Where Do Parliamentary Parties Get Their Money?

Some parties prefer not to reveal their sponsors and spending in their reports. But almost all parliamentary parties are now “addicted” to government funding. In 2016-18, they received more than 1.1 billion hryvnias from the budget; however, one of these parties can already lose government funding next year.

The CHESNO Civil Movement offers an analysis of data about the funding of parliamentary parties in 2016-17. Some of the information will also concern 2018.

“Addicted” to Government Funding

The first public money was transferred to the accounts of parliamentary parties on September 28, 2016. Then, the parties received the money to fund their statutory activities in the 3rd quarter of the year, which was just about to end.

In two weeks, the NAPC (which, among other things, performs the technical function of quarterly transfers of government funding) transferred money for the 4th quarter to the parties. Basically, the parties had 3 months to spend as much of that money as possible, because any unused funding, according to law, should be returned to the budget.

Infographic: CHESNO

In 2016, 391 million hryvnias were allocated in the state budget to fund parties. However, the newly created NAPC started to work in full only in July-August that year, and could transfer only the funding for the 3rd and 4th quarters to parties’ accounts. So actually, parties received only 168 million.

In addition, the Fatherland party didn’t submit the papers to receive government funding on time, so they received money only for the 4th quarter. The Opposition Bloc rejected the government money with the motivation that the introduction of government funding is out of place because of the economic situation in the country. However, in 2017, the Opposition Bloc changed its mind and started taking the government money after all.

We requested an official comment from the Opposition Bloc, asking them to explain why they changed their position on government funding. The party’s Press Service answered this question as succinctly as possible, and their answer basically came down to saying that the money was taken because that’s what the political executive committee decided.

Earlier, in a comment to the Our Money with Denys Bihus show, Yuriy Boyko explained the change in their position the following way. "We saw that this money is robbed from the budget. So it’s better if we take it to spend on our political activities and protect those who are robbed by the government leadership.”

Since then, the government funding for party activities has been distributed in time and in full amount. And it immediately became obvious that the amounts of government funding considerably exceeded the amounts of private donations to party accounts.

Depending on the specific party, the amount of government funding in the total party budget ranges from 61 percent for the Fatherland Party to almost 100% for the People’s Front.

By the way, the situation with the People’s Front is paradoxical in general. The winner of the last parliamentary election now receives the highest amount of public funding and at the same time, most probably, is going to fail the election to the next Parliament.

From 2019, government budget money will also be received by parties outside the parliament with 2 percent of votes in the latest election. However, according to survey results, the People’s Front could even fail to achieve that result. Within the party, the expectations are more optimistic; its representatives point at the fact that surveys do not always reflect the actual electoral moods.

As we know, political parties win in elections based on the expression of popular will, and not on the results of surveys conducted long before the election itself. We must remind you that at the parliamentary election in October 2014, the People’s Front political party took the first place in the nationwide election district, gaining an absolute victory among party lists. It happened despite the totally un-optimistic predictions of surveys at the start of the election campaign,” the party’s Press Service replied to CHESNO’s request.

Infographic: CHESNO

On average, the fraction of state funding in the total party budget reaches 87 percent. The dependence of parties on government funding is at approximately the same level as in Spain and Italy.

There are also opposite examples. In Germany and the UK, the fraction of government funding in the total party budget is 20 to 30 percent. The ratio of public to private funding can change closer to the elections, when the parties will start to collect money for their 2019 election campaign.

However, the trend in 2016-17 indicates that after receiving government funding, the amounts of private donations to central party accounts starts to fall sharply.

Infographic: CHESNO

The biggest reduction in private funding can be observed in the case of the Fatherland Party and the Opposition Bloc. In addition, the OppoBloc also demonstrates a correlation between the moment of receiving public funding (May 30, 2017) and the sudden reduction in the amounts of private donations. The amounts of private funding for this party fell sharply right after the government funding was received, and reached zero in the 2nd quarter of 2018.

Donations in support of parties from legal entities or private persons are made voluntarily by the corresponding agents; therefore, commenting on the question raised here is outside the party’s competence,” the Opposition Bloc’s Press Service commented on the falling levels of private donations.

The Fatherland’s private funding remained quite high even after they received government money, up until February 2017, when it fell sharply down to zero. We attribute the fall mostly to the publishing of our exposing article about how the  Fatherland Party was funded using the names of people who did not transfer any money to the party personally.

With some insignificant exceptions, the “dry spell” in private donations to the Fatherland Party’s central account lasted for more than a year, up until the second half of May 2018. In that period, the party received 23 million hryvnias within 5 weeks. Almost all of this money was immediately used to organize and popularize Yulia Tymoshenko’s New Course.

The Origin of Private Funding: Is Everything Transparent?

The problem of transparency of political parties’ funding could, in theory, be resolved by the quarterly reporting, which was introduced in 2016. In fact, however, parties either come up with new ways to conceal the actual origin of the funding, or do not report some of their spending at all.

There are several “models” of party funding schemes. The structure of private monetary donations to the Opposition Bloc is dominated by legal entities. The rest of the parties are funded mostly by private individuals. The only exception is probably the People’s Front, which was financially supported by only one person in two and a half years — the MP Oleksandr Prysiazhniuk.

