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Posts Tagged ‘Elections Act’

Behind the Headlines on the NDP Convention Sponsorships Issue

August 27th, 2012 | 11 Comments

[Welcome, National Newswatch readers!]

The NDP's communications plan to handle the situation arising from their disagreement with Elections Canada over convention advertising by 8 unions and 7 other organizations is an interesting study in contrasts as against the Conservative Party's approach in the past.

It might be that the former views itself as having a greater interest in maintaining a neutral election arbiter willing to muscularly enforce a common set of rules even-handedly, while the latter has been able to fundraise effectively based on stoking the fear that the election authority was part of a liberal monolith in Ottawa where conservatives felt like outsiders.

Or it could just be that the NDP did a cost-benefit analysis, and learning from the Conservatives' experience, decided that the legal fees and on-going news story would be costlier than just accepting Elections Canada's decision and moving on.

Regardless, one of the difficulties facing both parties is that, notwithstanding the current fascination with tactics and campaign machinery amongst the media and regular inhabiters of Twitter, it is almost impossible to have a lengthy, calm and factual discussion about the facts, timelines, and merits of such cases without descending into spin, finger-pointing, and hyperventilating torque.

Almost impossible, that is, except for here.

I've prepared a briefing note below, starting with a look at the relevant sections of the Elections Act, and how they've changed over the last couple of decades.

[PS, I've also started using the version of the Act published on the Department of Justice's laws-lois.justice.gc.ca site, which is organized a little more compactly than the one at elections.ca, and also contains links to previous versions of the various sections. Check it out. On the other hand, the version at elections.ca lets you link to specific sections, rather than just specific parts, so they both have their uses.]

Elections Act on Political Contributions

The provisions regarding contributions to a political entity are contained in sections 404-405.2 of the Canada Elections Act. In summary they now say:

  • only citizens or permanent residents of Canada can make contributions, and "no other person or entity shall"
  • contributions means both monetary and non-monetary contributions, and include contributions made to any of the entities regulated under the Canada Elections Act (a registered party, a registered association [aka "riding association", aka "electoral district association", aka EDA], a candidate, a leadership contestant or a nomination contestant)
  • contributions from ineligible contributors have to be returned to them, or if that's not possible, have to be paid to the Chief Electoral Officer, who will forward them on to the federal government's general revenues (i.e., the Consolidated Revenue Fund of the government)
  • various exemptions and clarifications are then outlined:
    • transfers and provisions of goods and services within various arms of a political family are excluded
    • an employer who grants an employee a paid leave of absence to run for office is not considered to be making a contribution to that employee's political party
    • party membership fees of $25 or less in a year are not considered a contribution
    • convention fees (the full amount) *are* considered a contribution by the person who paid them (whether the delegate him- or herself, or someone else on their behalf)
  • (see more details in the Elections Canada factsheet)

Changes to Elections Act provisions on Contributions over the years

These provisions have undergone a lot of amendment over the years, however*. Regulation of campaign finance started in 1873 after some grubby dealings around the building of the Canadian Pacific Railway, but we'll start with the era before 2000.

  • Pre-2000 – There was no cap on contributions, though the federal political tax credit limits provided an effective ceiling for all but the most ardent financial supporters (75% of the first $100; 50% of the next tranche, and 33% of a subsequent tranche, up to a fixed ceiling). Publication of the names and amounts over $100 was argued to suffice for accountability. This regime had been in place since the Election Expenses Act of 1974.
  • Bill C-2 (2000) – The tax creditable ceiling was raised to 75% of the first $200, and the reportable amount ceiling was also hiked to $200.
  • Bill C-24 (2003) – The so-called "Chrétien reforms", but based on a regime first introduced by the Parti Québécois government of Réné Lévesque in the 1970s. It introduced contribution ceilings of $5,000; and directed that only individuals could donate to registered parties (meaning no donations could be made by businesses, unions, other levels of government, or other organizations). Businesses and unions could still contribute up to $1,000 to local candidates or ridings. The tax creditable ceiling was raised to 75% of the first $400, though the reportable amount ceiling was left at $200.
  • Bill C-2 aka "Federal Accountability Act" (2006) – This bill ended business and union contributions to local candidates and ridings, and lowered the contribution ceiling to $1,000 (adjusted for inflation, whenever the accumulated annual inflation increments from a 1992 base would raise the ceiling by another $100; thus it hit $1,100 almost right away, and just hit $1,200 this past year). An amendment made by Liberal Senator Rod Zimmer added the provision in s.404.2(7) which clarified that convention delegate fees are fully recognized as political contributions.

