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Website: http://www.oag.govt.nz/2006/election-spending/default.htm
Report: Advertising expenditure incurred by the Parliamentary Service in the three months before the 2005 General Election (Report PDF)
Appendix 2: Advice of the Solicitor-General (PDF, 1.1 MB)

Advertising expenditure incurred by the Parliamentary Service in the three months before the 2005 General Election

Summary

Funding of parliamentary advertising

Advertising and publicity play an important role in the dialogue between members of Parliament (MPs), parliamentary parties, and the public that is central to representative democracy. Because of this, taxpayers meet the costs of MPs’ and parliamentary parties’ advertising. However, while advertising takes place in a political environment, taxpayers do not pay for political parties’ activities.

The Parliamentary Service (the Service) provides a range of support services to MPs and parliamentary parties, including meeting the costs of advertising.
Events leading up to my inquiry

On 21 June 2005, I reported to the House of Representatives a range of concerns I had about how parliamentary advertising was managed. I was particularly concerned that the administrative framework for such advertising was weak. My report also drew attention to the need for MPs and parliamentary parties to take care when advertising in the pre-election period.

In the three months before the General Election on 17 September 2005, I became concerned that electioneering material may have been paid for by the Service out of resources appropriated for MPs’ and parliamentary parties’ advertising.

I have conducted an inquiry into this expenditure. The main focus for my inquiry was whether the expenditure incurred by the Service during those three months was within the legal authority provided by Parliament for such expenditure.
Legal authority for funding

It is a fundamental principle in New Zealand law that public money may be spent only under parliamentary authority. In this case, the authority for the Service to incur advertising expenses on behalf of MPs and parliamentary parties is provided by specific appropriations forming part of Vote: Parliamentary Service, contained within an Appropriation Act.

The scope of those appropriations is limited to expenses that are incurred for a parliamentary purpose. The appropriations cannot be used for an electioneering purpose.

I took advice on the scope of the appropriations from the then Solicitor-General. That advice considered the applicable legislative framework, and confirmed that the appropriations provided for expenses incurred by MPs in their capacity as members but do not cover activities by MPs in their capacity as candidates for election. In particular, the advice relied on the Speaker’s Directions issued on 1 November 2003, which explicitly exclude “electioneering material” from the matters that may be funded under the appropriations. “Electioneering material” is something that is intended to persuade a voter to favour a candidate or party in an election, and is not limited to material that expressly solicits votes.

The Solicitor-General advised me that, if an item of expenditure has both a parliamentary purpose and an electioneering purpose, I am entitled to take the view that it falls outside the permitted scope of the appropriation.

As Controller and Auditor-General, I have a responsibility to bring any expenditure that, in my opinion, has been unlawfully incurred to the attention of the responsible Minister and the administering department. I also have certain powers to direct those responsible for the expenditure to account for that expenditure to Parliament. If I have reason to believe that the unlawful expenditure may continue, as Controller and Auditor-General I can prevent any further payments by the administering department.

In conducting this inquiry, I based my view of the law on the Solicitor-General’s advice, and used a method that would enable me to examine particular items of advertising to determine whether they were outside the scope of the appropriations. That method involved following a number of steps and weighing a series of factors that indicated whether a particular item tended to have an electioneering purpose or parliamentary purpose. I took a common-sense approach based on what I considered a reasonable member of the public would think from looking at the advertisement as a whole, in its full context.
Results of my inquiry

My inquiry established that significant breaches of the appropriations administered by the Service occurred in the period 16 June to 16 September 2005. The expenditure that I found to be outside the scope of the appropriations related to a range of types of advertising, and was incurred on behalf of all but one of the parliamentary parties.

The total value of the breaches I identified for the 2004-05 financial year was $443,462 (including GST), and the total value of the breaches I identified for 2005-06 financial year was $730,136 (including GST). Overall, $1,173,598 of unlawful expenditure was incurred.

I am concerned that I found a substantial amount of material that amounted to electioneering. A number of advertisements and newsletters expressly solicited votes. However, even where no express soliciting of votes occurred, a large number of advertisements contained material that could only be described as election platforms and promises. I was particularly disappointed to find that the Service paid for significant amounts of newspaper advertising by some parties in the last week before the General Election. That advertising was incontrovertibly of an electioneering nature, and I could not discern a legitimate parliamentary purpose for it.

In my view, the Service has not correctly interpreted the scope of the relevant appropriations as they apply to advertising expenditure. I am concerned that the Service does not satisfy itself, before expenditure is incurred, that advertising proposed by MPs and parliamentary parties is for purposes consistent with the relevant appropriations. It is the Service’s responsibility to ensure that expenditure is within the authority provided by Parliament. I do not accept that the authorisation of advertising expenditure by an MP or parliamentary party staff member absolves the Service of this responsibility.

It is clear that an incorrect interpretation of the scope of the appropriations administered by the Service coupled with processes for managing advertising expenditure that were designed on the basis of that incorrect understanding were significant factors in allowing the breaches to occur. These factors helped to create an environment in which the Service could not exercise the judgement required to ensure that expenditure was appropriately incurred.

However, the failures on the part of the Service are not the only cause of the breaches in appropriation. The accountability framework for the administration of the Vote – which should involve separate but complementary roles for both the Service and the responsible Minister – has been confused, and lacks transparency. This is unacceptable.

I have found the nature and extent of electioneering advertising expenditure put through the Service by MPs and parliamentary parties disturbing. In this regard, party-generated advertising produced by Leaders’ offices was of most concern.

I am aware that inadequate guidance is available to MPs and parliamentary parties about what constitutes appropriate advertising, particularly in the pre-election period. But the guidance clearly prohibits electioneering. I find it hard to accept that, despite my 2005 Report and the message to be careful about advertising expenditure in the pre-election period, behaviour did not change.
Actions to be taken

I have directed the Speaker of the House of Representatives, as Minister responsible for Vote: Parliamentary Service, to report the breaches I identified for the 2005-06 financial year to the House of Representatives. My direction was issued under section 65Z(1) of the Public Finance Act 1989.

It is not my role to comment on what further action, if any, should be taken about the expenditure that was outside the scope of the appropriations.

I note that my findings do not necessarily indicate that any provisions of the Electoral Act 1993 have been breached by any person. Those questions are separate, they are not my responsibility, and my inquiry did not consider them.

In this report I make several recommendations to the Service that should be implemented with urgency. The recommendations will help to reduce the risk that further expenditure may be incurred that breaches the appropriations.

The current framework for administering parliamentary advertising needs to be revised and strengthened, to provide a long-term solution that balances the need for a dialogue between elected representatives and the public with the need for prudent management of public money. This report shows the significant issues that have arisen through the failure of the current framework.

ENDS

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