The information in this section from the Electoral Commission is for general guidance and is not a final statement of the relevant law in the Electoral Finance Act 2007, particularly listed third parties' election expenses in Part 2, Sub-part 8.  The Commission will try to help with any issues that may arise in respect of third party election expenses (or party election expenses, and the Chief Electoral Office will try to help with any issues that may arise concerning candidate election expenses). Third parties may also seek their own legal advice.

What is the limit on third party election expenses?

A listed third party’s total third party election expenses (including GST) cannot exceed $120,000 and must not exceed $4000 in the case of election advertisement that relate to an electorate candidate.

What is the obligation to provide a return of third party election expenses?

After a general election the financial agent of every third party must provide a return to the Electoral Commission of third party election expenses incurred during the regulated period (1 January until polling day in the case of an election falling after 1 April in the year three years after the previous election). In relation to the 2008 general election this period is 1 January 2008 – 8 November 2008 inclusive. Expenses incurred outside this period may also need to be included.

The deadline to provide the return (and any auditor's report if required) is 70 working days after the election. In relation to the 2008 general election, the return is due 10 March 2009.

The return must be on a form provided by the Commission, and be accompanied by an auditor's report if the expenses exceed $30,000.

The obligation applies even if the third party did not publish any election advertising. If the third party had no election expenses the financial agent must make a nil return.

What is a third party election expense?

Third party financial agents and auditors should become familiar with the definitions of election advertisement (section 5) and publish (section 4), third party activity (section 113), election expense (section 114), and third party’s election expenses (section 115). For an activity to be an election activity these three questions must all be answered "yes":

1. Is the activity undertaken by the third party or its financial agent or with their authority?
2. Does the activity constitute publishing an election advertisement?
3. Is the activity undertaken (or deemed to be undertaken) during the regulated period (from 1 January 2008 to polling day)?

An election expense that must be included in the return is any spending on any election activity, along with spending before or after the regulated period that relates to any election activity within that period. A fair apportionment must be made when the activity happens before and continues during the regulated period. For example, if one quarter of a pamphlet print run had been distributed before the election year began then three quarters of the cost would be included in the return. However, if the third party produced billboards six months before election year and erected them in the month before polling day then the total production costs must be included in the return. A third party cannot avoid incurring or declaring an election expense simply by ensuring the work is done or invoiced before or after the regulated period.

Note: the cost of the following things (some of which may nevertheless be election advertisements and require promoter statements, etc) do not count as election expenses: travel, surveys or opinion polling, donated labour, replacement of election materials damaged in circumstances out of the third party's control.

What about free or discounted materials and services?

Materials or services provided free or at a special discount must be returned at reasonable market value. Labour given by an individual does not count, but labour donated or discounted as professional services by a firm does unless its employees provided their individual labour for free.  (Consider whether the discount value also needs to be accounted for as a third party donation.)

What about telecommunications, printing or postage paid for by someone else but relating to an election activity?

If something is an election activity, then it does not matter who pays the bill, it must be counted and returned as an election expense of the third party.

How are election expenses apportioned between the third party and a party or electorate candidate?

Where the financial agent of a party or candidate authorises in writing a third party’s election advertisement, the full cost of the election expense of that advertisement forms an election expense of both the party or candidate and the third party.

Remember, the party financial agent must give prior written authorisation before an election advertisement promoting the party is published, and the candidate financial agent must give prior written authorisation before an election advertisement promoting the candidate is published.

You cannot avoid counting the cost of such advertising as an expense of both the third party and party or candidate, as failing to obtain to written permission for such advertising is an offence.

How are election expenses apportioned between two third parties?

Where an activity is comprised of two or more third party activities, the cost of that activity must be apportioned equally among the third parties whose third party activities comprise it.

This result is not affected by the payment arrangements (if any) made between the third parties. If each pays its equal share no other issues arise. But if, for example, one third party pays a disproportionate share then the other third parties may need to disclose a donation.

Can costs be spread over more than one election?

No (and the cost of materials re-used at subsequent election must be accounted for again then).

Are there deadlines for billing the third party and the third party paying its expenses?

Yes:

No claim against a third party is recoverable unless sent to the financial agent within 20 working days after the day the chief electoral officer makes the declaration of election of list MPs by notice in the New Zealand Gazette. Parties should ensure that suppliers are aware of this.

All election expenses incurred by a third party must be paid no later than 40 working days after the date on which the above declaration is made unless payment is ordered after that time by an appropriate jurisdiction in the case of an unpaid or disputed claim, or by leave of the district court in the case of a disputed claim later agreed for settlement or an undisputed claim that was late being made.

What documentation is needed?

Invoices and receipts are required to be produced and kept for claims and payments of election expenses of $50 or more (including GST).

For the purposes of audit and possible investigation, every financial agent is required to take all reasonable steps to ensure that all records, documents, and accounts that are reasonably necessary to enable the return to be verified are retained.

