Political Financing Handbook for Registered Parties and Chief Agents (EC 20231) – June 2017 – DRAFT guideline OGI 2017-03
7. Election Expenses
This chapter explains what election expenses are, describes how limits are calculated and applied, and gives examples of typical election expenses. It covers the following topics:
- What are election expenses?
- Limits on election expenses
- Reimbursement of election expenses
- Typical election expenses (election advertising, voter outreach, travel, etc.)
- Use of existing resources (intellectual property, office expenses, websites, etc.)
What are election expenses?
An election expense is:
- any cost incurred or non-monetary contribution received by a registered party to the extent that the property or service that the cost was incurred for, or that was received as a non-monetary contribution, is used to directly promote or oppose a registered party or its leader during an election period
- any non-monetary transfer received from a registered association or a candidate of the registered party to the extent that the property or services are used to directly promote or oppose a registered party or its leader during an election period
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.
For details about fundraising expenses, see Chapter 5, Fundraising.
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 registered parties.
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 other 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:
- For electoral districts where the party has endorsed a candidate, $0.735 is multiplied by the number of names appearing on the preliminary lists of electors or on the revised lists of electors, whichever is greater.
- The limit is then adjusted by the inflation adjustment factor in effect on the day the election is called.
Limit increases for longer election period
If an election period is longer than 37 days, the election expenses limit increases as follows:
- the initial limit is divided by 37
- the result is then multiplied by the number of days by which the longer election period exceeds 37 days
Note: During an election, expenses limits are published on the Elections Canada website.
Limits on election expenses for by-elections
When a by-election is called, Elections Canada calculates the registered party election expenses limit for the electoral district.
If multiple by-elections are being 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 has endorsed a candidate. A party with candidates in more than one electoral district may distribute its election expenses limit among the electoral districts as it sees fit.
For an advertising expense to be an election advertising expense, it must:
- promote or oppose a party that has endorsed a confirmed candidate in the election, and
- be transmitted during the election period
All election advertising expenses, including the production, distribution or placement costs, are election advertising expenses subject to the election expenses limit. This includes expenses for election advertising communicated over the Internet.
Even though the advertising may be distributed to a broader area than the electoral district, 100% of the production cost, plus the actual cost to transmit in the region that includes the electoral district (which may be a broader area than the electoral district), are election expenses.
A party purchases an advertisement in a local newspaper that is distributed in a region that includes an electoral district where a by-election is underway. Despite the fact that the newspaper has a distribution area that goes beyond the electoral district, 100% of the production cost, plus the distribution cost for the area that includes the electoral district, are election expenses of the party, subject to the limit for the by-election.
If multiple by-elections are underway at the same time, and the same election advertising is transmitted in more than one electoral district, a party may allocate the election expense among the affected electoral districts.
- There are by-elections underway in three electoral districts. A party purchases election advertising that is transmitted in the broadcast area where the by-elections are underway. The party splits the production and transmission expenses evenly among the three electoral districts.
- There are by-elections underway in three electoral districts. The electoral districts belong to different broadcast areas. A party purchases election advertising that is transmitted a different number of times in each of these broadcast areas. The party splits the production cost evenly among the three electoral districts and reports the actual transmission cost for each electoral district.
Reimbursement of election expenses
Who is eligible for a reimbursement?
A registered party is eligible for a partial reimbursement of paid general election expenses if the following conditions are met:
- The Chief Electoral Officer is satisfied that the party has complied with the general election expenses reporting requirements with respect to the original return and any amended returns, even if the auditor makes a statement to the contrary in the audit report.
- The auditor's report does not contain a statement indicating any of the following:
- The return does not present fairly the information contained in the financial records on which the return is based.
- The auditor has not received all the required information from the party.
- Based on the examination, it appears that proper accounting records have not been kept.
- The candidates endorsed by the party received at least:
- 2% of the valid votes cast in the election, or
- 5% of the valid votes cast in the electoral districts where the party endorsed a candidate
Note: The Canada Elections Act does not provide for a reimbursement of by-election expenses.
