Candidature

The Australian Electoral Commission, in declaring candidates for the 2025 Federal general election, states 

The Australian Electoral Officer for Western Australia today declared all candidates for the election of Senators for Western Australia in the 2025 federal election in accordance with the Commonwealth Electoral Act 1918. 

Mr Rodney Culleton was among those candidates declared. This follows his lodgement of a fully completed nomination form and mandatory qualification checklist, together with the requisite $2,000 fee, before the close of nominations 12 midday on Thursday 10 April 2025. Mr Culleton’s nomination declared that he was not an undischarged bankrupt or insolvent. 

The provisions of the Electoral Act do not give the AEC or any AEC officer the power to reject a fully completed candidate nomination, regardless of whether any answer to a question of the qualification checklist is incorrect, false or inadequate (see section 170A, Electoral Act). This means the AEC cannot reject a nomination even if it contains a false declaration as to the eligibility of that person to stand for election. 

The AEC notes Mr Culleton is listed on the National Personal Insolvency Index as an undischarged bankrupt. It appears therefore that he may have made a false declaration as part of his nomination process. The AEC has referred this matter to the Australian Federal Police for their consideration. 

Under section 44(iii) of the Constitution: “Any person who is an undischarged bankrupt or insolvent, shall be incapable of being chosen or of sitting as a senator or a member of the House of Representative.” 

Following Mr Culleton’s nomination as a candidate under the same circumstances at the 2022 federal election, the AEC referred the matter to the Australian Federal Police. A prosecution relating to this matter is ongoing. 

Mr Culleton’s name will appear on the WA Senate ballot paper in the 2025 federal election. 

If the AEC is presented with compelling evidence that other candidates in the 2025 federal election may have also signed a false declaration we will consider whether similar referrals to the AFP are warranted to ascertain if the candidate has committed an offence. 

Editor’s notes: Intending candidates must make themselves aware of the operation of section 44 of the Constitution which includes the following.

The AEC separately notes 

s44 Disqualification: “Any person who: (iii) is an undischarged bankrupt or insolvent; shall be incapable of being chosen or of sitting as a senator or a member of the House of Representatives.” 

44 Disqualification 

Any person who: is under any acknowledgment of allegiance, obedience, or adherence to a foreign power, or is a subject or a citizen or entitled to the rights or privileges of a subject or a citizen of a foreign power; or is attainted of treason, or has been convicted and is under sentence, or subject to be sentenced, for any offence punishable under the law of the Commonwealth or of a State by imprisonment for one year or longer; or is an undischarged bankrupt or insolvent; or holds any office of profit under the Crown, or any pension payable during the pleasure of the Crown out of any of the revenues of the Commonwealth; or has any direct or indirect pecuniary interest in any agreement with the Public Service of the Commonwealth otherwise than as a member and in common with the other members of an incorporated company consisting of more than twenty‑five persons; shall be incapable of being chosen or of sitting as a senator or a member of the House of Representatives. 

Subsection (iv) does not apply to the office of any of the Queen’s Ministers of State for the Commonwealth, or of any of the Queen’s Ministers for a State, or to the receipt of pay, half pay, or a pension, by any person as an officer or member of the Queen’s navy or army, or to the receipt of pay as an officer or member of the naval or military forces of the Commonwealth by any person whose services are not wholly employed by the Commonwealth. ... 

Section 44 of the Constitution - grounds for disqualification 

A person is disqualified from nominating as a candidate or sitting in the Parliament where the person becomes subject to any of the five conditions listed in this section: 

Section 44(i) 

Section 44(i) of the Constitution applies to two categories of persons: a person who is “under any acknowledgement of allegiance, obedience or adherence to a foreign power”; and a person who “is a subject or a citizen or entitled to the rights or privileges of a subject or a citizen of a foreign power.” In the 1988 case of Nile v Wood [1988] 140 CLR 133, the Court clarified that the first category of disqualification under section 44(i) captures any “person who has formally or informally acknowledged allegiance, obedience or adherence to a foreign power and who has not withdrawn or revoked that acknowledgement”. 

The second category of disqualification under section 44(i) captures a state of affairs involving the existence of a status or of rights under the law of a foreign power. It applies to persons who have certain rights because of a formal citizenship link with a foreign power, and therefore to any person who holds dual or plural citizenship. 

In the 1992 case of Sykes v Cleary [1992] HCA 60, the Court found that candidates are disqualified from election to Parliament if they do not take "all reasonable steps" to renounce their other citizenship before nomination. 

In the more recent matters of Re Canavan; Re Ludlam; Re Waters; Re Roberts [No 2]; Re Joyce; Re Nash; Re Xenophon [2017] HCA 45, Re Gallagher [2018] 17 the Court upheld the approach taken by the majority of Justices in Sykes v Cleary. That is, to give section 44(i) its ordinary and natural meaning, subject only to the implicit qualification in section 44(i) that the foreign law conferring for foreign citizenship must be consistent with the Constitutional purpose of the provision. 

The Court has made it clear that whether a person has the status of a subject or a citizen of a foreign power necessarily depends upon the law of the foreign power. That is so because it is only the law of the foreign power that can be the source of the status of citizenship or of the rights and duties involved in that status. Accordingly, it is essential that candidates rigorously check their ancestry and to obtain their own legal advice on whether they may be a citizen of a foreign power. 

The Court has also held that an Australian citizen who is also a citizen of a foreign power will not be prevented from participating in the representative form of government ordained by the Constitution by reason of a foreign law which would render an Australian citizen irremediably incapable of being elected to either house of the Commonwealth Parliament. As is apparent, to rely upon this approach is conditional on both an analysis of the action taken by the intending candidate and the effect of the overseas law. Intending candidates will need to obtain clear legal advice on whether their circumstances are able to fit within this aspect of section 44(i) of the Constitution. 

The cases make it clear that if the issue of overseas citizenship is not resolved by the close of candidates’ nominations, then it is likely that the candidate will not be qualified to stand for election due to the operation of section 44 of the Constitution. 

Section 44(ii) 

Section 44(ii) of the Constitution applies to two categories of persons: a person “attainted by treason”; and a person who “has been convicted and is under sentence or subject to be sentenced”. 

The first category of disqualification would probably only apply where the person has been convicted of the offence of “treason” contained in section 80.1 of the Criminal Code Act 1995. 

The second category of disqualification is that the person is under sentence or is subject to be sentenced for any offence against the law of the Commonwealth or a State that carries a sentence of 12 months imprisonment or longer. As an example, in the matter of Re Culleton [No. 2] [2017] HCA 4 the Court was asked to consider whether Senator Culleton may have at the time of nomination as a candidate, been “convicted and under sentence or subject to be sentenced for an offence punishable under the law of the Commonwealth or of a State by imprisonment for one year or longer” contrary to subsection 44(ii) of the Constitution. 

The Court held that despite the subsequent annulment of the conviction, at the time of the nomination as a candidate Senator Culleton was to be sentenced for the offence of larceny, a crime involving property theft in NSW. This offence was punishable by imprisonment for a period of up to five years; but where the value of the property involved in the offence does not exceed $5,000, the maximum term of imprisonment that the Local Court may impose is two years. Senator Culleton's offence concerned property of a value less than $2,000. Accordingly, he was liable for imprisonment for a maximum term of two years. Therefore, the Court concluded that he was disqualified under section 44(ii) of the Constitution and his election was invalid, making his place vacant under section 45 of the Constitution. The Court ordered a special recount of Senate ballot papers in Western Australia, the state where Senator Culleton was elected. 

