Political Financing Handbook for Third Parties, Financial Agents and Auditors (EC 20227) – August 2019

6. Identifying and Allocating Regulated Expenses

This chapter helps a third party identify expenses that need to be counted as part of its regulated activities. In addition, because separate expense limits apply to activities that take place at different times, this chapter explains how to allocate expenses between the pre-election and election periods, outside those periods and during by elections.

It covers the following topics:

• Identifying expenses for regulated activities
• How to allocate expenses when a third party uses its own resource
• How to allocate expenses for websites and web content
• Allocating expenses between the pre-election period and election period
• Allocating expenses during by-elections

Identifying expenses for regulated activities

Third parties incur all kinds of expenses for regulated activities. Some of these are direct costs (buying advertisement space, purchasing postage, paying for signs), while others are incurred in relation to regulated activities (paid security for rallies, labour costs, expenses of volunteers).

Expenses incurred for regulated activities that take place during the pre-election period or the election period are subject to separate limits, so it is important to ensure that all related expenses are properly identified and reported.

During the pre-election or election period, the third party...	The regulated expense is...
hires a media firm to design and produce invitations for a partisan activity	the cost for the invitations (design and production) the cost to distribute the invitations
uses its own paid staff to recruit volunteers for door-to-door canvassing	the direct labour cost for the period the third party's employees engage in recruiting volunteers a reasonable allocation of the general overhead of the third party's office expenses expenses incurred by the volunteers while canvassing expenses for canvassing materials (flyers, postcards, business cards, etc.)
uses its own paid staff and resources to produce partisan advertising	the direct labour cost for the period the third party's employees engage in creating the partisan advertising the cost of materials used a reasonable allocation of the general overhead
hires a polling firm to conduct an election survey during the election period, and then uses the results to create election advertising	the cost for the survey (design and conduct) the cost for the advertisement (design, production and transmission)
uses volunteers to mail flyers to voters	the cost for the flyers (design and production) postage for mailing the flyers
uses volunteers to manage the third party's social media accounts to draw attention to a video on the third party's website	expenses incurred by the volunteers while managing social media the cost for the video (design and production) allocation of website costs (including hosting and design)
uses its own paid staff and resources to install signs	the direct labour cost for the period the third party's employees engage in installing the signs the cost for the signs (design and production)
organizes a BBQ to promote a candidate	the cost for food, drinks, plates, cups, etc. the cost for the invitations (design, production and distribution) labour cost (running the BBQ)

How to allocate overhead expenses when a third party uses its own resources

If the third party uses its office, equipment and paid staff to organize and carry out regulated activities, the third party must allocate the office expenses in accordance with the activities carried out. Office expenses include rent or property tax, utility cost, insurance, maintenance services, etc.

The third party should make a reasonable allocation for each component of costs: salary, equipment, supplies, materials, printing equipment and computers. Elections Canada accepts any reasonable basis for allocation of overhead—for example, an allocation based on labour hours.

If the third party is an individual using their own resources—for example, a home computer or personal cell phone—no expenses need to be allocated.

How to allocate expenses for websites and web content

Third parties commonly use websites to promote or oppose a political entity. This means some portion of the costs to design, host and maintain the websites are partisan activity expenses in the pre-election period, election period, or both. Social media accounts might also be used.

Websites

When a website is designed for the campaign, the regulated expense for each period in which it is used is calculated by:

• using the actual expense incurred to produce the website
• adding the prorated cost to host and maintain the website

When a pre-existing website is used for the campaign, the regulated expense for each period in which it is used is calculated by:

• identifying the pages that contain content used for the campaign and determining the commercial value of designing equivalent pages (or the actual expense incurred to produce those pages, whichever is lower)
• adding the prorated cost to host and maintain those pages

Web content

Expenses to produce and distribute web content are always regulated expenses when the content is first posted during a pre-election period or election period to promote or oppose a political entity. Web content includes text, audio, visuals, videos and promotional applications.

If content was produced entirely or in part using volunteer labour, only the actual expense incurred by the third party is a regulated expense. This may include materials, equipment rental or paid labour.