All along the way, another principle had been ensconced about the tax treatment of political fundraisers, to the effect that a receipt can only be issued for the portion of the ticket price not covering food, beverages, or other tangible benefits received by the contributor as part of the event. Thus the contribution here is not the full value of the ticket, but the ticket price minus the tangible benefits. All the parties are familiar with and have accepted these rules.

Chronology

With Bill C-24 set to come into effect on January 1, 2004, the NDP wrote to Elections Canada with a series of questions, including this one:

6. Would the purchase of an advertisement on the Party's website or in a convention magazine be considered a contribution or merely a payment for services rendered? Likewise, can the Party continue to sell items such as sweatshirts, baseball caps and buttons to unions, businesses or riding associations? Would the profit be considered a receiptable donation?

Answer:

Where a person or entity purchases goods or services from a registered party with the intention of economically benefiting the party, the payment for goods and services will not constitute contributions to the extent that the payment reflects the fair market value of the goods and service purchased. Any amount of the payment above the fair market value will constitute a contribution if the person purchasing the good and service intended to benefit the party.

The Toronto Star's Joanna Smith reported that a party insider from the time told her:

An NDP insider familiar with the issue said that in 2003, when the Liberal government under Jean Chrétien moved to limit donations from unions and corporations, the party sought an opinion from Elections Canada as to whether money obtained through selling advertising would be considered a political contribution….

Three years later, the Conservative government banned donations from unions and corporations altogether.

The party insider said the NDP also sought legal opinion and hired a third-party company to assess what fair market value for advertising would be in advance of each of the three policy conventions in question and followed those recommendations.

On that basis, former party National Director Brad Lavigne told Smith that:

"We put an emphasis on going to a third-party company to assess market value in order to keep (to) the letter as well as the spirit of the law…. We felt that while it wasn’t legally necessary to seek third-party validation for market value, we felt that it would be appropriate and well worth the investment.".

[The sentence about the Conservative government banning donations from unions and corporations altogether three years later is a red herring, because those new provisions only applied to riding associations and candidates. Union and corporations donations to national parties - the provision which is relevant here - were already outlawed by Bill C-24 as of 2004.]

So after consulting their third party consultant on the fair market value, the party charged:

  • 2006 Québec City Convention – 3 national unions (Steel, CEP, and the UFCW), along with the CLC, Douglas-Coldwell Foundation and NOW Communications $38,500 + GST of $2,360 for a total of $40,860
  • 2009 Halifax Convention – 4 national unions (Steel, CUPE, CEP, and the UFCW) 97,619.04 + GST of $4,880.96 for a total of $102,500
  • 2011 Vancouver Convention – 6 national unions (Steel, the UFCW, CUPE, PSAC, the Firefighters, and the Machinists), along with the CLC, and 5 businesses $179,337.49 + GST of $21,770.51 for a total of $201,108

Two months after the June 2011 convention, the Conservative Party's lawyer, Arthur Hamilton, wrote to the Chief Electoral Officer. He referred to earlier correspondence from the Commissioner of Elections to his own party, over an earlier dispute regarding the treatment of convention fees to their own 2005 annual meeting.

[As a sidebar, the Liberals back then were smarting because the timing of the retroactive coming into force of the Conservatives' Federal Accountability Act undermined their 2006 leadership convention, both from the perspective of the registration fee (at $995 it was going to account for most of their supporters' contribution ceilings that year) and the now well-known change to the contribution limits for leadership candidates. Probably for that reason, they seized on a June 27, 2006 comment made by newly-elected then-Treasury Board President John Baird at a Senate Committee studying Bill C-2 to the effect that he had not received a tax credit for his 2005 convention fees, and after the then-Chief Electoral Officer asked the Conservative Party to open its books on the convention costs, the Liberals wrote to the Commissioner of Elections in July asking for an inquiry. The Conservatives argued that the convention only broke even and thus if treated like any other fundraising event should not result in any political contributions, meanwhile filing a retaliatory complaint about the Liberals' convention fees.  But the party wound up having to file revised financial returns for 2005, which they did in late December, 2006, after Senator Zimmer's amendment to their bill was adopted by the House and the law came into effect. Jean-Pierre Kingsley's retirement as Chief Electoral Officer became public a week later.]

