Secondary menu

Political Financing Handbook for Electoral District Associations and Financial Agents (EC 20089) – June 2015

This document is the DRAFT version of Elections Canada's guideline: OGI 2015-02

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 association'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:

Examples
  1. 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.
  2. Clara made a $1,500 contribution in her riding to the registered association of the party she supports. Later that year an election is called and Clara makes a $1,500 contribution to the candidate representing the party in her riding. The official agent of the candidate, however, is aware of the contribution made to the association and returns the cheque to Clara, because with the earlier contribution she has reached her annual limit.

Note: It is important that financial agents of electoral district associations and nomination contestants, and official agents of candidates communicate about contributions, loans and loan guarantees, because the yearly contribution limit applies to the total amount of these.

  1. Peter gave a $1,500 loan to a candidate in his riding during the election period. The full amount is still outstanding on December 31st; consequently Peter could not have made another contribution that year to the registered association. The sum of contributions, loans and loan guarantees cannot at any time exceed the contribution limit.

Note: These examples use 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, auctions and draws?

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).

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.

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.

Any money that is used for the campaign out of the candidate's or the contestant's own funds is a contribution.

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 financial 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 financial agent and the electoral district 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 financial agent or an electoral district agent must not knowingly accept an ineligible contribution.

If the registered association receives an ineligible contribution, the financial 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 financial 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 financial 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 financial agent or an authorized electoral district agent receives a contribution that is:

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

Examples
  1. The financial agent of a registered association 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 financial agent issues a cheque for the excess amount, $100, and sends it to the contributor.

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

  2. The financial agent receives a notice from Elections Canada a couple of months after the reporting deadline, stating that a person who made contributions to both a candidate and the registered association exceeded the annual limit. Since the date of the ineligible contribution, the registered association's bank account balance had fallen below the ineligible amount; the funds were therefore used. The amount of the ineligible contribution must be sent to Elections Canada within 30 days of the financial agent becoming aware of the contravention. To return the contribution, the financial agent could organize a fundraising event, request a transfer from the registered party, or request that the registered party repay the contribution on the registered association's behalf. Once the money is available, the financial agent sends a cheque for the excess amount to Elections Canada, payable to the Receiver General for Canada.
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.

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
  • decorations – $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.

Fundraising during an election period

If a fundraising activity is organized by a registered association during an election period with the purpose of raising funds for a candidate's campaign, the promotion of the event is considered election advertising. Prior to incurring such expenses, the EDA must receive written authorization from the candidate's official agent. In addition, since this is an election advertising expense, the candidate's official agent's authorization also has to be mentioned in or on the promotion – for example, "Authorized by the official agent of John Smith."

The registered association must send a copy of the original supplier invoice for the advertising expenses to the candidate's campaign. The candidate's campaign must report the amount as an election expense.

Example

During an election period, the registered association is planning a fundraising event to collect contributions for the candidate's campaign. The financial agent obtains the official agent's written authorization to incur expenses advertising the event, and the association creates flyers and distributes them in the riding. After the event, the financial agent sends an invoice from the registered association and a copy of the original supplier invoice to the candidate's campaign for the expenses incurred for designing, printing and distributing the flyers. The official agent reports the invoiced amount as an election expense.

Auctions and draws

Note: Please check the provincial or territorial regulations before organizing draws or other lotteries. In jurisdictions where draws are permitted, a licence from the province or territory may be required.

Below is a list of important reminders about auctions and draws:

Example

Diane donated a painting to an auction organized by the registered association. A local art dealer appraised the painting at $450. During the auction, John made the winning bid and paid $600 for the painting. Let's see what the contributions are:

  1. Diane made a $450 non-monetary contribution to the registered association by donating the painting.
  2. John made a monetary contribution. The amount is the paid price minus the commercial value of the painting: $600 – $450 = $150.

Note: In addition, the financial agent records $450 (the painting's commercial value) as an expense and an other revenue in the association's annual statement of revenues and expenses.

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 financial agent and authorized electoral district agents can accept contributions to the registered association.

Recording anonymous contributions

If anonymous contributions of $20 or less are collected during an event, the financial agent or an authorized electoral district agent must record:

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

Example

Volunteers of the registered association organize a wine and cheese event one evening and invite local residents. Approximately 40 people show up. During the evening, the financial 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 financial agent records 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

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

Only the financial agent and authorized electoral district agents can provide official receipts for contributions, including receipts issued for income tax purposes.

