What do recent headlines mean for you?

On 1 December 2008 the Sydney Morning Herald led with an article about Sydney Lord Mayor Clover Moore allegedly breaching a council code of conduct by being involved in a vote on an issue to buy a property owned by Peter Holmes a Court. He had paid $6,940 in donations to her campaign.

This time the focus was on the Lord Mayor, but from time to time the media takes an interest in revealing the political donations made by various corporations. Mostly this comes from publicly available registers of political donations. However, if the media becomes aware of donations that do not match the publicly disclosed donations of corporations this creates a news story and a potential public relations nightmare for the relevant company.

For large organisations, and particularly those involved in property development and activities where decisions of governments at all levels can influence the outcome of projects, managing to track and collate information on political donations is likely to be a complex task. However, the cost of compliance needs to be weighed against the reputation risk and potential penalties for failure to adequately disclose those donations.

How can you minimise your risk?

Holding Redlich has developed a detailed checklist to assist organisations to manage compliance and protect their reputation. The balance of this newsletter provides an overview of obligations, elaborate on some key concepts, and provide some suggestions for managing the risk of non-compliance with the reporting obligations.

Overview of the disclosure regime

What constitutes a donation?

Most accounting systems are designed to identify specific expenses such as advertising, entertainment, sponsorships and donations, but may not characterise amounts that are political donations as such. There is a risk political donations will be misclassified within an accounting framework unless it clearly expects political donations to be made.

So what constitutes a donation? Donations include attendance at political fundraising events where the payment for attending exceeds the value of the function, indirect donations, gifts in kind, and some volunteering.

Are any other amounts disclosable?

In addition to donations, the state based regimes also capture amounts defined as gifts received by a donor and electoral expenditure. These amounts capture gifts to a company by a registered political party that are then used by the company, rather than the political party, for electoral expenditure e.g. promoting a candidate.

What are the thresholds and reporting periods?

Again, the disclosure thresholds and reporting period vary across jurisdictions. The lowest disclosure threshold is $200 in the Northern Territory and the highest $10,500 in relation to the Commonwealth.

Disclosure periods vary and are generally calculated on a 6 monthly period, financial year or an ‘Election Period’. As most companies operate on a financial year basis for record keeping and reporting, maintaining records for reporting political donations may require some additional systems being in place.

Reporting in relation to development applications is required to be made at the time of the application.

What are the penalties for failing to disclose?

The relevant government authority may impose monetary penalties for the late lodgement of returns, or the lodgement of incorrect returns where disclosure is required, this may lead to criminal sanctions. In some cases this is a strict liability offence, so fines cannot be remitted. In other jurisdictions it is possible for fines to be remitted if it can be shown that the donor did not intend to commit the offence of failing to lodge the return.

What can I do to ensure I comply with the requirements?

One of the most difficult issues with political donations is making sure the donation is recorded as such in some system in the company, that classification is captured and all similar expenses are aggregated for the purpose of determining compliance.