Full disclosure needed for 20 billion MNT electoral incentive shared among few parties

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In accordance with the Law on Political Parties, a one-off incentive of 1,000 MNT per vote obtained in elections has been given to each political party in Parliament from the state budget. However, it is not clear how parties are spending this money as they do not disclose their funding reports to the public. In other words, Mongolia’s political finance regulatory framework faces significant challenges stemming from the current lack of enforcement and various loopholes. Some law revisions are required to address this situation and keep up with the latest best global practices. Most importantly, there is a need to improve the oversight, disclosure and transparency of political finance systems and report on them to the public.

Although the Law on Elections and Law on Political Parties contain political finance regulations (sources of funding, spending limits, audits and sanctions) that apply to both political parties and candidates, the country does not meet international guidelines and best practice recommendations on party funding.

According to the Law on Political Parties, adopted in 2005, the parties that won seats in the 2008, 2012, 2016 and 2020 parliamentary elections received a certain amount of funding from the state. Independently elected members do not receive such state support because it is given only to political parties that triumphed in elections. Basically, in the last four elections, the Mongolian People’s Party (MPP), Democratic Party, Civil Courage Green Party, Mongolian People’s Revolutionary Party (MPRP), Mongolian National Democratic Party, Justice Coalition, Right Person and Electorate Coalition and You and Our Coalition received about 8.6 billion MNT from the state budget. Of this amount, MPP alone has cashed 4.3 billion MNT, or more than half of the distributed amount, since it usually had a majority or even an absolute majority in elections.

This is not the only money that parties receive from the state budget. Mongolia offers parties two types of state subsidies. The first is the above-mentioned one-off funding. The second is a quarterly amount equivalent to 10 million MNT that parties receive per seat, 50 percent of which is earmarked for electoral expenses. The amounts are adjusted according to the exchange rate. Thanks to this regulation, for example, Leader of former MPRP (now merged with MPP) N.Enkhbayar “expelled” O.Baasankhuu, who was elected alone from the party in the 2016 parliamentary elections, but “demanded” the immediate transfer of the 10 million MNT stipulated in the law.

Currently, MPP, which has an absolute majority of 62 members in Parliament, receives 620 million MNT annually, or almost 2 billion MNT since 2020. This means that the money will be provided every year until the term of office ends for these members. A total of 12.1 billion MNT was transferred from the state budget to parties under the names of 304 members elected in the last four parliaments. Since MPP has the largest number of members elected to Parliament, the overall amount of funding for the party is expected to reach 7.6 billion MNT by 2024. Furthermore, with the additional one-time state funding provided to the parties, the current authorities will pocket more than 12 billion MNT.

In total, in the last four parliaments, 20.8 billion MNT was given to a few parties and coalitions that won seats in Parliament. Unfortunately, it is not clear when, where and how the parties spent this money.

POOR CONTROL REGULATION

Mongolian legislation provides for two types of control in relation to party finances. The Law on Political Parties requires parties to be audited internally and annually and have the reports made public. The Law on Elections requires parties, coalitions and candidates to audit their electoral finances and report basic information about their electoral expenses, the income dedicated to electoral expenses (including donors’ identities) and any other assets.

These reports are submitted to the General Election Commission (GEC), which sends copies to the Mongolian National Audit Office (MNAO) and the General Taxation Department (GTD). MNAO has 90 days to review the report and publish a statement, together with the identity of any donors who exceeded the threshold of 1 million MNT from individuals and 2 million MNT from legal entities. MNAO is thus mandated to monitor, research and cooperate as part of these tasks.

However, the law does not provide sufficient clarity for oversight authorities, primarily MNAO, GTD, GEC and the General Authority for State Registration (GASR), to fulfill these mandates and the implementation of the above-mentioned regulations seems to be limited. In specific, the law does not clearly describe the process and procedures for selecting which party or candidate reports should be audited. Nor does it specify what GTD is supposed to do with the copy of the report it receives. In addition, MNAO has so far only published summaries of the reports and audits submitted by parties.

In other words, the Law on Political Parties is weak in terms of the control and regulatory system. Particularly, Article 19 of the law states that 50 percent of the above-mentioned two types of funding will be spent on the activities of constituencies. There is no other specific provision in the law. Since political parties do not report on it, it is doubtful whether half of the state funding is actually spent on developing constituencies.