Hamilton's August 31, 2011 letter to the CEO about the NDP convention quoted the former Commissioner of Elections as saying:

Our position, simply put, is that under the [Elections Act] any voluntary provision of money, property or service for the Convention purposes described above, minus the fair market value of any tangible benefit one receives in return, constitutes a contribution. Opportunities to view or participate in debates, presentations, votes and so forth pertaining to party policies have significant political value only and cannot be excluded as tangible benefits from the calculation of the contribution.

Hamilton wrote that:

In the circumstances, which include the declarations by the NDP, the various unions identified and at least one corporate identity, it appears that the NDP has received what the Commissioner of Elections Canada has deemed to be contributions in contravention of the Elections Act.

and he asked the CEO to investigate. Conservative M.P. Dean Del Mastro separately filed a complaint to the Ethics Commissioner, but she later referred the issue back to Elections Canada as well.

Reaction from the NDP and the unions was consistent with the provisions of the opinion letter the party had received from Elections Canada: that advertisements and sponsorships were allowed, so long as they were at fair market value. Indeed, the Chief Electoral Officer himself made the same argument before the Procedures and House Affairs Committee a month later.

But according to the Democracy Law Blog, the issue may have been a distinction between sponsorships and advertising, though the blogger also questioned how market value could be determined (not knowing about the third-party consultant hired by the NDP), and further questioned whether political parties should be in the business of advertising at all.

This past June, the Deputy Chief Electoral Officer François Bernier responded to Hamilton's letter as follows:

With reference to the letter of August 31, 2011, from Arthur Hamilton, Counsel to the Conservative Party of Canada, I wish to confirm that it is the position of Elections Canada that sponsorships of political events constitute contributions that are subject to the rules set out in the Canada Elections Act, including the rules regarding the inadmissibility of certain contributors and contribution limits.

Four days later he also wrote to the NDP, enclosing a copy of his letter to the Conservatives, and thanking the party "for the full cooperation it has given to Elections Canada in order to resolve the issue promptly and effectively".

The party appears to have paid the funds back, but rather than including the reports of returned contributions in their 2011 annual return, have been advised to file a revised 2nd quarter 2012 return instead, which will be posted shortly we're told. Evidently it picked a reporter from a paper with a Sunday edition to tell its side of the story long-form, but is otherwise acquiescing to Elections Canada's position.

Analysis

The interpretation of the newly-amended Elections Act leading to the so-called "in-and-out" case (referred to as the "media buys" case by Elections Canada) was vigourously disputed by the Conservative Party, both in court and in the court of public opinion. And there were some valid points worth litigating, in the interests of clarifying how the new Elections Act would be applied. Eventually the party lost, and repaid $230,198 in rebates along with a $52,000 fine, in order to settle the case and have charges dropped against the principals involved. But as a result, the principle that local election expenses can only be "incurred" by the agent for a local candidate was established.

The NDP believes it had a valid case to make legally on the issue of fair market value for advertising and sponsorships, in view of its earlier effort to obtain an opinion on the issue from Elections Canada, and its retaining of a third-party consultant to help establish what such a fair market value would be. Obtaining a legally-tested answer to that question would be not only to their own interest but that of their competitor political parties, but that won't come to pass. The lesson the NDP appears to have learned from watching the Conservatives is that they're better off disposing of the dispute quickly, than dealing with years of spin and torque in the chattering classes while the lawyers settle the issues at hand.

In effect, Elections Canada has ruled that all sponsorships at political conventions by definition have a fair market value of zero, and therefore all sponsorship payments are political contributions, and can't be made by ineligible contributors. Conventions have to be paid for somehow, so the NDP will have to raise the price of its convention fees next time around, or else cut back on some of the production values or content to make up the difference. This might be the right ruling, but it's not going to get any legal review, more out of a fear of needing to explain a complex issue of public policy over and over in the sound-bite era than anything else.

How we got to the point where election law is being made through a series of gotchas is the sadder part. The Chretien government tolerated almost no amendments from the Reform Party to its overhaul of the Elections Act in 2000, so the Conservatives got them back with punitive retroactive amendments to the Act in 2006, which led the Liberals to exploit a slip of John Baird's at a Senate committee to launch a complaint about their convention fees, which led the Conservatives to counter-complain about the Liberals convention fees, and now the NDP's. Meanwhile, civil society groups are trying to get in on the action themselves.

Basic misapprehensions abound, such as the belief that Elections Canada can just make up its own rules (it has to implement and enforce the Elections Act as passed by Parliament, warts and all), that party activists know or could be expected to know everything that's going on in their party across the country, and/or know every nuance of our complex and always-evolving electoral legislation.

