đorđević (SDrS)

Note: please see translation of the form (page 141) and text on page 81

146 ANNEX 2 147 prof. Dr Branislav Ivković (SNS)

Note: please see translation of the form (page 141) and text on page 82

148 ANNEX 2 149 Mirko Jović (NRS SD, EB)

Note: please see translation of the form (page 141) and text on page 80

148 ANNEX 2 149 Jelisaveta karađorđević (GG ILS)

Note: please see translation of the form (page 141)

150 ANNEX 2 151 Bogoljub Karić (GG BK)

Note: please see translation of the form (page 141) and text on pages 80 and 105

150 ANNEX 2 151 Dragan Maršićanin (DSS, G 17 plus, SPO, NS)

Note: please see translation of the form (page 141) and text on page 81

152 ANNEX 2 153 Zoran Milinković (PSD)

Note: please see translation of the form (page 141)

152 ANNEX 2 153 Tomislav Nikolić (SRS)

Note: please see translation of the form (page 141)

154 ANNEX 2 155 Borislav Pelević (SSJ)

Note: please see translation of the form (page 141)

ANNEX 2 155 Marijan Rističević (NSS)

Note: please see translation of the form (page 141) and text on page 83

156 ANNEX 2 157 ANNEX 3

Relations between the amount of raised and spent funds on electoral campaign

(1) (2) Candidate AMOUNT RAISED AMOUNT SPENT (2/1) (IN 000 CSD) (IN 000 CSD) Ljiljana Aranđelović 1.107 3.926 3.5 Vladan Batić 1.377 4.863 3.5 Milovan Drecun 607 2.979 4.9 Dragan Đorđević 607 3.243 5.3 Mirko Jović 607 3.025 5.0 Jelisaveta Karađorđević 1.051 3.484 3.3 Bogoljub Karić 9.711 51.861 5.3 Zoran Milinković 607 3.458 5.7 Borislav Pelević 607 3.458 5.7 Marijan Rističević 607 3.396 5.6 Ivica Dačić 7.482 7.482 1 Dragan Maršićanin 29.970 29.970 1 Tomislav Nikolić 4.496 4.496 1 Boris Tadić 42.944 42.944 1 Branislav Ivković 1.257 1.257 1

ANNEX 3 157 159 ANNEX 4

Expert opinions of Ministry of Finance on the application of certain provisions of the Law on political party financing

“... As the costs of election campaign imply costs related to activities during the election campaign, as provided in the first part of the relevant provision, and having in mind the overall content of Article 8 of the Law, it is our opinion that this part of Article 8 does not relate to all activities of the participant during the election campaign but only to those activities that represent, i.e. constitute the election campaign. These activities are defined in the second part of Article 8 of the Law, which states: “that is, posters, advertisements, programs on TV, radio and other media, commercials, publications and other related activities” and that is more precise specification of the relevant activities during an election campaign. Due to the aforementioned, we are of the opinion that the listed activities are not mentioned as examples and may not be considered as listing of examples, but is a designation and/or precise defining of particular activities during an election campaign, the costs of which are implied as election campaign costs in terms of the Law. This manner of defining the subject activities is also, according to our opinion, not an exhaustive listing of all permissible types of costs but a clear defining of election campaign activities whose cost are by implication election campaign costs including, however, in addition to the listed activities, also other activities that are related to the listed activities, as set forth in Article 8 of the Law: “ that is, posters, advertisements, programs on TV, radio and other media, commercials, publications and other related activities “. In respect of your question whether costs of rental of premises, communications, temporary engagement of personnel or engagement of specialised agencies, that you quote as an example, may be considered as election campaign costs, and having in mind what the Law provides as election campaign costs as determined in the manner under Article 8 of the Law, we are of the opinion that particular costs related to activities during the election campaign must, in this specific case, be assessed only within the statutory framework as forth by the Law, in order to be deemed election campaign costs in terms of this Law.

ANNEX 4 159 ....

As pursuant to provisions of Article 11, paragraph 4 of the Law, provisions of Article 5, paras 2 and 3 of the Law are accordingly applied to election campaign funds raised fromprivate sources, and in respect to your question “whether the volunteer work of supporters of a presidential candidate (e.g: engaged on putting up posters, distributing promotional material, organising of rallies) is considered “free services”, that are subject to conditions specified in Article 5, paras 2 and 3 of the Law “, it is our opinion that, with regard to the statutory manner of submitting of bills (imperatively and unconditionally) by legal entities and natural persons who are extending services or selling a product to a political party (and/or proponent of a candidate), where the Law does not define the types of services in terms of this Law, that the mentioned provisions of the Law apply in this specific case, regardless whether they are “free services” or not.”

