Part 5: Advertising support resources for members of Parliament

5.1
Prudent financial management in the state sector relies on a clear understanding of the legal parameters for expenditure, robust processes, and the exercise of informed decision-making.

5.2
In this Part, I:

• outline how the Service administers the requirements relating to advertising by MPs and parliamentary parties; and
• provide my assessment of the Service’s performance in this area.

The Parliamentary Service’s approach to administering parliamentary advertising resources

5.3
The Service’s approach to administering funding applied to advertising resources is guided by the decisions and instructions of the Parliamentary Service Commission and the Speaker, and the Service’s understanding of its financial management responsibilities. The Service’s approach is given effect through the systems, policies, and procedures that it applies to this area of expenditure.

The Service’s interpretation of its financial management responsibilities

5.4
As the department administering the appropriations and exercising its functions under the Public Finance Act and the Parliamentary Service Act (see paragraph 2.30), the Service and its General Manager are responsible to the Speaker for:

• the effective and efficient financial management of the Service, including the appropriations it administers;
• ensuring that all expenditure against appropriations is within the amount, scope, and period of the appropriations, and is reported in accordance with the Public Finance Act;
• ensuring that sufficient internal controls exist to provide reasonable assurance about the integrity and reliability of the expenditure authorised by MPs and parliamentary parties, and the consequent reporting on it; and
• complying with any lawful financial directions of the Speaker, including any specific rules or directions about how the appropriations are to be administered or what types of expenses can be incurred on the authority of MPs, consistent with the amount, scope, and period of the appropriations.

5.5
However, while the Service generally accepts this description of its responsibilities, the Service considers the following factors must be taken into account:

• The accountability framework within which it administers resources has been designed with the intent of transferring primary accountability for expenditure under the Party and Member Support appropriations from the Service to the parliamentary parties and MPs themselves. This approach, which dates from the introduction of party-specific appropriations in 1996,¹ significantly affects the administrative approaches the Service adopts.
• The Service, while acknowledging the status of the 2003 Speaker’s Directions, also operates in accordance with a range of other decisions that have been set by the Parliamentary Service Commission and previous Speakers, and other accountability documents produced by the Parliamentary Service Commission, the Speaker, and the Service.
• Within this environment, the Service does not consider that it has the autonomy to adopt financial management approaches without specific instructions from the Parliamentary Service Commission or the Speaker.

5.6
In my view, that interpretation is not in keeping with the legal framework. The framework provided for the Service by the Public Finance Act and the Parliamentary Service Act is not significantly different from that which applies to any public service department.

5.7
In addition, the Speaker has told me that she is not able to adequately fulfil her role as Minister responsible for Vote: Parliamentary Service. It seems that, to preserve the Speaker’s impartiality, the Service has not in practice involved the Speaker in matters which a responsible Minister might usually consider. Because of this, the Speaker is unable to carry out the role of responsible Minister envisaged by the legislation.

Day-to-day administration of advertising resources

5.8
The approach the Service has adopted to administering advertising resources day to day is based on support rather than control. It considers this approach to be consistent with the intent of the appropriations that authorise the provision of services to parliamentary parties, and the directions of the Speaker.

5.9
In general, MPs or (in the case of larger circulation items) staff from a Leader’s office may initiate the graphic design of advertising or publicity. The design may be done in-house or through external designers. The full production is controlled by the MP or parliamentary party.

5.10
The invoices for advertising production (and design if external designers are used) are sent directly to the MP or parliamentary party by the vendor providing the service. These invoices are then authorised for payment and coded to the appropriate account code by either the MP or their support staff.

5.11
These signed invoices are sent directly to the Finance Branch of the Service for payment. The Service does not require an example of the advertising to be attached to the invoice.

5.12
Before 12 September 2005, all invoices for payment were:

• scanned for any indication of non-compliance with the rules (if the invoice description indicated that the advertising might not have complied with the rules, then an example of the advertising was requested from the MP or parliamentary party);
• entered into the “accounts payable” system for payment; and
• paid at the next available payment run.

5.13
After 12 September 2005, any pre-election advertising had to be certified by MPs or parliamentary parties as complying with section 214B(3) of the Electoral Act 1993 before any invoices were released for payment. These certificates are discussed further in paragraphs 5.43-5.46.

5.14
In some circumstances, staff from a Leader’s office might ask the Service for advice about whether a design was consistent with the guidance set out in the Members’ Handbook of Services.

5.15
The Service told me that, during the pre-election period, only two parties commonly sought such assistance on advertising intended for nationwide distribution. In those situations, oral advice was provided by the Service that covered whether:

• the publicity contained the Parliamentary crest and was “not less dominant” than the party logo;
• the correct party logo was being used (the one currently registered with the Electoral Commission);
• suitable contact details were included in the publicity; or
• the language used was explicitly seeking either votes or financial support for a party or MP.