Call me old-fashioned, but I'd like to see election law made on the basis of what's good for our electoral system as a whole, and without people on either side of the issue deciding what their position is based on who they want to win, rather than a consideration of the facts and the outcome for the electoral system as a whole. We'll come back to this perspective again soon, when I get a chance to discuss the Etobicoke Centre case.

Thanks to those who provided me with copies of the relevant documents.

————————–

* For a good overview of the legislative developments, see these chapters in the Carleton University election series:

  • MASSICOTTE, Louis (1997). "Electoral Reform in the Charter Era", in Frizzell, Alan & Pammett, Jon H. (eds), The Canadian General Election of 1997, Dundurn Press, pp. 167-191.
  • MASSICOTTE, Louis (2006). "Electoral Legislation Since 1997: Parliament Regains the Initiative", in Pammett, Jon H. & Dornan, Christopher (eds), The Canadian General Election of 2006, Dundurn Press, pp. 196-219.
  • FLANAGAN, Tom & JANSEN, Harold J. (2009). "Election Campaigns under Canada's Party Finance Laws", in Pammett, Jon H. & Dornan, Christopher (eds), The Canadian General Election of 2008, Dundurn Press, pp. 194-216.

 Also, here's a bibliography of news clippings and other online sources on the current case:

and related sources about the Conservatives' convention case:

Leadership Rules Need Changing

August 31st, 2011 | 33 Comments

[Welcome, National Newswatch readers!]

The rules governing leadership fundraising in the Elections Act need changing, and fast. This is not a partisan question, as it could have an impact on any of the federal political parties within the next five years.

The current contribution regime for leadership contestants is amongst the worst-understood provisions of the Elections Act. Political actors, pundits and journalists alike get it wrong routinely, and I have even met MPs who voted in favour of the change who do not realize what the provision actually says.

Most people believe there is an annual contribution ceiling to leadership contestant, because that's what there is in every other case and it would just make common sense. But that's not what the law says, and I have to say: I believe the law is wrong-headed on this point.

——————————————————————————

Here's the relevant section of the Elections Act:

405. (1) No individual shall make contributions that exceed

  • (a) $1,000 in total in any calendar year to a particular registered party;
  • (a.1) $1,000 in total in any calendar year to the registered associations, nomination contestants and candidates of a particular registered party;
  • (b) $1,000 in total to a candidate for a particular election who is not the candidate of a registered party; and
  • (c) $1,000 in total to the leadership contestants in a particular leadership contest.

The amounts in s.405(1) are scaled up through an inflation adjustment, in increments of $100, with a base year of 2002, as per s.405.1. Thus any reference to $1,000 became $1,100 almost right away, and would now be $1,200 (though this is not being implemented until 2012, I'm told).

——————————————————————————

Note that contributions limits are set for an election candidate or nomination candidate for each calendar year, but candidates for a party leadership – where spending ceilings are likely to be much higher – must raise funds from contributors who can give the maximum only once per leadership contest. [Independent candidates for election to the Commons also face a per-event contribution ceiling.]

The drafting of the above sub-sections seems to make sense on the face of it, but in practice the law is an ass: allowing some candidates to game the system, on the one hand, and making it extremely difficult for honest candidates to cover their debts after the fact, on the other.

Think this doesn't apply to your party? Let me demonstrate:

  • Cabinet minister X retires from public office and takes up a job at one of the big five banks. An exploratory committee for some future leadership campaign spends the next five years collecting pledges of $1100 from various friends and colleagues and traditional party donors. In due course, that party's leadership opens up, the pledges are collected, and suddenly it becomes extremely difficult for any other candidate to enter the race.
  • A party is in its down cycle, and needs to attract new talent to renew itself. Unfortunately, an old warhorse has tapped the few remaining large contributors for the maximum donation, and newer entrants are effectively frozen out of the race because they can't hire the infrastructure to raise money from new small donors without already having seed money from larger donors.
  • [Actually happened:] In the middle of a leadership contest, under a known set of rules, Parliament amends the Elections Act, dropping the contribution ceiling to one-fifth of its previous size. Unsuccessful candidates who had entered the race under the old set of rules, and budgeted accordingly, were suddenly unable to find a sufficient number of donors who hadn't already contributed the maximum to one of the perceived front-runners, in order to pay off their debts.
  • An unsuccessful leadership candidate for one party, who is caught in such a squeeze, is approached by someone in another party to step down from his seat, with a promise that a new pool of contributors who support the second party will donate money to pay off his or her leadership debt.