Government of Serbia Ministry of finance No: 011-00-313/2004-08 29.06.2004 Belgrade

(pages 1 and 2) Minister Mlađan Dinkić

160 ANNEX 4 161 “... Having in mind, on one hand, the matter regulated by these Rules as set forth in Article 1, paras 1 and 2 of the Rules, as well as the obligation of a political party to, inter alia, compile also a report on the source, amount and structure of collected and spent funds for the election campaign (Article 1, para 4 of the Rules) in the manner and with data specified in Article 5 of the Rules and in Article 14, paragraph 1 of the Law on Financing of Political Parties, whereby all nominators of accepted electoral lists and/or nominators of opposing candidates, it is our opinion that provisions of the Rules in the part relating to compiling and manner of entering data in the report on the source, amount and structure of collected and spent funds, although not specifically designated therein, apply to all nominators of accepted electoral lists and/or all proponents of candidates participating in the election campaign, and not only to political parties. This by reason that the obligation of filing of the report is set forth by Law for all nominators of accepted electoral lists and/or nominators of candidates, thus the answer to your first question is as aforementioned. In respect to your question on application of the provisions of Article 5, paragraph 6 of the Rules, we point out that, due to the content of this provision as well as the set form of the report on the source, amount and structure of collected and spent funds for the election campaign, that Appendix 3 that comprises an integral part of the Rules, nominators of candidates are obliged to, within the framework of item 2.2 of the form of the report, separately list the overall funds received from legal entities and separately the overall contributions from natural persons, as well as the spent funds. Separate listing of information on contributions exceeding 6,000 dinars is not required in terms of the form of this report.”

Government of Serbia Ministry of finance No: 011-00-304/2004-08 18.06.2004 Belgrade

(page 2) Minister Mlađan Dinkić

160 ANNEX 4 161 163 ANNEX 5

Review of candidates’ TV slots

Advertisements* of presidential candidates on TV stations**

Round I – 10.05.2004. - 10.06.2004.

Number of Amount Candidate Price 000 CSD *** adds (in seconds) 1. Boris Tadić 338 8.158 20.556 2. Tomislav Nikolić 189 3.201 8.263 3. Bogoljub Karić 477 17.38 44.963 4. Dragan Maršićanin 435 8.601 36.196 5. Ivica Dačić 344 7.411 20.308 6. Vladan Batić 45 356 941 7. Mirko Jović 8 243 1.166 8. Ljiljana Aranđelović 7 225 1.080 9. Zoran Milinković 35 618 395 10. Јelisaveta Karađorđević 79 1.247 14.147 11. Borislav Pelević 32 427 2.050 12. Branislav Ivković 14 352 1.690

Round II - 16.06.2004. - 24.06.2004.

Number of Amount Candidate Price 000 CSD *** adds (in seconds) 1. Борис Тадић 253 5.361 24.480 2. Томислав Николић 183 4.674 13.115

Source: AGB Strategic Research Serbia and Transparency Serbia

* Includes TV commercials of presidential candidates, without paid programming slots

** The research included seven television stations from Belgrade and one from Novi Sad

*** The prices were calculated without discounts and the sales tax

ANNEX 5 163

ANNEX 6

Review of candidates’ print media advertising

Advertisements in the press

Period: 01.05.2004 - 13.06.2004

Share in Candidate Amount Price** overall media campaign (%) Dragan Maršićanin 128 10.963 23 Bogoljub Karić 81 9.670 18 Boris Tadić 60 8.453 29 Jelisaveta Karađorđević 20 3.307 19 Ivica Dačić 18 1.399 6 Borislav Pelević 8 221 10 Branislav Ivković 5 138 8

Period: 01.05.2004 - 13.06.2004

Share in Candidate Amount Price** overall media campaign (%) Boris Tadić 21 4.573 16

Source: AGB Strategic Research Serbia and Transparency Serbia

* The research included nine dailies and eight weeklies

** Prices were calculated in 000 CSD, without discounts and the sales tax

ANNEX 6 165 167 ANNEX 7

Review of candidates’ paid programming TV slots

Paid programming slots TV stations/hours first round of elections

Bogoljub Karić

RTS3 3:58:47 BK 4:19:35 Pink 1:25:55 Studio B 2:24:07 Politika 1:55:54 Total 14:04:18

Dragan Maršićanin

BK 6:47:40 Pink 2:22:05 Studio B 1:01:09 Politika 0:05:06 B-92 0:04:57 Total 10:20:57

Boris Tadić

Pink 0:59:25 Studio B 1:45:14 BK 3:18:45 B-92 1:00:51 Politika 0:44:16 Total 7:48:31