What is the return form for use for the 2008 general election and how should it be completed?

The form, including instructions for its use, is provided below for the use of financial agents of registered political parties.  Choose the appropriate form to use depending on whether it a nil return, in respect of candidate related activity only, or otherwise.  The forms are provided as Excel files so that financial agents complete the appropriate electronically before printing, signing and returning the form as instructed in the form.

What is the role of the auditor?

Third parties require an auditor if the third party’s total election expenses exceed $30,000 (including GST). The requirements are set out in s 128, with which the financial agent, and auditor are strongly advised to familiarise themselves. While engaged by the third party, the auditor is assessing and reporting as appropriate on whether the third party's election expenses and associated record keeping have been within the law, and whether the auditor has received all necessary information to form an opinion. The law gives auditors powers of access to the third party’s records and to require information and explanations from the financial agent.

Financial agents are reminded that the auditor cannot be a body corporate or someone closely connected to the running of a party, must be a chartered accountant, and properly appointed and notified to the Commission. (s 12, also Companies Act 1993 s 199(1)).

What information should the financial agent provide for the auditor?

1. details of all third party election expenses 
2. the completed return form 
3. the web address of this guidance

Can the auditor take a sample of expenses rather than look at them all?

The audit must be of the third party's entire election expenses so that the auditor can form an opinion on the matters which are required to be covered in the audit report, such as whether the return is accurate and proper records are being kept. Any sampling, drawn in accordance with normal professional auditing practice, must be from across the entire third party organisation without excluding any area of the third party's election expenditure. The Commission does not accept any of the following as 'reasonable excuse' for not providing an audit report on a third party's entire third party election expenses:

• cost or time involved in the audit or the servicing of it
• alleged difficulties arising from the location of relevant documentation
• alleged autonomy of organisations within the third party

What should the auditor do if they are unable to give an unqualified opinion?

If a third party does not provide all the information required or fails, in the auditor's opinion, to keep proper records of third party election expenses sufficient to earn an unqualified opinion then the auditor may give a qualified opinion, an adverse opinion, a disclaimer of opinion, or an ‘except-for opinion’ in accordance with the Institute of Chartered Accountants Auditing Standard No.702 "The Audit Report on an Attest Audit".

What happens if an auditor's report does not comply with requirements?

If the audit report does not comply with the requirements of section 128 of the Electoral Finance Act it may be rejected by the Commission and the financial agent would be required to get a new one.

What if an error in, or omission from, a return is discovered later?

The financial agent should immediately prepare an amended return, obtain an auditor's report on the amended return, and forward both to the Commission with a letter explaining the circumstances.

What if a disputed or unpaid claim is later settled in full or part?

If a disputed or unpaid claim included in the return is paid in full then a new return and auditor's report is not required. If a third party pays a disputed or unpaid claim for an amount different from that shown in the third party's return, then the financial agent should immediately provide an amended return with a letter explaining the circumstances. A fresh auditor's report is required only if the amount paid is more than that shown in the original return.
Similarly, if a court decision results in payment of a claim for election expenses which was not included in the third party's return of election expenses, the financial agent should immediately prepare an amended return of election expenses, obtain a new auditor's report on the return and send in both with a covering letter explaining the circumstances.

What does the Commission do with returns and audit reports received?

The Commission is responsible for ensuring that third parties comply with their statutory obligations in relation to the preparation, audit and submission of the required return and related documents. It:

• Checks to see that the return and audit report are in order.
• Puts the return and audit report (if in order) on public display within 3 working days of their receipt, and may also put the return or its contents on-line.
• Extracts information for summary tables, which are also made available for inspection at its offices, online, and in its annual report to Parliament.
• Raises any outstanding matters with the financial agent or auditor.
• Considers any response to any matters raised before deciding whether it believes an offence may have been committed, and reporting this to the Police if it does.

What are possible offences?

You need to check the law for precise wording, but in relation to election expenses, the possible offences include:

• incurring an unauthorised election expense (s 117(1))
• entering into an agreement or understanding for the purpose of circumventing the prohibition on incurring unauthorised election expenses (s 117(2))
• exceeding the spending limit (s 122(1)
• entering into an agreement or understanding for the purpose of circumventing the spending limit (s 122(2)
• paying a bill for an election activity later than 40 days of the declaration of election of list MPs (unless the bill is in dispute) (s 123(3))
• failing to comply with the requirements for the filing of the expense return without reasonable excuse (s 130(1))
• filing a false expense return (s 130(2))
• failing to keep proper records for audit purposes (s 131(2))

The penalties can be substantial, including fines up to $100,000, and up to two years’ imprisonment. An additional financial penalty determined with reference to the financial benefit may also be imposed. Third parties may be liable for offences committed by financial agents. Those convicted of corrupt practices lose the right to enrol, vote or stand for election for three years.