Section 44(iii) 

Section 44(iii) of the Constitution disqualifies a person if they are “an undischarged bankrupt or insolvent”. While there have been no specific decisions on the scope of section 44(iii), this appears to established by a question of fact as to whether a person has been made a bankrupt and whether the period of bankruptcy has concluded or been discharged. 

The Full Federal Court decisions in Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8 contains a brief discussion of section 44(iii) and section 45 of the Constitution. 

The AEC notes that the Australian Financial Security Authority (AFSA) is required to maintain the Bankruptcy Register and The National Personal Insolvency Index (NPII) which contain a publicly available and permanent electronic record of all personal insolvency proceedings in Australia.

Culleton appears elsewhere in this blog, eg here and here 

Fakes

The interim report of the Australian Senate's Select Committee on Adopting Artificial Intelligence feastures the following recommendations 

 Recommendation 1 The committee recommends that, ahead of the next federal election, the government implement voluntary codes relating to watermarking and credentialling of AI-generated content. 

Recommendation 2  The committee recommends that the Australian Government undertake a thorough review of potential regulatory responses to AI-generated political or electoral deepfake content, including mandatory codes applying to the developers of AI models and publishers including social media platforms, and prohibitions on the production or dissemination of political deepfake content during election periods, for legislative response prior to the election of the 49th Parliament of Australia. 

Recommendation 3  The committee recommends that laws restricting the production or dissemination of AI-generated political or electoral material be designed to complement rather than conflict with the mandatory guardrails for AI in high-risk settings, the recently introduced disinformation and misinformation reforms, and foreshadowed reforms to truth in political advertising. 

Recommendation 4  The committee recommends that the Australian Government ensure that the mandatory guardrails for AI in high-risk settings also apply to AI systems used in an electoral or political setting. 

Recommendation 5  The committee recommends that the government examine mechanisms, including education initiatives, to improve AI literacy for Australians, including parliamentarians and government agencies, to ensure Australians have the knowledge and skills needed to navigate the rapidly evolving AI landscape, particularly in an electoral context.

Pseudolaw

Another instance of pseudolaw - statutes are supposedly invalid because incorrectly sealed - with a religious inflection in New v Dvorsky [2024] TASMC 4  ...

 Nicholas Stefan Dvorsky did not vote at the Federal election held on 21 May 2022. He has been charged with failing to vote at an election contrary to s245(15) of the Commonwealth Electoral Act 1918. He has pleaded not guilty. He says he was not required to vote because of his religious belief. 

It is an offence for an elector to fail to vote at an election: s245(15). That is an offence of strict liability: s 245(15A). However, the offence is not committed if the elector has a valid and sufficient reason for the failure: s 245(15B). The fact than an elector believes it to be part of his or her religious duty to abstain from voting constitutes a valid and sufficient reason for that failure: s 245(14). The essential facts constituting the offence were averred in the complaint. Pursuant to s 388 of the Commonwealth Electoral Act 1918 they are taken to be proved in the absence of evidence to the contrary. There was no such contrary evidence. 

However, there was evidence of email communications between the defendant and the Australian Electoral Commission in which the defendant, describing himself as a "private sentiment soul" and "Nicholas Stefan of the House of Dvorsky" and using the email address Livingman1995@gmail.com, sought to establish that he was not obliged to vote. What the defendant was saying in those emails was difficult to understand. They contained illegitimate demands, used terms and language with a quasi-legal complexion but which were otherwise entirely misconceived and contained a plethora of non-sequutur. 

He accused the Australian Electoral Commission of being an unconstitutional foreign entity acting outside of the Commonwealth of Australia Constitution Act 1900 UK and not abiding by "heavenly father’s Authorised King James Version Bible 1611 (Banking Instruments, Banking Law and Equity)".

It is unclear whether the defendant's copy of the 1611 KJV includes a discrete chapter on 'Banking Instruments, Banking Law and Equity'.

The judgment indicates

 He then stated: “It’s against my religion to abstain from voting and if you ask why, it’s because that’s between myself and the Creator”. 

Taken literally that statement indicates the defendant is asserting a religious duty to vote. However given the other content of his emails I understand him to be asserting it is his religious duty not to vote. 

In order to fall within the valid and sufficient reason specified in s245(14) there is a need to identify a religious duty, that is a duty imposed by a religion. The leading authority on what constitutes a religion is Church of the New Faith v Commissioner of Pay-Roll Tax (Victoria) [1983] 154 CLR 120; [1983] HCA 40. 

As Mason ACJ and Brennan J observed at 132 "the mantle of immunity should soon be in tatters if it were wrapped around beliefs, practices and observances of every kind whenever a group of adherents chose to call them a religion ... a more objective criterion is required". Their Honours identified the objective criteria as being twofold: “[F]irst, belief in a supernatural Being, Thing or Principle; and second, the acceptance of canons of conduct in order to give effect to that belief ...”. 

Wilson and Deane JJ referred to the following indicia of a religion, at 174: a belief in the supernatural, that is to say a belief in a reality which extends beyond that which is capable of perception by the senses; a belief in ideas relating to the nature of human beings, their place in the universe and relationship to the supernatural; those beliefs require adherence to particular standards, codes of conduct or practices by those who hold them; the existence of an identified group of believers even if not a formal organisation; and the opinion of the believers that what they believe constitutes a religion. 

The defendant need only point to evidence which suggests the reasonable possibility that such a religious duty exists. It is then for the prosecution to negative the existence of that duty beyond reasonable doubt: s13(3) Commonwealth Criminal Code and Commonwealth Director of Public Prosecutions v Easton [2018] NSWSC 1516 at [73]. 

The defendant referred to Christian belief. He also referred to many texts from an ancient version of Christian scripture. However, aside from his assertion that it was against his religious belief to vote, there was no evidence that the Christian religion including its many manifestations in the multitude of formal and informal denominations which now exist contains any prohibition on voting. Indeed there was no express assertion that the defendant was an adherent of any group of believers who are subject to a duty not to vote. I am not satisfied he is. Rather his assertion of a religious duty appears idiosyncratic. 

Against the eventuality that I am wrong as to that I have assumed that the asserted duty not to vote arises as a result of adherence to the standards, codes of conduct and practices articulated in the various passages of scripture referred to by the defendant in the Authorised King James Version of 1611. I have therefore considered whether those texts in that version provide any support for the duty not to vote. In undertaking that consideration I take care to avoid this court assuming any role as a tribunal of doctrine. I am considering whether the ideas the defendant articulates as a basis for failure to vote give rise to a duty to behave in that manner. I also understand that a belief in the supernatural may involve an element of mystery, perhaps grounded in the experience of the divine rather than in logic alone. However, if the duty not to vote is to be established as a religious duty, it should be capable of some coherent explanation by reference to the tenets of the defendant’s religion. With those considerations in mind I turn to consider the passages of scripture referred to by the defendant. 

First, the defendant refers to Romans 2:11 which says, “For there is no respect of persons with God". Although on his case the Australian Electoral Commission is an unconstitutional foreign entity acting outside of the scope of the Australian Constitution, I infer the defendant considers it a person and therefore not respected by God. Whether or not the Australian Electoral Commission is a person and whether or not that entity is respected by God has no bearing on the duty of an elector to vote. Further, properly understood, that text is simply referring to the impartiality of God; that the social status of a person is irrelevant to God. It does not provide any foundation for failing to vote. 

