Committee: AEC return to Election Funding Inquiry

Senator RHIANNON: In the 2011 state election in New South Wales, for the first time parties and candidates had to operate under electoral expenditure caps. Mr Pirani, I was wondering if you have looked at how this worked. Did any compliance problems arise?

Mr Pirani: I might pass that to Mr Edgman, given that he has been present at some meetings at which, I understand, some issues have been raised.

Mr Edgman: One of the challenges with contemporaneous capping and bans and so forth and with later disclosure is that the AEC—or, in the case of New South Wales, the Election Funding Authority—does not necessarily become aware of breaches of those provisions until well after the event. For instance, if caps on election expenditure have been breached there is no evidence available to the administering authority for them to be aware of it and act on it at the time. It is always post the event.

Senator RHIANNON: There was an article in the Sydney Morning Herald that named three members of the National Party who may have breached the guidelines in terms of how they ran their election campaigns. Can you nominate in any way how we could track it so that if there were breaches occurring we could make that assessment before the election rather than some long time afterwards?

Mr Edgman: It would involve some intervention, I expect, of some other agency between the party or the candidate and the agency that they might be expending the funds with.

Senator RHIANNON: When you say 'another agency', do you mean an existing agency or that we would have to set something up?

Mr Edgman: It could be the Australian Electoral Commission or a separate agency could be set up or another agency within the Commonwealth could do it. For instance, with expenditure and donations it could be that in New South Wales and Queensland they are required to transact all their electoral donations and expenditure through a central account. It could be that that account has to be administered or held by a separate agency so that payments can only be made out of those accounts. That would mean that bills would have to be tendered on that account to that agency. There could also be requirements, for instance, for the major areas in which expenditure is made—such as the media and so forth—having to report to the AEC at the time that expenditure is incurred with them. In that way, it would be contemporaneous and having to provide that information would be out of the hands of the party or the candidate.

Senator RHIANNON: Thanks for that. That leads quite nicely into the issue of continuous disclosure. Thanks for the responses that you gave to some of our questions and that you sent in on the sixth of this month. I note that on continuous disclosure, question five, you said that you strongly favour it. How long do you estimate that it would take to set up such a system? I note that in response to some of the questions you said that you already have an e-returns portal. What is the degree of complexity? Other countries already have it. How quickly could we move to achieve this?

Mr Edgman: It would depend to some extent on how complex the system that is instituted for federal elections is. The e-returns portal was designed to take account of the potential for contemporaneous reporting. When it was built a year or so ago it was not hard coded to be able to cope with only annual disclosures and election disclosures. We were trying to be mindful of that and to make it more flexible and easy to amend. It is hard for me to say. I did not manage that original project. Based on how long it took to the e-returns portal built, I think six months would be an incredibly tight time frame that might be very hard to meet. It would probably be much safer to be talking about 12 months to have something up and readily available.

Senator RHIANNON: At what level would that be for donors and for everybody to get their material on there? That is what we are talking about.

Mr Edgman: The way the e-returns portal works at the moment is that people log on and submit their disclosure information through a secure log-on and that is then placed on the public record. That allows the AEC to be taken out of the equation. It can slow the process down, obviously, if we get large volumes of information that is provided to us in hard copy form and then we have to data-enter it with the inevitable concerns of errors and so forth. People can just log on, up-load the information and then it can be made available immediately.

Mr Killesteyn: The point I would make, too, about continuous disclosure is that there is an issue about what the AEC can provide by way of a conduit, if you like, for the information. The obligation on continuous disclosure is probably equally an issue for the donors and the parties because it feeds back into the capacity of those organisations to actually recognise the payments that need to be disclosed on a continuous basis, and that takes you into a discussion around the accounting mechanisms that those organisations have. So it is not just our issue.

Senator RHIANNON: It is not just your responsibility.

Mr Killesteyn: It is an issue for all the stakeholders in this particular area. So there may be some suggestions around whether, for example, particular dedicated accounts would need to be required to be set up in entities such as campaign accounts, through which moneys would flow, and then we could leverage other infrastructure that already exists, for example, through AUSTRAC, to allow that information to be reported and recognised very quickly.

Senator RHIANNON: Thank you for that. Because of the shortage of time, I would like to go to your response to question 6. This was about the problems of inconsistencies between donor and party returns not reconciling. How serious a problem do you believe this is, and do you have data that quantifies the degree of inconsistency between returns?

Mr Killesteyn: We think it is an important issue because it makes the process of matching between donor and recipient returns much more difficult if you have got an obligation on one party to aggregate below the threshold and on other parties the party returns where they only have to aggregate at levels above the $11,900 threshold. So matching becomes difficult. We cannot give any assurance at all that all donations have actually been disclosed. So I think it is serious from that perspective. If the committee is concerned about the importance of disclosure, then these sorts of issues need to be aligned between obligations between donors and recipients.

Senator RHIANNON: So you are recommending that it should be aligned and going in which direction—so there is consistency in terms of how donors do it or how the parties do it?

Mr Killesteyn: That then gets into a discussion about what the appropriate threshold is. I think generally there would be a view that the lower the threshold the better.

Senator RHIANNON: Just going back: do you have any percentage of the degree of inconsistency at the moment? Do you have any data on that?

Mr Killesteyn: We do not because it is hard to identify whether you have got a mismatch or not under the current disclosure provisions. That is exactly the same question that I asked of my people when we were putting this submission together: was there evidence that the disclosure obligations were not being met? The difficulty is: they are inconsistent; you cannot measure them.

Senator RHIANNON: In response to question 3, you said that no penalties have been issued in the last five years. What about the last 10 years or the last 15 years? Can you give some data on that?

Mr Killesteyn: We will take that on notice and do the research work.

Senator RHIANNON: You gave some interesting responses about the Commonwealth Director of Public Prosecutions that they have not pursued a matter for you. I was just interested in whether you could elaborate on that relationship. Do you see it as an issue of resources or more that it is just not a priority for them?

Mr Killesteyn: It is probably both, because they go hand in hand. But essentially what we are wrestling with are penalties that were set in 1984 and that have not been reviewed. Therefore, in comparison to other penalties, they are relatively low. That then takes you into a consideration with the DPP that, against all of the other matters that they are prosecuting, our matters appear relatively low priority from the perspective of public interest and what can be served. The other aspect is that in many of these cases the disclosure happens, albeit that it is not in compliance with the act. From that perspective, once the disclosure is made, there is a question as to whether there is a public interest in pursuing it any further. That is one of the reasons why we are suggesting that there needs to be a much greater proximity between the sanction and the disclosure obligation. One of the things that the committee ought to consider, as there is merit in considering it, is whether administrative penalties could be imposed by the AEC, particularly for things like late lodgement of returns. And these administrative penalties would escalate as the time between the obligation and the actual disclosure increases.

Senator RHIANNON: I will put my other questions on notice.