Municipal Campaign Finance 101: a critical look at the rules

Where does the data on the website come from?

The data for the study comes from the financial reports of all candidates for city council, regional council and mayoralty offices in the 2006 municipal elections in ten Ontario municipalities: Toronto, and the suburban municipalities of Oshawa, Whitby, Ajax, Pickering, Markham, Richmond Hill, Vaughan, Brampton and Mississauga.

There were 674 candidates in 132 contests for mayor, regional councilor (the upper tier municipal government) and ward or local councilor in the 10 municipalities.

Candidates who either collected or spent more than $10,000 had to complete a detailed financial report that included the names and addresses of contributors who gave more than $100 in cash or in-kind goods and services, a breakdown of all campaign expenditures, fundraising activities, and the final surplus or deficit. The financial statement was audited and signed by a licensed accountant.

Candidates who raised and spent less than $10,000, were required to file a shorter report that disclosed the names and addresses of contributors over $100 but they were not required to provide a breakdown of campaign expenditures or have the report audited. If a Toronto candidate participated in the contribution rebate program they were required to have their statements audited by a licensed accountant.

The data on the website was built from these returns and the lists of contributors who gave more than $100.

Ajax, and Oshawa have made the complete financial statements available on their websites. The City of Toronto has posted the complete financial statements but removed the addresses of individual contributors. Mississauga posted the statements without the lists of contributors over $100, thus defeating a prime reason for disclosure. Pickering did post the candidate financial statements but appears to have removed them from their website. In the remaining municipalities in the study, complete candidate financial statements can be viewed or copied in the city hall clerk’s office.

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Are the candidates’ financial statements trustworthy?

While candidate’s financial statement must be audited and signed by a licensed accountant if it exceeds $10,000 in fundraising or spending, the audit verifies neither the eligibility of contributors nor many other important details in the filing.

The financial statements of winners and losers frequently contain errors and omissions. A City of Toronto Auditor General’s review of 2006 campaign financial statements found that 29 of 45 winning candidate’s statements contained errors from the inconsequential to serious enough to potentially disqualify office-holders. The lack of enforcement of the rules means that most candidates who file incorrect reports escape without prosecution, penalty or even the requirement to correct errors and omissions.

The 2006 financial statements of four Vaughan councilors, the Mayor and the defeated Mayor have all been the subject of campaign audit requests. Many other candidate statements are incomplete or contain errors.

Just less than 10% of the candidates (61) did not file any financial statements and contravened the Municipal Elections Act. The slap on the wrist penalty of being banned from running in a subsequent election may partly explain these rates of delinquency.

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Who can contribute to candidates?

Individuals normally resident in Ontario, corporations that carry on business in Ontario and unions that hold bargaining rights for employees in the province are permitted to make contributions.

Contributors do not have to live or have an office in the municipality to be able to contribute to a candidate. Foreign owed companies can contribute to campaigns.

There is no limit on the number of campaigns a contributor can support. As you will find from selecting a contributor, many individuals and companies made multiple contributions and several supported more than 30 candidates though few approached the Greater Toronto Sewer and Watermain Contractors Association record of contributions to 95 candidates.

There is no age limit or citizenship requirement for contributing to a campaign.

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How much can an individual, corporation or trade union give to a candidate?

A contributor may give up to a total of $750 to a candidate for any municipal office with the one exception of a higher $2,500 limit for candidates for Mayor of Toronto.

The limit restricts contributors from giving more than these amounts to a single campaign but it does not prevent a contributor from giving to many candidates in several municipalities and it does not prevent an individual who owns or controls several corporations from directing contributions in their names as well as in his or her own name.

Corporations that are associated, that is owned or controlled by the same individual or individuals are not permitted to contribute more than a total of $750 or $2,500 in the case of the Toronto mayoralty race. The definition of associated corporations given the Income Tax Act is so complicated that determining association could only be done by a lawyer or accountant with complete access to corporate records. For private companies (most companies and most development companies), those not traded on a stock exchange, determining association is impossible for candidates and citizens. Several complaints about candidates’ financial statements have questioned whether contributing corporations are associated and a former mayor of Hamilton was found to have accepted contributions from related companies.

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How much can a candidate give to their own campaign?

A candidate and her or his spouse may give an unlimited amount and several winning candidates self-financed their campaigns. Jane Pitfield, who finished second to David Miller in Toronto’s mayoralty race, contributed $150,000 to her own campaign.

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Are non-cash contributions allowed?

