The comparative analysis is based on the accounts submitted to the Electoral Commission in accordance with the Financing of the Political Parties Act, and the guidelines issued by the Electoral Commission.
I do not intend to comment on every line item, but only on the most material ones.
INCOME
Comments
- During 2018, the PN received Euro 112,658 in membership fees and subscriptions, while the PL received Euro 110,233.
- During 2018, the PN received Euro 1,277,244 in monetary donations, while the PL received Euro 1,367,194.
- The PN seems to be more transparent in the amounts raised from fund raising activities, and it declared Euro 315,121 while the PL declared Euro 2,294. One possible reason could be that the PL is retaining any such income within its district clubs and not including it within the Central Accounts. In fact, the PL treats its clubs as related parties and not as part of its main political party.
- The PN accounted for a profit of Euro 133,499 on sale of property in 2018. It is appropriate to highlight that most of the PN district clubs are owned by the party, whereas the PL rents its district clubs, mostly acquired through requisitioned private property in central locations.
- Both parties received Euro 103,494 from the Government in 2018. This is a far cry from what should be considered as appropriate funding, to encourage other parties from venturing into the political arena, and to start breaking the unhealthy duopoly in what is supposed to be a democracy.
- Both parties received income from their branches (clubs). The PN received Euro 105,142, and the PL received Euro 99,540.It is not possible to establish whether these amounts represent the entire surplus funds generated by the clubs. In the absence of a separate detailed Income and Expenditure account, it is also not possible to establish what expenses are being made by the clubs, and whether such expenses may include amounts or expense items which the parties may not wish to publish.
EXPENDITURE
Comments
- Staff costs for the PN were Euro 425,179, and those for the PL were Euro 385,659. The PN had 18 employees during 2018, against 19 during 2019. The PL had 24 employees during 2018 and 2017. This reflects an average annual remuneration of Euro 21,425 for the PN and Euro 16,069 for the PL.
- Administrative expenses for the PN were Euro 306,865, an increase of 16% over 2017. The PL expensed Euro 207,193 against Euro 130,942 during 2017, showing an increase of 58% over 2017. It is pertinent to highlight that the reported amount is Euro 82,240, and the difference reflects an amount of Euro 124,953 which represent creditors written back and offset against Administrative expenses. There is no detailed explanation on this in the notes, but it could represent balances due to third parties for expenses incurred, which were waived off.
- The PN spent Euro 327,821 for its fundraising and public events in 2018 whereas the PL, once again, did not report any such expenses. This may be either because the PL had these expenses paid for by third parties, or these are included (covered up) in the unpublished results of its related parties, that is, its district clubs.
- The PN reported an expense of Euro 7,755 on Campaign and election costs, while the PL reported Euro 145,059. There were no elections in 2018, and these could be a roll over of expenses unbilled in 2017.
- The PN had a non-cash charge of Euro 98,779 for depreciation and amortisation, where as the figure for the PL was Euro 64,332.
- The PN had an interest expense of Euro 380,935 in 2018. The comparative figure for the PL, was Euro 109,830.The main variance arises as a result of the 4% Euro 4.3 million 10-year Ċedoli Scheme introduced by the PN in 2016.
SURPLUS FROM OPERATIONS
Comments
The PN had a surplus of Euro 501,317 before a subsidy of Euro 1,207,301 given to Media Link Communications to balance off its loss. The comparative amount for 2017 was Euro 2,035,447.
This shows an improvement on its media of Euro 828,146. In previous years, the subsidy was approximately Euro 2 million every year.
This result shows that the action being taken by the Party is reaping economic fruits.
As regards the PL, it does not seem to be subsidising its media subsidiary, One Productions Limited, and this is not surprising as the Government would be giving it, substantial advertising income at premium rates, if not also indirectly subsidising its salaries and wages.
It is not possible to analyse the results of the media subsidiaries as, One Productions has not been filing its audited accounts to the MFSA since it filed those for 31 December 2010 on 30 August 2012, and Media Link Communications filed those for 30 September 2004 on 30 August 2005.