The law also stipulates that the structural organization of parties should monitor their funding, but it is not being enforced. Moreover, the Accounting Law obliges parties to disclose their financial statements to the public but they do not implement it. In 2007, MNAO conducted a performance audit of the funds provided to political parties. It found violations such as not spending 50 percent of the funds in constituencies and sent recommendations to relevant organizations and officials, but political parties did not comply.

Furthermore, as stipulated in many laws, even enterprises and non-governmental organizations that have performed work and services with state and local budget funds must disclose their financial reports. But the political parties have been able to evade this regulation. In general, party funding is kept off the records concealed from not only the public but also its members.

In fact, people’s trust in political parties has decreased in our country and people say that it is wrong to give them funding from the fiscal budget. On the contrary, the budget funding given to parties is increasing all over the world.

Of the 180 countries surveyed by the International Institute for Democracy and Electoral Assistance (International IDEA), 64 countries regularly provide state budget support to their parties and 40 provide it based on election results. It mentioned that such support from the state budget to parties has many benefits such as preventing them from being influenced by foreign and domestic investors, increasing their independence and protecting the government from the interests of business groups.

On the other hand, researchers say that the state does not provide any financial support to non-parliamentary parties, which has the adverse effect of not only allowing a few people in Parliament to receive large amounts of funding but also destroying the multi-party system. In other words, financing based on the number of seats won in Parliament supports only a few elected parties. However, if the threshold is not set, the number of parties may increase. This will not make much difference in our country, which has only 3 million people but thirty political parties.

In the countries surveyed by International IDEA, funding is allocated from the budget based on the percentage of votes rather than the number of seats in Parliament. In addition, the parties receiving 1 percent of votes in Hungary, Bulgaria, Austria and France; 2 percent in Japan, Canada, Mexico and Latvia; 2.5 percent in Norway; 3 percent in Russia, the Czech Republic, Poland and Lithuania; 4 percent in Australia; and 7 percent in Turkiye receive support from the budget.

Based on the current situation, international and domestic experts have made the following recommendations:

• To clarify and review the electoral funding reporting framework. The Law on Elections and the Law on Political Parties should be aligned to subject campaign financing and non-election period party financing to the same strict disclosure and reporting requirements, and their control should be centralized into a single authority

• To refine the mandate, capacity and oversight role of MNAO as the controller of political finance. MNAO should be given proportional advisory, oversight and investigative responsibilities, including auditing electoral candidates’ and parties’ financial reports, as well as sanctioning the relevant authorities. The regulations should also clearly detail the process and procedures used to select which party’s or candidate’s reports are to be audited

• To promote cooperation among the various oversight authorities and encourage MNAO with the purpose of proactively engaging with all stakeholders to develop and carry out its role as the political finance oversight authority

• To prioritize coordination between MNAO and GEC, the Independent Authority Against Corruption and GTD

• To ensure that MNAO makes all information about party finance – electoral and non-electoral – transparent and readily accessible to the public, ideally in an electronic and user-friendly format

• To take steps to make party financial reporting more effective, which will enhance MNAO’s guidance, communication with political parties and review of parties’ financial reports

• To provide MNAO with the necessary resources – financial and human – to fulfill its existing and future oversight obligations with the expected diligence and efficiency

• To improve the political finance sanction framework by increasing fines and introducing new, more dissuasive punishments, such as the loss of public subsidies or prison 

A working group has been established by order of the speaker of Parliament to prepare the draft revision of the Law on Political Parties. Chairwoman of the working group Ts.Munkhtsetseg said that they discussed new regulations for enhancing the transparency and control of party financing.

In particular, the draft revision provides a formula for the calculation of the amount of public funding, which takes into account the number of votes received in parliamentary elections, as well as the number of seats won in Parliament, the number of women candidates over the minimum gender quota of 20 percent, the number of candidates with disabilities, the number of elected women and the number of elected candidates with disabilities (which numbers are multiplied by 50 times the minimum monthly wage). She also said that at least 30 percent of state funding should be spent on improving the political education of the party’s members and citizens. The bill provides for monitoring law implementation and liability system for failure to do so.

Indeed, if political parties receive billions of tugrug from the state budget and do not report what they spent it on, the state mustn’t finance them.

Misheel Lkhasuren

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