Second, the defendant refers to Leviticus 19:15 which says "Ye shall do no unrighteousness in judgment: thou shalt not respect the person of the poor, nor honour the person of the mighty: but in righteousness shalt thou judge thy neighbour". Although again alluding to impartiality, there is nothing in that passage which would justify a failure to vote. 

Third, the defendant refers to Matthew 7:12 which states "Therefore all things whatsoever ye would that men should do to you, do ye even so to them: for this is the law and the prophets". Sometimes referred to as the Golden Rule, there is nothing in that passage which would justify a failure to vote. 

Fourth, the defendant refers to Exodus 20:13, part of the Decalogue, in particular the prohibition on killing. There is nothing in that passage which would justify a failure to vote. 

Fifth, the defendant refers to Matthew 5:9, one of the Beatitudes, which states, "Blessed are the peacemakers: for they will be called children of God". There is nothing in that passage which would justify a failure to vote. 

Sixth, the defendant refers to Proverbs 24:11-12 which states, "If thou forebear to deliver them that are drawn unto death, and those that are ready to be slain; if though sayest, behold, we knew it not; doth not he that pondereth the heart consider it? And he that keepeth thy soul, doth not he know it? And shall not he render to every man according to his works?" Although clearly encouraging ethical, compassionate, empathetic and responsible conduct towards others, particularly the vulnerable, there is nothing in that passage which would support a failure to vote. 

Seventh, the defendant refers to Psalm 25:9 which says, "He guides the humble in what is right and teaches them his way". Once again there is nothing in that passage which would justify a failure to vote. 

Insofar as the defendant seeks to rely on Holy Writ, it appears somewhat convenient to the position he takes that he omits a reference to the Apostle Paul in Romans 13:1-4 which says, in the particular translation upon which the defendant relies, "Let every soul be subject unto the higher powers. For there is no power but of God: the powers that be are ordained of God. Whosoever therefore resisteth the power, resisteth the ordinance of God: and they that resist shall receive to themselves damnation. For rulers are not a terror to good works, but to the evil". That suggests a duty to comply with the requirements of the law. 

I have focussed on the passages of scripture referred to by the defendant because they are the only parts of his emails which carry any religious allusions. However in reality, insofar as the defendant’s objection to voting is capable of being understood, it is, in substance, based on a belief in the invalidity of the legislation requiring him to vote, that the legislation does not bind him for some other reason, some defect in the status of the Australian Electoral Commission or a disagreement with the decisions made by those elected. Similar views have consistently been held not to constitute a valid and sufficient reason for failing to vote: see Commonwealth Director of Public Prosecutions v Easton [2018] NSWSC 1516, particularly the discussion of the authorities by N Adams J from [75] and the summary at [95]. The defendant has simply given those views a religious gloss. The suggestion that they give rise to a religious duty of some sort is not established by the evidence. Indeed, the materials provided to me provide no coherent basis for concluding that any such religious duty exists. 

That is enough to determine these proceedings. However it is appropriate to refer to one further matter raised in the materials the defendant relied on. 

As part of the assertion that the laws which require the defendant to vote are not valid, he referred to statements said to have been made by Magistrate McKee when dealing with complaint 51841/2015 on 13 November 2015. The defendant asserts that Magistrate McKee said that he understood the argument of the defendant in that case to be that any state laws that had been passed since 1901 in Australia and in the State of Tasmania are invalid because they didn’t put the correct seal on. The laws the prosecution was relying upon therefore do not exist and if the prosecution was to proceed any further it would have to address the seal argument.

Electoral Roll

The Victorian Parliament's Legislative Assembly Electoral Matters Committee report last month on its inquiry 'into whether Victoria should participate in a national electoral roll platform' reflects the following terms of reference - 

(a) the possible implications, if any, of a national electoral roll platform on the independence of the Victorian Electoral Commission; 

(b) the security and integrity of Victoria’s electoral system; and 

(c) mechanisms to ensure the security and integrity of electoral systems and events in other jurisdictions around Australia and internationally to determine best practice. 

 The report states 

 Since 2017, Australia’s state, territory and Commonwealth electoral commissions have been working towards the development of a shared software platform. This ‘national electoral platform’ could support a variety of electoral functions, including the electoral roll. It has the potential to improve cyber security and to provide cost savings and efficiencies for electoral commissions. 

The national electoral platform is still in the concept phase. The system specifications, the funding arrangements and the governance structure have not been determined. No part of the system has yet been developed. 

This Committee was asked to investigate whether or not Victoria should move to a national electoral roll platform—that is, the electoral roll component of the national electoral platform. This would involve a major change from the current arrangements, in which the Victorian Electoral Commission (VEC) maintains a bespoke piece of software which stores Victoria’s database of electors, produces electoral rolls and supports other electoral functions. 

Given that the national electoral roll platform is still in the concept phase, the Committee cannot definitively say whether moving to it would be in Victoria’s interest. The evidence received by the Committee suggests that, if a national platform is designed appropriately, it could be beneficial for Victoria. A national electoral roll platform has the potential to facilitate best practice information security systems for electors’ data, to provide cost savings over time and to enable a more complete and accurate roll. 

However, to protect Victoria’s democracy, any change to electoral systems must be done in a carefully considered manner. Electoral systems are complex and it is important to ensure that changes do not have unintended consequences. Before moving to a national platform, the system needs to be carefully examined to ensure that it does not negatively impact on the VEC’s ability to perform its functions. 

A national platform must meet all of the VEC’s business needs. In addition, it must have systems to support future changes to Victoria’s legislation and the VEC’s processes, so that Victoria’s electoral independence can be maintained. It is also important that moving to a national platform does not affect the VEC’s ability to deliver local council elections. If the national platform can address these matters while providing the expected benefits, it would be in Victoria’s interests to move to it. 

The Committee’s conclusion is that it is worthwhile for the VEC to continue working with other commissions to explore the possibility of a national electoral platform, including a national electoral roll platform. 

In the meantime, both the Victorian and Australian electoral commissions are currently undertaking work to redevelop the software they use to manage their databases of electors and produce electoral rolls. The Committee considers this an appropriate interim measure while work towards a national electoral roll platform takes place. However, the Committee would strongly encourage both electoral commissions to collaborate wherever possible to reduce duplication of effort and costs. 

The Committee has also noted that there is a lack of transparency around what data are stored in the Victorian database of electors. The Committee has therefore recommended that legislation be updated to clearly set out what is stored on the database, as is the case in several other Australian states and territories.

The Committee's Findings and recommendations are -

 Current arrangements 

FINDING 1: Both the Australian Electoral Commission and the Victorian Electoral Commission maintain registers of enrolled electors on bespoke pieces of software. The vast majority of Victorian electors are on both registers. Western Australia is the only other state with a similar arrangement. Australia’s other states and territories rely on the Australian Electoral Commission’s register, which is used to produce electoral rolls for state and local council elections in those jurisdictions. 

FINDING 2: Both the Australian Electoral Commission and the Victorian Electoral Commission have recently begun work on redeveloping the software that they use to manage their registers of electors. 

RECOMMENDATION 1: That, as part of the Victorian Electoral Commission’s redevelopment of its Roll Management System, the Victorian Electoral Commission seek opportunities to collaborate with the Australian Electoral Commission and its project to redevelop its roll management system where possible. This collaboration should seek any opportunities to reduce the duplication of effort and costs involved with separately commissioning two pieces of software with similar functions. 

What Victoria needs from a register of electors 

FINDING 3: Victoria’s Electoral Act lacks clarity about what data are to be stored in the Victorian register of electors. Legislation in other Australian jurisdictions is clearer about what data must be stored, while still allowing for flexibility. Victoria’s Electoral Act could be improved by adopting this approach. 