ASSETS
Comments
- The Land and Buildings held by the PN are valued at Euro 15 million, whereas those held by the PL are valued at Euro 9 million. The PN owns various properties used as district clubs, besides the Dar Centrali. The PL seems to own just the Ċentru Nazzjonali, as its district clubs are either rented from third parties or are requisitioned premises from private individuals. It is also unknown as to whether the land and buildings known as ‘Australia Hall’, have been accounted for in some other accounts.
- The PL owns a number of investments in entities it controls. These are MLP Holdings Limited, Consultancy & Research Limited, One Productions Limited, Sound Vision Print Limited, Sunrise Travel Limited, Orpheum Theatre Limited, Red Touch Fone Limited and Various clubs and branches. The value of each of these investments has been reduced to Euro 2 each, except for Orpheum Limited, which has retained the original value of its share capital of Euro 2,329, and the clubs and branches which have a value at 31 December 2017, of Euro 12.3 million which is not represented by immovable property. It is highly questionable as to why, except for the resulting annual surplus, the income and expenditure of the clubs are excluded from the financial statements of the Party. This may be done specifically to hide income from donations, and avoid legal accountability. The audited accounts of these controlled entities have not been sent to the MFSA for a number of years, ranging from 20 years to 4 years. It is therefore highly questionable as to why the PL keeps holding on to these companies as active, rather than placing them into liquidation and striking them off the Companies Register.
- The PN owns two subsidiary companies, Media Link Communications Limited, which in turn has a fully owned subsidiary, Euro Tours Company Limited. The audited accounts of these subsidiary companies have not been sent to the MFSA. The last filing for Media Link Communications was on 30 August 2005 in respect of the accounts for the year ended 30 September 2004, and that for Euro Tours was on 5 July 2010, in respect of the accounts for the year ended 30 September 2005.
- The highlight of the PN’s financials is the Impairment of Euro 13,4 million together with the dilution of the original capital cost of Euro 7.7 million in respect of Media Link Communications. This means that the media arm of the PN has wiped out a funding of Euro 21 million up to 31 December 2018. This shows clearly that immediate radical action has to be taken, to rethink the economic feasibility and sustainability of its media. In fact, during 2018, the party managed to reduce the ‘subsidy required’ from a nearly constant of Euro 2 million to Euro 1.2 million.
- The PN had a cash liquidity of Euro 1.9 million as against Euro 1 million for the PL. The maintenance of a higher cash balance is important for the PN to have adequate free funds to pay the annual interest on the 10-year ‘ċedoli’ scheme. This has to date not been a problem, and in fact, this year the party had a surplus of Euro 501,317 after the payment of the interest. The PL may have more liquid funds in the asset of Euro 12.4 million relating to the investment in its clubs, but this remains an unknown, unless the law extends accountability to subsidiary and related companies/entities, including clubs.
LIABILITIES
Comments
- The accounts payable, that is creditors (amounts owed to third parties for operational activities) of the PN amounted to Euro 956,860, and those of the PL to Euro 753,835.
- The PN has total borrowings of Euro 8.7 million, which represent a bank loan of Euro 2.7 million, a 5.6% loan from a related party (lender not disclosed) of Euro 1.4million which is repayable in 2025, and the 4% 10-year Ċedoli Scheme amounting to Euro 4.6 million.
- The PL has total borrowings of Euro 3 million, which represent bank overdraft and loans amounting to Euro 2.8 million, and borrowings from party clubs and the public amounting to Euro 189,000.
NET WORTH
Comment – The Net Worth of the PN at 31 December 2018 was Euro 6.9 million whereas that of the PL was Euro 19.2 million.
OVERALL CONCLUSION
The Financing of the Political Parties Act, needs to be amended to:
- incorporate the submission of the financial statements of the subsidiaries/related parties of the political parties;
- to have companies owned by Political Parties, classified as public interest entities, with a tighter deadline for the annual submission of audited accounts to the MFSA;
- to prohibit Party clubs from being considered as independent entities, and to therefore have their detailed accounts aggregated with the accounts of the Party.