Tomislav Nikolić

Politika 2:09:58 Pink 2:15:33 B-92 0:15:05 BK 1:57:37 Total 6:38:13

ANNEX 7 167 Ivica Dačić

Pink 0:27:27 Politika 0:47:54 Total 1:15:21

Vladan Batić

Politika 0:48:25 Pink 0:25:09 Total 1:13:34

Borislav Pelević

Pink 0:29:25

Jelisaveta Karađorđević

Pink 0:24:57

Paid programming slots TV stations/hours second round of elections

Boris Tadić

Pink 2:42:09 B-92 0:54:54 Studio B 2:19:40 Politika 2:15:02 BK 2:58:59 Total 11:10:44

Tomislav Nikolić

Pink 2:12:31 BK 4:39:34 Politika 1:44:48 Total 8:36:53

168 ANNEX 7 169 ANNEX 8

Review of payments to the members of electoral boards at polling stations in certain municipalities

Number of electoral board members at polling station Despotovac Plandište Čukarica Subotica Zemun Vračar Apatin Total Užice Rača Knić Ub Nominator

JS 77 0 0 0 0 46 0 0 0 114 0 237

DHSS 38 126 67 0 62 46 150 88 46 119 110 852

SPS 84 182 68 224 62 46 169 97 46 118 208 1304

PS 81 0 0 146 62 46 128 92 46 0 97 698

SDrS 82 32 0 4 0 46 149 87 46 0 65 511

SNS 82 184 67 198 62 46 172 0 46 113 127 1097

NRS, EB, SD 76 167 69 16 62 46 108 27 46 110 200 927

GG ILS 62 168 49 150 62 46 144 0 46 50 169 946

GG BK 88 177 69 196 62 46 177 56 46 113 210 1240

DSS, G 17+, SPO 85 173 68 211 62 46 177 97 46 118 208 1291 i NS

PSD 81 68 66 156 43 0 119 63 46 113 186 941

SRS 80 184 70 226 62 46 180 92 46 120 203 1309

NSS 79 34 0 38 0 46 124 45 0 25 0 391

DS 86 183 69 209 62 46 168 97 46 120 208 1294

SSJ 0 0 0 149 62 46 139 32 46 0 0 474

Total 1081 1678 662 1923 725 644 2104 873 598 1233 1991

168 ANNEX 8 169 171 ANNEX 9

LAW ON FINANCING OF POLITICAL PARTIES

/”Official Gazette of the Republic of Serbia” No. 72/2003, 18 July 2003 and /”Official Gazette of the Republic of Serbia” No. 75/2003, 25 July 2003/

INTRODUCTORY PROVISION

Article 1

This Law governs financing, records and method of financial control of registered political parties (hereinafter “political parties”), nominators of registered election lists and nominators of candidates for president of the Republic of Serbia, municipality presidents and town mayors.

SOURCES AND USE OF FUNDS

1. Use of Funds

Article 2

Funds obtained in accordance with this Law may be used for financing of costs related to:

1) regular work of the political party;

2) election campaign for election of president of the Republic, deputies, mayor, municipal president and councilors.

2. Types of Funds

Article 3

Funds for financing of activities specified in Article 2 hereof may be obtained from public and private sources, in accordance with this Law.

ANNEX 9 171 Public sources in terms of this Law are funds from the Republic Budget, territorial autonomy unit budget and local self-government unit budget, appropriated for financing of regular functioning of a political party and election campaign costs. Private sources in terms of this Law are: membership dues, contributions from legal entities and natural persons, income from promotional activities of a political party, income from property of a political party and legacies.

3. Financing of Regular Work of a Political Party

Article 4

Public source funds appropriated for regular work of a political party whose candidates have been elected deputies and/or councilors are set at the level of 0.15% of the Republic of Serbia budget (reduced for the transfers to other levels of government and social security and medical insurance funds), at 0.1% of the territorial autonomy unit’s budget (reduced for the transfers from other levels of government) and/or 0.1% of the local self-government unit’s budget (reduced for the transfers from other levels of government). Funds specified in paragraph 1 of this Article in the amount of 30% shall be allocated in equal amounts to political parties with deputies or councilors, whilst the remaining funds (70%) shall be allocated in proportion to the number of deputies and/or councilors. The Ministry responsible for finance and/or the relevant administrative body of a territorial autonomy unit, and/or local self-government unit body, shall transfer every month the proportionate part of the funds specified in paragraph 1 of this Article to political parties, before the 10th day of the month for the preceding month.

