Why Is It Important for Party Finances to be Transparent?

In theory, political parties are organized groups of people who unite around shared ideas, values, or programs to influence laws and state policy. A political party’s primary role is to represent its voters’ interests and propose solutions to societal problems. 

However, theory does not always align with practice, and Ukraine is a vivid example of this. Many parties in Ukraine lack a clear ideology. They are often formed around a single leader, promoting the interests of a narrow group (some parties have been and continue to be influenced by powerful external players, sometimes even pro-Russian forces). 

It is clear that to win elections or at least surpass the electoral threshold, parties need funds for advertising and promotion. For example, in 2019, political parties spent over UAH 900 million on election campaigns. In 2024, UAH 840 million was allocated from the state budget for party activities, which can be used for administrative expenses such as salaries, fees, office rent, banking services, and taxes. Additionally, these funds can be spent on advertising, and since the start of the full-scale invasion, they can also be directed toward supporting the army. 

For instance, in the first three months of 2024, the Servant of the People party spent UAH 131 million on its local branches, UAH 83 million of which came from state funding. Batkivshchyna and European Solidarity spent significantly less—UAH 22 million and UAH 16 million, respectively—also mainly from the state budget. Servant of the People allocated substantial amounts to media services: Ukrainian Newspaper Syndicate received UAH 10 million for newspaper printing, while Digital System was paid UAH 5 million for PR services over three months. Meanwhile, Batkivshchyna spent over UAH 5.5 million of state funding on legal services and assistance. 

Where do parties get their funding from? Firstly, there are membership fees. However, this source is relatively small since the number of party members is quite low—surveys from 2021 indicate that only about 5% of Ukrainians were party members. The second source of funding is donations from sponsors or donors. These are typically businesses or individuals who support a particular political force for ideological reasons or practical benefits (i.e., expecting something in return for their support). Among “ordinary” Ukrainians, such contributors are also rare—a 2024 survey showed that only 3% of citizens had ever donated to election funds of parties or candidates. 

Finally, the third source is the state budget. Since 2016, all parties that received at least 2% of the vote in elections could qualify for state funding (this law was part of the “visa-free” package and aimed to reduce political corruption). However, since October 2019, only parties that entered Parliament—those that received at least 5% of the vote—can receive state budget funds. 

At the same time, regulations on transparency of party finances were introduced, requiring parties to submit reports on the receipt and use of funds to the National Agency on Corruption Prevention (NACP). Additionally, restrictions on funding sources were established to prevent individuals—such as oligarchs—from effectively “privatizing” parties by dictating conditions in exchange for financial support, as well as to avoid conflicts of interest. 

The Law on Political Parties stipulates that the following entities are prohibited from making voluntary contributions to political party accounts: (1) state authorities and local self-government bodies (LSGBs); (2) state and municipal enterprises, institutions, and organizations; (3) organizations where at least 10% of statutory capital or shares are directly or indirectly owned by the state, LSGBs, or foreign entities; (4) unregistered NGOs, charitable, or religious organizations; and (5) individuals recognized as oligarchs under the relevant law. 

If parties fail to submit reports or submit them with violations, they may be deprived of funding. One such violation is providing false information about donors—for example, when the declared income of a donor does not match the amount contributed or when individuals were unaware that donations were made in their name. By law, when a person transfers funds to a party’s account, the bank fully identifies them, including recording their tax identification number in the transaction report. In addition to verifying this information, the NACP checks whether the party’s expenditures comply with the legally defined purposes.

Tool for Monitoring Party Finances

In May 2021, the NACP launched the Unified State Register of Party Reporting—”POLITDATA“. Political parties are required to enter information about their income and expenditures into this register, allowing any voter to check their financial activities. However, in practice, the tool is mostly used by investigative journalists and specialized NGOs. 

Despite this, the Cabinet of Ministers of Ukraine shut down the register in 2020 due to the COVID-19 pandemic, citing the need to “ensure additional social and economic guarantees in response to the spread of coronavirus disease.” Ukraine was the only country to take such a step at that time. After the full-scale invasion, Parliament extended the suspension of reporting for parties. The register was finally reopened in October 2023 following pressure from civil society and Ukraine’s international partners. 

The reporting suspension resulted in a lack of transparency regarding nearly UAH 2 billion received by parliamentary parties between 2020 and 2022. As a result, it is unlikely that the public will ever know how these funds were spent, who financed parties during the 2020 local elections, and where the so-called “own funds of parties” originated. In Kyiv, for instance, these funds accounted for 90% of election fund financing for both parties and candidates. 

Since October 2023, the public has once again been able to monitor who funds political parties and how. As of February 26, 2024, only 167 out of 368 registered political parties in Ukraine were listed in the NACP portal. (All active parties are legally required to submit reports, but since the law does not impose penalties for failing to declare finances, the NACP merely marks non-reporting parties as such. The dissolution of a party can only be ordered by a court). 

Recently, the NACP reviewed 1,236 reports from political parties covering the years 2020-2024 and identified 466 reports with violations. These violations included donations from fictitious individuals, cooperation with questionable entities that only existed on paper for financial transactions, and concealing actual donation amounts and expenditures. As a result of this analysis, the NACP referred nine cases of criminal offenses related to party financing violations to law enforcement agencies. The parties implicated include Servant of the People, Batkivshchyna, European Solidarity, Opposition Platform – For Life (OPFL), Kernes Bloc – Successful Kharkiv!, and Platform for Communities. 

For example, OPFL–now Platform for Life and Peace (PFLP)–received over UAH 3 million between 2020 and 2022 from five individuals whose declared incomes did not match these donations, meaning the funds actually came from other sources, which constitutes a criminal offense. In 2021, the NACP suspended state funding for Servant of the People and Holos due to financial irregularities, later restoring it after corrections. However, in October 2024, a court ruling permanently stripped Holos of state funding until the end of the current parliamentary term (due to reporting discrepancies totaling nearly UAH 5 million). 

Based on Politdata records, civil society has conducted dozens of investigations, uncovering cases where party officials violated the law. Notably, in 2019, a supermarket employee “donated” UAH 700,000 to the Batkivshchyna party, while her niece unknowingly contributed UAH 250,000. Nearly all political parties, including the newly formed Servant of the People, either received funds from affiliated individuals or spent funds on them, with such transactions amounting to tens of millions of hryvnias. 

The Politdata register has become a crucial tool for ensuring transparency and accountability in political party financing. However, it can also be misused for unfair competition or obstructing the activities of certain political forces. For example, rival parties could make donations to competitors through proxy individuals, triggering NACP investigations into their finances. As a result, parties now have a strong incentive to carefully monitor their funding sources. 

Conclusion

State funding of political parties is a key tool for ensuring transparency and stability within the political system. This practice is widely used in many democratic countries as it helps minimize parties’ dependence on private capital, thereby reducing corruption risks. Additionally, an integral part of state financing is the transparency of party finances, which in Ukraine is ensured through the POLITDATA portal, promoting accountability among political forces. 

The Law on Political Parties, adopted in 2015, introduced unprecedented transparency in party financing at the time. Public access to financial data enables the detection of violations and informs voters about the integrity of political forces. This mechanism encourages parties to act in the public interest and supports the development of democracy. However, abuses in this sphere persist, making ongoing monitor of party financing crucial, along with appropriate sanctions for violations.