Infographic: CHESNO

The data in the graph is official. However, for their better understanding, it’s best to get deeper into the context. Having analyzed the financial reports for a few years, the CHESNO Movement discovered a number of schemes for transferring money of unknown origin to party accounts.

The parties which, on the contrary, declare very few donations, raise questions about the exhaustiveness of their financial reports — that is, about the extent to which the information provided in the reports reflects their actual spending, and therefore their actual income.

To put it simply, some parties collect and spend money outside their official bank accounts. Thus, we can only make conclusions about the origin of their funding and the amounts they spend based on various evidence about the activities of these parties.

Using Intermediaries (Often Without Their Knowledge)

For example, the Fatherland Party illegally used for its funding the personal information of people who mostly had no idea that they donated tens of thousands of hryvnias to the party. This scheme was used to transfer 7.5 million hryvnias to the Fatherland’s central account in 2016 and the early 2017.

In their public communication, representatives of the Fatherland distance themselves from these manipulations and claim that they have nothing to do with the schemes. In one of his TV appearances, the MP Serhiy Vlasenko noted that the NAPC investigation of the fake donations ended with “nothing,” and that “no sanctions were used against the Fatherland.”

The same comment about this situation was made by the Fatherland MP Ivan Krulko. At a public event dedicated to election campaign funding, he claimed that controlling agencies had nothing to say against the Fatherland.

But actually, last year, 2 criminal investigations were launched about the fact of forging financial reports and illegal use of personal data.

Infographic: CHESNO

A similar scheme was also used for funding the Kharkiv and Rivne branches of the BPP. The number of donors for these local party organizations stood out among other BPP branches, which was the reason for a more detailed investigation.

The investigation found that among the “donors” of the Rivne and Kharkiv branches of the BPP, a large group of public sector workers, particularly teachers, is prominent. For example, almost every school in Rivne had 1 to 6 teachers whose names were present in the BPP’s financial report.

However, the teachers interviewed by CHESNO denied that they funded the party, and said that they gave their personal information to BPP representatives during the election campaign of 2014. Back then, the educators wanted to serve as BPP election commission members for a monetary compensation.

After the investigation was published, the BPP promised to conduct their own investigation, and now they’re trying to persuade the public that it did not find the facts discovered by the CHESNO movement.

We conducted two types of checks. First, we selected 25 people each from Kharkiv and Rivne regions… All the people we called (we have the lists) confirmed they were party members and made contributions in support of the party. Next, we wrote letters, first of all to Kravchuk and Sydorchuk (the teachers who agreed to openly comment to the CHESNO Movement that they did not make any contributions to the party. Auth.)... We have these people’s answers, and they said that they got your words about sponsoring wrong,” says Borys Siklitsky, the head of the Legal Department of the BPP secretariat.

At least one of the teachers confirmed to the CHESNO Movement that he changed his testimony.

It is still unclear, however, how the teachers interviewed by the BPP could behave so synchronously and transfer the money to the party at the same second.

In the Mykolaiv branch of the BPP, the main donors who transferred hundreds of thousands of hryvnias to the party account turned out to be the branch’s employees with salaries in the range of 4,000-6,000 hryvnias a month.

The BPP is the only party which received most of its contributions not to its central account but to the accounts of its local branches.

Infographic: CHESNO

It was the government funding that allowed the party not to involve private contributions to fund its central headquarters. Before the BPP received the government money, it concealed at least part of its spending; in particular, the money used to maintain the editorial board and fund the creation, printing and distribution of the party paper went through the Solidarity NGO. Not long before receiving the government money, the paper was finally re-registered as a party project.

The Opposition Bloc used newly created companies which showed some signs of fakeness to fund itself. This scheme of money transfers was revealed by the journalists of the Our Money with Denys Bihus TV show. As a result of the journalistic investigation, a criminal case was opened — however, it was soon closed because the people involved in the case changed their testimonies. The actual origin of the money received by the Opposition Bloc for two years is still a mystery.

Undeclared Spending (and therefore, Funding)

The People’s Front was funded by only one person in two and a half years. The above mentioned MP Prysiazhniuk transferred 5,966 hryvnias to the party.

The party doesn’t see any problem with the amount of its private funding, because government funding is sufficient for them.

In accordance with the current law, the People’s Front political party received money from the government budget to maintain the party’s statutory activities. Given that this money was enough to fund the party’s activities, we did not involve any donor money. At the same time, we must remind you that involving ‘private funding’ is a political party’s right, not its duty. If needed, the People’s Front will use this right,” the People’s Front noted in response to a CHESNO request.

In the early 2016, the People’s Front had 5 million hryvnias on its accounts. However, there is a reason to believe that the party did not declare all the money it actually used. In the fall of 2016, the CHESNO Movement discovered that the People’s Front concealed at least 1.3 million spent on publishing the party’s press releases at news websites.

