The Electoral Commission has reached yet another historic milestone since the promulgation and implementation of the Political Party Funding Act. On 27 January 2023, the Commission formally tabled in the National Assembly the report and financial statements for political party funding. The tabled report included the report of the Auditor-General. This report relates to the financial year 2021-2022.
Clean Audit Opinion
The legislation requires the Commission to submit its books and records of account relating to the Represented Political Party Fund (RPPF) and the Multi-Party Democracy Fund (MPDF) (the Funds) to the Auditor-General of South Africa (AGSA), which would then audit and submit an audit report on those books and records to the Commission. On 30 November 2022, such an audit report was finalised and submitted to the Commission by the AGSA.
The Commission is pleased to announce that the AGSA has expressed a clean audit opinion in this regard. This is for us an unbounded demonstration of our commitment to good governance and upholding the highest level of prudent financial management. In relation to political parties and other stakeholders on whose behalf we manage the funds, we are hopeful that this audit outcome will go a long way in justifying our austerity in the implementation of the party funding law.
Total Amount Disclosed to the Commission
The total amount disclosed by political parties in the financial year was R145 451 464.00 (R 145.4 million). The monetary component of this is R137 329 456.00 (R137.3 million) whilst the in-kind component is R8 122 008.00 (R8.1 million). This only involves declarable income above the R100 000 threshold.
The RPPF disbursed R162 921 437.00 (R162.9 million) to represented political parties whilst the MPDF distributed R5 007 000 (R5 million).
What are the basic legislative requirements for the submission of Annual Financial Statements for political parties?
Legislatively, the deadline for submission of audited annual financial statements (AFS) by political parties is 30 September each year. Accordingly, represented political parties were required to submit two sets of financial statements together with the auditors’ opinion form before 30 September 2022. One set of financial statements would be in respect of the Funds (RPPF and MPDF) and the other would be in respect of direct funding to parties, namely; direct donations, membership fees, levies and any other income.
Unrepresented parties were required to submit only one set of financial statements in respect of direct funding (i.e., donations, membership fees and any other income) together with the auditors’ opinion.
The Commission conducted a multi-stage analysis of the submitted information in line with the stages that follow. The stages are in terms of the prescriptions in the Act.
Which Parties met the Requirement to Submit Annual Financial Statements
There were approximately 515 political parties registered with the Commission during the financial year 2021/2022. A total of 15 of the parties are represented in the various legislative bodies, namely, the National Assembly and the provincial legislatures. The other approximately 500 parties have no representation in legislative assemblies, but are on the register of parties.
Forty-one (41) parties submitted their financial statements. A total of twenty-four (24) parties submitted on or before the deadline of 30 September 2022 and seventeen (17) submitted after the deadline.
Amongst the represented political parties, eleven (11) of the fifteen (15) submitted audited financial statements as required by the Act, making it a considerable 73% submission compliance rate. The four (4) parties that did not submit financial statements are:
- African Independent Congress (AIC)
- Congress of the People (COPE)
- National Freedom Party (NFP)
- Pan Africanist Congress of Azania (PAC)
Among the eleven (11) represented parties that submitted, two parties failed to submit financial statements relating to direct funding, namely; the African National Congress (ANC) and the African Transformation Movement (ATM). The ANC has since rectified this omission by submitting revised financial statements, albeit after the prescribed date.
Nine (9) parties met the submission deadline of 30 September 2022, and two (2) did not. The parties that submitted after the prescribed date are the Economic Freedom Fighters (EFF) and the Minority Front (MF).
With regards to the unrepresented parties, thirty (30) submitted their financial statements.
Completeness of Annual Financial Statements
Upon receipt of the information, the Commission undertook the assessment of the financial statements for completeness, i.e., whether the submitted financial information was compliant with the legislative and regulatory framework.
Two (2) represented political parties, the African National Congress (ANC) and the African Transformation Party (ATM) made incomplete submissions, i.e., they submitted only one set of financial statements relating to the funds and nothing relating to direct funding. As indicated above, the ANC has since rectified this omission.
