5.1 Introduction

Amendments to the Electoral Act 1993 on 1 January 2011 made a number of changes to the obligations and requirements on party secretaries.

The party secretary is responsible for the party’s obligations in respect of election expenses and donations. Parties no longer need to appoint a financial agent for the purposes of party expenses and donations.

ELECTION EXPENSES

5.2 Expenditure limit

A registered party’s election expenses during the regulated period in a general election must not exceed $1,065,000 (including GST) plus $25,000 (including GST) per electorate contested by the party. It is a serious offence to spend more than this.

If a registered party does not contest the party vote its total election expenses cannot exceed $25,000 (including GST) for each electorate candidate nominated by the party.

The regulated period for the 2011 General Election will start on Friday 26 August 2011 and will end at the close of 25 November 2011 (the day before polling day).

The candidate election expenses regime does not apply to people who are list candidates only. Any spending by those candidates promoting the party is an election expense of the party and must be authorised by the party secretary.

These party limits are separate from the expense limits applying to electorate candidates.

5.3 Election Expenses

A party’s election expenses are the costs of advertising in any medium that:

may reasonably be regarded as either encouraging voters to vote for the party or discouraging voters from voting for another party, or both (whether or not the name of the party(s) are mentioned),

• is published, or continues to be published, during the regulated period, and
• is promoted by the party secretary or any person (including a registered promoter) authorised by the party secretary.

[See section 206 of the Electoral Act].

Party election expenses include:

• the cost incurred in the preparation, design, composition, printing, postage and publication of the advertisement,
• the reasonable market value of any materials used for the advertisement, including materials provided to the party free of charge or below reasonable market value,
• the apportioned costs for advertisements that promote two or more parties, or a party and a candidate (see paragraph 5.5 below for further information on apportioning),
• the entire advertising expenses of an advertisement that is both a party advertisement and a referendum advertisement (see paragraph 5.7 below for further information on expenses for joint referendum and election ads).

[See section 3E of the Electoral Act].

The costs of food, hall hire, surveys or opinion polls, free labour or replacing materials destroyed through no fault of the party are not election expenses.

The cost of any framework that supports a hoarding (other than a commercial framework) is no longer an expense. The value of any free time allocated to parties for opening and closing addresses and the costs of broadcasting election programmes paid for out of the broadcasting money allocated by the Electoral Commission is not an expense.

Surveys or opinion polls

The exclusion for surveys or opinion polls is not unlimited. If a survey goes beyond merely eliciting voters’ views and can reasonably be regarded as encouraging or persuading voters to vote for a constituency candidate or political party then it will not be a survey or public opinion poll for the purposes of the Act. It will be an election advertisement and the costs associated with the survey are election expenses. The Electoral Commission is happy to review a proposed script or survey and provide a view on whether or not it is an election advertisement, candidate advertisement and/or party advertisement.

If it is a party advertisement undertaken by phone canvassers who provide their labour free of charge, the costs are exempt. Any other costs incurred (for example, line rental and costs of any calls) would be an expense. The costs of paying any canvassing company to undertake the canvassing would be an election expense.

Signage on vehicles

The costs of party advertisement signage on campaign cars and other forms of mobile party advertising are election expenses. However, election expenses do not include the running costs of any vehicle used to display an election advertisement if the use of the vehicle for that purpose is not the subject of a contract, arrangement or understanding for payment.

Websites

Election expenses in relation to party advertisements published on a website include the costs that you incur preparing, designing and publishing the advertisement including hosting fees. They do not include the costs of setting up and maintaining the hardware and software infrastructure of the website.

Items distributed for public display

If a party distributes items such as t-shirts, bumper stickers and flags before 26 August 2011 (the start of the regulated period), you should assume that they will continue to be displayed during the regulated period and include the cost of these items as an election expense.

[See section 206CA of the Electoral Act].

See paragraph 5.5 for details on how the expense is apportioned. However, care should be exercised for such items because you could be exposing your supporters to the risk of prosecution if they display the items on election day (see section 7.2).

Re-used materials

Expenses cannot be apportioned between elections. If materials such as banners are purchased and then re-used in subsequent elections, at each subsequent election the party must account for the reasonable market value of the materials as an election expense. We advise parties to err on the side of caution when determining ‘reasonable market value’. We suggest that a party either use the price that was originally paid for the item, or if this is not known, what the item would cost to purchase now based on two quotes.