How the reimbursement is calculated
Eligible parties will receive a reimbursement of 50% of their paid election expenses, as reported in the party's election expenses return and subject to the limit.
The election expenses limit for the XYZ Party of Canada in the general election is $20 million. The maximum reimbursement that the party could receive is 50% of the limit, or $10 million. The party's paid election expenses in the general election total $12 million. As a result, the party will receive a reimbursement of $6 million.
Reduction of reimbursement amount
If the registered party's election expenses exceeded the election expenses limit, the reimbursement amount is reduced as follows:
- by one dollar for every dollar that exceeds the limit by less than 5%
- by two dollars for every dollar that exceeds the limit by 5% or more but by less than 10%
- by three dollars for every dollar that exceeds the limit by 10% or more but by less than 12.5%
- by four dollars for every dollar that exceeds the limit by 12.5% or more
Typical election expenses
The following are examples of typical election expenses.
Election advertising is the transmission to the public of an advertising message promoting or opposing the election of a candidate during the election period. Election advertising has to be authorized by the chief agent or a registered agent of the party. This authorization has to 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.
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. This authorization has to be in or on the message.
Some advertising material, such as signs, can often be used for more than one election. For details, see the Use of existing resources section below.
- In anticipation of an upcoming election, the chief agent purchases flyers before the election is called and distributes them during the election period to promote the party. The commercial value of the flyers—including their design, printing and distribution—is an election expense. The flyers are election advertising and have to include an authorization statement from the chief agent.
- The chief agent purchases an advertisement that is broadcast during the election period on the local radio station, promoting the party. The expenses for the advertisement—including its design, recording and transmission—are election expenses of the party. The advertisement is election advertising and has to include an authorization statement from the chief agent.
Election advertising on the Internet
Election messages communicated over the Internet are election advertising only if:
- they meet the general criteria for election advertising (see Election advertising above), and
- they have, or would normally have, a placement cost
Any other messages communicated over the Internet are not election advertising.
The chief agent has to authorize any election advertising, and this authorization must be 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.
For greater certainty, the following are not election advertising:
- messages sent or posted for free on social media platforms such as Twitter and Facebook
- messages sent by email or through other messaging services (including texts sent through a cellular or mobile network)
- content posted on the party's website (the ongoing costs of creating and maintaining a website are not placement costs)
However, any associated costs are election expenses.
If online content such as a video, website or Facebook page stays online during the election period, it has to be reported as an election expense. Alternatively, the party may remove all online content before the election period.
Note: A registered agent has to report as election expenses all the expenses related to the design, development and distribution of online communications used during an election period, regardless of whether or not they are election advertising.
- The party hires a media firm to place banners on websites and social media platforms during the election period, directing users to a video posted on YouTube. Because the banners have a placement cost and promote the party, they are election advertising and have to be authorized by the registered agent. Because there is no placement cost to post the video, it is not election advertising, but all expenses related to designing and developing the video are election expenses.
- A group page has been created for the party on a free social networking site. Volunteers manage the page and post articles related to the party. This is not election advertising. 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 an expense.
- The chief agent hires a media firm to post content on the party's website, promoting the party. The content is not election advertising, but all expenses related to designing, developing and posting the content are election expenses.
For a detailed discussion of this topic, please refer to Elections Canada's interpretation note 2015-04, Election Advertising on the Internet, on the Elections Canada website.
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 Guidelines on the Elections Canada website.
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:
- promoting or opposing a registered party or its leader, or any position on an issue with which a registered party is associated
- encouraging electors to vote or to refrain from voting
- providing information about the election, including information about voting hours and the location of polling stations
- gathering information about how electors voted in past elections, or will vote in the election, or their view on a registered party or its leader or on any issue with which a registered party or its leader is associated
- raising funds for a registered party
Expenses incurred for voter calls conducted during the election period, including the cost of production and distribution, are election expenses.
For a detailed discussion of this topic, please refer to Elections Canada's interpretation note 2015-11, Application of Election Advertising Rules to Telephone Calls, on the Elections Canada website.
