Party finances: PL in €2 million deficit, PN breaches rules

The Labour Party (PL) reported a deficit of over €2 million in its latest accounts, while the opposition Nationalist Party (PN) has not published its annual accounts for 2021 or 2022, leaving an air of mystery over its financial state.

Labour’s accounts show it ended 2022 with a deficit of more than €2 million, mainly due to costs relating to the general elections campaign, which it declared cost €3.2 million.

The PN has not published its accounts since 2020, violating electoral rules.

The latest data on who donates and the amount also raises questions on creative accounting and reporting to ensure the privacy of donors remains intact.

According to donation declaration rules, parties must name the source of donations only if it exceeds €7,000. Those under the threshold do not need to be named in official reporting.

In Labour’s donations report for 2022, it declared only one such donation – €10,000 from Paul Gauci, the owner of Pavi and Pama, now waiting for a permit from the Planning Authority on a lucrative deal.

The PL declared it had received a total of €1.9 million in donations, the majority of which fell under the €7,000 majority, meaning the donors remain anonymous.

The declaration that only one big donation was made is unusual as it is well known that big businesses, like developers and construction companies, offer significant donations to political parties, particularly those in power, ahead of the polls.

As for the PN, it has not presented its report yet to the Electoral Commission, citing a lack of resources. This puts the party in breach of the law and susceptible to fines imposed by the Electoral Commission.

So far, the commission, not known for its proactive approach to supervision, has not issued any fines for the PN’s breach.

Labour’s report, signed by treasurer Marisa Ciappara, also the financial controller of ARMS Ltd, and audited by RSM – the same company used by the government in the VGH hospitals scandal, shows the party ending the year with a loss of €2.1 million.

Just a year before (2021), Labour closed the year with a surplus of almost €1 million.

Its largest reported cost in the 2022 financial report was the electoral campaign, reportedly costing the party some €3.2 million, twice the cost reported for the 2017 general elections campaign.

This excludes the provision of services, given for ‘free’ by many of its suppliers or those paid by the state, as already exposed by The Shift.

Interestingly, while the party is the majority shareholder in various companies, including its TV production company, ONE Productions, no information is provided in the report on the state of its main commercial arm.

The accounts of ONE Productions, a separate commercial entity, were last published in 2009, in breach of the Companies Act.

The same applies to the accounts of the PN’s media arm, Medialink Communications, with its last audited accounts published in 2005.

It is understood that both political TV stations run at considerable losses every year.

While the Electoral Commission is expected to check the integrity of this financial reporting by the political parties, in reality, this is not done.

Apart from the commission’s composition, which includes representatives of the two major political parties, the ‘regulator’ does not have any tools, including experts, to check the declarations.

This has also been highlighted by the OSCE’s Office for Democratic Institutions and Human Rights (ODIHR) in a report following last year’s elections.

The report noted that it was likely that election campaign costs were much higher than what was reported. They said that in the last campaign, PL dominated in advertising with many billboards and online adverts and that, together with the costly rallies organised by both parties, led to “a distorted electoral campaign that disproportionately favoured well-resourced parties.”

Several recommendations by the OSCE since 2013 for more transparency in party funding remain ignored.