Reports by the Comptroller and Auditor General - The Speaker's Committee on the Electoral Commission Contents


Summary

Introduction

1.  The Electoral Commission (the Commission) was established under the Political Parties, Elections and Referendums Act 2000 (PPERA) as the regulator of party and election finance in the United Kingdom. It is responsible for overseeing funding and spending activities by registered political parties. Its remit includes providing advice and guidance on how to comply with the law on party and election finance, maintaining the UK Registers of political parties and donations, and investigating suspected breaches of the law. It has a statutory duty to be transparent in this area of its work, and plays an important role in the development of policy in this area. The Commission spends around £1.15m[4] annually on the direct costs of the Party and Election Finance directorate, compared to £1.329m when we last reported on this topic in 2008-09, although a direct comparison is not straightforward.

2.  This year, our annual value for money report examines whether the Commission is acting as an effective regulator of party and election finance in accordance with relevant principles of good regulatory practice, as set out in the 2005 Hampton Report and subsequent guidance (see Appendix A). The report looks at the progress the Commission has made in responding to the recommendations made in our last report on this topic in 2009, and also examines whether new powers and sanctions granted to the Commission in December 2010 have had an impact on its effectiveness as a regulator.

3.  We carried out our fieldwork during August and September 2012. This included interviews with Commission staff, analysis of Commission data and review of relevant documents. Our report is divided into four parts:

  • Advice and Guidance (Part One)
  • Monitoring of Compliance, Audit and Enforcement (Part Two)
  • Transparency (Part Three)
  • Learning Lessons (Part Four).

KEY FINDINGS

Progress since our 2009 Report on Party and Election Finance

4.  The Commission's approach to regulation now places much greater emphasis on encouraging compliance. Wherever possible, it does this through the provision of better, more effective advice and guidance, taking enforcement measures where it considers it is necessary and proportionate to do so. In taking this approach, the Commission demonstrates compliance with the better regulation principles outlined in the 2005 Hampton review, and subsequent guidance on regulatory good practice.

5.  The Commission has worked hard to improve the advice and guidance it provides to those it regulates. The Commission's guidance is now much clearer and easier to navigate. Further improvements are planned. The Commission offers authoritative, accessible advice through a variety of different methods, and engages proactively with those it regulates, to ensure all are aware of their responsibilities.

6.  The Commission has introduced and continues to develop a transparent, risk-based approach to monitoring compliance in line with principles of good regulatory practice. The Commission has developed risk profiles for each party it regulates, which enable it to target the majority of its audit and monitoring activities more effectively towards parties or individuals at greatest risk of failing to meet their statutory obligations. The Commission has, however, decided to continue checking all donations to ensure they are from a permissible source, rather than move to a sample-based approach.

7.  The Commission is meeting its statutory obligation to ensure transparency of party and election finance. The Commission places a large amount of information in the public domain on the financing and campaign spending of political parties and candidates, including access to the raw data and its own analysis of headline figures and key trends.

8.  The Commission has successfully implemented an online system for parties to submit their information electronically, PEF online. This system has helped the Commission to meet its statutory transparency obligations more efficiently and to become a more accessible and transparent regulator. The system has received positive feedback from key stakeholders, and has improved the quality and analysis of the information published on the Commission's website.

9.  The Commission is keen to improve its performance as a regulator and makes changes to its internal processes and policies as a result of lessons learned from regulatory experience and feedback from key stakeholders. The Commission now has a framework of performance indicators in place to measure its effectiveness as a regulator. The Commission also uses its knowledge and experience to inform wider policy and developments in party and election finance.

Impact of new powers on effectiveness as a regulator

10.  The Commission was given a more proportionate and flexible range of sanctions in December 2010, which has increased the effectiveness of its enforcement activity, and the Commission plans to make further use of these powers to improve the effectiveness of its regulatory activity. The Commission has not yet had to apply its new investigatory powers, since these largely help it to obtain cooperation voluntarily. The increased flexibility of the sanctions the Commission can impose means it is now able to take enforcement action which is more meaningful and appropriate for each individual case. The Commission is currently exploring ways to make better use of its new supervisory powers to check the robustness of parties' controls and compliance processes.

11.  The Commission's new emphasis on advice and guidance and risk-based monitoring, together with the introduction of new powers and sanctions, has had a positive impact on compliance rates. For example, the percentage of parties that failed to submit loans and returns on time has fallen from around five per cent in December 2010 to less than one per cent in March 2012.

CONCLUSION ON VALUE FOR MONEY

12.  To demonstrate that it is delivering value for money, a regulator should achieve its objectives as cost effectively as possible. In addition, to demonstrate adherence to the Hampton principles, a regulator should also aim to minimise the costs and burdens to those it regulates.

13.  The Electoral Commission is delivering value for money in its regulation of Party and Election Finance. Against a background of diminishing resources, the Commission has become a more proportionate, effective and accessible regulator in line with the relevant principles of good regulatory practice, drawing on the recommendations made in our last report, and this is reflected in improved compliance rates. The Commission has significantly changed the way it regulates compared to four years ago when we last reported. It now operates a risk-based approach, focussing on encouraging compliance through improved advice and guidance, a proactive approach to assisting stakeholders, a tailored approach to monitoring and more effective enforcement activity using its new more flexible powers and sanctions. The Commission is meeting its statutory obligation to ensure transparency of party and election finance, and the successful introduction of the PEF online system has improved the accessibility of this information. Overall the Commission is delivering value for money in this area of expenditure.

RECOMMENDATIONS

14.  The Commission plans to obtain further feedback from users and stakeholders on its advice and guidance, in order to make guidance as accessible as possible. It should include specific questions on which advice and guidance formats users and stakeholders find most helpful, and should reduce further the volume and cost of the guidance it produces.

15.  The Commission should develop a "spheres of influence" model to assess where it is exerting most influence and whether there are areas which need further attention, which would also help it develop more outcome focused performance measures[5].

16.  The Commission should keep its processes for checking the permissibility of donations under review, to ensure that they accurately reflect the risks involved. Currently the Commission undertakes a full check of all such donations but it should keep under review the balance of risk and benefits in moving to a sample-based approach.


4   This is the projected year end figure for 2012-13 Back

5   Report by the Comptroller & Auditor General, Ofcom: The effectiveness of converged regulation, HC 490 2010-11, November 2010 Back


 
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Prepared 25 March 2013