Dodgy accounting: What financial statements reveal (and hide) about political parties

The IEC now publishes political party financial statements. But does this increase transparency if information about two-thirds of the funding parties receive is missing?  

Extracts of financial statements published by the IEC in an annual report make for fascinating reading. 

The EFF declared a R 15,81 million surplus for 2022 – the biggest of any party. The DA reported R29,25 million in mysterious “other income”. The ANC noted a R324 500 loss on one set of its financial statements. 

However, this information sketches only a fraction of a picture of party finances without cooperation from parties (our emails went unanswered), due to two problems. 

Firstly, political parties need only submit financial statements to the IEC for income related to six of their sixteen streams. This income amounts to only a third of their total revenue.

The second issue is that the financial information provided, especially the information the public has access to, is severely limited and fragmented. 

It’s my political party, and I’ll be vague about my finances if I want to

Thanks to the 2018 Political Party Funding Act (PPFA), parties must submit two sets of financials to the IEC annually. 

One set of financial statements relates to donations, membership fees and other sources – so called direct funding. The other details money parties receive from the IEC. 

The IEC, in turn, publishes annual reports that include snippets of these financials. However, these snippets lack detail. 

For instance, what is the R29,25 million in other income the DA receives? “The Act requires that parties indicate other income without necessarily specifying categories for this,” says Kate Bapela, IEC spokesperson.  

Unlike other parties, the EFF does not list an amount under salaries and wages expenditure for its financial statements that relate to IEC funding. 

Is it instead listed under another line item? “We are unfortunately not able to confirm that,” says Bapela. “Same can only be confirmed by the party concerned or their auditors.”

Perhaps the EFF’s salary costs are covered under the set of financials related to direct funding? “Regulations on Political Party Funding, 2018 (Schedule 2) provides how the expenditure must be shown in the financial statements of the fund (one set). The Act, however, doesn’t require political parties to disclose the expenditure incurred under Direct Funding,” says Bapela.

“It’s an incomplete picture of party finances. It’s an argument we’ve made before in our court application that we launched in the Western Cape High Court earlier in May,” says Robyn Pasensie from My Vote Counts. 

“Our argument is that this is important to access the information you need for your right to vote.”

The PPFA requires that statements are audited. Only 11 of the 15 represented political parties did this. Most received unqualified audits. However, GOOD and ACDP received qualified audits. The ANC received a disclaimer.  

Four parties (ACDP, ATM, DA and GOOD) did not prepare their financials in line with generally recognised accounting principles.    

However, these shortcomings with the submitted financial statements pale when compared to the problem of the statements we don’t get to see. 

The dark money that parliaments pay political parties

If the PPFA fails to shine a light on party finances, it at least offers a candle. However, voters are left in the dark when it comes to funding parties receive from national and provincial parliaments.  

Parliaments can do this because the Constitution allows the National and Provincial Parliament to provide funds to parties to provide “financial and administrative assistance to each party represented in the Assembly in proportion to its representation, to enable the party and its leader to perform their functions in the Assembly effectively.”

According to research by the Organisation Undoing Tax Abuse (OUTA), National Parliament allocates this financial assistance - mainly through a line item called ‘constituency allowance’.

However, OUTA says there is little oversight on how many constituency offices exist or what they do. 

“In October 2020, OUTA asked Parliament and the parties’ Chief Whips for constituency office details (of constituency offices) but received no help from Parliament and only sample lists from the ACDP, AIC, FF Plus, UDM, Good, AL Jamah-ah, and IFP. Lists from the ANC, DA and EFF have not been forthcoming.” 

“One of the smaller parties, AL Jamah-ah, said there was no monitoring by Parliament of the spending or their constituency offices.”

Provincial Parliaments – the sugar daddies of political parties

Provincial Parliaments collectively donated R787,9 million in 2021/22 to political parties – with little oversight to no publicly available detail as to how these funds are spent. 

Bapela says that legally parliaments must report how much money they’ve given parties, “...but it does not require statements relating to this funding to be submitted to the IEC.”

“Whatever reporting back there is on spending is out of the public eye. It is also not clear how parties would be blocked from using the same expenses to account to separate legislatures for different funding streams,” notes OUTA. 

Civil Society wants to see more transparency when it comes to party funding.  

“OUTA does not oppose all public funding for represented political parties. We support the existence of the Represented Political Party Fund. Rather, it is the extent of this funding, the hidden nature of the bulk of it and the implications for democracy that causes concern."