Transparency International Georgia studied the issue of campaign finances of 2021 municipal elections from August 2 to November 13, 2021. 13 election subjects who either are getting public funding or who received donations of at least GEL 100,000 during the year were selected for the study.

Transparency International Georgia studied the issue of campaign finances of 2021 municipal elections from August 2 to November 13, 2021. 13 election subjects who either are getting public funding or who received donations of at least GEL 100,000 during the year were selected for the study. Both in terms of total revenues and expenditures (up to GEL 27-28 million each), the ruling party's finances were almost twice as high as the other 12 parties combined, indicating an extremely unequal distribution of finances between the parties, which is detrimental to the electoral environment.

Revenues received by election subjects

• The studied 13 election subjects received a total of GEL 27.8 million from August 2 to November 13. The ruling party - Georgian Dream - Democratic Georgia got about 65% (GEL 18 million) of this amount. The United National Movement was second with GEL 3 million and Lelo was third with GEL 2.5 million;
• Only 15% (GEL 4.1 million) of the total revenues received by the election subjects came from public funding, while 85% (GEL 23.7 million) came from private (donations and bank loans);
• Out of 13 election subjects, only 11 received donations during the election period, totaling GEL 22.1 million, of which GEL 15.7 million (71% of all donations) went to Georgian Dream - Democratic Georgia party. The United National Movement was second with GEL 2.5 million and Lelo was third with GEL 2.3 million;
• In addition, we analyzed the donations received by 13 parties from January 1, 20 to November 13, 2021, which amounted to a total of GEL 26 million: The Georgian Dream - Democratic Georgia got 73% - GEL 18.9 million of the amount. The United National Movement was second with GEL 2.8 million and Lelo for Georgia was third with GEL 2.4. About a third of the party donors contributed more than the average annual nominal salary in Georgia (according to the data of the third quarter of 2021, about GEL 16,422). Such donors accounted for about 80% of all party contributions, indicating their dependence on large donors;
• Only two political parties took bank loans. On September 8, European Georgia - Movement for Freedom borrowed GEL 500,000 from Liberty Bank for 12 months at an annual interest rate of 14%, while Georgian Dream - Democratic Georgia borrowed GEL 1,000,000 from Cartu Bank on November 12 for 1.5 months at an annual interest rate of 13.75%.

Expenditures of election subjects

• 13 election subjects spent a total of GEL 26.9 million from August 2 to November 13, 2021, of which 67% - GEL 17.9 million was spent by Georgian Dream - Democratic Georgia. The United National Movement was second with the expenditure of GEL 3 million and Lelo was third with GEL 2.5 million;
• Advertising accounted for 65% (GEL 17.5 million) of total election expenses. Office and rent (13% of total expenditures), and salaries (5%) were among other large expense categories;
• Georgian Dream - Democratic Georgia spent the most on advertising – GEL 12.5 million, which was 72% of the total advertising expenses of 13 election subjects. As for the categories of advertising, the largest amount was spent on outdoor advertising (GEL 7.9 million) followed by TV advertising (GEL 3.8 million). The largest share on outdoor advertising expenses - 90% - was attributed to Georgian Dream - Democratic Georgia. However, it should be noted that two election subjects - United National Movement and Davit Tarkhan-Mouravi, Irma Inashvili – the Alliance of Patriots of Georgia did not indicate the cost of outdoor advertising in their financial declarations, while TI Georgia’s observers detected billboards of these election subjects in Tbilisi;
• The studied election subjects spent a total of GEL 1.4 million on salaries, which was only 5% of their total expenditure. If we look at the relationship between salary expenses and overall expenditure of election subjects, zero salary costs of two parties - Progress and Freedom and Girchi would grab public attention. In addition, questions could be raised about the low salary costs incurred by Georgian Dream - Democratic Georgia and Gakharia - for Georgia. Particularly noteworthy is the case of the ruling party, which conducted the largest and most expensive election campaign, spending up to GEL 18 million, but the remuneration of the campaigners amounted to only 1.3% (GEL 228,844) of its expenses. For comparison, in the 2017 self-government elections, Georgian Dream - Democratic Georgia's salary expenses amounted to GEL 1,232,963 (7.2% of total expenditures). In general, it is particularly easy for political parties to hide their salary costs, as it is difficult to oversee them, therefore, this cost category is associated with particularly high risks of political corruption.

