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Political Financing Handbook for Registered Parties and Chief Agents (EC 20231) – April 2015

This document is the DRAFT version of Elections Canada's guideline: OGI 2015-01

Chapter 3 – Financial Administration

This chapter covers the following topics:

Introduction

This chapter helps to explain how the rules and regulations of the Canada Elections Act apply to the registered party's financial administration.

Note: The following table displays the limits for all political entities.

Individual Contribution, Loan and Loan Guarantee Limits
Political entity 2015 annual limit Limit per election called between Jan 1, 2015, and Dec 31, 2015
To each registered party $1,500* n/a
In total to all the registered associations, nomination contestants and candidates of each registered party $1,500* n/a
In total to all the leadership contestants in a particular contest $1,500* n/a
To each independent candidate n/a $1,500*

The contribution limits apply to: total contributions, the unpaid balance of loans made during the contribution period and the amount of any loan guarantees made during the contribution period that an individual is still liable for.

The sum of these three amounts cannot at any time exceed the contribution limit.

* The limits will increase by $25 on January 1st in each subsequent year.

There are some exceptions to the limits on contributions:

Example

Max decides to contribute $1,500 to the registered party he supports. In addition, he makes a $500 contribution to the party's registered association in his riding; and when a federal election is called in the same year, he makes a $1,000 contribution to the candidate representing the party in his riding. With that, Max reaches the annual limit for contributions to the registered party as well as the annual limit for contributions to any combination of candidates, registered associations and nomination contestants of the registered party.

Note: This example uses the limits in effect for 2015.

3.1 Contributions

This section provides details and practical examples about contributions: Who can contribute what and how much? Is volunteer labour a contribution? What are the rules about anonymous contributions, ticketed fundraising events or directed contributions?

In addition, this section provides basic information about how to administer contributions.

Definitions

What is a contribution?

A contribution is donated money (monetary contribution) or donated property or services (non-monetary contribution).

Note: Contributions made to a provincial or territorial division of a registered party are contributions to the party.

Monetary contribution

A monetary contribution is an amount of money provided that is not repayable.

Monetary contributions include cash, cheques or money orders, credit card or debit card payments, and contributions made using online payment services.

Non-monetary contribution

The amount of a non-monetary contribution is the commercial value of a service (other than volunteer labour) or of property, or the use of property or money, to the extent that it is provided without charge or at less than commercial value. This includes forgone interest on loans.

What is commercial value?

Non-monetary contributions are recorded at commercial value. The 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:

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 amount is deemed to be nil.

Example

A self-employed web designer offers to design the registered party's website and does not charge for the service. This is a non-monetary contribution from the web designer. The commercial value is equal to the lowest amount charged by that individual for the same kind of service of similar scope.

Directed contribution

A directed contribution is a contribution made to a registered party, with a written request from the contributor that the amount, or part of it, be transferred to a particular leadership contestant. The amount directed to the leadership contestant by the contributor is a contribution to the contestant's campaign and is subject to the contribution limit for contributions to leadership contestants.

Volunteer labour

Volunteer labour is any service provided free of charge by a person outside of that individual's working hours. Volunteer labour is not a contribution.

Note: A service provided by a self-employed person who normally charges a fee for that service is a non-monetary contribution and is not volunteer labour. The person providing the service has to be eligible under the contribution rules.

Example

A person who is employed at an accounting firm offers to work in the evenings in the registered party's office to answer the phone and help with other office duties. This is volunteer labour and therefore it is not a contribution.

Contribution rules

Who can contribute?

Only individuals who are Canadian citizens or permanent residents can make a contribution to a registered party, a registered association, a candidate, a leadership contestant or a nomination contestant.

Note: The term "individual" used in this section refers to a Canadian citizen or permanent resident.

Note: Corporations, trade unions, associations and groups cannot make contributions.

Contributor identification

Depending on the amount and type of the contribution, the contributor's personal information has to be recorded as follows:

Note: In order to issue a tax receipt, the chief agent or the registered agent has to record the address as well.

