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Political Financing Handbook for Leadership Contestants and Financial Agents (EC 20195) – October 2015

This document is Elections Canada's DRAFT guideline: OGI 2015-06.

Chapter 3 – Leadership Campaign Outflows

This chapter covers the following topics:

Introduction

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

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

3.1 Leadership campaign expenses

Definition

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

The Canada Elections Act does not set a limit on leadership campaign expenses.

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

Expenses incurred by a campaign prior to the start of the contest or after the end of the contest are not regulated, even though the property or services may be used during the contest period. Such expenses cannot be paid using campaign funds and are not subject to any reporting requirements. In this regard the rules for leadership campaign expenses differ from those governing electoral campaign expenses of candidates.

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

Note: The leadership contest period starts on the date the contest is called and ends on contest day.

Expenses include:

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

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

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

If during the contest period the campaign purchases property or a service from an individual for less than commercial value, the financial agent has to report the difference as a non-monetary contribution from the individual. The full commercial value of the property or service is reported as a leadership campaign expense.

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

Example

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

If during the contest period the campaign receives property or services from an affiliated political entity for less than commercial value, the financial agent has to report the difference as a non-monetary transfer from the affiliated political entity. The full commercial value of the transferred property or service is reported as a leadership campaign expense.

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

Note: During the contest period, a non-monetary transfer from the registered party or registered association is allowed as long as it is offered equally to all contestants.

Determining when an expense is incurred

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

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

Leadership campaign expenses

The following are examples of typical leadership campaign expenses.

Advertising expenses

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

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

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

Example

The financial agent purchases flyers during the contest period and mails them to party members. The commercial value of these flyers, including the design, printing and distribution, is a leadership campaign expense.

Internet communications

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

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

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

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

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

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

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

Note: Assets purchased during the campaign should be disposed of at the end of the campaign. They can be sold and the funds transferred to the party or to a registered association of the party.

Example

During the contest period, the contestantís campaign buys a computer from a local office supplier for $1,000 and the financial agent records $1,000 as a leadership campaign expense. At the end of the campaign, the financial agent should sell the computer and transfer the funds to the registered party or to a registered association of the party.

Renting a campaign office

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

Surveys

The commercial value of a survey, for which the expense was incurred during the contest period, is a leadership campaign expense.

Example

During the contest period, the financial agent engaged Accurate Polling Inc. to conduct a survey. Once the survey was completed, the financial agent paid Accurate Polling Inc. $1,538.42, issuing a cheque from the campaign bank account. The financial agent records the amount as a leadership campaign expense, and keeps the invoice to submit it later with the contestantís return.

Compensation paid to the financial agent or other campaign workers

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

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

Example

The leadership contestant decides during the contest period to pay a salary of $ 2,500 to her financial agent. This amount has to be reported as a leadership campaign expense.

Expenses of volunteers

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

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

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

Example

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

Expenses of senators and elected Members

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

Use of parliamentary resources

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

Compensation

If employees on the staff of an elected Member engage in political activities to support the Member as a leadership contestant during the contest period, the employeesí salaries are leadership campaign expenses and, if not paid by the campaign, they are non≠monetary contributions from the elected Member. However, if the employees work on the contestantís 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 Membersí websites

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

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

3.2 Contestantís personal expenses

Definition

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

Personal expenses not reimbursed by the campaign must be reported as non-monetary contributions.

Incremental expenses

The contestantís personal expenses have to be reasonably incurred as an incidence of the leadership 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 leadership contest.

Contestantís personal expense categories

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

Travel and living

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

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

An important point is that the expenses of campaign workers and volunteers accompanying the contestant or assisting the contestant during events that are incurred during the contest period are leadership campaign expenses Ė not the contestantís 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.

Examples
  1. The leadership contestant incurs expenses during the contest period for commercial flights to meet with supporters across the country. The contestant's airfare plus costs for hotels and meals during the trip are personal expenses.
  2. During the contest period the contestant travels with leadership campaign workers who are volunteers. The campaign workers' airfare, lodging and meals during these trips are leadership campaign expenses.
Child care

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

Care for a person with a physical or mental incapacity

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

Expenses related to a disability

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

Example

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

Other personal expenses

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

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

3.3 Transfers sent

Transfers sent by the contestantís campaign

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

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

3.4 Administering leadership campaign expenses

The financial agent and authorized leadership campaign agents are responsible for administering leadership 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, the leadership contestant, or authorized leadership campaign agents can incur leadership campaign expenses.

Who can pay expenses?

Only the financial agent or authorized leadership campaign agents can pay leadership campaign expenses. There are two exceptions to this rule:

Paying expenses incurred outside the contest period

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

Non-monetary contributions or transfers are also recorded as expenses

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

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

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

Note: During the contest period, a non-monetary transfer from the registered party or registered association is allowed as long as it is offered equally to all contestants.

Example

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

Invoices

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

If a leadership campaign expense of less than $50 was incurred during the contest period and paid on behalf of the leadership contestant, either the financial agent or the authorized leadership campaign 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 invoices and proof of payment within three months after the day on which the petty expense was incurred.

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

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

Claims and loans repayment

All invoices have to be submitted to the financial agent.

Claims or loans have to be paid within 36 months after contest day.

For details about unpaid claims and loans, see Chapter 5, Closing the Leadership Contestantís Campaign.

Administering the leadership contestantís personal expenses

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

Supporting documentation

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