Article 5

Membership dues specified in Article 3, paragraph 3 hereof imply the amount regularly paid by party members, in accordance with the provisions set out in the Statute of a political party. Payment exceeding this amount is deemed a contribution. Legal entities and natural persons may give contributions to a political party. In terms of this Law, a contribution implies all gifts presented to a political party, free services or providing services to a political party under conditions deviating from market conditions. The authorised officer of a political

172 ANNEX 9 173 party is required to issue a receipt for the received contribution. The shareholders’ assembly and managing bodies of the legal entity shall be informed of the contribution to a political party. A legal entity or natural person providing services or selling a product to a political party shall make out an invoice to the political party, regardless of who shall be liable for payment for the services or product, and/or regardless of whether the services were provided or product given free of charge. The total amount of contribution specified in paragraph 2 of this Article, if the contribution is given by a natural person, may not exceed in a single calendar year ten average monthly salaries in the Republic of Serbia in the year preceding the year when the contribution is given, according to official data of a statistics authority, and/or one hundred average salaries if the contribution is given by a legal entity. Income from political party’s promotional activities is the income from sale of publications, symbols and other tokens of the political party. A political party may acquire property in the territory of the Republic of Serbia. Annual income of a political party from property owned by such party may not exceed 20% of the amount of the overall income of a political party. A political party shall, within thirty days after submitting of the annual statement of accounts in accordance with Article 16 hereof, give as charity, to one or more organisations engaged in charity work, any amount of income exceeding the above mentioned 20%. The amount of funds from private sources, except funds from membership dues, collected by a political party in a single calendar year for its regular work, may not exceed 100% of the funds received by a political party from the Republic of Serbia Budget. The amount of funds from private sources, except funds from membership dues, that a political party not entitled to funding from the Republic of Serbia Budget may collect, shall not exceed in a single calendar year 5% of all funds specified in Article 4, paragraph 1 hereof.

Article 6

It is prohibited to accept material and financial assistance from: foreign states, foreign legal entities and natural persons; anonymous givers; public institutions and public enterprises, institutions and companies with government capital share regardless of size of share; private companies performing public services pursuant to contract with government bodies and public offices, for the duration of such contract; enterprises and other organisations exercising public authority; trade unions; humanitarian organisations; religious com-

172 ANNEX 9 173 munities; organisers of games of chance; importers, exporters, merchandisers and manufacturers of excise goods and legal entities with due but unsettled payments to public revenue. A political party shall transfer the money or pecuniary value of other property acquired in manner contrary to this Law and other regulations, in favour of the Republic of Serbia Budget account within ten days of receipt thereof.

Article 7

It is prohibited to exert pressure of any kind on legal entities and natural persons during collection of donations for a political party. It is prohibited to promise or hold out the prospect of any privilege or personal gain to a donor of a political party.

4. Financing of Election Campaign Costs

Article 8

For the purpose of this Law election campaign costs shall relate to activities during an election campaign, and/or: posters, advertisements, radio and television and other media shows, commercials, publications and similar related activities during the period from calling of elections until election day.

Article 9

Budget appropriations to cover election campaign costs specified in Article 8 of this Law are provided in the year of regular elections in the amount of 0.1% of the Republic of Serbia budget (reduced for the transfers to other levels of government and social security and medical insurance funds), 0.05% of the territorial autonomy unit’s budget (reduced for the transfers from other levels of government) and/or 0.05% of the local self-government unit’s budget (reduced for the transfers from other levels of government) for the year for which the budget is passed. In event of early elections the competent bodies are required to provide funds stipulated under paragraph 1 of this Article for election campaign costs.

174 ANNEX 9 175 Article 10

Funds specified under Article 9 of this Law in the amount of 20% thereof shall be allocated in equal portions to nominators of registered election lists and/or nominators of candidates within ten days of election list registration and/or confirmation of list of candidates, whilst the residual amount of the funds (80%) shall be allocated to nominators of electoral lists that have won seats in proportion to number of seats won, and/or nominator of a candidate who has won a seat, within ten days of proclaiming of election results. The ministry responsible for finance and/or the competent body of regional government and local self-government unit shall allocate funds in the manner specified in paragraph 1 of this Article pursuant to information received from the Republic Election Commission and/or the election commission of a territorial autonomy and local self-government unit. If the funds paid pursuant to provision of Article 1 of this Article exceed the amount of funds spent for the election campaign up to election day, the difference shall be returned to the budget of the Republic of Serbia, and/or territorial autonomy unit and local self-government unit, within ten days from the day of payment.

Article 11

The nominator of a registered electoral list and/or the nominator of a candidate may raise funds also from private sources to finance costs of electoral campaign, in accordance with this Law. The amount of funds collected from private sources by a nominator of a registered electoral list and/or the nominator of a candidate to finance election campaign costs may not exceed 20% of the funds set out under Article 9 hereof. A donation by a single natural person towards election campaign costs may not exceed 0.5% of the amount set out in paragraph 2 of this Article, and the donation by a single legal entity may not exceed 2% of that amount. Provisions of Article 5, paragraphs 2 and 3 hereof, shall accordingly apply to collection of funds from private sources for financing of election campaign costs.