In his report to Parliament on recommended changes to the Elections Act following the 2008 general election, the Chief Electoral Officer recommended that the "per-contest" limit be changed to an annual ceiling, in order to be consistent with the other entities he regulates (national parties, local riding associations, nomination candidates, and party candidates for election to the House of Commons).

I realize some people who understand the current provisions still support them, because they feel leadership contestants ought not to ring up such excessive expenditures in a vain pursuit of their party's leadership, and that such contests should be far more frugal. And, at one level, it's perhaps not hard to criticize a few individual campaigns for over-reaching. But consider: having a healthy ego is an occupational hazard of the practice of politics in the modern always-on age we live in, and we don't really want our leaders to be pessimistic and un-ambitious, do we?

A leadership campaign can be financed through:

  • individual contributions, to the per-contest ceiling per contributor
  • transfers from either the national party or a local riding association, so long as those transfers are offered on an equal basis to all candidates (see s.404.3(1) of the Act)
  • loans, though those loans must be repaid from out of either (a) or (b)

Note that it cannot be financed by the individual candidate, nor can it be funded by the candidate's party or riding association to any greater extent than that offered to other leadership candidates.

Now, should Parliament not see fit to amend s.405(1)(c) to institute annual contribution limits rather than per-event contribution limits for leadership contests, a political party organizing a leadership race could still decide to enforce more restrictive contribution limits on its own candidates.

For example, a party could set a $600 contribution limit for each contestant, regardless of the contribution ceiling in the Elections Act, and/or any spending ceiling the party also decided to put in place. This would reassure unsuccessful candidates that they could still raise funds after the race to pay their vendors and properly dispose of their debts, and thus allow a leadership race to remain relatively open.

Political parties occupy a unique place in our democratic system. They are not direct agents of the state, but at the same time they are more than private social clubs. They are voluntary organizations that have become professionalized and partially regulated by law, and are the chief recruiters, vetters and providers of the candidates we must choose from amongst, when we cast our ballots at election time.

It is in the public interest that political parties be able to attract a wide range of potential candidates during a leadership race, and that viable candidates not be dissuaded from running for fear they will be unable to pay their debts later on, or be subjected to potentially corrosive pressures in order to do so.

Thus, I urge Parliament to consider amending s.405(1)(c) of the Elections Act, at the first opportunity, to change the leadership campaign contribution ceiling from a per-contest one into an annual one, and I also urge the various political parties who will be launching leadership contests over the coming months and years to set rules and spending limits that don't force candidates into impossible situations after the fact.

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Of course, this raises the question of where the 2006 Liberal leadership candidates are at with their fundraising and debt repayments, and Glen McGregor of the Ottawa Citizen noted the other day that Stéphane Dion is continuing to hold fundraising events to pay down his debts.

In fact, most of the latest leadership candidates' returns have just been posted on the Elections Canada website, with the exception of Michael Ignatieff, Scott Brison and Bob Rae, who are all already out of debt and have filed final returns, and Stéphane Dion and Hedy Fry who both requested and were given 30-day filing extensions, as allowed under the judge's order.

The judge ordered that all candidates' debts be paid off by December 31, 2011 (with the exception of Ken Dryden, who has been given until June 30, 2012). After that they have a further 60 days to file their final returns, for which a further 30-day filing extension could also be granted.

Here are the latest figures (as of the candidates' June 30, 2011 returns, unless otherwise indicated).

  • $354,120.78 - Ken DRYDEN – [reminder, he has a June 30, 2012 deadline to pay everything off, while the other candidates only have until December 31, 2011]
  • $115,000.00 - Martha HALL FINDLEY
  • $110,090.00 - Joe VOLPE
  • $108,302.47 - Gerard KENNEDY
  • $33,164.08 – Maurizio BEVILACQUA
  • $77,500.00 – Hedy FRY – [as of Dec 31, 2010]
  • $30,000.00 – Stéphane DION - [as of Dec 31, 2010] UPDATE: return now available, figures remain the same
  • $0 – Carolyn BENNETT
  • $0 – Scott BRISON
  • $0 – Michael IGNATIEFF
  • $0 – Bob RAE

Note that a large chunk of Mr. Dryden's outstanding obligation is the result of unpaid claims totalling $129K (all but $5K in loan interest), and the one operating loan taken out by the campaign was a $300K loan from Mr. Dryden himself at an interest rate of 5.5%. Thus, he is in the unenviable position of legally having to raise money to pay himself back, or else he would be in violation of s.405(1)(c) if the loan becomes a deemed contribution and puts him over his contribution limit for the leadership contest. He's plugging away at it, but it's going slowly, and it was an $805K campaign that obtained just under 5% of the vote on the first ballot (238 delegates). In contrast, the three top candidates spent some $3M each.