RECOMMENDATION 2: That the Government amend the Electoral Act 2002 to specify what data can be stored in the register of electors. The legislation should specify what data must be stored and what data may be stored for each elector, as in the Australian Capital Territory’s Electoral Act. The legislation should also provide for flexibility by allowing further data categories to be specified in subordinate legislation. 

A national electoral roll platform 

FINDING 4: Australian electoral commissions have done some work to develop the concept of a national electoral platform, which would include a national electoral roll platform. However, they have not yet developed a concrete proposal for how a platform would be designed or operate. Work is ongoing. 

FINDING 5: If it is designed appropriately, a national electoral roll platform has the potential to meet Victoria’s needs, while providing better cyber security, being more accurate and complete, and enabling cost savings over time compared to the current arrangements. 

RECOMMENDATION 3: That the Victorian Electoral Commission continue working with other jurisdictions towards the creation of a national electoral platform, including a national electoral roll platform. As part of this, the Victorian Electoral Commission should advocate for the platform to be designed in a way that will meet Victoria’s needs. 

RECOMMENDATION 4: That Victoria not commit to a national electoral roll platform until details of the design and governance structure are more developed. At that time, an assessment can be made as to whether or not a national electoral roll platform would meet Victoria’s needs. 

Election Funding

Policy observations and recommendations from today's NSW ICAC report on Investigation into political donations facilitated by Chinese Friends of Labor in 2015 (Operation Aero) - 

Donation laws across Australian jurisdictions 

Political financing laws differ significantly, however, across the federal, state and territory jurisdictions. Without a prohibition and caps on the amount of donations that can be made in other jurisdictions, such as in the federal system, all prohibited donors in NSW still have a vehicle to exert political influence by making major donations elsewhere. 

While uniformity in political finance regimes across jurisdictions may not be feasible (or necessarily desirable) there is a need for greater transparency as a control to prevent undue influence and corruption. However, as NSW, Queensland and other jurisdictions continue to reform their electoral donation and expenditure laws, it can be argued (or at least perceived) that electoral funding systems are becoming more divergent than harmonised. 

Concerns about the lack of harmonisation of election finance laws across Australia were raised in the Commission’s 2014 report, titled Election funding, expenditure and disclosure in NSW: Strengthening accountability and transparency, as follows: Each state, territory and commonwealth jurisdiction has its own set of electoral funding laws. Operating at a national level, parties, third-party campaigners and associated entities could take advantage of discrepancies between the laws of the different state and federal jurisdictions. NSW laws have the greatest discrepancies when compared with the other electoral funding laws of Australia. Relative to other jurisdictions, NSW caps and disclosure thresholds are lower, specific groups are banned from donating, and public funding is higher, thereby creating an environment in which cross-jurisdictional differences may be exploited. 

The channelling of donations through different jurisdictions is a way of circumventing the intent of the rules in NSW. As a result, tracking the flow of money – and influence – from donors to campaigners to election expenditure is exceedingly complex. For example:

• property development organisations in NSW can lawfully donate for the purpose of funding federal campaigns, but not at state level 

• an individual, living in any Australian jurisdiction, can make a single or multiple lawful donations uncapped at the federal level 

• the threshold for disclosure of donations at the federal level ($14,500) is much greater than it is for NSW or any other state in Australia 

• a property developer looking to influence a political party can donate $14,499 at the federal level to be used for “federal purposes” and it need not be disclosed.

By law, money for federal purposes must be kept in separate bank accounts; for example, one to be specifically used for “other/general purposes”. In practice, money from the “other/general purposes” account could be allocated for state purposes without being identified in any NSW audit. 

Mr Huang, who was based in NSW, was not constrained by the dollar amount of donations he could make at the federal level. Indeed, official records show that between 2012 and 2015, Mr Huang (either by himself or by companies associated with him) made as many as 20 donations, totalling $1,095,000, to parties at the federal level. Mr Dastyari, former NSW Labor general secretary and Australian senator, gave evidence that accepting funds into the NSW Labor federal account, which would otherwise be prohibited at the state level, is a known practice, as follows:

[Counsel Assisting]: [Mr Dastyari]: And that was your practice when you were general secretary, I take it? Of course, I mean, yeah, you, the rules, the rules are very very clear. You take, they’re not, let’s be clear, prohibited state donors are not prohibited federal donors. You take the money, accept the money into the federal campaign account, and you fully disclose it. 

As Mr Dastyari (indirectly) pointed out during the inquiry, the $100k cash given by Mr Huang could legitimately have been donated at the federal level:

...to me what’s incomprehensible about this entire enquiry, to be honest, is that, is if the series of events that have been purported are true, they could have just accepted the money into the federal campaign account, which is what, how you normally take money from prohibited donors or people above the limits. 

The federal rules allow you to take that money. 

In Australia’s federal system, it is not uncommon for there to be nine separate sets of laws regulating many areas of public policy. Although the Commission cannot direct recommendations at the Commonwealth Government, it would nonetheless be helpful if there was greater coordination between the federal, states and territories to ensure that reforms to strengthen legislation in one jurisdiction do not unduly create legislative loopholes in another. For example, greater consistency and transparency is needed around the definitions of “donor”, “donation” and “donation threshold”. Regardless of whether a level playing field between jurisdictions is an attainable goal, at the very least, there should be minimal confusion. This is particularly so with regard to donation disclosure and compliance requirements; both for the donor and the responsible reporting person(s) in political parties. 

Cash donations 

Compared with payments made by electronic funds transfer, credit card or cheque, donations made in cash can be more easily: • recorded in the name of a person or organisation that is not the real donor (possibly to conceal a prohibited donation) or not recorded at all • split to avoid donation caps or disclosure caps. 

An examination of the NSW Labor financial records by the NSWEC shows that most cash deposits were, in the period under investigation, less than $1,000, and that transactions involving large amounts using cash was not a common business practice. The cash donations disclosed by NSW Labor in relation to the 2015 CFOL dinner appear to be exceptions. As discussed above, there was no regulation in NSW specific to cash donations until 31 December 2019. 

In the NSW Parliamentary Legislation Review Committee Digest Report (No 7/57 – 22 October 2019, iv), the committee noted that the intention of the Electoral Funding Amendment (Cash Donations) Bill 2019 was to: ...improve traceability and transparency of donations, promote compliance and improve the integrity of the electoral system. These intentions are consistent with the broader objects of the Electoral Funding Act 2018. 

Since 1 January 2020, it has been unlawful for a person to knowingly make or receive a political donation in cash that exceeds the value of $100 (s 50A Electoral Funding Act 2018). The penalty to be imposed on a person who does any act that is unlawful under divisions 5 (Management of donations and expenditure), 6 (Prohibition of certain political donations) or 7 (Prohibition of donations from property developers or tobacco, liquor or gaming industries) of Part 3 of the Electoral Funding Act 2018, if the person was at the relevant time aware of the facts that result in the act being unlawful, is set out in the offence provision s 145(1). 

The offence under s 145(1) of the Electoral Funding Act 2018 carries a maximum penalty of 400 penalty units or imprisonment for two years, or both. At the time of writing this report, it is noted that prosecution in Court is required to enforce an offence under s 145(1) of the Electoral Funding Act 2018 relating to a contravention of the cash donation provision in s 50A of the Act. The Commission notes, however, that the NSWEC can issue penalty notices under s 148 of the Electoral Funding Act 2018 for breaches of other provisions of the Act, including offences under s 145(1) relating to contraventions of various sections in Part 3 Division 5 of the Act (concerning management of donations and expenditure), which carry similar penalty unit points and terms of imprisonment. 