There are also doubts about the exhaustiveness of the information in the Radical Party’s financial report. First of all, the doubts are raised by the fact that the report basically does not reflect the spending on appearances in Rinat Akhmetov’s media (the Segodnya paper and website, the Ukraine Broadcasting Company). In these media, Oleh Liashko and other members of his party appear 2-3 times a week — much more often than other political players.

It is up for discussion which section of the Radical Party’s financial report should include the declaration of its cooperation with these media. If they pay for appearing in the news, then the information should be reflected in the spending section. But if Akhmetov provides access to his media free of charge, it should be considered the oligarch’s donation.

There are also questions about the spending on regional media, which have mentioned the “radicals” quite often in the past 3-4 years; however, the party started paying these media officially only after it received government funding.

The Problem of Parties Using Eponymous NGOs

There were also issues with the exhaustiveness of the Samopomich Party’s financial report; the party organized some of its activities through the eponymous NGO. This is about the parallel existence of the NGO and the Self-Help Party, whose activities are impossible to separate, because they both use the same website, social media pages, visually similar branding, etc.

According to its financial reports, the party’s Lviv branch did not have a single employee. Nevertheless, the party website contained information about a whole team of several dozen people. After the party got government funding, the majority of the team started to receive official salaries from it.

The party returned to the practice of receiving contributions via the Samopomich NGO in 2018. At the website dedicated to the presidential campaign of the party’s leader, the mayor of Lviv Andriy Sadovyi, donations are linked to the NGO’s account.

The practice of parties using NGOs is very widespread. Recently, BPP outdoor advertising for the Constitution Day was paid for by the Solidarity NGO (almost half a million hryvnias). The BPP reported the donation from the NGO, but it was unclear where the NGO got the money. In 2016, the same NGO maintained an editorial board, published and distributed the BPP paper. Then, the party did not report this spending at all.

The Movement of New Forces collects money to an NGO account at its website, and then the NGO transfers some of the money to the party. Therefore, in the financial report, we don’t see the actual donors, just the total amount transferred from the NGO.

In 2015–17, the People’s Control NGO and its related company spent considerable resources to create video shows, and paid for their broadcast on regional TV channels. The party denied this spending, although both the People’s Control party and the eponymous NGO and its videos are branded with identical logos.

According to the law, some of these examples may not be considered violations (if a party reports NGO spending as donor contributions), and parties abuse this loophole to conceal the actual amounts of their spending and the origin of their money.

Oleh Lavryk, the head of the Samopomich Executive Committee, claims that in their case it is not about working around the rules, but about “enabling the process of money collection” among ordinary citizens.

According to him, the procedure of making a monetary contribution to a party is excessively complicated and doesn’t allow people to fund the party through online payment systems. The financial report form requires detailed information about the person making the contribution (their taxpayer’s number, ID number, exact address of residence). But payment systems do not have an additional field to enter these data, so the only option is still to transfer contributions at bank branches.

We could only take a person, persuade them to donate, and then take them by the arm, physically bring them to the bank and make sure that they fill in the form accurately. Otherwise the money will end up in the state budget… (Unidentified payer or incomplete information about them are reasons to return the money to the payer or transfer it to the state budget. Auth.). We have tried all payment systems and contacted them about introducing additional fields, but they say it’s impossible. So we’re looking for ways out. Otherwise we have no other option,” explains the MP Oleh Lavryk, head of the Samopomich Executive Committee.

The party promises to publicly report about who transfers how much money to the NGO account, and about how the party spends it.

We are interested in maximum transparency. We’re going to reveal all the spending and income we have on the NGO account. Right now, I cannot say yet where the money will be transferred… We will cover some spending from the party account, and some from the NGO account. During the election campaign, the spending will be solely from the election fund, there are no options in that case. The system is different there, it’s only from the election fund,” adds Lavryk.

Many experts and other political parties have pointed out many times that the procedure of making a contribution to a political party is unjustifiably complicated.

This procedure is rather an exception, because in the absolute majority of countries party supporters can easily transfer money to them through online payment systems. However, in general, this situation requires primarily legislative solutions.

Nobody can predict whether a party will use its affiliated NGOs with good intentions or for abuses and concealment of its actual donors and the scale of its spending.

In order to find a balance between transparency and regulation, political parties can initiate changes to the Law “On political parties in Ukraine.”

Preliminary Conclusion

The most urgent issue to be solved is bringing parties to responsibility for serious violations. The heaviest consequences of such violations so far have only been open criminal investigations (often, they were opened only through court hearings) which are not actually investigated.

Unlike the controlling agencies and the National Police, parties do not waste time. We already know about two cases (with the Opposition Bloc and the BPP) when people involved in journalistic investigations changed their testimonies and said something opposite to what they told journalists.

Therefore, the result of the third year of reform implementation is, first of all, the publishing of a part of the information about financial operations. But partial transparency, unfortunately, does not cause systemic change, only stirs the society with new stories about ever more large-scale abuses by politicians.

Author: Ihor Feshchenko, party finance analyst for the CHESNO Civil Movement

Data preparation and analysis: Vita Zhyhalina, Anton Kryvko, Ihor Feshchenko, CHESNO Movement

Infographics: Ivan Lampeka, CHESNO Movement