Georgia’s Political Finance in 2020: Revenues and Expenditures of Political Parties and Financial Oversight - საერთაშორისო გამჭვირვალობა - საქართველო
GEO

Georgia’s Political Finance in 2020: Revenues and Expenditures of Political Parties and Financial Oversight

28 May, 2021

 

Transparency International Georgia studied the issue of Georgia’s political finance in 2020. The main focus was on those 9 political entities that received at least 1% support in the 2020 parliamentary elections. One of them (Girchi) did not submit financial statements, therefore, the findings of the report are mainly based on the analysis of annual financial declarations provided by 8 political entities and other related issues.

In 2020, several important legislative amendments were made, which fundamentally changed certain aspects of Georgia’s political finance. For example: the minimum threshold of voter support a party needs to get public funding has been reduced; the rule of calculating the amount of public funding has been simplified and improved; specific sanctions were introduced for illegal expenses made against a political party, and so on. In addition, at the end of the year, members of the parliamentary majority introduced a new draft law in parliament and passed it in the first reading. According to this draft law, the party will lose public funding if it does not use its seats in parliament. The project was criticized by the Venice Commission and the OSCE / ODIHR calling on the Parliament to reconsider it.

The ruling Georgian Dream - Democratic Georgia party had almost half of all parties' total revenues and expenditures (each amounting to about GEL 60 million), which shows an extremely unequal distribution of finances between the parties. Nevertheless, compared to other years, financial inequality has been relatively reduced, which was mainly caused by the fact that several financially strong new political parties appeared in 2020.

Only 19% of the total revenues received by the parties came from public funding. For comparison, in 2019, public funding was up to 60% of the revenues received by the parties. This is explained by the fact that in 2019, unlike 2020, no general elections were held. The share of private donations received is traditionally high in an election year.

97% of the total donations received by the parties were made by individuals and 3% by legal entities. Georgian political parties mainly depend on large donors and the share of small contribution is usually insignificant.

In 2020, as in other years, the alleged cases of political corruption and the lack of adequate response to them were relevant. As it turned out, the companies connected with the donors of the ruling party had won public tenders worth about GEL 158 million in 2020 and, in return, during the same period, these donors had donated GEL 1.6 million for the benefit of the Georgian Dream - Democratic Georgia. In addition to tenders, the companies of the individuals donating to the ruling party are also recipients of simplified public procurement contracts. In particular, companies, which are directly or indirectly connected to persons who have contributed approximately GEL 2.8 million to the ruling party in 2020, received around GEL 11.7 million from simplified public procurement contracts during the same year.

Over the years, several major groups had been formed among the ruling party's donors who have been contributing large sums of money to the Georgian Dream – Democratic Georgia in almost every election. All such groups have a common characteristic - a large part of its members donate money to the ruling party on the same day or 1-2 days apart, which raises doubts about whether such collective action is organized by someone in advance and whether the donations are made through third persons. The Georgian legislation prohibits third-party donations. In 2020, among such large groups there still were persons associated with Bidzina Ivanishvili, the founder of the Georgian Dream - Democratic Georgia party, the former chairman of the same party and former Prime Minister.

The largest expenses of political parties fell under the following categories: a) advertising; b) salaries; c) rental costs of the real and movable estate; d) office expenses; e) costs of organizing congresses or other events; and f) notary, consulting and translation costs. As 2020 was an election year, advertising expenses accounted for a substantial share (59%) of total expenditures of political parties.

During the election period, the State Audit Office initiated administrative proceedings in 13 cases. The proceedings were completed in 10 cases, on which this agency drew up administrative violation protocols and the court made decisions. Such cases did not include many alleged cases of political corruption related to the donations declared by parties, therefore, the State Audit Office, like in other years, was ineffective in investigating.

In 2020, funding of Georgian political parties from a hostile state - Russia - was topical, which was not followed by an adequate response from the relevant state agencies. More specifically, Dossier – an investigative journalism platform, published two reports describing the ties and financial relations of the Alliance of Patriots of Georgia with the Kremlin. This case has once again showed that the State Audit Office does not have relevant powers and legal tools for investigating such instances. As for other state agencies with investigative powers (Georgian Prosecutor's Office, State Security Service), they did not consider it necessary to launch an investigation, leaving unanswered serious questions about interference of the hostile country in Georgian politics.

Recommendations

  • Since the competencies of the SAO are not sufficient to adequately respond to alleged cases of political corruption, including corrupt transactions between donors and parties, and illegal financing schemes, an independent anti-corruption agency should be established. This agency should be equipped with investigative powers and, among other things, should oversee the financing of political parties;
  • In order to avoid worsening the standards of political party funding in the country, the Parliament should refuse to adopt the draft registered on December 16, 2020, which unreasonably restricts the access of political parties to state funding and other benefits.
  • The SAO should respond more effectively and promptly to relevant violations, including the deficiencies identified in this report. Cases of deliberate and systematic violation of the law by the political party Girchi needs special response;
  • It would be good if the SAO systematically updates and places more information in the register of violations;
  • The SAO should consider returning the Form N9.7.1 to the financial declaration template, or establish another mechanism by which political parties / election entities will be able to disclose detailed information about their loans;
  • The SAO should pay more attention to strengthening the capacity of political parties to complete financial statements and develop more detailed and comprehensive instructions to establish consistent practices.