For the offence of exceeding the $100 cash limit, a distinction should be made between the value of the cash donation made, and the role and responsibility of the person who accepted the cash donation. 

Consider, for example, a cash donation that exceeds the cap by $50. If a local government electoral candidate accepted a cash donation of $150, this would be an offence, but one that is less likely to proceed to prosecution given the dollar value of the donation against the cost of taxpayer money incurred in proceeding to Court. Consider also the distinction between the role and responsibility of a party agent (or party official) who accepted and/or disclosed a donation that exceeded the cap, and a volunteer supporting the party at a community event (who perhaps inadvertently accepted such a donation because they were unaware of the rules). Both circumstances would constitute an offence; however, it may be impractical to proceed with prosecution against a volunteer. In summary, the prohibition on cash donations exceeding $100 strengthens transparency and goes some way to rebuild public confidence and integrity in the NSW electoral system. However, less severe offences may not warrant the costs and taxpayer expense involved in taking such cases to prosecution. Adopting an approach that allows the NSWEC to issue penalty notices for less severe offences will flag more breaches of donations law that simply may not have been acted upon and ultimately assist political parties to ensure they are compliant with regulatory provisions governing donations. 

The Commission supports legislation to limit cash donations to $100 but makes the following recommendation: 

Recommendation 1 

That the NSW Government amends the Electoral Funding Regulation 2018 to provide for the NSWEC to issue penalty notices for less severe breaches of the prohibition on cash donations under s 50A of the Electoral Funding Act 2018. 

The management of donations and the NSW Labor governance arrangements 

Political parties are voluntary, not-for-profit organisations that organise themselves in accordance with their own philosophical ideals. Even well-established parties such as NSW Labor tend not to have significant resources and rely heavily on party volunteers. 

The public has an interest in the organisation and practices of registered political parties for state elections, not least because these parties may receive taxpayer funding to subsidise their electoral campaigns and administration. 

At a minimum, the public should expect that parties have proper financial policies and procedures in place to comply with electoral funding legislation. 

In relation to the Administration Fund, the Commission’s aforementioned 2014 report stated that: Even though taxpayers pay both for the parties to administer themselves and the NSWEC to administer the fund, in the end, parties receive the full amount even if their internal controls are unsatisfactory. 

Consequently, the first recommendation in that report was: That the NSW Government amends the Election Funding, Expenditure and Disclosures Act 1981 to convert administration funding from a reimbursement scheme to a grant, contingent on the internal governance capability of political parties. 

The Commission’s recommendation was not adopted. Given the events that took place in this investigation, the Commission reiterates that the rationale behind this recommendation remains sound, and this is reflected in recommendation 2. 

As discussed above, NSW Labor and Country Labor shared the same political ideology, staffing arrangements and governance structures. Importantly, one designated party agent was legally responsible for making disclosures of political donations for the two parties. In effect, a lack of satisfactory governance arrangements in NSW Labor meant a lack of satisfactory governance arrangements in Country Labor. The shortcomings in governance capabilities within NSW Labor’s head office during the period under investigation (2015–16) were made evident during the inquiry. The need to strengthen the systems and processes was particularly apparent, as set out in table 4. 

Legacy of lax governance arrangements 

The lax governance arrangements prior to, and leading up to the time of the event, was a matter that Ms Murnain knew of when she took over from Mr Clements as general secretary. Ms Murnain had conveyed these concerns to Mr Dastyari (predecessor to Mr Clements), who told the Commission: The Labor Party accounts and donations were a ‘shit show’ and she was whinging to me about how everyone had abandoned her and she’d been left alone in the Labor Party office and we all moved on to our other careers and she was there to clean up the mess. 

Ms Sibraa referred to the governance arrangements and process around the handling of donations as “sloppy, poor governance, terrible way of functioning”. Ms Murnain told the Commission that, in 2015, NSW Labor initiated three independent reviews to address the lack of satisfactory governance arrangements:

...the party undertook three different reviews and has undertaken some since as well in relation to procedures on handling donations in particular but also in relation to the way the office is structured. It, it was the case back then that procedures, everyone has a slightly different view of procedures because that’s what happens when things weren’t written down. Some, there were some areas of the office that had procedures but obviously governance was a pretty significant issue in 2015, which has been widely reported, and then we proceeded to make a significant number of changes to improve accountability and governance in the office because of those reviews. So there’s a number of recommendations, rules, changes and processes that have been put in place since then.

As Ms Murnain indicated, several attempts were made to address the problems of governance within NSW Labor’s head office. The Tarrant/Tierney review (2015), the Whelan/Farrar review (2015–16) and the Needham/ Bianchi review (2015) each respectively involved a review of the administrative and finance committees, the head office workplace, and the Australian Labor Party (NSW Branch) Rules 2020. 

Ms Murnain gave evidence that the Needham/Bianchi review in particular tackled the “pretty systemic cultural issues” that beset the working environment. Subsequent to the above reviews, and under Ms Murnain’s leadership, a number of governance improvements were put in place. For example, the role of governance director was created and a ban on cash donations above $1,000 was introduced. Important as those improvements were, the matters exposed in this investigation highlighted the serious shortcomings in the governance of NSW Labor head office. More recent measures have included a staff code of conduct and improvements to IT systems to track and disclose donations. In October 2019, the then NSW Labor leader, Jodi McKay, and federal Labor leader, Anthony Albanese, called for “a new era of transparency and accountability” and announced that a further two-part review of NSW Labor, would be led by former Commonwealth attorney general Michael Lavarch. The focus of the review was on the issue of power within NSW Labor, including: 

Governance shortcomings at the NSW Labor head office 

Accounting for, receipting and banking donations 

There was a lack of clarity around who was accountable for bringing the donations from the fundraising event back to NSW Labor head office. Mr Clements considered this to be Mr Cheah’s responsibility. And, although the financial controller agreed that as a matter of proper practice, tax invoices and receipts (such as the $50,000 in donations made in 2016) should have been issued directly to donors, receipts were sent directly to Mr Wong’s office (in 2016). 

There was also no policy or procedure to prohibit NSW Labor staff taking home large amounts of cash before banking (such as the $100,000 that Mr Cheah took home in 2015). According to Mr Cheah, Mr Wong, Mr Clements and Ms Murnain, the 2015 CFOL dinner was typically “chaotic”. 

The organisation of fundraising events 

Although the 2015 CFOL dinner was organised to raise donations prior to the 2015 NSW State Election, the invitation/reservation forms made no reference to Country Labor for which donations were purportedly made. Any fundraising event, which had the potential to raise money for both NSW Labor and Country Labor, should have ensured that the donation form included an option for donors to clearly indicate to which party they wished to donate. 

Identifying prohibited donors and donations that exceed statutory caps 

There was a due diligence failure to identify that the donor disclosure forms for NSW Labor (in colour) were photocopied (in black-and-white) to produce otherwise identical but false declarations of donations made to Country Labor. This, and the failure to identify the identically handwritten “$5000” on the forms should have alerted those reconciling the $100k cash and the forms to probe deeper and ensure matters were in order. 

The roles and responsibilities of staff, including volunteer staff 

Ms Murnain said that in 2015:

... people had in their heads their roles and responsibilities, but nothing was written down that clearly delineated people’s roles that other people would have access to. No-one really understood each other’s roles other than when they worked with each other to understand it. 

