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Political Financing Handbook for Nomination Contestants and Financial Agents (EC 20182) – June 2016

Chapter 3 – Nomination Campaign Outflows

This chapter covers the following topics:

Introduction

The campaign will incur various expenses during the nomination contest. This chapter defines the expenses, explains the rules governing them and gives examples to explain the commonly encountered expense types.

Section 3.4 of the chapter explains how to administer expenses. Who can incur expenses? Who can pay expenses? What kind of documentation is required to ensure accurate reporting and compliance with the Canada Elections Act? These questions are dealt with here.

3.1 Nomination campaign expenses

Definition

Nomination campaign expenses are expenses reasonably incurred by or on behalf of the nomination contestant during the nomination contest as an incidence of the contest. These expenses must be paid using campaign funds.

Nomination campaign expenses are subject to the nomination campaign expenses limit.

Political parties and electoral district associations establish the contest period and usually set their own rules, in addition to those in the Canada Elections Act, for holding nomination contests. They may provide other restrictions on political financing aspects of the contest, which they administer themselves. As long as these rules do not conflict with the requirements of the Canada Elections Act, this is not problematic.

An expense is incurred when the campaign becomes legally obligated to pay.

Expenses incurred by a campaign prior to the start of the contest or after the end of the contest are not regulated, even though the property or services may be used during the contest period. Funds provided specifically to pay for expenses incurred outside the contest period are not subject to the controls on contributions and loans in the Canada Elections Act. Such expenses cannot be paid using campaign funds and are not subject to any reporting requirements. In this regard the rules for nomination campaign expenses differ from those governing electoral campaign expenses of candidates.

Property or services accepted by the campaign during the contest period must also be reported as non-monetary contributions or transfers, as the case may be, and as nomination campaign expenses. Property or services accepted outside the contest period do not need to be reported by the campaign.

Note: The nomination contest period starts on the contest start date and ends on the selection date as indicated in the nomination contest report provided by the registered association or the registered party that held the contest.

Expenses include:

The financial agent has to report the amount charged to the campaign for a nomination campaign expense. Generally, this amount is the commercial value of the property or service received.

Commercial value is the lowest amount charged at the time that it was provided for the same kind and quantity of property or service, or for the same use of property or money, by:

Commercial value is generally the amount charged in a store for an item or a service.

If during the contest period the campaign purchases property or a service from an individual for less than commercial value, the difference between the purchase price and the commercial value of the property or service is a non-monetary contribution from the individual. If during the contest period the campaign receives property or a service from an individual at no charge, the full commercial value of the property or service is a non-monetary contribution from the individual.

In both cases, the full commercial value of the property or service is also a nomination campaign expense.

Note: The campaign may purchase property or services for less than commercial value from individuals only, because only individuals can make contributions. If the commercial value of a non-monetary contribution is $200 or less, and it is from an individual not in that business, the contribution amount is deemed to be nil.

Example

A self-employed web designer offers to design the nomination contestant's website during the contest period for a discounted price. He charges $400 instead of his regular fee of $700. The financial agent records the commercial value, which is the amount the web designer normally charges for his work (in this case $700), as a nomination campaign expense. He also records the difference between the commercial value and the actual amount paid ($300) as a non-monetary contribution from the web designer.

If during the contest period the campaign purchases property or a service from an affiliated political entity for less than commercial value, the difference between the purchase price and the commercial value of the property or service is a non-monetary transfer from the affiliated political entity. If during the contest period the campaign receives property or a service from an affiliated political entity at no charge, the full commercial value of the property or service is a non-monetary transfer from the affiliated political entity.

In both cases, the full commercial value of the transferred property or service is also a nomination campaign expense.

For a discussion of contributions and transfers, see Chapter 2, Nomination Campaign Inflows.

Note: A non-monetary transfer from the registered party or registered association is allowed as long as it is offered equally to all contestants.

Determining when an expense is incurred

An expense is incurred when the campaign becomes legally obligated to pay. The timing of this event will vary based on how the property or service is procured. In cases where a written contract is executed, such as an office lease or a loan agreement, the expense is incurred when the contract is signed. In cases where no written contract exists, the expense is incurred when a verbal agreement is reached. Generally, this will be when property or services are ordered or, in the case of retail purchases, at the point of sale.

In the case of a non-monetary contribution or transfer of property or services, the expense is incurred when the campaign accepts the contribution or transfer.

OGI reference

For a detailed discussion of this topic, please refer to Elections Canada's interpretation note 2014-01, Definition of leadership campaign expenses and nomination campaign expenses, on the Elections Canada website.