5.16
The Service advised my Office that the usual approach a parliamentary party might take when seeking assistance was to arrange a meeting and bring a printed proof of the proposed advertising. In some circumstances, oral advice to the parliamentary party may have been complemented by a handwritten comment. However, the amount printed or the extent of distribution planned were not discussed.

5.17
During the pre-election period, the Service considers it would have held such discussions about two or three times each week. At the end of each discussion, the MP or parliamentary party retrieved all advertising examples. This means that the Service was not able to provide me with any documentation to reflect the advice it had provided.

5.18
The Service has stressed that this advisory process was to help the party or MP to comply with the relevant guidance on advertising, and was not considered to be approval. The Service saw the final decision about whether the publicity should proceed as the MP’s or parliamentary party’s responsibility.

5.19
I received differing views on the advice provided by the Service to parliamentary parties. A number of parliamentary parties maintain that they sought and received advice from the Service on proposed advertising in the pre-election period. The Service, on the other hand, told my inquiry team that it had not previously considered most of the advertising reviewed in my inquiry. I have been unable to reconcile the conflicting views. The parties’ general approach to advertising has not been questioned by the Service for a number of years.

Managing compliance with the appropriations

5.20
As discussed in Part 2, appropriations set the legal parameters for public spending. To effectively control public expenditure, administering departments must correctly interpret and consistently apply appropriations.

5.21
The Service considers that it has administered the appropriations completely in accordance with the Speaker’s Directions, and the decisions of the Parliamentary Service Commission. However, in my view, the Service has not correctly interpreted the scope of the Party and Member Support appropriations as they apply to advertising expenditure.

5.22
In Part 3, I explained how the Party and Member Support appropriations apply to advertising undertaken by MPs and parliamentary parties. The scope includes advertisements for parliamentary purposes but excludes those for electioneering purposes. This message is clearly set out in the Speaker’s Directions and the Members’ Handbook of Services.

5.23
However, the Service’s approach of excluding only those advertisements that explicitly solicit votes, membership, or funding is not consistent with the scope of the appropriation and the generally expressed limitation on “electioneering”. The Service has not recognised that material can have an electioneering effect in other ways than an explicit request for a person’s vote.

5.24
I note that, in the responses I received from parliamentary parties, one party advised that −

The Service in deference to Parliament applied a narrow definition.

5.25
This practice may have evolved over time, but the Service has no authority to accept practices by MPs and parties that allow expenditure inconsistent with the scope of the appropriations. It must act in accordance with the Speakers’ Directions, as required by section 7 of the Parliamentary Service Act.

5.26
I also note that, after the presentation of my 2005 Report, parliamentary party Office Managers and Chiefs of Staff were asked by the Parliamentary Service Commission to review and report on the rules that should apply to advertising paid for by the Service. The documentation I have reviewed indicated that this group took as a starting point the Service’s incorrect understanding of lawful expenditure. Given this, in my view, although such a review was well intended, it would not have addressed the fundamental issue that electioneering materials cannot be produced and distributed using funds administered by the Service.

5.27
As I have noted, I received differing views from parliamentary parties and the Service about the nature and extent of advice the Service provided. Regardless of which view should prevail, the advice from the Service would not have effectively mitigated the risk that the Party and Member Support appropriations may have been breached. This is because the Service’s advice would have been based on an erroneous interpretation of the scope of the appropriations.

Quality of systems for processing advertising expenditure

5.28
Robust processes are an essential aspect of effective financial management.

5.29
The Service considers that the processes it has in place for administering advertising expenditure are wholly consistent with its financial management responsibilities, and completely appropriate to the circumstances in which parliamentary parties’ and MPs’ advertising is arranged, authorised, and paid for. In this regard, the Service is of the view that the systems it employs can only be questioned if my method for establishing the appropriateness of expenditure under the appropriations is accepted.

5.30
In my view, it is clear from the process described in paragraphs 5.8-5.19 that the Service’s approach to processing advertising expenditure has not included the steps necessary to ensure that the expenditure was incurred for a parliamentary purpose.

5.31
I am concerned that the Service does not satisfy itself, before expenditure is incurred, that advertising proposed by MPs and parliamentary parties is for purposes consistent with the Party and Member Support appropriations. This issue was first brought to the attention of the Service in my 2005 Report, and has not yet been addressed.

5.32
In the course of my inquiry, the Service reviewed the advertising material I had identified as being paid for inappropriately. The Service advised me that, had it been aware of the nature of some of the material, it would not have allowed the expenditure to be incurred.

5.33
The Service considers that it is acting in a manner consistent with the Estimates. The explanation of the Party and Member Support appropriations in the Estimates for Vote: Parliamentary Service for the year ending 30 June 2006 states that the expenditure is incurred “on the direct authority” of the MPs themselves “under rules promulgated by the Speaker”. The Service told me that it does not consider that it could unilaterally change the interpretations or generally understood practices regarding the administration of the payment of funding entitlements for parliamentary purposes.