Article 12

For the purpose of raising election campaign funds, the nominator of a

174 ANNEX 9 175 registered electoral list and/or the nominator of a candidate shall open a special bank account that may not be used for other purposes. All funds intended for the costs of electoral campaign shall be paid into the account specified in paragraph 1 of this Article and all payments of election campaign costs shall be made from this account. The funds received in cash shall be deposited in the account specified in paragraph 1 of this Article within three days of the receipt. Should the funds obtained from private sources exceed the amount specified in Article 11, paragraph 2 hereof, the surplus of funds shall be transferred into the permanent account of the political party.

Article 13

The nominator of a registered electoral list and/or the nominator of a candidate shall appoint two persons who will be responsible for lawful raising and assigned spending of funds and for reporting. The signatures of the persons specified in paragraph 1 of this Article shall be deposited with the bank where the account specified in Article 12, paragraph 1 hereof, is opened.

Article 14

The nominator of a registered electoral list and/or the nominator of a candidate shall, within ten days of the election day, submit to the Republic Electoral Commission (hereinafter “the Commission”) a detailed report on the origin, amount and structure of the funds raised and spent on electoral campaign. The form of the report referred to in paragraph 1 of this Article shall be specified by the minister responsible for finance. The Commission shall check the data contained in the report referred to in paragraph 1 of this Article within 90 days of receipt of the report. The Commission may engage certified auditors to perform specific tasks of this audit. The report is published in the “Official Gazette of the Republic of Serbia” at the expense of the political party or nominator.

176 ANNEX 9 177 5. Political Party Accounts, Mandatory Accounting Records and Financial Control

Article 15

A political party shall have an account, and its organizational entities may have sub-accounts to which funds are remitted in accordance with this Law. The Statute of a political party or a special decree passed on basis of the Statute shall set out relations between organizational entities of a political party in respect of remittance of funds.

Article 16

A political party shall keep accounting records of all income and expenditure. The accounting records shall be kept according to the origin, amount and structure of income and expenditure in compliance with the accounting regulations. The credit and debit bookkeeping records of a political party are subject to annual audit in accordance with the accounting regulations, and may be subject to control by competent bodies. A political party is required to keep special records of contributions received and of its property. The minister responsible for finance shall specify the content of these records. A political party is required to submit to the committee of the National Assembly of the Republic of Serbia competent for finance (hereinafter “Finance Committee”) the annual statement, and certificate of a certified auditor, as well as a report of all contributions exceeding 6,000 dinars and a report on property. The minister responsible for finance shall specify the content of these reports. The annual statement and reports referred to in paragraph 5 of this Article are published at the cost of a political party in the “Official Gazette of the Republic of Serbia.”

Article 17

The Statute of a political party shall regulate the internal audit of financial operations and the right of party members to be informed of income and

176 ANNEX 9 177 expenditures of the party. The Statute must set out the officer responsible for financial operations, reporting and bookkeeping of the political party, and authorised for contacts with the Finance Committee. The reporting entity shall inform the Finance Committee of appointment of a responsible officer specified in paragraph 2 of this Article within three days of his/her appointment, and in the event of any change in status of such person, within three days of such change. The responsible officer shall sign all reports and is responsible for all records relating to reports and, following a request from the Finance Committee, the responsible officer may submit the reports for inspection. Political parties shall keep their reports for a minimum of six years after submission. The Commission shall make all reports available to the public and shall take appropriate steps to ensure access of all citizens to information contained in the reports. Every citizen of the Republic of Serbia is entitled to inspect the reports filed with the Finance Committee and to receive a copy of such reports or parts thereof, at his/her expense.

Article 18

In the event of determining irregularities related to collection, use or recording of funds in terms of this Law, the president of the Finance Committee shall file charges with competent authorities. If a political party is effectively penalized for an offense stipulated under this Law, it shall forfeit the right to public funds for the following calendar year. The Finance Committee passes the decision specified in paragraph 2 of this Article. The decision shall be published in the “Official Gazette of the Republic of Serbia”.

III PENAL PROVISIONS

Article 19

A political party shall be fined from 200,000 to 1,000,000 dinars if:

1) raises funds contrary to the provisions of Articles 5, 6 , 7 and 11 hereof;

178 ANNEX 9 179 2) fails to open an account in accordance with provisions of Article 12 hereof, does not remit funds to the account or effects payment contrary to provisions of Article 12, paragraph 2 hereof;

3) keeps accounting records contrary to the provisions of Article 16 hereof;

4) fails to submit the reports in accordance with provisions of Articles 14, 16 and 17 hereof.