Staff time

The cost of labour provided to you free of charge is not an election expense. The cost of paid campaign staff, for example a campaign manager, is also not an election expense unless the staff member is directly involved in the preparation, design, composition, printing, postage or publication of party advertising. An example where paid staff might be an expense is where the staff member is directly involved in preparing copy or artwork.

5.4 Election expenses paid before or after the regulated period

Expenses paid for or incurred either before the regulated period or after 26 November 2011 (polling day) must be included in the return to the extent to which they relate to election advertisements published within the regulated period.

Where a party advertisement is published before and during the regulated period, the party secretary is responsible for apportioning the election expenses so that only a fair proportion of the expense is attributed to the regulated period.

5.5 Apportioning election expenses

It will be necessary for the party secretary to apportion election expenses if the total expenses of an election advertisement relate partly to the promotion of the party concerned and partly for another purpose. Examples where apportionment is required are:

• an advertisement promotes both a party and a candidate,
• an advertisement promotes two or more parties,
• an advertisement promoting the party runs before and during the regulated period.

Apportionment is a factual exercise determined by the circumstances of each case. The Electoral Commission is happy to discuss any apportionment questions.

See Appendix E for a summary of how the costs of election advertisements are to be accounted for, and Appendix F for an example to illustrate the principles to be applied when apportioning.

5.6 Election expenses for advertisements promoted by third party

Expenses cannot be apportioned with third party promoters. If a party secretary authorises someone else to publish an advertisement encouraging people to vote for the party, the entire cost of the advertising will form part of the party’s election expenses. The same costs will also need to be included as part of the third party’s election expenses.

The party secretary will need to obtain further information from the third party about costs incurred.

The advertising and expenditure rules that apply to third parties are set out in the booklet Third Party Handbook – 2011 General Election and Referendum.

5.7 Expenses for joint election and referendum advertisements

Expenses cannot be apportioned between joint election and referendum advertisements.

If a party secretary promotes an advertisement that encourages people to vote for the party and supports a particular option in the referendum, the entire cost of that advertisement must be accounted for twice by the party: first as an election expense and second, as a referendum expense.

If the party authorises a third party to publish the same advertisement the entire cost of the advertisement will form part of the party’s election expenses. The same costs will also need to be included as part of the third party’s election expenses and referendum expenses. See Part 6 for further information on referendum advertising.

See Appendix E for a summary of how the costs of election advertisements are to be accounted for.

5.8 Paying election expenses

Invoices for election expenses must be sent to the party secretary within 20 working days of the declaration of the election of list candidates. The Electoral Commission expects that the deadline will fall on 2 February 2012 unless there are recounts.

The party secretary must pay any bill within 40 working days of the declaration. It is an offence not to do this. Sections 206F and 206G of the Electoral Act set out the procedure to follow if a bill is disputed. The Electoral Commission expects that the deadline will fall on 2 March 2012 unless there are recounts.

5.9 Keeping records of election expenses

Party secretaries must take all reasonable steps to keep records of all party election expenses. Party secretaries must keep invoices and records for all election expenses of $100 or more for three years after polling day.

5.10 Return of election expenses

After a general election the party secretary of every registered party must file a return with the Electoral Commission of party election expenses. [See section 206I of the Electoral Act]. Expenses incurred outside the regulated period may also need to be included (see paragraph 5.4 above).

If there are no election expenses to report on, the party secretary must file a nil return and obtain an auditor’s report.

The return must:

• be made on form M30 – Party Exp,
• be accompanied by an auditor’s report,
• be filed before within 50 working days after the day the Electoral Commission declares the election of list candidates. The Electoral Commission expects that the deadline will fall on 16 March 2012 unless there are recounts.

The return form (M30 – Party Exp) is available from the Electoral Commission or at www.elections.org.nz

The form requires the party secretary to provide details of all party election expenses incurred, including expenses incurred by any person authorised by the party secretary.

The advertising expenses of unregistered promoters and registered promoters that the party secretary has authorised need to be included in the form.

Party secretaries who fail to meet these requirements are committing offences and may be referred to the Police.

The returns are open to public inspection and will be published on the Electoral Commission’s website.

5.11 Auditor’s report

All party election expense returns must be accompanied by an auditor’s report. We suggest the party secretary familiarise themselves with section 206L of the Electoral Act which sets out the audit requirements.

While engaged by the party, the auditor is assessing and reporting as appropriate on whether the party’s election expenses and associated record keeping have been within the law, and whether the auditor has received all necessary information to form an opinion.

