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This is the third posting of five about how the BC Local Elections Campaign Financing Act (LECFA) will impact the upcoming elections – from John Whistler, the Financial Agent for the Green Party of Vancouver.
This posting will look at the administrative complexity to manage the LECFA, which creates a nightmare for candidate and electoral organization financial agents. While many may not sympathize with the financial agent’s administrative burden, it results in counter-productive workarounds and public disclosure reports that are inconsistent and unreliable.
Consistent and reliable public disclosure reports are important to demonstrate fairness and transparency. It is always a media event, with scrutiny and analysis, when Election BC publishes the disclosure reports (expected soon after January 18 2019). In addition, in a not-so-public fashion, candidates and electoral organizations will review the reports of their competitors to look for ideas, tips and mistakes for next time. Bad reporting suppresses these activities.
The administrative complexity is a legacy of the 2014 LECFA that that allowed for unlimited contributions. Complex requirements were included as an attempt to mitigate the negative impacts from unlimited contributions, in particular to manage the public’s perception which was demanding limits.
As mentioned in the previous posting, electoral organizations that endorse both city council and school board candidates are operating in two different jurisdictions, and each is a separate and independent campaign. Two separate campaign bank accounts are required.
In practice, and in the eyes of the public, electoral organizations operate one campaign in an integrated fashion that includes city council, the school board and maybe a regional district. The financial agent will then create a separate set of accounts and processes to manage the LECFA that are disconnected from the day-to-day campaign activities. Impacts include:
- Contributors need to make two separate transactions if they wish to contribute to both a city council and school board campaign.
- Most contribution transactions are electronically processed through third-party payment processors. These transactions are more complex to manage when there is need to deposit specific contributions into different bank accounts.
- Most expenses will cover multiple jurisdictions and need to be paid from multiple bank accounts proportional to each campaign.
- Elections BC’s administration is more complex as they have to process and reconcile multiple sets of returns.
- The media and the public need to review multiple sets of financial disclosures to gain a comprehensive understanding of the campaign.
A key activity of the financial agent is to complete the public disclosure reports. These are also administratively complicated to manage.
The public disclosure reports are not based on the most standard of accounting practices – a Balance Sheet and Income Statement that is reconciled between each reporting period. Instead, the reports are based on cash inflows and outflows that mix changes to assets and liabilities. Even when a typical accounting software package is used, off-book spreadsheets need to be maintained. It is difficult, if not impossible, to reconcile between reporting periods.
The expense categories are numerous and confusing. There are at least 26 expense categories (compared to 16 categories used by Elections Canada – which is also too many). Other categories include: Other Campaign Administrative Expenses, Other Campaign Related Functions and Other (Describe). The completion guide suggests Food for Volunteers as an example of what would be included in Other (Describe). If the financial agent is confused, how can it be expected that disclosure reports will be produced that are consistent and meaningful to the public?
Some key important income and expense categories that are strategic to election campaigns are missing. In-kind contributions should be split out from monetary contributions. Travel, Refreshments and Entertainment should be a stand-alone expense category – this is where Food for Volunteers really should go.
Administration would be streamlined by simplifying the LECFA regulations, which would also improve fairness, accountability and transparency. This includes:
- Annual reporting. Elimination of the non-applicable period.
- Combining the Election Period and Campaign period to be an Election Year. Spending limits would apply to the full Election Year.
- Elimination of the not-applicable operations bank account for electoral organizations. Allow elector organizations that have multiple jurisdictions to use one bank account.
- Disclosure reports based on the typical accounting standard of an Income Statement and Balance Sheet.
- Review income and expense categories to ensure that they are meaningful and relevant.
The primary reason for complex regulations and reporting went away when contribution limits were introduced in 2017. Simplification needs to be a priority for the next set of amendments to the LECFA.