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Political Financing Handbook for Nomination Contestants and Financial Agents (EC 20182) – December 2014

This document is the DRAFT version of Elections Canada's guideline: OGI 2014-04

Chapter 3 – Nomination Campaign Outflows

This chapter covers the following topics:

Introduction

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

Section 3.5 of the chapter explains how to administer expenses. Who can incur expenses? Who can pay expenses? Why do non-monetary contributions and transfers also have to be recorded as other 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 Nomination campaign expenses

Definition

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

Nomination campaign expenses are subject to the nomination campaign expenses limit.

Expenses incurred outside the contest period are not nomination campaign expenses subject to the limit even if the property or services are used during the contest. In this regard the rules for nomination campaign expenses differ from those governing election expenses of candidates.

The reporting of expenses related to the nomination contest that are incurred before or after the contest period is optional. However, expenses incurred outside the contest period may be reported under other expenses in order to give a full picture of the campaign's finances and to explain any discrepancies in the surplus calculation.

Finally, nomination campaign expenses do not include non-monetary contributions or transfers used by the campaign. Again, in this regard, they differ from the definition of election expenses for candidates and parties. Accordingly, when reporting non-monetary contributions or transfers, contestants should include them as "other" expenses, but not as nomination campaign expenses.

For details about surplus calculation, see Section 5.3, Disposing of surplus.

Note: The nomination contest period starts on the contest start date and ends on the selection date as indicated in the nomination contest report provided by the registered association or the party that held the contest.

Expenses include:

  • liabilities incurred
  • the commercial value of donated property and services (other than volunteer labour)
  • the difference between the liability incurred and the commercial value of the property or services (when they are provided at less than their commercial value)

The financial agent has to report the amount charged to the campaign for a nomination 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:

  • the person who provided it (if the person who provided the property or service is in that business)
  • another person who provides that property or service on a commercial basis in the area (if the person who provided the property or service is not in that business)

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

If during the contest period the campaign purchases a property or service from an individual for less than the commercial value, the financial agent has to report the difference as a non-monetary contribution from the individual. In this case, a corresponding expense equal to the value of the non-monetary contribution is to be reported under other expenses.

Note: The campaign 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 during the contest period the campaign 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 and an other expense.

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

Note: A non-monetary transfer from the registered party or registered association is allowed as long as it is offered equally to all contestants.

Example

A self-employed web designer offers to design the nomination contestant's website during the contest period for a discounted price. He charges $400 instead of his regular fee of $700. The financial agent records the amount paid, $400, as a nomination campaign expense. He also records the difference between the amount paid and the commercial value of the work as a non-monetary contribution and an other expense.

Limit on nomination campaign expenses

The Canada Elections Act imposes a limit on nomination campaign expenses. The limit applies to all expenses reasonably incurred during a nomination contest as an incidence of the contest. This includes nomination campaign expenses that are paid or unpaid.

The nomination contestant and the financial agent have to respect the nomination campaign expense limit. They cannot enter into contracts or incur nomination campaign expenses that exceed the limit.

How are the limits calculated?

The limit allowed for a nomination contestant in an electoral district is:

  • 20 percent of the limit that was allowed for a candidate's election expenses during the last general election in that electoral district, or
  • in any other case, the amount determined by Elections Canada

Note: The registered party or the registered association holding the nomination contest informs the nomination contestants about the nomination campaign expense limit. The information is also available on the Elections Canada website. Parties and associations should also inform contestants about the start and end dates of the contest.

Note: The Canada Elections Act does not provide reimbursement for nomination campaign expenses.

Nomination campaign expenses

The following are examples of typical nomination campaign expenses.

Advertising

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

Advertising expenses incurred during a nomination contest period, including the cost of production and distribution, are to be reported as nomination campaign expenses.

Example

The financial agent purchases flyers during the contest period and mails them to residents in the electoral district. The commercial value of these flyers, including the design, printing and distribution, is a nomination campaign expense.

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 applying to other forms of advertising. All expenses incurred during the contest for the design, development and distribution of online advertising, or for a website, must be reported as nomination campaign expenses.