Party secretaries are reminded that a party auditor cannot be a body corporate or someone closely connected to the running of a party, must be a chartered accountant, and properly appointed and notified to the Electoral Commission. [See section 206K of the Electoral Act].

The audit must be of the party’s entire election expenses (not a sample) so that the auditor can form an opinion on the matters which are required to be covered in the audit report.

The Electoral Act gives auditors powers of access to party records and to require information and explanations from the party secretary.

The New Zealand Institute of Chartered Accountants and the Electoral Commission are jointly recommending the use of a representation letter in the final stages of the audit process. A copy of the letter is available on the Commission’s website www.elections.org.nz

The Electoral Commission does not accept any of the following as ‘reasonable excuses’ for not providing an audit report on a party’s entire election expenses:

• cost or time involved in the audit or the servicing of it,
• alleged difficulty arising from the location of the relevant documentation,
• alleged autonomy of organisations within the party.

If a party secretary does not provide all the information required or fails, in the auditor’s opinion, to keep proper records of party election expenses sufficient to earn an unqualified opinion then the auditor may give a qualified opinion, an adverse opinion, a disclaimer of opinion, or an ‘except for’ opinion in accordance with the New Zealand Institute of Chartered Accountants Auditing Standards No. 702 ‘The Audit report on an Attest Audit’.

If the audit report does not comply with the requirements of section 206L of the Electoral Act it may be rejected by the Electoral Commission and the party secretary would be required to obtain a new one.

DONATIONS

5.12 Party donations

A party donation is a donation of money, goods or services that is made to a party. [See section 207 of the Electoral Act].

Party donations and contributions to donations of more than $15,000 (incl GST) are required to be declared in the party’s return of donations. A series of donations, or contributions of more than $1,500 to donations, made by one person that adds up to more than $15,000 must also be declared.

A party donation includes:

• where a party is provided with free goods or services free of charge that have a reasonable market value of more than $1,500,
• where a party is provided with discounted goods or services and the reasonable market value of the goods or services is greater than $1,500, the difference between the contract or agreed price and the reasonable market value of the goods or services is a donation,
• when a party sells over-valued goods or services, the difference between the price paid and the reasonable market value is a donation,
• where credit is provided to a party on more favourable terms than those prevailing at the same time for similar credit, the value of the favourable terms is a donation.

The following are not a party donation:

• volunteer labour,
• goods or services provided free of charge to a party, or to any person on the party’s behalf, that have a reasonable market value of $1,500 or less, or
• a candidate donation that is included in a candidate’s return of donations.

If a person or organisation gives or pays for goods or services that would otherwise be party election expenses, the reasonable market value of those items whatever their value should be recorded as an election expense. If the reasonable market value of the items exceed $1,500 it should also be recorded as a donation.

5.13 Donations made up of contributions

A donation can be made up in part by funds contributed by more than one person (contributors), for example where there is a collection or whip-round for a party’s campaign.

[See section 207 of the Electoral Act].

The total proceeds of collection or whip-round are treated as a donation under the Electoral Act.

The person who collects the money will normally be the donor. The individuals who contribute to the collection are contributors for the purposes of the Act.

If a party donation, other than an anonymous donation, is made up of contributions, the transmitter or donor, must tell the party secretary:

• the name and address of the donor,
• that the donation is made up of contributions,
• the total amount of individual contributions of $1,500 or less, and
• in the case of individual contributions greater than $1,500: the total amount of those contributions, the name, address and contribution of each contributor and whether any of them are ‘overseas persons’ (see paragraph 5.17 below).

If the party secretary knows, or has reasonable grounds to believe, that the donor has failed to supply information about contributions, the whole donation must be returned to the donor.

5.14 Raffles, cake stalls, and other fundraisers

Providing a party with free cakes or other goods or services to use for fundraising is not making a donation for the purposes of the Electoral Act if the value of the items given is worth $1,500 or less. Purchasers of raffle tickets and cakes from a cake stall are not ‘donors’ as they are not making a donation to anyone. The total proceeds of a raffle or a cake stall for a party’s campaign are treated as a donation. The person who runs the raffle or cake stall will normally be the donor.

If the total funds from the raffle or cake stall are over $15,000, then the party’s donation return must include the name and address of the person who ran the fundraiser and subsequently donated the proceeds, along with the total amount given and the date that the donation was received by the party secretary.