Risk management and internal audit 

Ms Wang, financial controller, agreed that the state of the NSW Labor accounts was in a form that the auditors would query in 2016. NSW Labor’s failure to manage gifts and conflicts of interest Mr Clements received gifts from Mr Huang in a personal capacity but did not disclose this to NSW Labor. During the inquiry, he agreed this to be a potential conflict of interest 

Compliance and ethical obligations of senior party officials 

The integrity of senior party officials is called into question by their failure to meet their compliance obligations. For example, Ms Murnain did not report her suspicions, if not knowledge, that an unlawful donation may have been made, either within the party, or to the NSWEC during its investigation of the event. 

Mr Clements, did not disclose the $10,000 gifted by Mr Huang (to give to a union member) to either NSW Labor or the NSWEC. 

Where power lies within the Branch, how that power is exercised, what are the checks and balances to the use of power and how those entrusted with power are held accountable for using power in the best interests of the Party as a whole. 

The first stage of the review focused on the structural reform of the Administrative Committee of NSW Labor (the governing body). The second stage (report forthcoming) will focus on compliance with electoral and donation laws, including fundraising activities and training provided to NSW Labor officials and candidates. 

The Lavarch review produced the 2019 interim report, titled Review into the NSW Labor Head Office, which made several recommendations for substantial reform of the structure and governance arrangements at NSW Labor’s head office. A key recommendation was to establish an audit and risk committee with a remit to advise a newly created state executive board on matters, including:

• preparing statutory accounts and annual financial statements 

• monitoring and reviewing the external audit process 

• reviewing the risk management framework of NSW Labor 

• recommending any internal audit of NSW Labor’s regulatory obligations under fundraising disclosure or other laws 

• monitoring compliance of all regulatory obligations and advising on continuous improvement of culture of compliance at head office 

• reporting directly to the NSWEC or any other appropriate regulatory authority, any suspected illegalities in NSW Labor’s compliance with regulatory and legal obligations that have not been acted upon by NSW Labor after identification by the committee.  

Notwithstanding the implementation of the Lavarch recommendations or those that may follow from the second stage of the review, the Commission’s recommendations set out below are intended to apply to all political parties in NSW. 

Recommendation 2 

That the NSW Government, in consultation with affected parties, initiates an amendment to the Electoral Funding Act 2018 so that payments from the Administration Fund are contingent on the achievement of acceptable standards of party governance and internal control. A working group should be established to determine the relevant governance and control standards, which could relate to:

• accounting for, receipting and banking donations 

• the organisation of fundraising events 

• identifying prohibited donors and donations that exceed statutory caps 

• the roles and responsibilities of staff, including volunteers 

• risk management and internal audit 

• whistleblowing and complaint-handling 

• management of gifts and conflicts of interest 

• compliance and ethical obligations of senior party officials. 

Given the different governance arrangements in different political parties, and as a matter of good practice, it is reasonable to assume that multiple political parties would be either members of, or invited to, represent their views to the working group. As the independent regulator, the NSWEC would ultimately determine if the parties had met the governance and control standards agreed on by the working group and adopted by government. The intention is for standards to be clearly agreed on, according to the points (and principles) set out in the Commission’s recommendation 3. The working group should also consider whether political parties should be able to request a review, before the NSW Civil and Administrative Tribunal, of the consequences of a decision taken by the NSWEC (for example, withholding administrative funding) as opposed to the decision itself. 

Recommendation 3

That the newly established working group should seek input from the NSWEC to ensure the efficient administration and implementation of standards. That is, consideration should be given to:

• applicable minimum standards 

• whether the standards should take the form of model rules, which an individual party would be free to modify only if the NSWEC agreed that the modified rule did not adversely affect the party’s governance. This would prevent small, or new, parties from incurring the expense of drafting rules from scratch 

 • the limits on the type of standards that could be required. That is, in order to avoid topics and areas that the state has no legitimate interest in regulating (for example, the way a political party formulates its policies) 

• the desirability, or extent to which, the standards take the form of specific rules, so as to meet the reasonable satisfaction of the NSWEC 

• the need for a proportionate approach that does not unreasonably penalise small, new political parties or independents 

• providing political parties with reasonable opportunities to address shortcomings in their governance and internal control frameworks before administration funding is withheld. 

Recommendation 4 

That the NSW Government amends the Electoral Funding Act 2018 to provide the NSWEC with the necessary powers to assess, audit and enforce non-compliance with standards of party governance and internal control. 

Recommendation 5 

That the NSW Government amends the Electoral Funding Act 2018 to require the NSWEC to publish findings regarding political parties’ adherence to established governance and controls standards. 

Penalties and compliance 

In its 2014 report, the Commission raised concerns about the lack of effective penalties and sanctions to act as an effective deterrent against non-compliance with disclosure obligations. That year, the NSW Government established a “Panel of Experts – Political Donations” in response to public concern over the influence of political donations on the integrity of government decisions. 

The panel recommended (among other matters):

• adopting a range of mid-level enforcement options available to the NSWEC, including the ability to withhold public funding entitlements from parties and candidates found in breach of the laws (recommendation 46) 

• increasing the maximum monetary penalty that can be imposed by the Local Court (recommendation 43) 

• simplifying the means by which the prosecution must prove knowledge, awareness or intent for offences in order to maximise the chances of successful prosecution (recommendation 45). 

The Electoral Funding Act 2018 now reflects new penalties for non-compliance with provisions relating to expenditure and donations. Recovery of up to double the value of unlawful donations and criminal prosecution for offences are two non-mutually exclusive enforcement actions available to the NSWEC. Enforcement actions are taken in accordance with the NSWEC’s Compliance and Enforcement Policy. With regard to questions of further policy and law reform arising from issues exposed in its investigation, the Commission focused principally on measures to ensure a higher level of self-regulation and compliance by political parties with the requirements of the statutory election funding, expenditure and disclosure regime. 

In particular, the Commission considered whether the legislative provisions surrounding the duty to report contraventions of the Electoral Funding Act 2018 be modified so that a senior party officer is required to report any reasonable suspicion of a contravention. 

Failure of duty to report offence 

Under s 100(1) of the Electoral Funding Act 2018, “Senior Office Holders” of a registered party are guilty of an offence if they fail to report to the NSWEC any conduct in connection with the party that the office holder knows or reasonably believes constitutes a contravention of the Act without reasonable excuse. The offence carries a maximum penalty of 50 penalty units ($5,500). Section 100(1) of the Act is a new offence that did not exist in the EFED Act and was not in force when the events under investigation took place. Section 100(2) of the Electoral Funding Act 2018 states that a reasonable excuse may be if the person knows or reasonably believes a report about the conduct has already been made to the NSWEC. 

There are challenges, however, in being able to prove what a senior office holder should reasonably understand about the lawfulness of the specific conduct. Notably, the Electoral Funding Bill 2018 included a “duty of care and diligence” and a “duty of good faith” provision, which were ultimately not included in the Electoral Funding Act 2018. The intent of the care, diligence and good faith provisions, however, may be approximate to the general intent of a “reasonably suspected” obligation. 

Recommendation 6 

That the NSW Government, in consultation with the NSWEC, gives consideration to: a) amending s 100(1) of the Electoral Funding Act 2018 to require senior office holders of political parties to report reasonably suspected contraventions of the Act b) increasing penalties associated with the offence under s 100(1) of the Electoral Funding Act 2018 to bring it into line with the penalties set out in sections 141 to 146 of the Act. 