Expenses to produce and distribute pre-existing web content that remains accessible during the pre election or election period, whether on the third party's website or social media pages, is a regulated expense if the third party:

• incurred the expense to produce the content for the campaign, or
• promoted the content during the pre-election period or election period

Promotion, in the context of pre-existing web content, is to transmit or draw attention to an item of content through any means, such as advertising, mass emails, social media postings, re-posting of content, or coordinated promotion through another entity, person or group.

Allocating expenses between the pre-election and election period

The Canada Elections Act imposes a limit on expenses that a third party can incur for regulated activities.

Limits on expenses for regulated activities between April 1, 2019, and March 31, 2020

Where the limit applies	General election		By-election
	Pre-election period of a fixed-date election	Election period
Overall	$1,023,400	$511,700	n/a
In a given electoral district	$10,234	$4,386	$4,386

When a third party conducts regulated activities during the pre-election period or the election period, the associated expenses are subject to a limit, regardless of when they were incurred. Expenses cannot be moved between periods to stay within the limits.

Some phases of a regulated activity may take place only during the pre-election period, while others may continue into the election period. In such cases, the expense for distribution (if there is any) may in some circumstances be allocated between the different periods (for example, when advertising is charged per day).

The expenses for planning and producing a regulated activity (for example, design, production and organization costs) are never allocated between the different periods. If the regulated activity takes place during both the pre election and election periods, the full expense to plan and produce the regulated activity counts toward both limits.

The table below shows examples of expenses over the different periods.

When the activity takes place	Examples	Regulated expenses
Before the pre election period	Survey of residents in the riding at the end of May about their voting intention	There is no regulated expense
Starts before June 30 and continues during the pre-election period	Advertisement starting on May 31 and continuing until July 31	All expenses for the advertisement, including design and production costs Transmission cost calculated for the pre election period between June 30 and July 31
	Telephone calls to electors on June 15, July 15 and August 15	All expenses for the scripts, including design and production Cost for making the calls during the pre election period (July 15 and August 15)
	Election survey designed in early June and conducted in August	All expenses for designing and conducting the survey
Only during the pre-election period	BBQ on August 15 to promote a candidate	All expenses for planning and organizing the event, including expenses for promotional material distributed, food, drinks, etc
	Radio advertisement from August 1 to 15	All expenses for the advertisement, including design, recording and transmission
	Election survey conducted two days before the election period begins	All expenses for designing and conducting the survey
Starts during the pre-election period and continues in the election period	Same election survey conducted first on July 31 and again on September 30	Expenses for conducting the survey on July 31 are pre-election period expenses Expenses for conducting the survey on September 30 are election period expenses All expenses for designing the survey are both pre-election period expenses and election period expenses
	Advertisement in local paper for 5 days in August and 10 days in October	Expenses for distribution are allocated between pre election period (5 days = 1/3) and election period (10 days = 2/3) All expenses for designing and producing the advertisement are both pre-election period expenses and election period expenses
Only during the election period	A rally on October 10 using signs created before the election period	All expenses for the rally, including planning and organizing the event, labour costs, security, etc. All expenses for designing and producing the signs
	Election advertisement on national radio to promote a registered party between October 1 and 15	All expenses for the advertisement, including design, production and broadcasting

Note: In the case of a by-election or a general election held other than on a fixed date, a third party might not be able to cancel a regulated activity on the day the election is called. Under these circumstances, the third party is deemed not to have incurred regulated expenses for the uncancellable activities.

Allocating expenses during by-elections

If a regulated activity takes place during and for a by-election, 100% of the planning and production cost (or the commercial value, if it was contributed) is a regulated expense. This is true even if the regulated activity takes place in a broader area than the by-election riding.

If a regulated activity such as election advertising takes place in a broader area than the by-election riding, the regulated expense for distribution (if applicable) is what it would actually cost to distribute to the smallest area that includes the by election riding. If there is no smaller distribution area for the specific medium used, then 100% of the distribution cost is a regulated expense.

If multiple by-elections are underway at the same time, and the same regulated activity takes place in more than one electoral district, a third party may allocate the expenses among the affected electoral districts.

Note: There is no pre-election period for a by-election.

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