Note: The registered association must obtain a written authorization from the leader of the registered party before issuing tax receipts.

The financial 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.

Example

Clara made a contribution of $500 to the registered association of the party she supports. Later in the same year when an election was called, Clara contributed $300 to Peter, a candidate in Clara's riding. Clara will receive a tax receipt for $500 from the registered association and a tax receipt for $300 from Peter's campaign.

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

Loans from financial institutions

There is no limit to the amount a registered association can borrow from a financial institution. Note however that if the financial institution requires a loan guarantee, only the registered party, another registered association, 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 the registered party or from another registered association

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

Loans from individuals

If an individual obtains a personal loan from a financial institution and lends those funds to the registered association, 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 association 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 financial agent has to record the interest rate of each loan in the Registered Association Financial Transactions Return.

Interest incurred on a loan is an expense, whether it is paid or accrued.

If the interest rate on a loan from an individual is lower than the market interest rate, the financial 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 association'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 must be recorded as a loan at the maximum amount overdrawn. Note however that if the financial institution requires a guarantee, only the registered party, another registered association of the registered 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 financial agent has to include the following information when reporting an overdraft or a line of credit:

Example

The registered association's bank account has overdraft protection of $1,000. The account goes into overdraft by $200 and the financial agent pays back $100 within the same day. Later on that day, the financial 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 association's annual financial return is $500 while the balance on December 31st to be reported is nil.

Administering loans

The financial agent must include the following information when reporting a loan:

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

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 a registered association:

If the registered association receives property or services 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: Transfers may not be accepted from provincial parties or provincial electoral district associations. Transfers from a registered provincial division of a federal registered party are considered transfers from the registered party.

Outgoing transfers

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

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

Property or services provided by the registered association to another political entity

When property or a service is provided to the registered party, another registered association, a candidate, a nomination contestant or a leadership contestant by the registered association, a copy of the original supplier invoice as well as the invoice from the association must be sent to the political entity receiving the transfer. The documentation should confirm the amount reported in the political entity's financial return. Common items supplied by the association include signs and riding service packages.

Example

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

Administering transfers

The financial agent has to include the following information when recording a transfer:

3.4 Expenses of registered associations

The Canada Elections Act does not set limits on the amount of expenses a registered association may incur. Expenses incurred for property or services used by the registered association must be reported in the association's annual financial return.

However, if expenses are incurred for property or services that are subsequently used to promote a candidate or a party during an election period, they must be reported by the candidate or the party, as the case may be, as election expenses. For example, the registered association may rent an office that is used as a campaign office during the election period. These expenses must be reported as election expenses in the candidate's return.

Advertising activities

Election Advertising

Election advertising is the transmission to the public of an advertising message promoting or opposing a registered party or the election of a candidate during the election period. Election advertising has to be authorized by a registered agent of a party or by the official agent of a candidate. This authorization has to be mentioned in or on the message – for example, "Authorized by the official agent of John Smith."

Prohibition on election advertising

During an election period, the registered association is prohibited from transmitting election advertising or incurring expenses for election advertising.

The registered association can conduct election advertising only if it is done on behalf of a candidate or the party, and if it receives prior written authorization from a registered agent of the party or by the official agent of a candidate. This authorization must be mentioned in or on the message. A copy of the original supplier invoice for the election advertising activity must be sent to the candidate or party. The expenses incurred for advertising conducted during the election period, including the cost of production and distribution, are to be reported as election expenses in the candidate's or party's return.

Traditional election advertising

Advertisements distributed through traditional means such as signs, billboards, flyers, pamphlets, radio, television, newspapers or magazines during an election period are election advertising and have to be authorized by a registered agent of the party or by the official agent of a candidate. This authorization has to be in or on the message.

The association may have in its possession signs used in a previous election. If these signs are reused in a second or subsequent election, the current commercial value of equivalent signs will have to be recorded as a non-monetary transfer or contribution to the political entity receiving the transfer or contribution. Contribution and transfer rules apply to these transactions.

Example

After an election is called, the financial agent of the registered association obtains the official agent's written authorization to purchase and distribute signs promoting the candidate. The financial agent has to send a copy of the original supplier invoice to the candidate's campaign. These expenses are election expenses of the candidate. In addition, the official agent's authorization must be mentioned on the signs.