Rental of a temporary party office
The registered party may rent temporary office space for the duration of the campaign. The portion of the rent incurred before and after the election period has to be recorded as a registered party expense. Only the portion of the rent used during the election period is an election expense.
The party rents an office on March 1, a month before the election is called. The rental agreement is for three months and the rent is $300 a month. The election period is 37 days. The election expense to be recorded is the rent for the month of April, plus the rent for 7 days in May: $300 + (7/31 x $300) = $367.74. The remaining amount, $532.26, has to be recorded as an expense of the party.
The installation cost incurred for items used during the election period is an election expense even if the installation takes place before the election is called, as long as the item itself is an election expense. Installation costs cannot be pro-rated.
Other office expenses include the cost of buying office supplies, such as paper or toner cartridges, or supplying refreshments during meetings. As long as these supplies are used during the election period, the cost of buying them is an election expense.
Expenses related to surveys or research conducted during the election period are election expenses. Expenses related to surveys or research conducted outside the election period are not election expenses, even if the results of the survey are used during the election.
After the election was called, the chief agent engaged Election Polling Inc. for $1,538.42 to conduct a survey. Once the survey was completed, the chief agent issued a cheque from the party's bank account to pay Election Polling Inc., recorded the amount as an election expense and kept the invoice to submit later with the party's return.
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.
If employees on the staff of a member of Parliament 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.
Use of existing resources
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. The chief agent 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.
- During a by-election, the registered party assigns some of its existing staff to perform work directly related to the campaign. The chief agent has to determine the compensation and benefits paid to these employees for the hours spent working on the campaign and report them as election expenses. As well, the employees' campaign work is tied to overhead expenses such as office space, computers, supplies and printers. The chief agent has to allocate overhead expenses for these employees on a reasonable basis and include them as election expenses.
- During a by-election, volunteers use the registered party's office to perform work directly related to the campaign. No compensation is paid to the volunteers. However, their campaign work is tied to overhead expenses such as office space, computers, supplies and printers. The chief agent has to allocate overhead expenses for these volunteers on a reasonable basis and report them as election expenses.
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. Even if the party uses the data during the election period, the intellectual property and the systems used to store and process the information are not election expenses.
The party, as an ongoing political entity, might own property that is used in more than one election.
If the registered party purchases a capital asset and uses it during the election period, the election expense is the lower of the commercial value of renting a similar asset for the same period or the purchase price.
A capital asset may be eligible for an election expenses reimbursement after one or more elections, depending on how the asset is reported. For example:
- If the asset is reported at the commercial value of renting a similar asset during the election period, it may be eligible for a reimbursement each time it is used in an election.
- If the asset is reported at the purchase price (the commercial value), it may be eligible for a reimbursement only once, after the election for which it was obtained.
For low-value items such as office supplies, the full purchase price (the commercial value) must be recorded.
Property other than capital assets (for example, signs) can also be used for more than one election. If a registered party uses such property in a subsequent election, the election expense to be recorded is the current commercial value of equivalent property. Such election expenses are not eligible for the election expenses reimbursement.
Note: Amortization may not be used as a method of calculating the commercial value of the use of the asset.
If the registered party's website stays online during the election period, its commercial value—including design, maintenance and hosting costs—is an election expense of the party.
Elections Canada will accept the current commercial value of an equivalent website as the commercial value of a pre-existing website.
If a registered party uses signs in a second or subsequent election, the amount of the election expense to be recorded is the current commercial value of equivalent signs.
The commercial value, including design, production and installation costs, of any pre-existing billboards that remain in place during the election period are election expenses. Billboards include the sign and the supporting structure. Elections Canada will accept the commercial value of an equivalent sign that would be temporarily installed just for the election period.
Similarly, with respect to the supporting structure, Elections Canada will accept the commercial value of an equivalent structure that would typically be used for an election period rather than the commercial value of a structure designed to be more permanent in nature. Note that the commercial value of the structure is the lower of its purchase price or rental cost.