For violations specified in paragraph 1 of this Article the responsible officers shall be fined from 10,000 to 50,000 dinars.

Article 20

A political party spending funds in an electoral campaign exceeding the amount set out in this Law shall be fined double the amount of the sum in question. For violations specified in paragraph 1 of this Article the responsible officers specified in Articles 13 and 17 hereof shall be fined from 10,000 to 50,000 dinars.

IV TRANSITIONAL AND FINAL PROVISIONS

Article 21

Political parties shall harmonise their Statutes with the provisions of this Law within six months of entering into force of this Law.

Article 22

Political parties are required to submit to the Finance Committee within six months of entering into force of this Law a report on their property, expressed by type, size and origin. The report shall be published in the “Official Gazette of the Republic of Serbia” at the expense of the political party.

178 ANNEX 9 179 Article 23

The minister responsible for finance shall specify the contents of the reports referred to in Article 14, paragraph 2 and in Article 16, paragraph 5 hereof, as well as the contents of the records referred to in Article 16, paragraph hereof, within 90 days of entering into force of this Law.

Article 24

On the day this Law enters into force, the Law on Financing Political Parties (“Official Gazette of the Republic of Serbia” No. 32/97), Article 13a of the Law on Presidential Elections (“Official Gazette of the Republic of Serbia” No. 1/90, 79/92 and 73/2002), Article 51, paragraph 2 of the Law on Local Elections (“Official Gazette of the Republic of Serbia” No. 33/2002, 37/ 2002 and 42/2002) and Article 103 of the Law on Election of Members of Parliament (“Official Gazette of the Republic of Serbia” No. 35/2000 and 69/2002) shall cease to be valid. On the day this Law enters into force, the Law on Financing Political Parties (“Official Gazette of FRY” No. 73/2000) shall cease to be valid, except for the provisions of Articles 13 and 14 of that Law.

Article 25

This Law shall become effective on the eighth day following its publishing in the “Official Gazette of the Republic of Serbia”, and shall apply as of 1 January 2004.

OSCE Mission to SaM Legal Translation Unit 30-July-2003

180 ANNEX 9 181 ANNEX 10

Council of Europe, Committee of Ministers, Recommendation Rec(2003)4

In April 2003, The Council of Europe recommended the following Common Rules Against Corruption in the Funding of Political Parties and Electoral Campaigns to its member states184:

I. EXTERNAL SOURCES OF FUNDING OF POLITICAL PARTIES

Article 1 Public and private support to political parties

The state and its citizens are both entitled to support political parties. The state should provide support to political parties. State support should be limited to reasonable contributions. State support may be financial. Objective, fair and reasonable criteria should be applied regarding the distribution of state support. States should ensure that any support from the state and/or citizens does not interfere with the independence of political parties.

Article 2 Definition of donation to a political party

Donation means any deliberate act to bestow advantage, economic or otherwise, on a political party.

Article 3 General principles on donations

a. Measures taken by states governing donations to political parties should provide specific rules to:

184 http://www.cm.coe.int/stat/E/Public/2003/adopted_texts/recommendations/2003r4.htm

180 ANNEX 10 181 § avoid conflicts of interests;

§ ensure transparency of donations and avoid

§ secret donations;

§ avoid prejudice to the activities of political parties;

§ ensure the independence of political parties.

b. States should:

i. provide that donations to political parties are made public; in particular, donations exceeding a fixed ceiling

ii. consider the possibility of introducing rules limiting the value of donations to political parties

iii. adopt measures to prevent established ceilings from being circumvented.

Article 4 Tax deductibility of donations

Fiscal legislation may allow tax deductibility of donations to political parties. Such tax deductibility should be limited.

Article 5 Donations by legal entities

a. In addition to the general principles on donations, states should provide:

i. that donations from legal entities to political parties are registered in the books and accounts of the legal entities; and

ii. that shareholders or any other individual member of the legal entity be informed of donations.

182 ANNEX 10 183 b. States should take measures aimed at limiting, prohibiting or otherwise strictly regulating donations from legal entities which provide goods or services for any public administration.

c. States should prohibit legal entities under the control of the state or of other public authorities from making donations to political parties.

Article 6 Donations to entities connected with a political party

Rules concerning donations to political parties, with the exception of those concerning tax deductibility referred to in Article 4, should also apply, as appropriate, to all entities which are related, directly or indirectly, to a political party or are otherwise under the control of a political party.

Article 7 Donations from foreign donors

States should specifically limit, prohibit or otherwise regulate donations from foreign donors.