Whether the individuals who purchase a ticket or buy a cake are ‘contributors’ depends on whether they bought their ticket in the knowledge or expectation that some or all of the money paid would be included in a donation to the party. This will be a question of fact. It would need to be very clear to purchasers that it is a party fundraiser for the purchasers of tickets to be ‘contributors’.

If the purchasers of raffle tickets are ‘contributors’, the organiser must tell the party secretary at the time of making the donation that the donation is funded from contributions. The donor must also disclose whether the donation is made up of contributions of more than $1,500. If an individual pays more than $1,500 for raffle tickets, their name and address would have to be disclosed in the party’s donation return, along with the amount of their contribution.

[See section 207C of the Electoral Act].

If a ticket is sold to a fundraising event, such as a dinner, or an item is auctioned at a fundraising auction, the difference between the price paid for the ticket and the reasonable market value of the ticket is a donation. Determining the reasonable market value for unique items may be difficult: for example, if you have speakers at the dinner or auction a one-off item. However, parties should not rely on the price paid at a fundraising auction as evidence of reasonable market value.

In the absence of an objective basis to value the donation component that the party secretary can defend, the Electoral Commission’s advice would be to err on the side of caution and treat the entire difference between the ticket price or auction price and the reasonable market value of assessable goods or services such as food and beverages, as a donation.

5.15 Transmitted donations

A party donation can be made either directly by the donor to the party or indirectly by a transmitter who transmits a donation to the party on someone else’s behalf, for example, via a lawyer’s trust fund. Any person who receives a party donation on the party’s behalf must, within 10 working days of receipt, either transmit it to the party secretary, or deposit the donation into a bank account nominated by the party secretary.

When transmitting a donation, the transmitter must tell the party secretary:

• that the donation is being transmitted on behalf of a donor,
• the name and address of the donor,
• whether the donation is made up of contributions,
• the total amount of contributions of $1,500 or less, and
• In the case of contributions greater than $1,500: the total amount of those contributions, the name, address and contribution of each contributor and whether any of them are ‘overseas persons’ (see paragraph 5.17 below).

Where a transmitter does not disclose the name and address of the donor, the donation must be treated as an anonymous donation (see paragraph 5.16 below).

A donation to an electorate committee is considered a transmitted donation with the electorate committee being the transmitter. If the donor does not specify to the electorate committee whether the donation is to the party or the candidate, the presumption is that it is a donation to the party. The electorate committee must within 10 working days of receipt, either transmit it to the party secretary, or deposit the donation into a bank account nominated by the party secretary.

5.16 Anonymous donation

Parties are not allowed to retain anonymous donations exceeding $1,500. An anonymous donation is a donation made in such a way that the party secretary who receives the donation does not know the identity of the donor and could not, in the circumstances, reasonably be expected to know the identity of the donor. [See section 207 of the Electoral Act].

If a party secretary receives an anonymous donation greater than $1,500 he or she may retain $1,500 of that donation. The balance of the donation must, within 20 working days of receipt, be paid to the Electoral Commission for payment into a Crown bank account.

5.17 Overseas donations

Parties are not allowed to retain donations or contributions exceeding $1,500 made by an overseas person. [See section 207K of the Electoral Act].

An overseas person is:

• an individual who resides outside New Zealand and is not a New Zealand citizen or registered elector,
• a body corporate incorporated outside New Zealand, or
• an unincorporated body that has its head office or principal place of business outside New Zealand.

If a party secretary receives a donation from an overseas person greater than $1,500, he or she can retain $1,500 of that donation. The balance of the donation must, within 20 working days of receipt, either be returned to the overseas person who made the donation, or if this is not possible, be paid to the Electoral Commission for payment into a Crown bank account.

If a party secretary receives any donation from a donor who is not an overseas person that includes a contribution from an overseas person greater than $1,500, the party secretary must return the whole donation to the donor. If that is not possible, the party secretary must forward the whole donation to the Electoral Commission for payment into a Crown bank account.

5.18 Donations protected from disclosure

A donation protected from disclosure enables a person to make an anonymous donation of more than $1,500 to a registered party without their identity being disclosed to either the public or the party.

The donation is made to the Electoral Commission. The Electoral Commission puts the donation together with others and pays it to the party, together with any interest earned without identifying the value of individual donations, or the number or names of donors involved.

The maximum amount that an individual or body can donate to any one party through this

process is $42,225 between two successive elections.

No party may receive more than $281,500 from donations protected from disclosure between two successive elections.