Limit on nomination campaign expenses

The Canada Elections Act imposes a limit on nomination campaign expenses. The limit applies to all expenses reasonably incurred during a nomination contest as an incidence of the contest. This includes nomination campaign expenses that are paid or unpaid.

The nomination contestant and the financial agent have to respect the nomination campaign expenses limit. They cannot enter into contracts or incur nomination campaign expenses that exceed the limit.

How are the limits calculated?

The limit allowed for a nomination contestant in an electoral district is:

Note: The registered party or the registered association holding the nomination contest informs the nomination contestants about the nomination campaign expenses limit. The information is also available on the Elections Canada website. Parties and associations should also inform contestants about the start and end dates of the contest.

Note: The Canada Elections Act does not provide reimbursement for nomination campaign expenses.

Nomination campaign expenses

The following are examples of typical nomination campaign expenses.

Nomination contest fees

Nomination contestants might be required to pay a contest entry fee or other service fees to the registered party or the registered electoral district association organizing the contest. These fees may be refunded to the contestant at the discretion of the party or the association.

Advertising expenses

Advertising is the transmission of an advertising message promoting the nomination contestant's campaign.

Advertising expenses incurred during a nomination contest period, including the cost of production and distribution, are nomination campaign expenses.

Expenses incurred during a nomination contest period for the design, development and distribution of advertising are nomination campaign expenses.

Example

The financial agent purchases flyers during the contest period and mails them to residents in the electoral district. The commercial value of these flyers, including the design, printing and distribution, is a nomination campaign expense.

Internet communications

Expenses incurred during a nomination contest period for the design, development and distribution of online content are nomination campaign expenses.

Although content and messages may be posted for free on social media platforms such as Twitter and Facebook, or communicated on the nomination contestant's website, any associated costs incurred during the contest period are nomination campaign expenses.

The cost of pre-existing online content, such as videos, websites and Facebook pages, is not a nomination campaign expense.

Examples
  1. The contestant's campaign hires a media firm to place banners on websites and social media platforms during the contest period, directing users to a video that was produced and posted on YouTube during the contest period. The placement cost for the banners is a nomination campaign expense, together with all expenses related to the design and development of the video.
  2. During the contest period, a group page is created for the contestant on a free social networking site. Volunteers created and manage the page during the contest period, and post articles related to the nomination contest. As long as the volunteers are helping outside their regular working hours and are not self-employed in the business of managing social media, the volunteer labour is not a nomination campaign expense.
  3. The financial agent hires a media firm to post content on the contestant's website during the contest period, promoting the campaign. All expenses related to the design, development and posting of the content are nomination campaign expenses.
Voter contact calling services

Voter contact calling services are services involving the making of calls during a nomination contest for any purpose related to the contest, including:

Expenses incurred during a contest period, including the cost of production and distribution, are nomination campaign expenses.

Assets

If the contestant's campaign incurs an expense for the purchase of an asset for nomination campaign purposes during the contest period, the full purchase price (the commercial value) is a nomination campaign expense. In this regard the rules for nomination campaign expenses differ from those governing election expenses of candidates.

An asset might be received in the form of a contribution from an individual during the contest. In that case, the commercial value of the asset has to be recorded as a non-monetary contribution and a nomination campaign expense.

Note: Amortization may not be used as a method of calculating the commercial value of the use of the asset.

Note: Assets purchased during the campaign should be disposed of at the end of the campaign. They can be sold and the funds transferred to the candidate endorsed by the party in the electoral district in which the contest was held, to the registered association that held the contest, or to the registered party.

Example

During the contest period, the contestant's campaign buys a computer from a local office supplier for $1,000 and the financial agent records $1,000 as a nomination campaign expense. At the end of the campaign, the financial agent should sell the computer and transfer the funds to the candidate endorsed by the party in the electoral district, to the registered party or to the registered association.

Renting a campaign office

The campaign may rent an office for the nomination contestant's campaign. The rent incurred during the contest period is a nomination campaign expense. However, if the expense for the rent was incurred before the contest (i.e. the lease was signed before the contest start date), the rent is not a nomination campaign expense and cannot be paid with regulated funds.

Compensation paid to the financial agent or other campaign workers

The campaign may choose to pay compensation to the financial agent or other campaign workers. Compensation expenses incurred during the contest period are nomination campaign expenses.

It is advisable to include with the contestant's return a written contract or other documentation about any compensation paid, because in the absence of evidence, the payment of salaries may be considered an inappropriate use of campaign funds that would need to be returned.