Examples
  1. The contestant's campaign hires a design firm during the contest period to create a website promoting the contestant. The commercial value of the website design is a nomination campaign expense, together with the fees for hosting the website.
  2. A group page has been created during the contest period for the contestant on a free social networking site. Volunteers manage the page and post articles related to the contestant's campaign. 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 nomination campaign expense.
Assets

If the contestant's campaign purchases an asset during the contest period and uses it for nomination campaign purposes, the value of the asset recorded as a nomination campaign expense is the lower of the commercial value of renting a similar asset for the same period or the purchase price.

For low-value items such as office supplies, the full purchase price (the commercial value) must be recorded.

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 as an other 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 a candidate, the registered association that held the contest, or to the registered party.

Examples
  1. During the contest period, the contestant's campaign buys a computer from a local office supplier for $1,000. Renting a similar computer for the same period would cost $80 per month. The nomination campaign expense is calculated using the rental fee: $80 x 2 = $160. The remaining amount ($840) is recorded under other expenses in the nomination contestant's return. At the end of the campaign, the financial agent should sell the computers and transfer the funds to the registered party or the registered association.
  2. During the contest period the financial agent pays $100 at a discount store for the purchase of a refurbished fax machine. The equivalent rental rate for the same period for a similar fax machine would have been $200. The financial agent records $100 as a nomination campaign expense because in this case the purchasing price ($100) is less than the rental rate would have been.
Renting a campaign office

The campaign may rent an office for the nomination contestant's campaign. The rent incurred during the contest period has to be recorded as a nomination campaign expense. The rent incurred outside the contest period may be reported under other expenses in order to give a full picture of the campaign's finances and to explain any discrepancies in the surplus calculation.

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 nomination campaign expenses.

It is advisable to include with the contestant's 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 nomination contestant decides during the contest period to pay a salary of $1,000 to her financial agent. This amount has to be reported as a nomination campaign expense.

Expenses of volunteers

Incidental expenses of volunteers incurred during the contest period (for example, refreshments, lodging or transportation) are nomination campaign expenses. These expenses have to be reported in the contestant's return.

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

If a volunteer pays for an incidental expense incurred during the nomination contest period, the amount must be reported as a non-monetary contribution and an other expense. However, if the amount is $200 or less and the person is not in the business of providing that 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.

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 person's involvement that were incurred during the contest period are nomination campaign expenses and have to be authorized in advance by the financial agent or the contestant. Any expense incurred in relation to the nomination 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 must be reported under other expenses.

Use of parliamentary resources

Nomination contestants who are Members of Parliament may wish to make use of parliamentary resources such as websites during a nomination contest in relation to their nomination campaigns. Any expenses incurred by the Member's office during the contest period in relation to the nomination contest are nomination campaign expenses. Expenses outside the contest period may be reported under other expenses in order to give a full picture of the campaign's finances and to explain any discrepancies in the surplus calculation. If these expenses 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. In the case of a non-monetary contribution, the expense must be reported under other expenses.

Compensation

If employees on the staff of an elected Member engage in political activities to support the Member as a nomination contestant, the employees' salaries are nomination campaign expenses and if not paid by the campaign, they are non-monetary contributions from the elected Member. In the case of a non-monetary contribution, the expense must be reported under other expenses. Expenses outside the contest period may be reported under other expenses in order to give a full picture of the campaign's finances and to explain any discrepancies in the surplus calculation. However, if the employees work on the contestant'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 of their working hours. It does not include a service provided by a self-employed person who normally charges for that service.

Elected Members' websites

Nomination contestants may have websites that are designed and maintained using parliamentary resources. Expenses incurred during the nomination contest period to modify such a website for the purpose of the Member's nomination campaign are nomination campaign expenses. In the case of a non-monetary contribution, the expense must be reported under other expenses. In this regard the rules are different than those applied to the website of a candidate during an election.

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

3.2 Contestant's personal expenses

Definition

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

  • travel and living expenses
  • child care expenses
  • expenses related to the provision of care for a person with a physical or mental incapacity for whom the contestant normally provides such care
  • in the case of a contestant who has a disability, additional personal expenses that are related to the disability
  • other personal expenses – that is, all personal expenses other than those in the preceding categories

Personal expenses not reimbursed by the campaign must be reported as non-monetary contributions and as other expenses. It is optional to report personal expenses related to the nomination contest that are incurred before or after the contest period. However, expenses outside the contest period may be reported under other expenses in order to give a full picture of the campaign's finances and to explain any discrepancies in the surplus calculation.

