Treatment of expenses for nomination contests called before September 24, 2015
Nomination Campaign Outflows
Note: The following text is an excerpt from the April 2014 edition of the nomination contestant's handbook.
Nomination contests that started before September 24, 2015 (before Elections Canada's guideline on nomination campaign expenses came into effect), may rely on the guidance found in this document with respect to the treatment of expenses and may use campaign funds to pay expenses that were not incurred during the contest period.
This chapter covers the following topics:
- 3.1 Nomination campaign expenses
- 3.2 Contestant's personal expenses
- 3.3 Other nomination campaign expenses
- 3.4 Administering nomination campaign expenses
The campaign will incur various expenses as an incidence of the nomination contest. These expenses fall into two categories: nomination campaign expenses and the contestant's personal expenses. 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? Why do non-monetary contributions and transfers also have to be recorded as nomination campaign 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
Nomination campaign expenses are expenses reasonably incurred by or on behalf of the nomination contestant as an incidence of the nomination campaign.
Nomination campaign expenses for property or services used during the contest period are subject to the nomination campaign expenses limit and are reported separately from those used outside the contest period.
Note: The nomination contest period starts on the contest start date and ends on the selection date.
- amounts paid
- liabilities incurred
- the commercial value of donated property and services (other than volunteer labour)
- the difference between an amount paid or liability incurred and the commercial value of the property or services (when they are provided at less than their commercial value)
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:
- the person who provided it (if the person who made the contribution is in that business)
- another person who provides that property or service on a commercial basis in the area (if the person who made the contribution is not in that business)
Commercial value is generally the amount charged in a store for an item or a service.
If the campaign purchases a property or service from an individual for less than the commercial value, the financial agent has to report the difference as a non- monetary contribution from the individual.
Note: The campaign may purchase property or services for less than commercial value from individuals only, because only individuals can make contributions.
If the campaign receives a property or service from an affiliated political entity for less than the commercial value, the financial agent has to report the difference as a non-monetary transfer from the affiliated political entity.
Note: A non-monetary transfer from the registered party or registered association is allowed as long as it is offered equally to all contestants.
A self-employed Web designer offers to design the nomination contestant's website 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.
Limit on nomination campaign expenses
The Canada Elections Act imposes a limit on nomination campaign expenses. The limit applies to all nomination campaign expenses for property or services used during the contest period whether they are paid, unpaid or accepted as non- monetary contributions or transfers.
The nomination contestant and the financial agent have to respect the nomination campaign expense 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:
- 20 percent of the limit that was allowed for a candidate's election expenses during the last general election in that electoral district, or
- in any other case, the amount determined by Elections Canada
Note: The registered party or the registered association holding the nomination contest informs the nomination contestants about the nomination campaign expense limit. They receive the information from Elections Canada through the returning officer. The information is also available on the Elections Canada website.
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.
Advertising – traditional media
Advertising is the transmission of an advertising message promoting the nomination contestant's campaign.
The commercial value of advertising conducted as an incidence of a nomination contest, including the cost of production and distribution, is to be reported as a nomination campaign expense.
The financial agent purchases flyers 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.
Advertising – use of social media and the Internet
The term "social media" designates online tools and platforms that allow users to publish and share content on the Web.
The rules governing the use of social media for advertising are the same as the rules applying to other forms of advertising. All expenses related to the design, development and distribution of online advertising, or to a website used during a nomination contest, must be reported as nomination campaign expenses.
Note: If someone modifies a pre-existing website for nomination campaign purposes and performs the work for free, the person providing the service has to be eligible under the contribution and transfer rules or meet the definition of volunteer labour.
- The contestant's campaign hires a design firm to create a website promoting the contestant. The commercial value of the website design is a nomination campaign expense, together with the fees for hosting the website.
- A group page has been created for the contestant on a free social networking site. Volunteers manage the page and post articles related to the contestant's campaign. 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.
If the contestant's campaign purchases an asset and uses it for nomination campaign purposes, the value of the asset recorded as a nomination campaign expense is the lower of the commercial value of renting a similar asset for the same period or the purchase price.