Note: When recording a contributor's personal information, the full first and last name (initials are not acceptable) and the home address have to be recorded.

Ineligible contributions

The chief agent and registered agents are responsible for ensuring that contributions are in accordance with the rules set out in the Canada Elections Act. The following contributions are ineligible:

Returning ineligible contributions

The chief agent or a registered agent must not knowingly accept an ineligible contribution.

If the registered party receives an ineligible contribution, the registered agent has to return the unused contribution to the contributor within 30 days of becoming aware that it is ineligible. If that is not possible, the chief agent has to send a cheque for the amount of the ineligible contribution to Elections Canada, payable to the Receiver General for Canada. In the case of an ineligible non-monetary contribution that has been used, the chief agent has to send an amount equal to the commercial value of the property or service to the Receiver General for Canada.

Anonymous contributions

If the chief agent or a registered agent receives a contribution that is:

the chief agent has to send a cheque for the amount without delay to Elections Canada, payable to the Receiver General for Canada.

Example

A registered agent of the registered party receives a cheque for $600 from a contributor. When he enters the contribution in the books, he notices that the same person has already contributed $1,000 in that year. Within 30 days, assuming the money has not been spent, the registered agent must issue a cheque for the excess amount, $100, and send it to the contributor.

Note: This example uses the limits in effect for 2015.

Ticketed fundraising

If a fundraising activity is held for the primary purpose of soliciting monetary contributions through the sale of tickets, the amount of a ticket purchaser's monetary contribution is the difference between the price of the ticket and the fair market value of the benefit that the ticket entitles the purchaser to receive. The benefit received includes the fair market value of using a rented venue, the cost of dinner and entertainment, etc. The chief agent must authorize all fundraising functions.

Example

A ticketed fundraiser was expected to attract 50 attendees. On the assumption that this number would attend, the following expenses were incurred in an open and competitive market:

  • room rental – $500
  • meal – $2,500
  • decoration – $300
  • entertainment – $500
  • server staff and gratuities – $200
  • total – $4,000

The fair market value of the benefit for each ticket purchaser is $80, calculated by dividing $4,000 by 50. The fair market value remains the same regardless of the number of individuals who actually attend the event.

Forty tickets were sold at $200 each for the event. The amount of each monetary contribution is therefore $120, calculated by subtracting $80 (the fair market value) from the ticket price ($200).

Note: The contribution rules apply to contributions made through ticketed fundraising.

Attending a party convention or a leadership convention

The payment of fees by or on behalf of an individual to attend a party convention or a leadership contest is a contribution to the party.

The contribution amount is the difference between the amount paid by the individual and the commercial value of any tangible benefits received. Tangible benefits include meals, lodging and any other tangible goods or services directly received by the convention attendee. The general expenses incurred by the party in holding the convention, such as room or audiovisual equipment rental, would not be deducted from the convention fee.

Sponsorship or advertising

A transaction involving the receipt of money by a political entity in exchange for advertising or promotional opportunities directed at members or supporters of the political entity is not recognized as a commercial transaction. Any money received as part of such an arrangement is to be treated as a contribution that is subject to the contribution limit and eligibility rules.

Administering contributions

Accepting contributions

Only the chief agent and authorized registered agents can accept contributions to the registered party.

Recording anonymous contributions

If anonymous contributions of $20 or less are collected during an event, the chief agent or an authorized registered agent has to record:

Anonymous contributions of $20 or less may also be received outside the context of a particular function. In that case, the chief agent or a registered agent has to keep track of the total amount collected plus the number of contributors.

Example

Volunteers of the registered party organize a wine and cheese event one evening and invite local residents. Approximately 40 people show up. During the evening, the chief agent passes a basket around to collect cash contributions from the attendees. She informs the guests about the contribution rules: a maximum of $20 can be accepted from any one individual as an anonymous cash contribution. At the end of the evening there is $326 in the basket.

After the event the chief agent has to record the following: the date and a description of the event, the approximate number of people who attended (40), and the amount collected in anonymous contributions ($326).