Example

The nomination contestant decides during the contest period to pay a salary of $1,000 to her financial agent. This amount has to be reported as a nomination campaign expense.

Expenses of volunteers

Incidental expenses of volunteers incurred during the contest period (for example, refreshments, lodging or transportation) are nomination campaign expenses.

For more details about volunteer labour, see Chapter 2, Nomination Campaign Inflows.

If a volunteer pays for an incidental expense incurred during the nomination contest period and is not reimbursed by the campaign, the amount is a non-monetary contribution and a nomination campaign expense. However, if the amount is $200 or less and the person is not in the business of providing that service, the non-monetary contribution is deemed to be nil, and no expense has to be reported.

Example

Late one night during the contest period, volunteers help in the campaign office to prepare hundreds of flyers for mailing. A volunteer orders pizza and pays $83.50 to the pizza delivery person. Since this amount is less than $200, the non-monetary contribution is deemed to be nil and no nomination campaign expense has to be reported.

Expenses of senators and elected Members

If a senator or another elected Member of the House of Commons or any provincial legislature campaigns on behalf of the contestant, the expenses related to that person's involvement that were incurred during the contest period are nomination campaign expenses and have to be authorized in advance by the financial agent or the contestant. Any expense incurred during the contest period in relation to the nomination campaign has to be reimbursed using campaign funds or accepted as a non-monetary contribution if paid by an eligible contributor. In the case of a non-monetary contribution, the expense is a nomination campaign expense.

Use of parliamentary resources

Nomination contestants who are Members of Parliament may wish to make use of parliamentary resources during a nomination contest in relation to their nomination campaigns. Any expenses incurred by the Member's office during the contest period in relation to the nomination contest are nomination campaign expenses. If these resources are not paid for by the campaign, their use is a non-monetary contribution from the elected Member and is subject to the contribution limit.

Compensation

If employees on the staff of an elected Member engage in political activities to support the Member as a nomination contestant during the contest period, the employees' salaries are nomination campaign expenses and, if not paid by the campaign, they are non-monetary contributions from the elected Member. However, if the employees work on the contestant's campaign outside normal business hours or are on leave, their involvement is volunteer labour. Volunteer labour is any service provided free of charge by a person outside of their working hours. It does not include a service provided by a self-employed person who normally charges for that service.

Elected Members' websites

Nomination contestants may have websites that are designed and maintained using parliamentary resources. Expenses incurred during the nomination contest period to modify such a website for the purpose of the Member's nomination campaign are nomination campaign expenses. If these expenses are not paid by the campaign, their use is a non-monetary contribution from the elected Member and is subject to the contribution limit.

Note: The use of parliamentary resources may also be governed by other rules, including those imposed by the House of Commons.

OGI reference

For a detailed discussion of this topic, please refer to Elections Canada's interpretation note 2014-02, The use of Member of Parliament resources outside of an election period, on the Elections Canada website.

3.2 Contestant's personal expenses

Definition

This section deals with the personal expenses of the nomination contestant that are reasonably incurred by or on behalf of the nomination contestant during the contest period in relation to his or her nomination campaign. These expenses are also regulated by the Canada Elections Act. The nomination contestant's personal expenses include:

Personal expenses not reimbursed by the campaign must be reported as non­monetary contributions.

Incremental expenses

The contestant's personal expenses have to be reasonably incurred as an incidence of the nomination campaign. They may include new expenses or increases in normally incurred expenses. In other words, they have to be expenses that the contestant would not normally incur if there was no nomination contest.

Contestant's personal expense categories

The following are examples of typical personal expenses that the nomination contestant might incur in relation to his or her campaign.

Travel and living

The contestant might incur travel and living expenses during the contest period as an incidence of the campaign. If he or she travels to meet supporters, the travel and lodging expenses incurred during the trips are personal expenses of the contestant.

If the contestant uses a personal vehicle for travel during the contest period, the contestant may submit receipts for gas and other expenses, or may submit a mileage log. The mileage log should contain the following information: the date, the point of origin, the destination, the kilometres travelled and the purpose of travel. Elections Canada follows the kilometric rates established by the Treasury Board of Canada.

An important point is that the expenses of campaign workers and volunteers accompanying the contestant or assisting the contestant during events that are incurred during the contest period are nomination campaign expenses – not the contestant's personal expenses.

Note: The travel claim has to be either for actual expenses, such as fuel and rental costs, or else for mileage. The claim cannot be for both.

Example

The nomination contestant travels with volunteers during the contest period to visit supporters. The expenses associated with the volunteers' transportation and meals during the trips are nomination campaign expenses subject to the limit. The contestant's travel expenses are personal expenses not subject to the limit.

