State Comptroller’s Report on the Financing of Political Parties
The State Comptroller, Judge Joseph Shapira (retired), published an audit report on the financing of political parties in relation to parliamentary parties in the 20th Knesset for the period from April 2015 until year-end 2016.
A substantial portion of the report, which received considerable media coverage, engaged in the finding that several conventions, events, and conferences held by various non-partisan bodies and organizations in support of some parliamentary parties did not comply with the restrictions prescribed in section 8 of the Financing of Political Parties Law. As such, these constitute prohibited and illegal contributions (with regard to sum and source of the contribution and the identity of the contributor).
The State Comptroller’s report on these conventions, events, and conferences, and his determination that they constitute an illegal contribution to the parliamentary parties, does not contain surprises. The State Comptroller reiterated the legal analysis, directives, and determinations former state comptrollers have included in many of their earlier reports.
However, the report also includes a new and interesting determination by the State Comptroller. While it has not received media coverage, it could have significant repercussions, both on the parliamentary parties and particularly on non-partisan organizations or private individuals, including lawyers, accountants, and other professionals, who work on behalf of or under the auspices of the parliamentary parties.
One subject examined by the Comptroller, the findings of which were included in the report, is that of parliamentary parties who regularly provided personal advisory services at no charge to the general public. This included advice from lawyers and accountants in a variety of fields, including legal issues, taxes, mortgages, and more. These advisory services were provided in political party offices and in the public reception offices at a number of branches throughout the country. The political parties did not record the aforesaid volunteer activities provided by professional advisors in their books, which, prima facie, constitute cash-equivalent contributions, since they are within the scope of the occupations of those volunteering professionals.
In this regard, the State Comptroller stated, inter alia, that “the fact that citizens are direct beneficiaries of the advice being provided does not, per se, negate the possibility that the volunteering was tantamount to a contribution to the parliamentary party. The fact that the parliamentary parties made its offices available for the provision of professional services and advertised the services as being offered on behalf of that parliamentary party and under its auspices are what create the linkage between the benefit to the recipients of the service and the benefit to and promotion of the parliamentary party, such that the provision of the advisory services creates a benefit to the parliamentary party and is thus tantamount to a contribution.”
Later on, the State Comptroller indeed accepted the explanations of those parliamentary parties who reasoned that that provision of personal advisory services is tantamount to public reception by members of the parliamentary party, the purpose of which is to maintain contact with the public.
However, the Comptroller prescribed a new rule and guideline, whereby, from now on, the provision of personal advisory services by professionals on a volunteer basis in their fields of expertise and occupation (such as lawyers, accountants, and, of course, professional commercial advisory firms), which are being offered on behalf of or under the auspices of a parliamentary party, shall be deemed an illegal contribution to a parliamentary party, thus violating the provisions of section 8 of the Financing of Political Parties Law. Parliamentary parties are thus prohibited from engaging in such activities (regardless of whether or not the parliamentary party pays a fee to those advisors).
In this regard, it is important to note that, apart from the direct impact of the State Comptroller’s new directive on the parliamentary parties themselves, it also has a direct impact on those same firms and private individuals who might provide a personal advisory service as stated on behalf of or under the auspices of a parliamentary party. This is because, pursuant to the Financing of Political Parties Law – such activity that shall, from now on, be deemed an illegal contribution to a parliamentary party according to the position of the State Comptroller – may expose those same advisory service providers to the criminal sanctions prescribed by law.