Issuing contribution receipts

Only the chief agent and authorized registered agents can provide official receipts for contributions, including receipts issued for income tax purposes.

Receipts have to be issued for each contribution over $20.

The chief agent may use Elections Canada's Electronic Financial Return (EFR) software to issue all receipts, including tax receipts. Please refer to the EFR User Guide for more information. The EFR User Guide can be found under the Help menu within the EFR software application. EFR is free and downloadable from the Elections Canada website.

Administering directed contributions

It is the responsibility of the registered party to provide the leadership contestant's campaign with a Statement of Directed Contributions Received and Transferred to a Leadership Contestant. This form includes the name and address of each contributor, the amount and date of the contribution, the amount of the directed contribution, the amount that the party has transferred and the date of the transfer. The party and the leadership contestant must also report to Elections Canada any directed contributions received and the amounts transferred.

Note: Income tax receipts are available for directed contributions and are issued by the registered party.

What to keep in mind when administering contributions

As a best practice, it is recommended to only accept contributions made by way of a traceable instrument – such as a cheque or money order – that links the contributor to the contribution. Here are some important points to keep in mind when recording contributions or issuing receipts:

3.2 Loans

Loans are used as a source of financing. This section discusses how loans are received, reported and repaid.

Getting a loan

A registered party may receive loans from either a financial institution or an individual who is a Canadian citizen or permanent resident. A registered party may also receive a loan from a registered association of the party. A written loan agreement must accompany all loans.

Loans from financial institutions

There is no limit to the amount a registered party can borrow from a financial institution. Note however that if the financial institution requires a loan guarantee, only a registered association of the party or individuals who are Canadian citizens or permanent residents can guarantee the loan. The amount an individual guarantees is subject to the individual's contribution limit.

Loans from a registered association of the party

There is no limit to the amount a party can borrow from a registered association of the party. The registered association of the party can also guarantee loans obtained from financial institutions. There is no limit to the amount a registered association of the party can guarantee.

Loans from individuals

If an individual obtains a personal loan from a financial institution and lends those funds to the registered party, the lender is the individual and not the financial institution. The loan amount would be subject to the individual's contribution limit.

An individual can lend money to a registered party as long as the total of the individual's contributions, the unpaid balance of loans made that year and the amount of any outstanding loan guarantees made that year does not at any time exceed the contribution limit for the calendar year.

Loan interest

The chief agent has to record the interest rate of each loan in the Registered Party Financial Transactions Annual Return.

Interest incurred on a loan is an expense, whether it is paid or accrued. Interest expense accrued during an election period on a loan obtained to finance an election campaign is an election expense.

If the interest rate on a loan from an individual is lower than the market interest rate, the chief agent will need to record the forgone interest as a non-monetary contribution from the individual.

Note: If the loan is from an individual who is not in the business of lending money and the forgone interest on the loan is $200 or less, the non-monetary contribution is deemed to be nil.

Demand loan

A demand loan is a loan with no specific payment deadline. It is due whenever the lender demands to be repaid. To report a demand loan, a loan agreement has to be submitted with the registered party's financial return. It is recommended that the agreement include a maximum term for the repayment.

Note: If the demand loan is from an individual, it is subject to the contribution limit.

Overdraft and line of credit

If overdraft protection or a line of credit is used, it has to be recorded as a loan at the maximum amount overdrawn during the reporting period. Note however that if the financial institution requires a guarantee, only a registered association of the party or individuals who are Canadian citizens or permanent residents can guarantee the overdraft or line of credit. The amount an individual guarantees is subject to the individual's contribution limit.

The chief agent has to include the following information when reporting an overdraft or a line of credit:

Example

The registered party's bank account has overdraft protection of $1,000. The account goes into overdraft by $200 and the chief agent pays back $100 within the same day. Later on that day, the chief agent withdraws another $400 from the bank account, bringing the highest amount overdrawn during that year to $500. On December 31st the account is no longer in an overdraft position.