II. SOURCES OF FUNDING OF CANDIDATES FOR ELECTIONS AND ELECTED OFFICIALS

Article 8 Application of funding rules to candidates for elections and elected representatives

The rules regarding funding of political parties should apply mutatis mutandis to:

§ the funding of electoral campaigns of candidates

§ for elections;

§ the funding of political activities of elected

§ representatives.

182 ANNEX 10 183 III. ELECTORAL CAMPAIGN EXPENDITURE

Article 9 Limits on expenditure

States should consider adopting measures to prevent excessive funding needs of political parties, such as, establishing limits on expenditure on electoral campaigns.

Article 10 Records of expenditure

States should require particular records to be kept of all expenditure, direct and indirect, on electoral campaigns in respect of each political party, each list of candidates and each candidate.

IV. TRANSPARENCY

Article 11 Accounts

States should require political parties and the entities connected with political parties mentioned in Article 6 to keep proper books and accounts. The accounts of political parties should be consolidated to include, as appropriate, the accounts of the entities mentioned in Article 6.

Article 12 Records of donations

a. States should require the accounts of a political party to specify all donations received by the party, including the nature and value of each donation. b. In case of donations over a certain value, donors should be identified in the records.

184 ANNEX 10 185 Article 13 Obligation to present and make public accounts

a. States should require political parties to present the accounts referred to in Article 11 regularly, and at least annually, to the independent authority referred to in Article 14.

b. States should require political parties regularly, and at least annually, to make public the accounts referred to in Article 11 or as a minimum a summary of those accounts, including the information required in Article 10, as appropriate, and in Article 12.

V. SUPERVISION

Article 14 Independent monitoring

a. States should provide for independent monitoring in respect of the funding of political parties and electoral campaigns.

b. The independent monitoring should include supervision over the accounts of political parties and the expenses involved in election campaigns as well as their presentation and publication.

Article 15 Specialised personnel

States should promote the specialisation of the judiciary, police or other personnel in the fight against illegal funding of political parties and electoral campaigns.

184 ANNEX 10 185 VI. SANCTIONS

Article 16 Sanctions

States should require the infringement of rules concerning the funding of political parties and electoral campaigns to be subject to effective, proportionate and dissuasive sanctions.185

185 Quoted in: “Best practices in combating corruption”, OSCE, 2004. The text (page 26) follows the Recommendation: Further guidance comes from the 50 heads of state and government of the Commonwealth of Nations, which developed a “Commonwealth Framework Principles on Combating Corruption.” This document includes provisions for the funding of political parties. These provisions are designed to:

§ Prevent conflicts of interest and the exercise of improper influence

§ Preserve the integrity of democratic political structures and processes

§ Proscribe the use of funds acquired through illegal and corrupt practices to finance political parties

§ Enshrine the concept of transparency in the funding of political parties by requiring the declaration of donations exceeding a specified limit

186 ANNEX 10 187 ANNEX 11

Presidential Elections, 13 and 27 June 2004 Republic of Serbia (Serbia and Montenegro) OSCE/ODIHR Final Report186

“…B. LAW ON FINANCING OF POLITICAL PARTIES

A new Law on Financing of Political Parties was applied for the first time in this election. The law, which was passed by Parliament in 2003 with a wide majority, entered into force on 1 January 2004. It regulates campaign financing of presidential, parliamentary and municipal elections187, and introduces a much more stringent framework for party and campaign finances as a whole, setting limits on party expenditure, property income, and voluntary contributions. While the introduction of the new law is a welcome step towards increasing transparency and accountability in party finances, its effective implementation was a source of controversy. Several points in the law were interpreted differently by the presidential candidates and by the Ministry of Finance, leading to a heated debate and legal action taken against the latter. The most controversial point in the law was the amount of state funds to be disbursed for campaign finance purposes. According to the Finance Ministry’s interpretation, the law does not stipulate the exact amount of campaign funds to be released by the Ministry for a single election; instead, it sets the total amount for all elections to be held in a budget year (0.1 per cent of the annual state budget). Consequently, on 6 May, the Ministry188 set a total of 45 million Dinars (around 642,000 EUR) to be allocated for financing campaigns in the June 2004 presidential elections, a fraction of the 228 million Dinars prescribed189

186 Presidential Elections, 13 and 27 June 2004 Pages: 6 -8, Republic of Serbia (Serbia and Montenegro) OSCE/ODIHR Final Report 187 More precisely in Article 1. of the Law on political party financing (Annex 10). 188 The decision of the Government (see Chapter 4). 189 The Law on political party financing projected amount of 228 million CSD for campaign financing, but only 12 million were appropriated in annual budget (please see chapter 3).