Of the 30 unrepresented parties which submitted statements, fifteen (15) are audited and fifteen (15) others are unaudited.
Political parties who failed to submit by the deadline were issued with letters in terms of section 15(1)(a) of the Act, requiring them to make representations as to why they had not complied with their obligations under the Act.
Compliance with the Requirements of Annual Financial Statements
For the majority of represented political parties, the AFS relating to the RPPF and MPDF are compliant with the Act and regulations. However, the AFS of four (4) represented political parties were not prepared in accordance with the generally recognised accounting practices (GRAP) which is prescribed by the Act. The parties concerned are the African Christian Democratic Party (ACDP), the African Transformation Movement (ATM), the Democratic Alliance (DA), and GOOD.
Three independent auditors’ reports indicated that the AFS were prepared in accordance with International Financial Reporting Standards (IFRS) for Small and Medium-Sized Entities, which is not the standard prescribed in terms of Regulation 10 of the Regulations on Political Party Funding (Schedule 2). Essentially, such presentation of financial statements constitutes non-compliance with the Act. The AFS of the ACDP did not provide an indication of the standards used in the audit procedures.
Independent Auditors’ Opinion of Political Parties
The majority of represented political parties received unqualified audit opinions on their AFS relating to the funds. However, for the ACDP and GOOD, the independent auditors’ opinion was qualified.
In respect of the ANC, the independent auditor’s opinion was a disclaimer. The independent auditor’s opinion indicated that this was with regard to statements relating to direct funding. The auditor stated that they were unable to obtain financial information to enable them to express an opinion on donations, hence a disclaimer.
Audit Opinions of Unrepresented Political Parties
More than 50% of the unrepresented parties’ statements that were submitted to the Commission were not audited or were “audited” by firms or individuals who are not registered in accordance with the Auditing Professions Act as required by the PPFA.
Where suitably qualified independent auditors expressed audit opinion on the financial statements, ten (10) unrepresented political parties received unqualified opinions and one (the Cape Independence Party) received a qualified opinion. The unrepresented political parties with unqualified audit opinions are:
- Abantu Integrity Movement
- ActionSA
- Afrikaner Selfbeskikking Party
- Cape Muslim Congress
- Christian Democratic Party
- Civic Warriors
- New Dawn Democratic Party
- Patriotic Alliance
- Setsotso Service Delivery Forum
- The Organic Humanity Movement.
Action Taken by the Electoral Commission Against Non-Compliance
Political parties that were found to be in contravention of section 12(4) of the PPFA (i.e., failed to submit their audited financial statements by the 30 September 2022) were issued with request in terms of section 15(1)(a) requiring them to make representations explaining the reason for the breach. Four (4) represented political parties and 47 unrepresented political parties submitted representations in response to directions issued.
The Commission has considered the representations. It has determined that these parties remain non-compliant. In line with s15 of the Act, it will direct them to comply with their obligations. If they fail to comply with the Act, the Commission will approach the Electoral Court in terms of s18 of the Act to request the Court to impose administrative fines on the non-compliant parties. The s 15 directions are being sent to 474 political parties.
This process is related to those parties for whom no AFS were received at all and those who submitted wholly or partially after the prescribed deadline of 30 September 2022.
The Electoral Court jurisdiction in respect of administrative fines is circumscribed by Schedule 1 to the Act which set maximum possible fines to be imposed for first offending parties.
Conclusion
The Commission wishes to thank parties which submitted financial statements. It is clear that there is a need to engage once again with party accounting officers to ensure that there is greater compliance with the various provisions of the Act. It is evident that the veil of secrecy on party funding is beginning to be removed, but a lot more work still needs to be done going forward.
Media enqueries:
Kate Bapela
Cell: 082 600 6386
For media interviews: Email requests to spokesperson@elections.org.za