The maximum overdraft amount to be reported in the registered party's annual financial return is $500 while the balance on Dec 31st to be reported is nil.

Administering loans

The chief agent has to include the following information when reporting a loan:

A copy of the loan agreement must accompany the return.

Note: If there is any amendment to the above information, the chief agent must send an update to Elections Canada without delay.

The Canada Elections Act does not specify a time period within which loans must be repaid.

3.3 Transfers

Definition

A transfer is a provision of funds, property or services between political entities of the same political affiliation. A transfer is not considered to be a contribution, and contribution rules therefore do not apply.

Transfers are permitted only between related political entities (registered party, electoral district association, candidate, leadership or nomination contestant) of the same political affiliation.

However, not all types of entities are authorized to provide all types of transfers. For a quick reference guide to eligible and ineligible transfers, see the Transferstypes and rules table in the Tables and Reminders section.

Transfer types

A monetary transfer is a transfer of funds. A non-monetary transfer is a transfer of property or services.

Incoming transfers

The following transfers may be accepted by the registered party:

Outgoing transfers

The registered party may transfer funds, property or services to the following political entities:

The registered party may transfer property or services, but not funds, to the following political entities:

Note: Transfers to or by a registered provincial division of a federal registered party are considered transfers to or by the registered party.

Property or services provided by the registered party to a candidate, nomination contestant or leadership contestant

When property or a service is provided to a candidate, nomination contestant or leadership contestant by the registered party, a copy of the original supplier invoice as well as the invoice from the party must be sent to the candidate's or contestant's campaign. The documentation should confirm the amount reported in the candidate's or contestant's return. Common items supplied by the party include signs and other promotional material.

Example

The registered party purchases signs and transfers them to the candidate's campaign. The party has to send a copy of the original supplier invoice to the candidate. The candidate's official agent has to report the commercial value of the signs as an electoral campaign expense as well as a non-monetary transfer from the registered party.

Administering transfers

The chief agent must include the following information when recording a transfer:

3.4 Expenses of a registered party

The registered party may incur operating expenses that include the normal administrative costs of maintaining the party as a continuing entity. These expenses must be reported in the statement of expenses than accompanies the party's annual financial return.

If an election is held in a given year, a registered party might also incur election expenses. Election expenses are subject to a limit and must be reported. In the case of a by-election, elections expenses must be reported in the annual financial return, and in the case of a general election, they must be reported in the return in respect of general election expenses.

Expenses include:

The registered party has to report the amount charged to the party for an 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 the party purchases a property or a service from an individual for less than commercial value, the chief agent has to report the difference as a non-monetary contribution from the individual.

Note: The party may purchase property or services for less than commercial value from individuals only, because only individuals can make contributions. However, 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.

If the party receives property or a service from an affiliated political entity for less than the commercial value, the chief agent has to report the difference as a non-monetary transfer from the affiliated political entity.

Election expenses

Definition

An election expense is:

This generally means that any expense reasonably incurred for property or service used during the election period in relation to an electoral campaign is an election expense of the party. Only some fundraising expenses are exceptions to that rule. The exceptions are contribution processing fees and non-promotional expenses for a fundraising activity. In other words, while expenses related to a fundraising activity are not election expenses, any promotion related to the fundraising activity is.

The concept of "directly promoting or opposing a registered party or its leader" is not limited to election advertising only. It is to be understood broadly as including expenses necessary to run a campaign, such as office rental, telecommunication services etc.

The election period starts on the day the election is called and ends on election day when the polls close.

Limits on election expenses

The Canada Elections Act imposes a limit on election expenses to facilitate a level playing field among political participants. The limit applies to the total of all election expenses, whether paid, unpaid, or accepted as non-monetary contributions or transfers. The chief agent, registered agents and any person authorized in writing by the chief agent to incur expenses all have to respect the election expenses limit. They cannot enter into contracts or incur election expenses that exceed the limit. It is highly advisable to agree on an expense approval process; this will help ensure that the chief agent and any other authorized persons are informed and co-operate when incurring expenses. An expense approval process and a campaign budget created at the beginning of the campaign help manage campaign finances effectively.

