2.1 To be entitled to a payment of election funding, a candidate or Senate group must receive 4% or more of the formal first preference vote cast in the election contested. The entitlements of endorsed candidates and Senate groups are paid to the State/Territory branches of their political parties.
2.2 The Australian Democrats have appointed a Principal Agent to whom the AEC must pay all funding entitlements of the party. The Australian Labor Party has lodged agreements with the AEC which have a similar effect with the funding entitlements of all its State and Territory branches being paid to the agent of the National Secretariat.
2.3 The rate of election funding is indexed every six months to increases in the CPI. For the 3 October 1998 election and the Newcastle supplementary election the rate of election funding was 162.210 cents per vote. This compares to a rate of 157.594 cents at the 2 March 1996 federal election.
2.4 The amount of funding entitlement payable is calculated on the total number of first preference votes obtained by a candidate or Senate group. A total of $33 920 787.43 in funding was paid following the 1998 federal and Newcastle supplementary elections.
2.5 The Act requires payment of at least 95% of election funding to be made as soon as possible after entitlements are calculated on the 20th day after polling day. For the 3 October 1998 election, cheques totalling $31 103 228.82 were raised and sent out in the fourth week after polling day. Final payments were made upon completion of the count of votes. Final entitlements were able to be calculated as at the 20th day after the Newcastle supplementary election and were immediately paid in full.
2.6 The following chart summarises the distribution of total funding paid. Appendix 2 provides full details of the election funding entitlements paid.
|Labor Party||$14 010 512.42|
|Liberal Party||$11 488 881.15|
|National Party||$2 321 589.02|
|Democrats||$2 256 772.57|
|One Nation||$3 061 502.87|
|Total||$33 920 787.43|
2.7 Concerns have been raised in the Parliament and the media that at least one political party made a profit on the election funding paid to it at the 3 October 1998 election. The validity of such concerns is founded on the fact that the introduction of the election funding scheme in 1983 was intended to assist candidates and political parties defray the direct costs incurred in a federal election campaign and that, in this instance, the party spent less on its campaign than it received in funding.
2.8 The funding scheme was not designed to subsidise ongoing administration costs or provide a financial base from which future election campaigns could be fought. It was introduced as a strict reimbursement scheme with the Act limiting the amount of funding payable to the lesser of the funding entitlement or expenditure proven to have been incurred directly on that campaign. In administering this scheme the AEC demanded original vouchers in support of claimed expenditure and, for example, would only accept claims for what were considered to be expenditures additional to the ongoing costs of maintaining and running a political party.
2.9 In 1995, so that it first applied for the 1996 election, election funding was changed from a reimbursement scheme to become an entitlement paid automatically by the AEC. This change did not alter the underlying principle that funding was provided to parties and candidates as a subsidy to their costs of contesting a particular federal election campaign, although that principle is not spelled out in the Act. The AEC's role now is to calculate and automatically pay the full funding entitlements in accordance with a timeframe laid down in the Act.
2.10 Submissions to the Joint Standing Committee on Electoral Matters (JSCEM) and some commentary in the media have suggested that this change to the way funding is paid is responsible for creating the opportunity for profiteering. Indeed, at the time of writing this report, the JSCEM has a recommendation before it to return funding to a reimbursement scheme as a means of eliminating the opportunity for profits being made.
2.11 The contention that the reintroduction of direct reimbursement of campaign expenses would prevent profiteering is mistaken. The opportunity for profiteering on funding existed, and most likely occurred, under the previous reimbursement scheme.
2.12 There are various means by which a party (or candidate or Senate group) could evidence legitimate campaign expenses even though those "expenses" did not amount to a true cost to the party of the campaign. At its simplest, a party could receive funding for campaign expenses incurred personally by its candidates but then not fully reimburse them for those expenditures. In other cases all that would be required is for a party to incur expenditure that otherwise would not have been incurred, which is then either not actually paid or which ends up being donated back to the party. (For example, instead of a printing firm offering a discount on the production of campaign material it might invoice the party at the full price and then donate some or all of its fee back to the party.) Either way the party has valid, documentary evidence of campaign expenditure that would qualify for reimbursement. Similarly, services which would otherwise have been received on a volunteer basis or for a nominal fee may be contracted for with the party or candidate. Such services might range from the campaign manager right through to polling day workers and even candidates themselves. Such contracts and expenses are added on to a claim for election funding as needed until a payment of the full funding entitlement is ensured. The contracts are legally binding and clearly constitute claimable campaign expenditure but the contracts may never be paid out on, or some or all of the fee may later be donated back to the party. Either approach results in a profit to the party on its election funding.
2.13 A reimbursement scheme does not prevent profiteering on election funding. On previous experience, if a reimbursement scheme were to be reintroduced, it can be expected that full entitlements would nearly always be paid, as now occurs under the direct payment scheme. Also, reimbursement of expenditure would result in added administration and cost to the AEC and many claimants. In many instances it could be expected to result in sometimes lengthy delays in payments being made. The AEC, therefore, strongly opposes the reintroduction of an election funding scheme based on the reimbursement of proven campaign expenditure.