GEO

Campaign Finances in Georgia’s 2018 Presidential Elections Interim Report

26 October, 2018

 

 

TI Georgia has been monitoring campaign revenues and expenditures of the presidential candidates running in the 2018 election. In the reporting period of 1 August to 15 October 2018, this effort has revealed several key findings:

Candidates’ Campaign Revenues

  • Salome Zurabishvili, a presidential candidate backed by the ruling Georgian Dream party, and five main candidates, nominated by so-called qualified political parties, have raised a total of GEL 6 762 283 from all sources;
  • Zurabishvili generated the highest of all amount – GEL 4 145 207 – 61 per cent of the total figure. Next comes Grigol Vashadze, a presidential candidate of the United National Movement, with GEL 1 360 023 in campaign revenues. The third highest amount was raised by Davit Bakradze, a presidential candidate of the European Georgia party, whose campaign fund received GEL 864 046. Zurabishvili is ineligible for public funding; still, her revenues were three times greater than the amount raised by Vashadze and 1.5 times greater than the sum of those raised by the five opposition candidates altogether;
  • Salome Zurabishvili was the only presidential candidate to have taken a bank loan. She borrowed GEL 1 million from Cartu Bank, at an annual interest rate of 10 per cent, for a three-month period;
  • The six presidential candidates received a total of GEL 4 226 120 in donations, 99 per cent of which are donations from individuals. The largest share of the money, GEL 3 105 011 – 73 per cent of the total figure – was raised by Salome Zurabishvili, followed by Grigol Vashadze (GEL 583 820), Davit Bakradze (GEL 516 404), Davit Usupashvili (GEL 13 290), Kakha Kukava (GEL 6 596), and Shalva Natelashvili (GEL 1 000). Donations raised by the Zurabishvili campaign are approximately five times greater than those attracted by Grigol Vashadze and 2.5 times larger than those raised by the five opposition candidates altogether;
  • Salome Zurabishvili received donations from 148 individuals, out of whom 92 are associated with 356 various legal entities as shareholders or directors. Out of these legal entities, only 18 were companies that received at least one government contract through an uncompetitive, simplified procurement process as of 31 July 2018, until when the data is available. The total sum of funds deposited through such government contracts was GEL 243 875, while the individuals associated with these companies donated GEL 815 008 to Zurabishvili. Therefore, there are no worrying trends in this regard.
  • At the beginning of October, over a dozen of doctors working at Chachava and Ghudushauri clinics, who contributed to the Zurabishvili campaign on 2 and 3 October, appeared in the public and media spotlight. This raised questions about a possible donation by a third-party donor – practice not allowed by Georgian legislation and subject to a fine twice the amount of the donation. The State Audit Office is already looking into the case;
  • Out of 148 donors of the Zurabishvili campaign, 46 had also contributed to other electoral subjects in previous elections. 41 individuals, who contributed GEL 836 000 to Zurabishvili, had previously donated to Georgian Dream, making up 28 per cent of all donations. In previous years the same persons had donated around GEL 1 950 000 to Georgian Dream. Eight of Zurabishvili’s donors had also given donations amounting to a total of GEL 425 000 to the United National Movement in 2012;
  • In general, political parties do not use public events for campaign fundraising. In leading democracies, electoral candidates often rely on party campaigning and outreach with the constituency with the goal of attracting donations, giving them an opportunity to diversify their revenue sources. Parties are less reliant on a few large donors and less prone to being part of corrupt funding schemes. This is less than common in Georgia: political parties largely depend on the funding from the state coffers. While the ruling and a few opposition parties additionally raise donations, they largely rely on a few key donors, raising many questions among the public. 

Candidates’ Campaign Expenditures

  • Georgian Dream-backed candidate Salome Zurabishvili and the qualified electoral subjects reported spending a total of GEL 6 911 676 in the given period;
  • The highest amount – GEL 4 124 047, 60 per cent of the total figure – was spent by the Zurabishvili campaign, followed by Vashadze (GEL 1 485 604) and Bakradze (GEL 882 313). As demonstrated, Zurabishvili’s expenditures are three times higher than Vashadze’s and 1.5 times higher than those of all five opposition candidates altogether;
  • Most expenditures went towards advertising, real estate lease payments, and salaries;
  • Zurabishvili spent GEL 3 368 507 (82 per cent of the total figure) on advertising, which is 2.5 times more than all other candidates. The six presidential candidates spent a total of GEL 4 678 893 on advertising, out of which Zurabishvili’s share was 72 per cent;
  • Eight qualified electoral subjects were giving up their air time for free political advertising to other presidential candidates, which should be considered as a donation. Such practice is not allowed by Georgian legislation and is subject to a fine twice the amount of donation. The State Audit Office is looking into the case;
  • Salary expenses of Salome Zurabishvili’s campaign are also of special interest. Against the total spending of over GEL 4 million, whereas there are more than 80 campaign offices throughout the country and dozens of electoral meetings have been held, the amount spent on salaries – GEL 19 625 – looks modest. For comparison, some other candidates have declared spending 10 times higher on salaries only.

Other Issues

  • Incomplete financial reporting by the electoral subjects remains a serious problem. The absolute majority of financial declarations is missing some information or contain inconsistencies. Information required by the financial forms are left blank on multiple occasions. It seems that the electoral subjects either do not know how to properly fill out the declaration forms and how the information needs to be presented, or are deliberately making these mistakes;
  • This issue has persisted for years and the State Audit Office has been ineffective at addressing this problem. Especially worrying is the situation in regards to the monitoring of campaign expenditures. The State Audit Office representatives have said multiple times that they lack relevant resources to carry out such monitoring;
  • The State Audit Office has been ineffective in following up on the instances of suspicious donations. The process of examining these donations is usually rather protracted and final outcomes are not satisfactory;
  • The State Audit Office has not revealed a single violation to date;

Transparency around the sponsored political content on Facebook remains a challenge. The State Audit Office is, for objective reasons, unable to determine the identity of those advertising political content on social media.

Recommendations

  • The State Audit Office must pay closer attention to identifying high-risk donations. Such donations need to be examined in the shortest possible time-frame, in order for the Office to work effectively and increase public trust;
  • The State Audit Office must urgently examine the issue of eight electoral subjects – political parties, party coalitions of initiative groups registered by the Central Electoral Commission – transferring their air time for free political advertising to other electoral subjects;
  • The State Audit Office must pay closer attention to the capacity building of political parties in the area of financial reporting. They must also examine the content of declarations – especially the expenditures, and if appropriate, follow up and take necessary measures;
  • The State Audit Office must take interest in reported salary expenditures of the Zurabishvili campaign and determine whether or not the amounts presented in their declarations are accurate;
  • The State Audit Office should restore Form 9.7.1 in its financial reporting forms, which asks the political parties / electoral subjects to specify terms of their bank loans;
  • 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.

This report was made possible by the support of the American people through the United States Agency for International Development (USAID). The opinions expressed in the report belong to Transparency International Georgia and may not reflect the views of USAID or the United States Government.

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