186 ANNEX 11 187 in the annual budget. This interpretation of the law, that attributes to the Ministry the task of setting the total of campaign funds for a single election, gives considerable discretionary power to the government and constitutes a potential advantage to incumbent candidates. It is also to be noted that, while drafting the annual election budget, the government did not take into account the new law on financing political parties. Rather it applied earlier regulations in force until last year, thus adding further confusion to the issue. Representatives of 11 of the 15 first-round candidates contested the decision of the Ministry of Finance at the REC. They claimed that the amount disbursed should be five times greater than that set by the Ministry. Differences in interpretation might have been avoided had the Ministry provided timely unambiguous information on the functioning of the new law. Communication between the Ministry, political parties, and the REC could have been better. The law foresees that 20 per cent of the approved sum to cover campaign expenses be equally divided among all the registered candidates, with the remaining 80 per cent going to the winner of the seat(s). One evident shortcoming of the law is that it makes no distinction between allocation of funds for an election under the proportional system (i.e. parliamentary or municipal) or a majoritarian system, such as a presidential election. In fact, the procedure in place is designed mainly for the proportional system, allocating the greater part of the funds for parties that succeed in winning seats in an election. The difference is too big in the case of a presidential race, where only 20 per cent is distributed among all participants and 80 per cent goes to the winner. Furthermore, the losing candidate in the second round is further dis- advantaged, having to face more expenses than other unsuccessful first-round candidates but allocated the same amount of funds. When it became clear that candidates were only going to receive around 600,000 Dinars (8,700 EUR) each under the 20 per cent provision, instead of the 3 million Dinars which they had calculated, eleven of the fifteen candidates embarked on a legal action against the Ministry of Finance for mishan- dling the law, by filing a suit with the Supreme Court. Candidates claimed that this sum was barely sufficient to cover costs incurred in the candidate registration phase, when a minimum of ten thousand supporting signatures must be certified by a notary190. The Ministry of

190 The Report refers to notarisation in the court.

188 ANNEX 11 189 Finance, on the other hand, claimed that some candidates registered only for the purpose of obtaining state funds, while realizing they had no real pros- pects of winning. The law stipulates that funds for campaign finance should be disbursed to candidates within ten days after the certification of the list of candidates. However, this deadline was not respected and funds arrived late, again drawing criticism of the Ministry of Finance. In order to receive funds stipulated under the law, candidates need to open a special bank account and appoint two authorized persons responsible for the lawful raising and spending of campaign funds. The Ministry explained that the delay was caused by some candidates failing to meet these requirements, and that this led to a temporary block on the transfer of funds to all candidates. According to the law, two bodies are responsible for overseeing its implementation. The Parliamentary Finance Committee oversees the regular party finance side, while the REC is responsible for auditing the financial reports of campaign expenses191 which candidates must present ten days after the certification of the final election results. Despite earlier plans to provide technical training in financial matters to REC personnel, this did not happen and the REC remained without specific financial expertise. According to the law, the REC may hire an independent company192 to audit the financial reports of campaign expenses. Under the new law, the amount approved for campaign financing from state sources also determines the maximum amount of privately donated funds which parties or candidates can spend193 on campaigning. The law also envisages penalties for candidates who spend in excess of the limit.194 Uncertainty about the amount of funding provided by the state made it difficult for candidates to plan and budget for the campaign.”

191 Reports on the origin, amount and structure of the funds raised and spent on electoral campaign (Annex 2). See also chapters 2 and 3 of this book. 192 The Law (Art 14, para 3) provides for engagement of auditors, i.e. whether companies or individuals (from public or private sector). 193 “Nominators of candidates” (political parties, coalitions and citizens’ groups) as those subjected to limitations. The issue of spending limit is rather complex (discussed in chapter 2 of this book). 194 I.e. nominators, not candidates themselves.

188 ANNEX 11 189 RECOMMENDATIONS

6. The Ministry of Finance should, after consulting with other interested parties, state its considered interpretation of all controversial points in the law on political party financing.

7. Campaign financing for presidential elections should be regulated separately in a different section or article of the law on political party financing. Distribution of campaign funds for presidential elections should be regulated in a manner different from the one applied for parliamentary elections.

8. The form used for reporting on campaign finances should be revised to include a list of funding sources, so that it is made clear whether private donation limits have been respected.

9. Vesting in one body the responsibility for the implementation of the law on campaign finance should be considered. If relevant training ispro- vided, the Republican Election Commission would be the appropriate body to be vested with this function.

10. Technical training for organs charged with the implementation of the law on campaign finance should be provided. Also, training for political parties and election administration bodies might be considered. In addition, the Ministry of Finance should establish better communication with the Republican Election Commission and political parties.195

195 See also recommendations in chapter 5 of this book.

190 ANNEX 11