Public statements about NSWEC compliance activities 

The NSWEC is not presently authorised to inform the public of the outcome or conclusion of an investigation, nor to publish identifying information about any investigation. 

In the current investigation, the Commission’s power to hold a public inquiry was critical to obtaining truthful evidence from witnesses. The Commission’s public inquiry exposed the false information given by putative donors and persons of interest to the NSWEC during its investigation of the matter. Additionally, once the NSWEC then referred the matter (as per s13A of the ICAC Act) to the Commission, some witnesses provided evidence in compulsory examinations that the Commission has now found to be false (as set out, for example, in chapters 9, 11, 20, 22 and 23 of this report). 

Given the value of public exposure in this investigation and the more general positive effects of transparency, the Commission considers it necessary for the powers of the NSWEC to be enhanced to authorise it to make public statements about its compliance activities. Subject to ensuring that political parties are afforded procedural fairness, the power to make public statements may create an additional deterrent to persons who might contemplate submitting false information to the NSWEC. 

The NSWEC would require the authority to name political participants as part of any new power to undertake periodic reporting of the outcomes of its regulatory functions. As noted above, the NSWEC is not presently authorised to do this. 

The Commission notes, however, that there may be a public interest in limiting any new reporting power of the NSWEC in the immediate lead up to an election so as to avoid suggestions that the timing of a report inappropriately impacted an election result. 

Recommendation 7 

That the NSW Government amends the Electoral Funding Act 2018 to give the NSWEC power to publish the results of its compliance audits, investigations and regulatory actions. 

Elections

Problems with bureaucratic incapacity or just differing views of mission? The Australian Electoral Office has been dismissive of a negative report by the ANAO regarding the AEC's administration of the political donation system. 

In Administration of Financial Disclosure Requirements under the Commonwealth Electoral Act the ANAO concludes that the AEC had failed to take any concrete steps to improve following a 2012 review, which found it needed to be more proactive in its approach to compliance. 

Its assessment is that -

• the AEC is failing to obtain key records from some donors. In four years, the AEC has not obtained 75 annual returns – a key record detailing a donors’ contribution in any given financial year. 
• Many records are being submitted late, in some cases by more than a month. Around a quarter of annual returns and 17% of election returns were submitted late. 44 donors were late by an average of more than 30 days. 
• The AEC is doing little to verify that the information it does receive is accurate and complete. It appears to looking for empty fields in forms and obvious errors but not validate by comparing what a donor has reported to other data from internal or external sources. 
• The AEC is failing to meet its own target for compliance reviews, which are used to audit a donor’s claims, notably failing to conduct 58 of the 168 reviews it had planned in the five years examined in the audit. 
• No compliance reviews have been conducted on entities who claimed to have made no donations in any particular period. 
• Donation records from third parties  such as the Minderoo Foundation,  the Australian Christian Lobby and unions are not analysed. 
• The AEC failed to analyse donation records submitted during elections by candidates, Senate groups or election donors, instead relying on records handed in by political parties. 

Most interestingly, the report argues the AEC is not properly using its enforcement powers when it does identify noncompliance. 

ANAO again offers recommendations to improve the AEC’s handling of the political donations system, strengthening analysis of the accuracy of the data, improved  collection of donation records, and adopting a more targeted approach to its compliance activities. 

 The AEC response has been unenthusiastic. The recommendation to use a more graduated system of punishments for noncompliance by donors, including the use of criminal prosecutions was rejected outright, because the AEC said it already takes such an approach. Other recommendations were accepted with qualifications.

The AEC report states in part

Background 

1. The financial disclosure scheme was introduced in 1983 to increase overall transparency and inform the public about the financial dealings of political parties, candidates, senate groups and others involved in the electoral process. Regulation of the receipt and public disclosure of campaign funding and expenditure was seen as complementary and a necessary corollary to the introduction of public funding of political parties and candidates. 

2. The financial disclosure scheme requires specified participants (entities) in the electoral process that receive funding, provide funding, or incur political, now electoral expenditure to lodge financial disclosure returns with the Australian Electoral Commission (AEC). Such information assists voters to make judgements knowing who funds political representatives and to what extent. 

Rationale for undertaking the audit 

3. The administration of the financial disclosure requirements by the AEC was selected for audit because the purpose of the financial disclosure scheme is to preserve the integrity of the electoral system, maintain public confidence in the electoral process and reduce the potential for undue influence and corruption. The financial disclosure scheme is also a central pillar of the Australian arrangements to provide electors with sufficient information on which to base selection of their political representatives. 

Audit objective and criteria 

4. The objective of the audit was to examine the effectiveness of the AEC’s management of financial disclosures required under Part XX of the Commonwealth Electoral Act 1918, including the extent to which the AEC is achieving accurate and complete financial disclosures. 

5. To form a conclusion against the audit objective the following high level audit criteria were used: Has the AEC established effective arrangements to administer the financial disclosure scheme? Has the AEC developed and implemented effective compliance monitoring arrangements? 

Conclusion 

6. The AEC‘s management of the financial disclosures required under Part XX of the Commonwealth Electoral Act 1918 is partially effective. 

7. The arrangements that the AEC has in place to administer the financial disclosure scheme are limited in their effectiveness as: across the four year period examined, while the AEC has obtained 5882 annual and election returns, as at 30 June 2020, 75 returns have not been obtained. There have also been delays with the submission of returns to the AEC with 22% of annual returns and 17% of election returns lodged after the legislated due date; the AEC does not make effective use of available data sources to identify entities that may have a disclosure obligation that have not submitted a return; there is insufficient evidence that the returns that have been provided are accurate and complete5; there is limited analysis undertaken of returns that are obtained; and risks to the financial disclosure scheme are not managed in accordance with the risk management framework. 

8. Compliance monitoring and enforcement activities are partially effective with the result that the AEC is not well placed to provide assurance that disclosure returns are accurate and complete. 

Supporting findings 

9. Across the four year period examined by the ANAO the AEC has obtained 5882 annual and election returns, and as at 30 June 2020, has not obtained 75 returns. Compliance with legislated timeframes has also been an issue, with 22% of annual returns and 17% of election returns lodged after the legislated due date. Forty four entities have submitted annual returns on average over 30 days late on two or more occasions, with 12 (27%) having lodged, on two or more occasions, on average over 120 days late. Additionally, the AEC does not make effective use of available data sources to identify entities that may have a disclosure obligation and have not submitted a return. 

10. There is insufficient evidence that annual and election returns are accurate and complete. While the AEC checks that all fields have been completed and looks for some obvious errors it does not compare the figures disclosed with other data available from internal or external sources, instead relying on its annual compliance review program to provide sufficient evidence that the annual and election returns are accurate and complete. 

11. The effectiveness of the analysis undertaken by the AEC is limited. Annual returns submitted by third parties and donors are not analysed. Election returns submitted by candidates, senate groups or election donors are not analysed. The analysis that is undertaken of annual returns submitted by political parties and associated entities is limited as there is no detailed analysis of the financial information, and effective data analytics and data matching techniques are not employed by the AEC. 

12. Risks to the financial disclosure scheme have not been managed in accordance with the AEC’s risk management framework. While the risk appetite and tolerance statement of this framework states that the AEC has a low/moderate risk tolerance for risks associated with the disclosure function there is no evidence that risks relating to all entities that have a disclosure obligation have been assessed and are being managed appropriately. Additionally, there is no treatment plan in place for the risk that has been identified by the AEC, being the risk of non-compliance by political parties. 