- to incorporate the disclosure in the financial statements of the remuneration paid to specific Party Officials; and
- to incorporate a note in the financial statements, showing the movements during the year in the number of members (tesserati), that is, number at the beginning of the financial year, number of withdrawals, number of new members and the closing number at the end of the year.
- In view of the present misinformation in public on the amount of debt of the Nationalist Party, I would like to highlight that, on the basis of the audited accounts as at 31 December 2018, the borrowings/debts amount to a total of Euro 9.6 million. Of these, Euro 7.5 million are payable within 10 years.
| INCOME AND EXPENDITURE |
PN |
PL |
PN |
PL |
PN |
PL |
| FOR THE YEAR ENDED 31 DECEMBER 2018 |
2018 |
2018 |
2017 |
2017 |
2016 |
2016 |
|
Euro |
Euro |
Euro |
Euro |
Euro |
Euro |
|
| INCOME | ||||||
| Membership and subscriptions |
112,658 |
110,233 | 151,829 | 106,311 | 64,722 |
71,934 |
| Monetary donations |
1,277,244 |
1,367,194 | 3,201,679 | 1,981,911 | 979,319 |
630,590 |
| Donations in kind | 0 |
– |
– |
– |
6,418 |
|
| Income from fund raising activities |
315,121 |
2,294 | 216,064 | 4,714 | 190,867 |
– |
| Interest income |
654 |
2 | 3,040 | 506 |
– |
15 |
| Profit on sale of property |
133,499 |
100,000 |
– |
– |
– |
|
| Rental income and grountrents | 87,707 |
– |
81,527 |
– |
87,527 |
|
| Income from Government |
103,494 |
103,494 | 94,870 | 94,870 | 103,203 |
103,785 |
| Other amounts remitted by branches |
105,142 |
99,540 | 109,325 | 381,126 | 50,000 |
108,386 |
| Other income |
839 |
34,426 | 18,124 | 29,944 | 10,741 |
60,393 |
| TOTAL INCOME |
2,048,651 |
1,804,890 | 3,894,931 | 2,680,909 | 1,398,852 |
1,069,048 |
| Notional income |
0 |
3,400 |
||||
| TOTAL INCOME |
2,048,651 |
1,808,290 |
||||
| EXPENDITURE | ||||||
| Staff costs |
425,179 |
385,659 | 430,527 | 374,775 | 351,694 |
375,811 |
| Administrative expenses |
306,865 |
207,193 | 264,088 | 130,942 | 204,244 |
122,019 |
| Cost of fund raising and public events |
327,821 |
0 | 322,718 |
– |
81,002 |
– |
| Campaign and election costs |
7,755 |
145,059 | 1,326,466 | 1,239,797 |
– |
129,033 |
| Depreciation and amortisation |
98,779 |
64,332 | 104,794 | 70,501 | 100,635 |
119,999 |
| Interest payable |
380,935 |
109,830 | 395,082 | 107,751 | 369,200 |
125,496 |
| Miscellaneous expenses | 22,122 |
– |
22,408 |
– |
17,511 |
|
| Impairment of debtors | 33,584 |
– |
22,904 |
– |
139,148 |
|
| TOTAL EXPENDITURE |
1,547,334 |
967,779 |
2,843,675 |
1,969,078 |
1,106,775 |
1,029,017 |
| SURPLUS FROM OPERATIONS |
501,317 |
840,511 | 1,051,256 | 711,831 | 292,077 |
40,031 |
| Donations in kind | -3,400 | |||||
| Write back of creditors | 124,953 | |||||
| Impairment – Media Link Communications |
-1,207,301 |
-2,035,447 |
– |
-1,931,634 |
– |
|
|
SURPLUS/(DEFICIT -) FOR THE YEAR |
-705,984 | 962,064 |
-984,191 |
711,831 | -1,639,557 |
40,031 |