Maurizio Bevilacqua appears to have most aggressively retired his debts since our last check-in, when he owed some $193K.

Note also that the government has several times tabled legislation seeking to further regulate who candidates and contestants may obtain loans from. We can probably expect to see a version of this legislation coming forward at some point in the current Parliament as well.

Hill Times Article: Time to Modernize Election Process

June 14th, 2010 | 4 Comments

Following the tabling of the Chief Electoral Officer’s Report to Parliament on the 40th General Election last week, I filed a story for the Hill Times, which was published in this morning’s edition.  It is reprinted here with kind permission.

Time to modernize election process, urges Canada’s chief electoral officer

Chief Electoral Officer Marc Mayrand tells Parliament the Elections Act needs an overhaul.

By ALICE FUNKE

The wave of legislative reforms to federal political financing and reporting rules in recent years has resulted in an increasingly complex system that needs more coherence, advises Chief Electoral Office Marc Mayrand in his comprehensive post-2008 general election report released last week.

Saying “we need to modernize the electoral process and make it more efficient,” Mr. Mayrand is recommending that Parliament enact a series of changes to make the rules more consistent between the five main political entities he regulates—parties, candidates, nomination contestants, riding associations, and leadership candidates—to strengthen his ability to ensure compliance, but also to reduce some of the unnecessary burden on largely volunteer bodies.

Topping his list is a request for authority to ask for supporting documentation from political parties for the expenses reported on their national campaign returns, both to determine that the expenses were properly incurred before paying out their rebates, and to ensure that the national spending limit was adhered to.

Currently national parties file a one-page audited report summarizing their campaign expenditures under a set of nine categories, but unlike the case with candidates or riding associations [actually, it's only the case for candidates], the law does not allow Elections Canada to request receipts or other supporting documents in order to certify those expenses. Given that some $29-million in public funds were paid out as election expense rebates in the 2008 election, Mr. Mayrand said he believes that his power of oversight for parties should be at least equivalent to that for candidates, riding associations and leadership contestants in this regard, and be consistent with similar powers already granted to every one of his provincial counterparts under their governing statutes.

A second key area needing consistent rules is the area of contribution limits for leadership contestants, versus political parties, candidates and riding associations. Contributions to a leadership contestant are currently capped for the entire contest, while contributions to a candidate, riding or political party are capped on an annual basis, something Mr. Mayrand said he believes should be the case for leadership contestants as well.

The legislative regime for leadership contestants was put into place before later rule changes prohibiting corporate and union donations and further capping contributions came into effect, and should be reviewed to ensure that all the pieces work together, Mr. Mayrand explained.

“Often you’ll see the recommendations reflect issues that happen as a result of successive legislative changes, and no-one’s taking a step back and asking, ‘Are we still making sense,’ ” he said.

Mr. Mayrand is also suggesting the introduction of some administrative penalties when parties or candidates overspend their limits, as is the case in Ontario and Manitoba. Currently the commissioner of elections can send a warning letter or enter into compliance agreements with candidates, or prosecute them. Setting an administrative penalty, such as a dollar-for-dollar reduction in their election expense rebate, would offer a middle ground, and provide more timely consequences and better compliance, Mr. Mayrand said.

A total of 50 recommended changes to the Elections Act, covering the electoral process, political financing, governance and a variety of technical issues, will now be studied by the Commons Procedure and House Affairs Committee.

Another key area needing attention is that both citizens and political parties want to do more business electronically with Elections Canada, Mr. Mayrand said. But in order to permit both e-registration on the voters’ list and the electronic filing of many party and candidate reports, an amendment to the Elections Act is required to authorize a secure non-signature means of authentication for electronic transactions.

E-registration is set to commence in the fall of 2011, but Mr. Mayrand said the act needs to be “modernized” in order to provide a “fuller range of e-services,” and to obtain Parliamentary authorization to commence pilot projects of i-voting for certain groups of voters during a by-election.

Alice Funke is the publisher of the Pundits’ Guide to Canadian Federal Elections (punditsguide.ca)

UPDATED: Proposed Election Act Amendments from the CEO

June 11th, 2010 | 0 Comments

The Chief Electoral Officer’s comprehensive post-2008 general election report was tabled in parliament Wednesday, and CEO Marc Mayrand met with members of the media Thursday morning to discuss his recommendations for overhauling the Elections Act in more detail.  Glen McGregor’s story for the Ottawa Citizen is here.