Election Advertising on the Internet

Election messages communicated over the Internet are election advertising only if they have, or would normally have, a placement cost.

If the registered association conducts any election advertising on behalf of a candidate or party, the official agent's or a registered agent's prior written authorization must be obtained and mentioned in or on the advertisement. Where the authorization statement cannot be included on the advertising message because of its size, this is acceptable if the statement is made immediately apparent to the viewer by following the link in the advertising message.

Content and messages posted for free on social media platforms such as Twitter and Facebook, or communicated on the association's website, are not election advertising.

Websites of registered associations

If the association's pre-existing website stays online during the election period, this is not election advertising, but it is an election expense of the candidate who the website promotes. For this reason, the candidate's official agent must approve this transfer from the association to the campaign. If the official agent does not wish to have this expense count toward the candidate's election expenses limit, the website must go offline during the election period.

Examples
  1. During the election period, the association would like to post a video promoting the candidate on YouTube. Because there is no placement cost to post the video, it is not considered election advertising. However, because it is an election expense of the candidate, the association has to obtain prior written authorization from the candidate's official agent.
  2. The association would like to hire a media firm to place banners on websites and social media platforms during the election period, directing users to videos promoting the candidate on YouTube. Because there is a placement cost, the banners are election advertising. The association has to obtain prior written authorization from the candidate's official agent, and this authorization must be mentioned on the banners. The financial agent has to send a copy of the original supplier invoice to the candidate's campaign. These expenses are election expenses of the candidate.
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:

Incurring expenses for voter contact calling services must be authorized by the chief agent, the official agent, or the financial agent of the political entity the services are to be acquired for. The registered association must send an invoice, including a copy of the original supplier invoice, to the registered party, the candidate or the nomination contestant.

Expenses incurred for voter calls conducted during an election, including the cost of production and distribution, have to be reported by the entity the services were acquired for, as election expenses (or nomination campaign expenses).

Note: If a registered association provides voter contact calling services to a nomination contestant, the service must be offered equally to all nomination contestants.

Examples
  1. The financial agent distributes flyers outside of an election period to promote an information session held at the registered association's office. The commercial value of the flyers – including the design, printing and distribution – is an expense and has to be reported by the registered association.
  2. After an election is called, the financial agent of the registered association obtains the official agent's written authorization to purchase and distribute signs promoting the candidate. The financial agent has to send a copy of the original supplier invoice to the candidate's campaign. These expenses are election expenses of the candidate.
  3. The association is renting a billboard that promotes the party and the member of Parliament from the riding. The expenses are reported in the association's annual financial return. When a federal election is called and the member of Parliament runs for re-election, the association plans to keep the billboard up to promote the incumbent candidate. The official agent has to authorize the expenses of the billboard, including the design, installation and rental expenses, and report them as election expenses in the candidate's return.
Auditor's fee

The Canada Elections Act provides for a subsidy of a maximum of $1,500 for audit services when an audit is required for the association's annual financial return. The auditor's invoice has to be submitted with the association's annual financial return. The auditor is paid directly from public funds.

If the auditor's fee exceeds the maximum allowable subsidy, the registered association is responsible for the difference.

Administering the registered association's expenses

The financial agent is responsible for recording and reporting the registered association's expenses and keeping receipts and invoices, as required by the Canada Elections Act.

Who can incur expenses?

Only the financial agent and authorized electoral district agents can incur registered association expenses.

Who can pay expenses?

Only the financial agent and authorized electoral district agents can pay registered association expenses.

Expenses can be paid from the petty cash 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 and transfers are also recorded as expenses or assets

When a non-monetary contribution is received, the financial agent or an authorized electoral district 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 the registered party, a candidate or another registered asociation 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 financial agent as a transfer received as well as an expense or an asset. The amount to be reported is the commercial value of the transferred property or service.

Invoices

If an expense of $50 or more was incurred and paid on behalf of the registered association, either the financial agent or the authorized electoral district agent who made the payment must keep the 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 association, either the financial agent or the authorized electoral district 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 for claims have to be submitted to the financial agent or authorized electoral district agents.

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

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

Maintaining books and records

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

The financial agent must prepare the Registered Association Financial Transactions Return and submit it to Elections Canada by May 31st every year. The return has to be accompanied by supporting schedules when applicable.

For details about completing the registered association's return, see Chapter 4, Reporting Requirements.