13. While the AEC has identified some lessons that it could learn from other electoral bodies that regulate financial disclosure schemes, there is little evidence of any resulting changes having been made to how the Commonwealth scheme is administered. The AEC has also not taken adequate steps to implement agreed recommendations from a review it commissioned in 2012 of the disclosure compliance function (which concluded that the AEC needed to become more proactive in its approach). 

14. The AEC does not apply an appropriate risk based approach to planning and conducting compliance activities. While most reviews are planned on the basis of a risk assessment, there are a number of limitations in the risk assessment methodology employed. Over the period assessed the AEC did not undertake a compliance review of any election donor returns or of any annual returns that included no financial disclosures (that is, a nil return). 

The number of reviews, and the resources allocated to them, have declined considerably across the five year period analysed. These reductions do not reflect an assessment that the risk of non-disclosure or non-compliance has reduced and this situation is also at odds with the significant growth that has occurred in the total value of receipts and other figures included in the financial disclosure returns provided to the AEC. 

15. Planned compliance activities are not implemented in a timely and effective manner. Of the 168 reviews that were planned to have been conducted over the five year period examined by the ANAO, 58 (35%) have not been completed. While completion rates have improved in the last two years this is due to the AEC significantly reducing the number of planned reviews, narrowing the scope of planned reviews, and reducing the value of the transactions being tested. There has also been a marked decline in the number of full reviews that are being conducted on large entities with disclosure obligations. 

16. The AEC does not appropriately act upon identified non-compliance. It is not making effective use of its enforcement powers and as such has not implemented a graduated approach to managing and acting on identified non-compliance.

The ANAO's  recommendations in summary are - 

Recommendation no.1 

Paragraph 2.19 The Australian Electoral Commission improve the extent to which it is obtaining annual and election returns by taking: greater steps to identify entities with a reporting obligation, and drawing that obligation to the attention of those entities; and more effective action to obtain returns that have not been submitted by an entity with an identified disclosure obligation. 

AEC Response: Agreed with qualification 

Recommendation no.2 

Paragraph 2.43 The Australian Electoral Commission use data analytics and data matching techniques to provide greater assurance over whether data included in returns can be relied upon, and as an indicator of returns that may require investigation. 

AEC Response: Agreed with qualification 

Recommendation no.3 

Paragraph 2.52 The Australian Electoral Commission identify and develop treatment plans for risks relating to the financial disclosure scheme and manage the scheme in line with its revised risk management framework. 

AEC Response: Agreed 

Recommendation no.4 

Paragraph 3.13 The Australian Electoral Commission apply the lessons learned that have been identified through: accessing specialist expertise to test the effectiveness of the processes and practices that are in place to identify undisclosed financial transactions; and establishing arrangements with other government agencies to share intelligence gathering, data interrogation and risk based sampling techniques. 

AEC Response: Agreed with qualification 

Recommendation no.5 

Paragraph 3.39 The Australian Electoral Commission adopt a risk based approach to its compliance review program that: assesses the aggregate level of risk to inform decisions about the size and coverage of the program; includes all disclosures required under the updated legislative framework; and improves the effectiveness of the risk matrix used to select the majority of reviews, and better address risks of non-disclosure and incomplete disclosure. 

AEC Response: Agreed with qualification 

Recommendation no.6 

Paragraph 3.73 The Australian Electoral Commission establish performance measures for its compliance program that are relevant, reliable and complete. 

AEC Response: Agreed 

Recommendation no.7 

Paragraph 3.90 The Australian Electoral Commission implement a graduated approach to addressing non-compliance, including by making better use of its investigatory powers and seeking to have prosecutions undertaken by the Commonwealth Director of Public Prosecutions or civil penalties applied by the courts where serious or repeat non-compliance has been identified. 

AEC Response: Not agreed

The AEC's response in summary is  

An effective and transparent financial disclosure scheme is a key pillar of Australia’s democratic framework, and the outcomes of this audit demonstrate there are aspects of the AEC’s administration of the disclosure scheme that would benefit from further enhancements. The AEC acknowledges the audit team’s work and notes the observations, which we will address in line with our responses to the recommendations. However, the ANAO’s categorisation of the AEC’s management of the disclosure scheme as ‘partially effective’ is rejected. The proposed report contains some errors of fact and superficial analysis that lead to some flawed observations. It demonstrates a misunderstanding of the AEC’s business and the legislation under which it operates. The ANAO’s decision to conduct this audit prematurely –before recent legislative changes have had a chance to take effect — is akin to a building inspector assessing a two-storey house after only the first level had been completed. The result is a report that gives the Australian public an unduly negative and misleading impression of the effectiveness of the scheme. 

The ANAO’s finding that the AEC’s management of the disclosure scheme is ‘partially effective’ runs counter to the extent of disclosure achieved by the AEC (obtaining 98.9% of annual returns and 99.6% of election returns during the four year period examined), the transparency of the current system, and the successful operation of the scheme within existing legislative boundaries. 

The AEC view is that the ANAO has misunderstood the intent of the legislation. Over the period the AEC has been administering the requirements of the Electoral Act, the AEC has not detected systemic issues, wilful or large scale non-compliance with the legislation. And nor have others that scrutinise this scheme through our transparent sharing of the data. Our experience is that incomplete or incorrect disclosures are almost entirely caused by administrative mistakes or misunderstanding of disclosure obligations, which participants rectify. As a result, disclosure is achieved in line with the legislation. 

The AEC’s risk based approach to compliance reviews is the outcome of balancing the competing tensions of natural justice, apprehended bias and prudent use of Commonwealth funds with the preservation of public confidence in the transparency of the financial dealings of political parties and others involved in the electoral process. 

Moreover, the AEC disagrees with the ANAO’s view that it does not make effective use of its enforcement powers. The ANAO seems to have misinterpreted parliament’s intent on this issue. The AEC’s view, supported by data, is that the AEC has successfully achieved disclosure through consultation and education. The proposition the AEC should be more heavy-handed in its approach to enforcement is rejected, as prosecutorial action for amendments and other administrative mistakes would be disproportionate. 

The AEC believes the ANAO’s misunderstanding of the intent of the legislation exaggerates the nature of the recommendations and the perceived risk to electoral integrity.

In contrast the ANAO comments 

The core elements of the financial disclosure scheme were introduced in 1983 and required disclosure reporting to the AEC and also provided the AEC with powers to undertake reviews and inquiries to maintain compliance with the disclosure provisions as well as a range of penalties aimed at discouraging non-compliance. Since its introduction, the financial disclosure provisions of the Electoral Act have been subject to four substantial amendments, most recently in 2018. The impact of those recent amendments on the AEC’s practices was considered as part of the audit. Reflecting that the key elements of the AEC’s responsibilities for administering the scheme are longstanding the audit examined administration of the disclosure scheme across four financial years spanning two federal elections and eleven by-elections. 

To achieve the purpose of the disclosure scheme, it is important that reports be obtained from all those with a reporting obligation and that the reports obtained be timely, accurate and complete. While almost all returns sought by the AEC were obtained: 

• reporting has not been sufficiently timely, with 22% of annual returns and 17% of election returns lodged after the due date with some entities submitting returns late on multiple occasions; and 78% of returns reviewed by the AEC required amendment 

• yet, rather than increasing its scrutiny of the reports that have been obtained, the AEC:

• significantly reduced the number of planned reviews, narrowed the scope of planned reviews, and reduced the value of the transactions being tested; 

• did not undertake or did not complete 35% of planned compliance reviews; and 

• has not undertaken a compliance review of any election donor returns or of any annual returns that included no financial disclosures (that is, a nil return).