How are the limits calculated?

Elections Canada calculates the election expenses limit for each registered party as follows:

Limits for by-elections

If a by-election is called, Elections Canada calculates the limits for each electoral district in which a by-election is to be held. If multiple by-elections are held on the same day, the limit for a particular party is calculated by adding the limits for the electoral districts in which the party endorses a candidate. A registered party with endorsed candidates in more than one electoral district may distribute their election expenses limit among the electoral districts as they see fit.

Limit increases for longer election period

If an election period is longer than 37 days, the election expenses limit increases as follows:

Reimbursement of election expenses

A registered party eligible to receive a reimbursement, will receive 50% of paid election expenses (subject to the limit), as reported in the party's election expenses return.

A registered party is eligible for reimbursement in the following circumstances:

Note: The Canada Elections Act does not provide reimbursement for by-election expenses.

Reduction of reimbursement amount

If the registered party's election expenses exceeded the election expenses limit, the reimbursement amount is reduced as follows:

Election expense categories

Election advertising

Election advertising is the transmission of an advertising message promoting the campaign. Election advertising must be authorized by the chief agent or a registered agent. This authorization must be mentioned in or on the message – for example, "Authorized by the registered agent of the XYZ Party of Canada."

Expenses incurred for advertising conducted during the election period, including the cost of production and distribution, are to be reported as election expenses.

Broadcasting time allocation

During an election period, every broadcaster must make broadcasting time available for registered parties to purchase for the transmission of political announcements and other programming.

In addition, selected broadcasters must also provide a certain amount of free broadcasting time for registered parties.

The amount of broadcasting time is determined by the Broadcasting Arbitrator. For details about how the broadcasting time is allocated, please consult the Broadcasting Arbitrator's Guidelines on the Elections Canada website.

Election 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 applied to other forms of advertising. The chief agent or a registered agent must authorize any election advertisement transmitted to the public. Also, the party must report as election expenses all the expenses related to the design, development and distribution of online advertising or a website used during an election. This includes all expenses, not merely any incidental costs incurred to modify an existing website for election purposes.

Note: The posting of comments on a social media platform is not considered election advertising.

Voter contact calling services

Voter contact calling services are services involving the making of calls during an election period for any purpose related to an election, including:

Expenses incurred for voter calls conducted during the election period, including the cost of production and distribution, are to be reported as election expenses.

Surveys and research

Expenses related to surveys or research conducted during the election period are election expenses. Expenses related to surveys or research conducted prior to the election period are not election expenses, even if the results of the survey are used during the election.

Intellectual property assets of the party

The party, as an ongoing political entity, might have databases that contain intellectual property created through surveys and research conducted prior to the election period, and uses them during the election period. The intellectual property created by the party through surveys and research conducted prior to the election period, and the systems used to store and process the information are not election expenses.

Office expenses

The party, as an ongoing political entity, might maintain national or regional offices. Office expenses incurred during an election period are considered election expenses. These include a portion of the rent or property tax, utility cost, insurance, maintenance services, etc.

The chief agent should allocate the office expenses incurred in accordance with the basic activities carried out by that office. He or she must consider the purpose of each activity to determine whether the costs incurred to carry out the activity qualify as election expenses.

For the salaries of staff members or the cost of facilities, the method of allocation can be based on any breakdown that results in a reasonable allocation of costs. The chief agent should make a reasonable allocation for each component of costs – salary, equipment, supplies, materials, printing equipment and computers.

Leader's tour

The party leader's tour expenses are election expenses of the party and may not be election expenses of the candidates. In addition to the expenses of transportation, the party has to include the expenses of all other related items, such as meals, refreshments, salaries of party staff assigned to the tour, and communications equipment rented for the media.

If the candidate's campaign incurs expenses to attend the leader's tour event, such as transporting campaign staff to the event, these are expenses of the candidate.