Child care

The contestant might engage in campaign activities during the daytime or evenings, or on weekends. Additional child care expenses incurred during the contest period are incremental expenses because they would not normally occur if there was no nomination contest. The additional child care cost is a personal expense of the contestant.

Care for a person with a physical or mental incapacity

If the contestant normally provides care for a person with a physical or mental incapacity, additional care might be needed for the times when the contestant is engaged in campaign activities. The cost of additional care incurred during the contest period is a personal expense of the contestant.

Expenses related to a disability

In the case of a contestant with a disability, the additional personal expenses that are related to the disability, and are reasonably incurred during the contest period, are personal expenses of the contestant.

Example

The contestant has a disability that requires the services of a caregiver when the contestant travels. This person accompanies the contestant on trips during the campaign. The expenses of this additional care that are incurred during the contest period are personal expenses of the contestant.

Other personal expenses

This category includes personal expenses incurred during the contest period other than those in the preceding categories.

This is the category in which to report items such as costs of dry cleaning, personal grooming or the contestant's cellphone use. All must be for expenses that the contestant would not normally incur if there was no nomination contest.

3.3 Transfers sent

Transfers sent by the contestant's campaign

The following transfers may be sent by the nomination contestant's campaign:

Note: If an invoice requiring payment is prepared by one political entity and sent to its related political entity, together with a third party vendor invoice representing the commercial value of the goods or services provided, this is not a transfer but a sale of goods or services from one entity to another.

For a quick reference guide to eligible and ineligible transfers, see the Transfers types and rules table in the Tables and Reminders section.

3.4 Administering nomination campaign expenses

The financial agent is responsible for administering nomination campaign expenses and keeping receipts and invoices, as required by the Canada Elections Act. All supporting documentation will have to be submitted to Elections Canada with the contestant's return.

Who can incur expenses?

Only the financial agent or the contestant can incur nomination campaign expenses.

Who can pay expenses?

Only the financial agent can pay nomination campaign expenses. There are two exceptions to this rule:

Paying expenses incurred outside the contest period

Campaign funds cannot be used to pay expenses that were incurred outside the contest period as these are not nomination campaign expenses. If a campaign pays for expenses incurred outside the contest period using campaign funds, this constitutes an improper use of campaign funds and could lead to an offence for failure to dispose of the campaign surplus in accordance with the requirements of the Canada Elections Act.

Non-monetary contributions or transfers are also recorded as expenses

When a non-monetary contribution is accepted during the contest period in relation to the nomination contest, the commercial value of the property or service is a nomination campaign expense as well as a contribution.

Note: If the commercial value of a non-monetary contribution is $200 or less, and it is from an individual not in that business, the contribution is deemed to be nil and consequently no expense has to be reported.

A non-monetary transfer, which can only be accepted during the nomination contest period, is a nomination campaign expense as well as a transfer.

Note: A non-monetary transfer from the registered party or registered association is allowed as long as it is offered equally to all contestants.

Example

After the contest start date, an individual donates office supplies to the campaign, such as packages of paper, ink cartridges and binders. Buying the same items in the local stationery store would cost $300; therefore this is the commercial value of the donated goods. The financial agent has to record the following: $300 as a non-monetary contribution from the individual, and $300 as a nomination campaign expense.

Invoices

If a nomination campaign expense of $50 or more was incurred during the contest period and paid on behalf of the nomination contestant, the financial agent has to keep a copy of the supplier invoice setting out the nature of the expense and the proof of payment.

If a nomination campaign expense of less than $50 was incurred during the contest period and paid on behalf of the nomination contestant, the financial agent must keep a record of the nature of the expense and the proof of payment.

For payments made from the petty cash, the person who is authorized to pay petty expenses has to provide invoices and proof of payment within three months after the day on which the petty expense was incurred.

Property or services provided by the registered party or the registered association

When property or a service is provided to the contestant by the registered party or registered association during the contest period, a copy of the original supplier invoice should be included with the contestant's return. The documentation should confirm the amount reported in the contestant's return.

Claims and loans repayment

All invoices have to be submitted to the financial agent.

Claims or loans have to be paid within 36 months after the selection date.

For details about unpaid claims and loans, see Chapter 5, Closing the Nomination Contestant's Campaign.

Administering the nomination contestant's personal expenses

As set out in the Canada Elections Act, the nomination contestant is responsible for keeping invoices and other documents in relation to his or her personal expenses.

Supporting documentation

The financial agent must maintain proper books and records throughout the nomination contest to ensure accurate reporting and compliance with the Canada Elections Act.