For low-value items such as office supplies, the full purchase price (the commercial value) must be recorded.
An asset might be received in the form of a contribution from an individual. In that case, the commercial value of the asset has to be recorded as a non-monetary contribution. The amount to be recorded as a nomination campaign expense is the lower of the commercial value of renting a similar asset for the same period or the purchase price. The remaining amount, if any, is recorded as an other 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, or else transferred to the party or association.
- The contestant's campaign buys a computer from a local office supplier for $1,000. The computer is used for two months. Renting a similar computer for the same period would cost $80 per month. The nomination campaign expense is calculated using the rental fee: $80 x 2 = $160. The remaining amount ($840) is recorded under other nomination campaign expenses in the nomination contestant's return. At the end of the campaign, the financial agent should transfer the computer (or else sell it and transfer the funds) to the registered party or the registered association.
- The financial agent pays $100 at a discount store for the purchase of a refurbished fax machine. The equivalent rental rate for the same period for a similar fax machine would have been $200. The financial agent records $100 as a nomination campaign expense because in this case the purchasing price ($100) is less than the rental rate would have been.
Renting a campaign office
The campaign may rent an office for the nomination contestant's campaign. The rent during the contest period has to be recorded as nomination campaign expense. The rent incurred outside of the contest period has to be recorded as an other nomination campaign expense.
Installation costs and other office expenses
Installation costs incurred for items used during the campaign are nomination campaign expenses, even if the installation takes place before the contest is called, as long as the item itself is a nomination campaign expense.
Other office expenses include the cost of buying office supplies such as paper or toner cartridges, or supplying refreshments during meetings. The cost of these is a nomination campaign expense.
The nomination contestant may decide to pay compensation to campaign workers. The compensation paid to these individuals for work related to the nomination campaign is a nomination campaign expense.
The nomination contestant decides to pay a salary of $1,000 to her financial agent for work related to the nomination campaign. This amount has to be reported as a nomination campaign expense.
Expenses of volunteers
Actual incidental expenses of volunteers (for example, refreshments, lodging or transportation incurred as an incidence of the campaign) are considered nomination campaign expenses. These expenses are paid by the campaign and have to be reported in the contestant's return.
If a volunteer pays for an actual incidental expense incurred as an incidence of the nomination campaign, the amount must be reported as 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 the service, the non- monetary contribution is deemed to be nil, and no expense has to be reported.
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 drinks, 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.
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 in the campaign are nomination campaign expenses and have to be authorized in advance by the financial agent or the contestant. Any travel expense has to be reimbursed using campaign funds or accepted as a non- monetary contribution if paid by an eligible contributor.
Use of parliamentary resources
Nomination contestants who are members of Parliament may make use of parliamentary resources such as websites during a nomination contest. The use of such resources, if modified for the nomination contest, is a nomination campaign expense. If these resources are not paid by the campaign, their use is a non-monetary contribution from the elected member.
If employees on the staff of an elected member engage in political activities to support the member as a nomination contestant, the employees' salaries are nomination campaign expenses and if not paid by the campaign 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. If such a website is modified to promote the nomination contestant and stays online during the nomination contest, its commercial value - including the initial design, maintenance and hosting – are nomination campaign expenses. Elections Canada will accept the current commercial value of an equivalent website as the commercial value of a pre-existing website.
Note: The use of parliamentary resources may also be governed by other rules, including those imposed by the House of Commons.
3.2 Contestant's personal expenses
This section deals with the personal expenses of the nomination contestant that are reasonably incurred 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:
- travel and living expenses
- child care expenses
- expenses related to the provision of care for a person with a physical or mental incapacity for whom the contestant normally provides such care
- in the case of a contestant who has a disability, additional personal expenses that are related to the disability
The contestant's personal expenses have to be 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.
The expenses of day-to-day meals in the contestant's home are not related to the campaign because meals are consumed regularly outside the contest period. On the other hand, if the contestant has to travel because of the campaign, he or she might incur meal expenses during the trip. A $50 dinner consumed by the contestant while travelling is recorded as the contestant's personal expense.