Incremental expenses

The contestant's personal expenses have to be reasonably incurred as an incidence of the nomination 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 nomination contest.

Contestant's personal expense categories

The following are examples of typical personal expenses that the nomination 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 kilometre log. The kilometre 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 considered nomination campaign expenses – not the contestant's personal expenses.

Note: The travel claim has to be either for actual expenses, such as fuel and rental costs, or else for kilometres. The claim cannot be for both.

Example

The nomination contestant travels with volunteers during the contest period to visit supporters. The expenses associated with the volunteers' transportation and meals during the trips are nomination campaign expenses subject to the limit.

Child care

The contestant might engage in campaign activities during the daytime or evenings, or on weekends. Child care expenses incurred during the contest period are incremental expenses because they would not normally occur if there was no nomination 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 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 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 contestant's cellphone use. All the items reported must be for expenses that the contestant would not normally incur if there was no nomination contest.

3.3 Other expenses

Definition

Nomination campaigns might incur expenses before or after the contest period. The reporting of these expenses is optional.

However, expenses outside the contest period may be reported under other expenses in order to give a full picture of the campaign's finances and to explain any discrepancies in the surplus calculation.

For a discussion of reporting, see Chapter 4, Reporting Requirements.

Note: The nomination contest period starts when the contest is called and ends on the selection date.

All expenses related to a non-monetary contribution or a non-monetary transfer must be recorded under other expenses.

3.4 Transfers sent

Transfers sent by the contestant's campaign

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

  • funds to a candidate of the same party in the electoral district in which the nomination contest was held
  • funds to the registered association that held the nomination contest
  • funds to the registered party
Reporting sent transfers

The financial agent has to include the following information when reporting a transfer in the Nomination Contestant's Campaign Return:

  • the full name of the affiliated political entity
  • the date the transfer was sent
  • the amount of funds transferred

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

3.5 Administering nomination campaign expenses

The financial agent is responsible for recording nomination 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 or the nomination contestant can incur nomination campaign expenses.

Who can pay expenses?

Only the financial agent can pay nomination campaign expenses. There are two exceptions to this rule:

  • Personal expenses of the contestant can be paid by the contestant.
  • Expenses from the petty cash can be paid 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 or transfers are also recorded as expenses

When a non-monetary contribution is accepted in relation to the nomination contest, the financial agent must record the commercial value of the property or service as an other 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 accepted in relation to the nomination contest has to be recorded by the financial agent as an other expense as well as a transfer.

Note: 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 an other expense.

Invoices

If an expense of $50 or more was incurred during the contest period and paid on behalf of the nomination contestant, the financial agent has to 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 during the contest period and paid on behalf of the nomination contestant, the financial agent 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 the registered association

When property or a service is provided to the nomination contestant by the registered party or registered association, a copy of the original supplier invoice as well as the invoice from the party or association should be included with the contestant's return. The documentation should confirm the amount reported in the contestant's 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 the selection date.

For details about unpaid claims and loans, see Chapter 5, Closing the Nomination Contestant's Campaign.

Administering the nomination contestant's personal expenses

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

The contestant has to prepare the Nomination Contestant's Statement of Personal Expenses within three months after the selection date. This statement should include all personal expenses incurred by the contestant during the contest period that were not yet reimbursed from campaign funds. All invoices and receipts have to accompany the personal expenses statement. For details about completing the personal expenses statement, see Chapter 4, Reporting Requirements.

Note: The contestant has to prepare the Nomination Contestant's Statement of Personal Expenses even if the personal expenses were nil.

Supporting documentation

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

The financial agent has to prepare the Nomination Contestant's Campaign Return and submit it to Elections Canada within four months after the selection date unless that date falls within an election period or 30 days before it. In that case, the deadline is four months after election day. The contestant's return has to be accompanied by supporting documents, including the documents related to nomination campaign expenses:

  • invoices and receipts
  • bank statements
  • deposit slips
  • cancelled cheques
  • third party invoices
  • loan agreements and repayment schedules
  • contribution receipts and copies of cheques from contributors
  • contracts or salary agreements
  • rental agreements
  • mileage logs
  • any other relevant documents

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