While I’ve filed a general story for Monday’s Hill Times, I thought readers might be interested in the full list of recommendations governing Political Financing.

  • Supporting documents requestable from registered parties The CEO says he needs the same authority to request supporting documents from registered parties to confirm their rebatable election expenses as he now has for candidates, and as all his provincial counterparts have under their respective statutes.  This is his number one ask, and tops Glen’s story as well.  You can examine the parties’ campaign returns at the Elections Canada website here.
  • Consequences for overspending candidates The law as currently written permits either a “slap on the wrist” (a warning letter or a compliance agreement) or a full-blown prosecution for cases of overspending, with not only nothing in between, but no actual financial consequences.  Weirdly, the way the law is written, expenses incurred over the limit are still rebatable: something I certainly never knew, nor could have imagined. [UPDATE: Well, I'm really glad to find out I'm wrong on that one.  What they were trying to say in that section of the report was that if a candidate *under-reported* expenses, and was fined for doing so, s/he would still be eligible for a rebate of the additional expenses, possibly amounting to more than the fine.  However, no rebate is given for expenses exceeding the limit, and thank goodness for that!]  Mayrand is proposing that some administrative penalties be added to the Act, such that candidates or political parties found to have overspent their limits would be dinged dollar-for-dollar out of their rebates.  In addition, if they were found to have done so deliberately, they could still be prosecuted.  This is currently the law in Ontario and Manitoba.
  • No re-registration of delinquent riding associations The CEO believes there should be a four-year ban on registering a new riding association for a party in a riding where its last riding association had outstanding financial returns, and/or deregistered itself and hasn’t filed its final return.  The ban would be reversable once the missing returns were filed.
  • Candidates should not be allowed to keep property acquired during the campaign At present, candidates can transfer the property of their campaigns (e.g., an inventory of signs, or a piece of office equipment) to either their local riding association, and/or the party that endorsed them, but they don’t have to.  The CEO argues that candidates should not be allowed to profit financially from their candidacy, and thus should be required to dispose of that property at fair market value, include that value in the calculation of campaign revenue and campaign account surplus, which then triggers other sections of the Act to govern its disposal.
  • Candidates should also bear responsibility for filing a false or misleading campaign return Currently only the financial agents are legally responsible for these offences, but the CEO believes the Act should be amended to share that responsibility with candidates and nomination contestants.
  • Clarify the Act’s treatment of advertising expenses incurred prior to the campaign period for transmission during the campaign period, by both third parties and riding associations.  Currently the Act only regulates expenses incurred during the campaign for these two groups.  In light of the fixed date amendments to the act, this oversight could have growing consequences for perceptions of fairness in the electoral system.
  • Clarify the Act’s treatment of candidate debates as non-monetary election expenses The definition of a candidate’s election expenses in s.407 probably includes the costs of organizing candidate debates, since they promote a candidate or might disadvantage a candidate who doesn’t participate.  So, for example, say the local community association organizes a debate for 4 candidates, one quarter of its costs in organizing the debate could arguably be considered a non-monetary contribution to the participating candidates.  But wait, since another set of amendments were passed banning contributions by anyone other than individuals, now the community association would be in violation of the Act, since it may not make even a non-monetary contribution to those candidates.  You and I might look at things and say that reasonable people could easily figure out this is not what Parliament intended, but public servants are governed by the law the way it’s written.  What’s worse is that (and let’s be honest with ourselves here), some all-candidates meetings are organized by groups who clearly intend to help one candidate and/or hurt another, and even in other occasions where that organization might be trying to be fair, their obvious point of view might leave certain other candidates feeling the deck is stacked against them regardless.  Arguably in the former case, that group’s expenses should be treated as a non-monetary contribution to the candidate being promoted, but for the problem that only an individual could then hold such a meeting, not an organization.  A further problem would plague the case of meetings in ridings with large numbers of candidates (usually the core urban riding in each city): would the association trying to organize a neutral meeting still have to invite every single candidate to it?  The CEO is asking Parliament to clarify its intent in these situations, and outlines the guidelines he has employed to handle them, asking for some legislative backup of those practices.