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 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, 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, are considered 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
The contestant travels with volunteers in relation to the contest. The expenses associated with the volunteers' transportation and meals during the trips are nomination campaign expenses subject to the limit.
The contestant might engage in campaign activities during the daytime or evenings, or on weekends. Child care expenses incurred as an incidence of the contest 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 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 as an incidence of the contestant's campaign, are personal expenses of the contestant.
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 are personal expenses of the contestant.
3.3 Other nomination campaign expenses
Nomination campaigns typically incur expenses for property or services used before or after the contest period. These expenses must be reported because they must be paid for using campaign funds, or they must be accepted as non-monetary contributions or transfers.
These expenses have to be reported in Part 3a, column 8 of the Contestant's Nomination Campaign Return.
Note: The nomination contest period starts when the contest is called and ends on the day that is the selection date.
Most of the typical nomination campaign expenses could also be incurred for property or services used outside the contest period:
- rent before or after the contest period
- any inventory or asset that was never used during the contest period and remains on hand after the selection date
- interest on loans accrued before the contest was called or after the selection date
- expenses associated with fulfilling the various reporting obligations after the selection date, as set out in the Canada Elections Act
3.4 Administering nomination campaign expenses
The financial agent is responsible for recording 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:
- Personal expenses of the contestant can be paid by the contestant.
- Expenses from the petty cash can be paid by a person authorized in writing by the financial agent. (The financial agent must set the maximum amount that may be paid from the petty cash.)
Non-monetary contributions or transfers are also recorded as expenses
When a non-monetary contribution is made and the donated property or service is used for campaign purposes, the financial agent must record the commercial value of the property or service as 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 received by the contestant's campaign has to be recorded by the financial agent as a nomination campaign expense as well as a transfer. The nomination campaign expense reported is the commercial value of the property or service received.
Note: A non-monetary transfer from the registered party or registered association is allowed as long as it is offered equally to all contestants.
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.
If an expense of $50 or more was incurred and paid on behalf of the contestant, the financial agent has to keep the supplier invoice and the proof of payment.
If an expense of less than $50 was incurred and paid on behalf of the contestant, the financial agent must keep a record of the nature of the expense and the proof of payment.
The same documentation requirement applies to payments made from the petty cash.
Note: The deadline to submit all invoices to the financial agent is three months after the selection date.
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, a copy of the original supplier invoice as well as the invoice from the party or association must be included with the contestant's return. The documentation should confirm the amount reported in the contestant's return.
All invoices for claims have to be submitted to the financial agent within three months after the selection date.
After confirming the status of unpaid claims with the financial agent, Elections Canada publishes on its website a list of unpaid claims that remain unpaid 18 months after the selection date.
For a detailed discussion of unpaid claims, see Chapter 5, Closing the Nomination Contestant's Campaign.
Administering the 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.
The contestant has to prepare the Nomination Contestant's Statement of Personal Expenses within three months after the selection date. This statement should include all personal expenses incurred by the contestant that were not yet reimbursed from campaign funds. All invoices and receipts have to accompany the personal expenses statement.
Note: The contestant has to prepare the Nomination Contestant's Statement of Personal Expenses even if the personal expenses were nil
The financial agent must maintain proper books and records throughout the nomination contest to ensure accurate reporting and compliance with the Canada Elections Act.
The financial agent has to prepare the Contestant's Nomination Campaign Return and submit it to Elections Canada within four months after the selection date, unless that date falls within an election period or 30 days before it. In that case, the deadline is four months after election day. The contestant's return has to be accompanied by supporting documents, including the documents related to nomination campaign expenses:
- invoices and receipts
- bank statements
- deposit slips
- cancelled cheques
- third party invoices
- loan agreements and repayment schedules
- contribution receipts and copies of cheques from contributors
- contracts or salary agreements
- rental agreements
- mileage logs
- any other relevant documents