Travel expenses

Expenses incurred for travel during the election period are considered election expenses of the party to the extent that the expenses are incurred to promote or oppose the party or its leader.

During an election period, the incidental expenses of salaried and volunteer campaign workers of the party are considered election expenses of the party. These expenses include meals, transportation, lodging and any other expenses reasonably incurred in relation to the party's campaign.

Expenses of senators and ministers or another candidate

If a senator, a minister or another candidate campaigns on behalf of the registered party, the expenses related to that person's involvement in the campaign are election expenses and must be authorized in advance by the chief agent or a registered agent. Any expense incurred in relation to the campaign has to be reimbursed by the party or accepted as a non-monetary contribution if paid by an eligible contributor.

In the event that a senator, a minister, or another candidate has travelled to a particular destination for purposes unrelated to the election and campaigns on behalf of the registered party while there, any incremental costs incurred to assist with the campaign are election expenses.

Compensation

If employees on the staff of an elected Member engage in political activities to support a registered party during the election period, the salaries of these persons are election expenses of the party and non-monetary contributions from the elected Member. However, if the employees work on the party'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 their working hours. It does not include a service provided by a self-employed person who normally charges for that service.

Administering the registered party's expenses

The chief agent is responsible for reporting the registered party's operational expenses and election expenses, and for keeping supporting schedules, as required by the Canada Elections Act.

All expenses, including by-election expenses, are reported in the party's annual financial return. In addition, election expenses must be reported separately within eight months after election day.

For a detailed discussion on reporting expenses, see Chapter 4, Reporting Requirements.

Expenses cannot be transferred

It is important to differentiate between the candidate's electoral campaign expenses and the expenses of the candidate's registered party. The Canada Elections Act specifies separate expenses limits for the registered party and each of its candidates. The Act prohibits the transfer of expenses without accompanying property or services. Each entity has to report the expenses that it incurred for property and services used to promote that entity in the campaign.

Who can incur expenses?

Only the chief agent and authorized registered agents can incur registered party expenses.

Who can pay expenses?

Only the chief agent and authorized registered agents can pay registered party expenses.

Expenses can be paid from the petty cash by a person authorized in writing by the chief agent. (The chief agent must set the maximum amount that may be paid from the petty cash.)

Note: A registered agent of a registered party may incur or pay expenses for the electoral campaign of the leader of the registered party. This is an exception to the ordinary rule that only the candidate's official agent may incur and pay such expenses.

Non-monetary contributions and transfers are also recorded as expenses or assets

When a non-monetary contribution is made, the chief agent or an authorized registered agent must record the commercial value of the property or service as a contribution as well as an expense or an asset.

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. However, all non-monetary transfers, provided by a candidate or a registered association must be reported, regardless of commercial value.

Similarly, when a non-monetary transfer is received from an affiliated political entity, it has to be reported by the chief agent as a transfer as well as an expense or an asset. The amount to be reported is the commercial value of the transferred property or service. The date and the nature of the transfer determine the type of expense.

An expense related to a non-monetary contribution or transfer is incurred when the contribution or transfer is accepted.

Invoices

If an expense of $50 or more was incurred and paid on behalf of the registered party, either the chief agent or the authorized registered agent who made the payment must keep the original supplier invoice setting out the nature of the expense and the proof of payment.

If an expense of less than $50 was incurred and paid on behalf of the registered party, either the chief agent or the authorized registered agent who made the payment 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 the invoices and proof of payment within three months after the date the petty expense was incurred.

Claims and loans repayment and reporting

All invoices have to be submitted to the chief agent or authorized registered agents.

Claims have to be paid within 36 months after payment is due. There is no time limit for paying loans.

The party's annual financial return must include the following schedules when reporting unpaid claims and loans:

Maintaining books and records

The registered party has to maintain proper books and records to ensure accurate reporting and compliance with the Canada Elections Act.

The party's auditor shall have access to the party's books and records at any reasonable time and may require the provision of any additional information or explanation to enable the auditor to prepare the auditor's report.