The trend of recent decades shows that despite the rapid personification of the political system, parties still play a central role in political processes. In countries where elections are held regularly, parties are key agents of democracy. It is clear that it costs a significant amount of resources to establish parties and operate them, and the management of those funds influences the level of intra-party democracy.

What is the model of party funding in Georgia? What problems and challenges does it create? Does the state have an effective mechanism for controlling party finances? Who in the party makes decisions about financial issues? Do ordinary party members know what party money is spent on? Do regional organizations have any influence on the process of allocating finances? – Answers to these questions will help us establish the correlation between party finances and the degree of intra-party democracy. To answer these questions, first we need to review the shortcomings of the Georgian model of party financing and the challenges in financial control.

According to Georgian legislation, parties receive funding in three main ways: (if) budget funding received by all parties that received at least 1 percent of the vote. The amount of funding is determined by the number of votes received by the party; (ii) membership fees, the minimum amount of which is set by the parties individually, and according to the legislation, should not exceed 1,200 GEL per year; and (iii) private donations, which are set at a maximum of 60,000 GEL for an individual and 120,000 GEL for a legal entity (per annum). As of 2020, 60% of the parties' total funding came from budget funding and 40% from private contributions.

Some scholars of intra-party democracy deem that the budget model of party financing is one of the preconditions to develop the party system and consolidate democracy, as it evens the playing field for the ruling and opposition parties. However, in the case of Georgia, the challenges typical of a country in transition, including weak state institutions, political and economic instability, and an extremely high level of polarization exacerbate financial inequality between the parties (especially private donations). For example, in 2020, the ruling party received 48% of total private donations, which was about three times more than the donations received by the second largest party and almost twice the total contribution of the other 27 political parties.

The loss of power in the Georgian political space automatically implies the loss of a significant part of private donations. Consequently, large contributors for whom financial stability is a priority, finance parties for potential financial gain, not because of ideological support. The current funding model significantly increases the risks of political corruption, especially on the part of the ruling party, which can reach out to a potential donor and offer him or her specific benefits in exchange for contributions, including winning tenders or simplifying public procurement.

Unequal distribution of donations means that the ruling party manages to mobilize a disproportionately large number of campaign funds, while opposition parties are so weak that they fully depend on budgetary resources. The financial disparity between Georgian political parties has a negative impact on the quality of intra-party democracy, which is one of the important obstacles to the democratic development of the country. Financial transparency in the ruling party is hindered by its unlimited political and economic power as well as the extreme weakness of the opposition parties. This means more opportunities for party leaders to engage in corrupt deals, usually between the party leader and several individuals close to him, while ordinary party members have no idea how the party manages to attract so many donations.

Assessing the financial condition of the parties and revealing the existing shortcomings falls to the State Audit Office, which only monitors the finances of the parties and lacks a law enforcement mechanism. The 2020 report of the OSCE Office for Democratic Institutions and Human Rights (ODIHR) states that the activities of the State Audit Office are limited to the identification of easily detectable violations, not prevention of corruption and political scrutiny.

The lack of an effective law enforcement mechanism hinders the development of intra-party democracy for two main reasons: (i) it fails to ensure the transparency of party finances, which deepens mistrust between party leaders and ordinary members because ordinary members do not know how these finances are obtained and spent; and (ii) party leaders feel safe to make corrupt deals. “Money laundering” is also usually carried out by party leaders and an extremely exclusive circle of people close to them, which makes the involvement of ordinary party members in the decision-making process nominal.

The control of party finances is further complicated by the fact that each party that receives the minimum required percent of votes qualifies for budget funding, however, the state does not impose any financial obligations on the parties in exchange for the funding.  In many countries, particularly in Europe, parties make specific commitments to receive budget funding. Some European countries allocate financial resources to parties for specific purposes, such as ongoing party activities (Serbia, Slovenia), to encourage women's involvement (Finland), for research and development (Greece, Poland), or to increase youth political participation (Ireland).

The issue of financial independence of the regional offices of the party is especially important in the distribution of party revenues. In some countries, parties receive funding only on the condition that they facilitate party decentralization, allowing regional offices to pursue policies that are completely independent from the central office (including in finance management). In Georgia, however, political parties do not make specific commitments to receive state funding. Consequently, the parties remain extremely centralized, with party leadership making all decisions about how the regional office should spend financial resources, which are mainly used to distribute salaries. The lack of state demands on how parties spend budgetary funds promotes the centralization of the party, which in turn hinders the development of intra-party democracy.

To summarize, the current model of party financing and the lack of an effective financial control mechanism thwarts the development of two most important features of intra-party democracy in Georgian parties: inclusiveness and decentralization. Finances are controlled by an extremely exclusive group in Georgian political parties--either entirely in the hands of a party’s leader or very small group of leaders. At the same time, ordinary party members are completely excluded from financial decisions. In most parties, ordinary members not only have no influence on the process of developing party policies (including spending finances), but often do not even know what party money is spent on. Political parties in Georgia share a high degree of centralization, meaning regional offices spend the money according to the directives of the central office, not based on their needs.

These problems significantly hinder the development of intra-party democracy in Georgia and reduce voter confidence in the parties. Ensuring transparent party finances as well as achieving greater inclusiveness and decentralization are vital to the development of intra-party democracy in Georgia, which would reduce the influence of a small circle of leaders in the decision-making process and increase the involvement of ordinary party members in managing party finances.