  • The treatment of unpaid election expenses by candidates, nomination contestants, and leadership candidates needs to be streamlined, and made more effective.  Explaining this recommendation could take an entire blogpost all on its own.  The law as currently written did not anticipate many of the consequences of its application, and means amongst other things that a candidate has to apply to the CEO or a judge in order to pay off their debts any later than 4 months after the campaign has ended (18 months for leadership candidates), or it becomes a “deemed contribution” by the vendor or lender.  This creates a host of problems, because given that candidates usually haven’t paid those bills because they don’t have the cash and need to raise it, now they can no longer legitimately spend any money in order to raise it (since the Act says that any invoice must be submitted within 3 months), nor to request the extension from the Chief Electoral Officer or a judge.  Simply going ahead and paying the bill after 4 months without authorization (which many people do inadvertantly, not realizing the requirement), not only puts them in violation of the Act, but is now no longer transparent, since unauthorized payment of an outstanding debt does not trigger the requirement for an updated campaign return which is invoked with an authorized payment of an outstanding debt.  So we’ll never know who they raised money from to pay those debts, or whether they were paid and paid in full … unless the CEO decides to impose that requirement when they ask for authorization to pay the claim after the deadline.  Worse still is that any updated campaign return has to have an updated audit, thus incurring another expense that the candidate would have to raise more money to pay, without spending any money to raise it, and so on and so on and so on.  It’s a mess.  Trash the whole system and rebuild it from scratch I say.  The CEO’s suggestions in that regard seem reasonable to me, but then I’ve never run a leadership campaign, nor been an official agent for a candidate.
  • Judges shouldn’t need to approve every single filing extension, just the grossly negligent ones Political entities like candidates or political parties can ask for extensions on their filing deadlines up to two weeks after the due date, but after that it’s no-person’s land.  Although there’s no provision for it in the act, in practice the parties have retained lawyers on behalf of their candidates to request extensions from a judge.  Also, there are only very narrow grounds for granting any extension, and no extension means no return of their nomination deposit, no rebate payment, possible deregistration, and no sitting as an MP in Parliament.  Oh and prosecution.  So, there may be situations in which the CEO might feel that an extension is warranted, but has no authority under the act to grant the extension; following which no financial return will be published, an unfortunate result that works against transparency.  The proportion of candidates not filing in time has risen from 20.3% in 2004 to 29.4% in 2008, according to the report, so this situation has become more pressing over time.  To ensure transparency in the absence of some legislative changes, the agency has had to reluctantly sacrifice its goal of ensuring timeliness.  It would like to redefine the acceptable reasons for granting an extension, not bring the courts into the process so early, and introduce an administrative penalty such that late candidate returns forfeit a portion of their nomination deposit.  Also, updated returns should not have to have a completely updated audit, as it serves little practical use.
  • The ‘per contest’ cap on leadership contest fundraising should be replaced with an annual cap, as is the case for contribution limits to every other political entity regulated under the Act (such as candidates or parties).  It’s also recommended to repeal the presumption that any contribution made within 18 months of the conclusion of a leadership campaign was made for that race, and not for any subsequent one that may since have started.  Finally, not every report currently mandated to be filed by leadership contestants serves a purpose, and two of the six required reports could be dropped in the CEO’s view.
  • Candidates shouldn’t need bank accounts if they don’t spend anything This change alone would save on a lot of pointless administrivia.  In a related recommendation, the CEO suggests that candidates who are not rebate-eligible and don’t raise money or incur expenses above $5K or $10K really shouldn’t need to produce an auditor’s report when they file their returns.
  • Parties and riding associations should be able to transfer funds and goods and services to a candidate’s campaign at any time Currently this can’t be done until the candidate is confirmed by the returning officer, however this can impede their campaign start-up significantly.
  • The rules around by-elections superceded by general elections need to be completely revisted.  All kinds of unintended consequences result from this situation, the craziest of which is that a by-election candidate is not allowed to transfer the assets of their by-election campaign to their general election campaign, even though this violates any standard of common sense.  Candidates endorsed by a political party could transfer the assets to the riding or party and then ask for them to be transfered back to the new candidate campaign.  But Independent candidates in that situation are completely out of luck.
  • The limit on fees allowed to be paid to campaign auditors should be allowed to be adjusted for inflation.

I think fair-minded people and those who care about sensible public administration will agree with the issues raised by the Chief Electoral Officer here, even if they don’t agree with every detail of the proposed solutions.  For others, the above blogpost has probably unfortunately served as a guide on some of the ways they could game the system.

However, the CEO’s general point in making these recommendations to Parliament is that the political financing provisions of the Elections Act are a patchwork of a succession of legislative changes, which don’t work well together, aren’t consistent across all the political entities he has to regulate, and leave some large gaps in some areas of transparency and compliance, while imposing unneeded and burdensome administrative requirements in others.  For anyone who’s worked with the Elections Act at all, they can