5.34
I do not agree with this approach. The Estimates can be essential aids to understanding the scope of an appropriation. However, as noted in paragraphs 2.23 and 2.24, they do not have the same status as the appropriations themselves, except to the extent they are expressly incorporated into an Appropriation Act. The reference to “direct authority” therefore cannot diminish the responsibility of the Service and the General Manager to administer the appropriations in terms of the Public Finance Act and the Parliamentary Service Act, as set out in paragraph 2.30.

5.35
MPs and parliamentary parties choose what sort of advertising they wish to undertake, and how, when, and where that is to occur. The Service does not control those aspects of advertising. However, all Party and Member Support expenditure must be within the scope of the appropriations. It is the Service’s responsibility to ensure that expenditure is within the authority provided by Parliament. I do not accept that the authorisation of advertising expenditure by an MP or parliamentary party staff member absolves the Service of this responsibility.

5.36
This position is no different from any other type of “other expense” appropriation under which an administering department makes payments to other organisations under the appropriations. It is incumbent on the administering department in all circumstances to ensure that the payments are consistent with the appropriations and for a lawful purpose.

5.37
I am also concerned about the systems applying to advertising undertaken using resources under the Members’ Communications appropriation. As noted in paragraph 1.30, while advertising was undertaken using resources under the appropriation, there was nothing to link expenditure associated with laser printers and stationery under the appropriation to any examples of advertising. Without such an audit trail, I was unable to draw any conclusions about the appropriateness of such expenditure.

5.38
While the compliance of advertising expenditure with the Members’ Communications appropriation could not be examined in this inquiry, the lack of systems to track expenditure in this area is of serious concern and should be addressed by the Service.

Financial management decision-making

5.39
My inquiry has found that the interpretation of the appropriations by the Service and the processes it uses with advertising expenditure are based on an incorrect understanding of its financial management responsibilities. In such a context, the ability of management to make appropriate financial management decisions about advertising is seriously challenged.

5.40
The following example demonstrates my concerns in this area.

5.41
The Speaker’s Directions recognise that funding can be used to allow each member to develop, research, critique, and communicate policy, and communicate with “constituents or other communities of interest”. However, the Speaker’s Directions also clearly state that the funding may not be used –

…for producing or distributing promotional or electioneering material by mail or other means of communication for the purpose of supporting the election of any person or the casting of a party vote for any political party.

5.42
Advertising that is “electioneering” may be an election expense. Election expenses are capped under the Electoral Act 1993. Under section 214B(3)(b) of the Electoral Act, every person who directly or indirectly pays or knowingly aids or abets any person in paying for, or on account of, any election expenses any sum in excess of the maximum amount prescribed by this section is –

…guilty of an illegal practice unless the person proves that he or she took all reasonable steps to ensure that the election expenses did not exceed the maximum amount prescribed by this section.

5.43
Because of the implications of the Electoral Act, the Service took legal advice and introduced a system requiring MPs and parliamentary party staffers submitting advertising invoices to the Service for payment to certify compliance with section 214B(3) of the Electoral Act. The certificate stated −

The Electoral Commission, in its publication “Election Expenses and Returns” recognises that Vote: Parliamentary Service might fund legitimate “parliamentary business” facilities and services, which may also constitute an “election expense” for the purposes of the Electoral Act 1993.

Section 214B(3) of the Electoral Act 1993, makes it an offence to pay for or aid or abet a person in paying for election expenses in excess of the maximum amount.

To ensure that this account does not breach section 214B(3) of the Electoral Act 1993, please certify that:

• Either the attached invoice does not relate to an election expense; or if it is
• That the maximum amount, as set out in s 214(2) of the Electoral Act 1993 will not be exceeded.

5.44
I have two comments to make about this certificate.

5.45
First, the advice provided in the certificate is factually incorrect and misleading to MPs. I have confirmed with the Electoral Commission that its published guidance on election expenses and returns does not indicate that Vote: Parliamentary Service might fund legitimate “parliamentary business” facilities and services that may also constitute an “election expense” for the purposes of the Electoral Act. I also note that the reference to section 214(2) is incorrect. The section in the Electoral Act setting the maximum amounts for political parties’ election expenses is section 214B(2).

5.46
Secondly, and more importantly, it is difficult to believe that the Service could have been aware that electioneering might be taking place using the resources it administered without becoming concerned that the appropriations might be breached. However, that appears to have been the case.

5.47
I note that my findings in this report do not necessarily indicate that any provisions of the Electoral Act have been breached by any person. Those questions are separate, they are not my responsibility, and my inquiry did not consider them.

1: This occurred with the introduction of the MMP representation system.