The alleged cases of political corruption or other types of violations

• In 2021 (January 1 – November 13), the companies connected with the donors of the ruling party had won public tenders worth about GEL 280 million and simplified public procurement contracts of GEL 7 million. During the same period, the donors directly or indirectly affiliated with these companies contributed over GEL 3 million for the benefit of the Georgian Dream - Democratic Georgia:
• Zimo LLC, a company affiliated with the former Prime Minister and founder of the ruling party Bidzina Ivanishvili, has been among the major state contractors. This company won public tenders of about GEL 13 million during the year, and persons in various ways connected with Ivanishvili and this business group donated a total of over half a million GEL to the Georgian Dream - Democratic Georgia during the year. It is noteworthy that individuals in this group donate substantial sums of money to the ruling party almost every year, and this usually happens in a very short time - at intervals of 1-2 days;
• Arali LLC, won public tenders of GEL 62 million in 2021, while its owner, Demetre Tateshvili, contributed GEL 50,000 to the ruling party. TI Georgia has previously written about large public procurement contracts of Tateshvili’s companies and corruption risks in the process;
• Road Construction Division #1 LLC and Road Construction Division #2 LLC are large state contractors that jointly won tenders worth GEL 26 million during the year. The owner of these companies, Nugzar Abalaki, and his business partner, Avtandil Katchkatchishvili jointly donated GEL 45,000 to Georgian Dream – Democratic Georgia;
• Anagi LLC was also worth mentioning that has won several major public tenders. This company won tenders worth more than GEL 22 million in 2021. Davit Andghuladze, a person connected with Anagi, and his business partner Giorgi Chitashvili donated a total of GEL 110,000 to the ruling party.
• Another company that was among the 10 largest state contractors is Ibolia LLC, which donated GEL 20,000 to Georgian Dream - Democratic Georgia. TI Georgia has written numerous times about the receipt of tens of millions of GEL worth of public procurement contracts in suspicious circumstances by the company, its owner, former Member of Parliament Ioseb Makrakhidze, and his family members.

• In August, there were reports that the government representative in the region of Samtskhe-Javakheti and the regional heads of the State Security Service and the Investigation Service of the Ministry of Finance allegedly tasked local businesspeople to make financial contributions to the ruling party. When the reports were checked, it turned out that, in the period between 2 and 16 August, 87 individuals and five companies from Samtskhe-Javakheti made donations to the ruling party amounting to the total of GEL 714,000. This amount of donations made from this single geographic area in such a short period is quite unusual and may be considered to be indirect evidence backing the aforementioned reports. Furthermore, on 4 September, TV Pirveli aired a story in which some of the persons, who had made the donations, effectively confirmed in conversation with journalists that the meetings and circumstances mentioned above had indeed occurred. The legality of the donations was investigated within its authority by the State Audit Office, which reported that no violations were detected. In this case. Although there were obvious signs of a criminal offense, according to our information, the prosecutor's office has not launched an investigation.

Transparency and Oversight of Campaign Finances

• During the election period, the State Audit Office responded to possible violations and provided the relevant information to the public. On September 29, the State Audit Office released an interim report on the financial monitoring of the parties, however, since then the agency has not released any reports, which raised the problem of public unawareness of the agency’s activities.

• As in previous elections, this election cycle has shown that the State Audit Office is particularly ineffective in responding to cases of alleged political corruption. The management of this agency has been openly declaring for years now that the agency does not have the relevant powers and legal tools for monitoring party finance and finds it extremely difficult to study possible cases of political corruption.

Recommendations

• Since the competencies of the State Audit Office 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;
• It is necessary for the prosecutor's office to launch an investigation into the alleged fact of pressure on local businessmen in Samtskhe-Javakheti;
• It is necessary to make changes in the Organic Law of Georgia on Political Associations of Citizens. A political party should not lose public funding, which it is entitled to, regardless of whether it uses its parliamentary mandates. Public funding should depend on electoral support a party gets rather than its parliamentary activities;
• The State Audit Office should:
• determine the source of funding for the billboards in various cities, which featured opposition party leaders and journalists, and take appropriate measures in case of violation of the law;
• determine the reasons why the United National Movement and Davit Tarkhan-Mouravi, Irma Inashvili – the Alliance of Patriots of Georgia did not provide information on outdoor advertising in their declarations;
• thoroughly study the information provided by political parties on salary costs and find out why some parties have declared unrealistically small amounts of money;
• publish interim reports on its activities about overseeing the financing of political parties before both the first and second rounds of elections (if any). Such information can be relevant for voters to make informed decisions. It is also advisable for this agency to publish its final report after the announcement of the election results;
• Political parties / electoral subjects should do more to raise donations through events and campaigns. Parties that fundraise in such a way are usually less reliant on a handful of key donors and find themselves entangled in corruption schemes.