If a donation or contribution takes an individual or party over the limit then the Electoral Commission will return the excess.

Payments are made weekly, during the period between 26 October 2011 (writ day) and 15 December 2011 (the return of the writ for a general election) and monthly at any other time.

The Electoral Commission must report the total amounts of protected disclosure donations received and amounts paid to a party secretary quarterly on the website and in its annual report.

5.19 Keeping records of donations

Party secretaries must take all reasonable steps to keep records of all party donations received (even donations of less than $15,000). Records have to be retained for three years after polling day.

5.20 Return of party donations

Party secretaries of all registered parties are required to file an annual return of party donations with the Electoral Commission.

The return must be filed by 30 April each year for party donations received during the previous calendar year.

If there are no donations to report on, the party secretary must file a nil return and obtain an auditor’s report.

The annual return must:

• be made on form M-41 Party Don,
• be accompanied by an auditor’s report,
• be filed with the Electoral Commission before 30 April each year.

To complete the return, the party secretary will need to be able to provide full details about all party donations or contributions of more than $15,000. This includes a series of donations (or contributions exceeding $1,500), made by, or on behalf of, the same person that when aggregated adds up to more than $15,000.

Details of all anonymous donations and donations from overseas persons of more than $1,500 also need to be provided.

The party secretary will also need to be able to provide details on the number and total amount of party donations received that are less than $15,000.

Parties are also required to make immediate disclosure within 10 working days of receipt to the Electoral Commission where a donor gives more than $30,000 to it in a 12 month period. Disclosure is made using form M41-Party-$30k.

Parties must have systems in place to track aggregated totals by donors for the purposes of the annual donations return, as well as immediate disclosure of donations exceeding $30,000.

Donations to an electorate candidate disclosed in the candidate’s post-election return are not included.

The returns are available on the internet and open to public inspection.

Refer to Appendix G for a summary of what information the party secretary needs to include in the return for the various types of donations.

Donations exceeding $15,000

For donations of more than $15,000, other than anonymous or overseas donations, the party secretary will need to provide the following details:

• the name and address of the donor,
• the amount of the donation, or in the case of aggregated donations, the total amount of the donations,
• the date that the donation was received, or in the case of aggregated donations, the date each donation was received, and
• whether the donation is made up of contributions of more than $15,000, and if so:
  • the name and address of each contributor,
  • the amount of each contribution made by the contributor, and
  • the date on which the donation to which the contribution forms part was made.

Donations exceeding $30,000 that have been disclosed during the year under section 210C Electoral Act also need to be included

Anonymous donations

For anonymous donations exceeding $1,500, the party secretary will need to provide:

• the date the donation was received,
• the amount received, and
• the amount paid to the Electoral Commission and the date payment was made.

Donations from overseas persons

For donations by overseas persons exceeding $1,500, the details required are:

• the name and address of the overseas person,
• the amount of the donation or, in the case of aggregated donations, the total amount of the donations,
• the date that the donation was received or, in the case of aggregated donations, the date each donation was received, and
• the amount returned to the overseas person or paid to the Electoral Commission, and the date that such return or payment was made.

Contributions from overseas persons

For contributions by overseas persons exceeding $1,500 to any party donation the party secretary will need to provide:

• the name and address of the overseas person,
• the amount of the contribution,
• the date on which the related donation funded from the contribution was made, and
• the amount returned to the donor or paid to the Electoral Commission, and the date that such return or payment was made.

Protected disclosure donations

For protected disclosure donations paid to a party from the Electoral Commission, the party secretary must include:

• the date the payment was received,
• the amount of the payment,
• the amount of any interest included in the payment.

Donations below $15,000

A new requirement under the Electoral Act is for details of donations below $15,000 to be included in the party’s donations return. The details of these donations are the number and total amount of:

• anonymous party donations of $1,500 or less,
• overseas party donations of $1,500 or less,
• party donations of more than $1,500 up to and including $5,000,
• party donations of more than $5,000 up to and including $15,000.

This new requirement does not apply to donations received before 1 January 2011 and are therefore not required to be included in the returns due 30 April 2011.

5.21 Auditor’s report

All party donation returns must be accompanied by an auditor’s report. We suggest the party secretary familiarise themselves with section 210A of the Electoral Act which sets out the audit requirements.

The audit requirements for donations return are similar to those for a party’s election expenses. (For further information on the audit requirements see paragraph 5.11 above).