Contributions of goods and services are subject to the contribution limits noted above. They must be must be valued at current market prices.

Establishing market value on a unique office rental location for example, is not easy and it is likely that contributions of goods and services do sometimes circumvent the limits.

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Is voluntary labour a contribution?

The Toronto Candidate’s Guide approached the thorny question of campaign workers paid by an employer with the following interpretation:

Services donated by people acting on a volunteer basis are not considered contributions. If an employer makes employees available (who have volunteered their time) to work on a campaign and does not pay them extra for this work, this does not count as a contribution. However, if the employer pays them in addition to their regular wage, the amount of the extra wages is a contribution and is subject to the contribution limits (p.76).

This means that campaign financial statements do not report the value of wages paid to employees who volunteer to work on a campaign and have the permission of the employer to leave work to do so.

For a candidate with corporate supporters who are limited by the low contribution limit, this could be a huge and unreported benefit as the supporter could release paid employees to work on the campaign. The use of election workers paid by contributors is probably widespread and amounts to a significant advantage for corporate backed candidates and particularly incumbents who have worked with people like developers during the previous term in office.

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Whose money?

Money given to a campaign must come out of a contributor’s own funds. For example, no person may contribute money that was given to them by another individual, corporation or trade union for the purpose of supporting a candidate and thereby evading rules on limits and disclosure.

There is no doubt that this rule is often broken most often in the form of employers giving money to employees to pass on to candidates. The Toronto Computer Leasing Inquiry or Bellamy Inquiry documented one such case but this is probably not infrequent and may be done without the candidate’s knowledge.

Only better disclosure rules that require contributors to reveal their occupation and employer, as is the case in US federal financial disclosure rules, would allow such conspiracies to have a chance of being detected.

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What do contributors to a campaign have to tell us about themselves?

Supporters can contribute up to $25 in cash to a campaign without telling the campaign anything about themselves. This rule covers occasions when a candidate passes-the-hat around at a campaign event. As there is no record of the identities of cash donors, the same individual could make cash contributions on several occasions that could add up to more than the $100 disclosure limit.

A contribution of greater than $25 must be made in the form of a cheque, money order or credit card payment. The contributor must disclose their name and address to the campaign so that amounts greater than $100 in total can be listed in financial statements.

The Municipal Elections Act requires that contributors disclose an address but it does not require that it be the address of their residence. This has led to some contributors giving office or corporate addresses making it more difficult to track identities.

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How much can candidates spend?

In 2006, all candidates for council and regional council are governed by a spending limit of $5,000 plus 70 cents per voter. Ward population sizes vary in the nine suburban municipalities so spending limits for candidates for council ranged from an average of $16,136 in Ajax to $36,591 in Brampton. The average spending limit for candidates for the 44 wards in Toronto was $26,867. Suburban regional council contests had widely varying spending limits partly as a result of at-large versus ward electoral districts. The limits in the at-large election systems of Markham and Vaughan were $119,220 and $117,920 respectively. Contestants for mayor had a spending limit of $7,500 plus 70 cents per voter but had many more voters and so a much higher limit. The spending limit for the Toronto mayoralty race in 2006 was $1,013,634 while the suburban limits ranged from $319,664 in Mississuaga to $52,046 in Ajax.

Spending limits can be deceiving. Some candidates raised and spent far more money than the official limit because costs incurred for fundraising functions and post-election parties are not included under the limit. City of Toronto elected councilors spent an average of nearly $45,800 despite the much lower limit and two councilors, Mammoliti and Kelly, spent as much as $100,000 with over half of that sum going on fundraising functions – a spectacularly inefficient ratio.

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When are campaign financial statements filed?

Candidates are required to close their campaign accounts at the end of the year and file their campaign financial statements at the end of the third month in the new year.

Candidates with deficits may apply for up to two six month extensions to continue to raise funds. They must file their statements within 60 days of the end of the extension period. This effectively means that candidates need not submit final statements until 16 months after the election.

The opportunity to continue to raise funds after election day and into the following year if an extension is filed, is an open invitation for contributors to win favour with an elected councilor. Defeated contestants have a much more difficult time erasing deficits.

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Are there rebate or tax credit programs for contributions as there are in federal and provincial politics?

Rebate programs return a portion of a contribution to a contributor if the candidate or candidates they supported complete the election finance reporting forms and if the contributor completes an application form.

In Ajax, Markham and Toronto, rebates were only available for individual contributors and not for corporations or unions. Toronto has the most generous rebate program, paying out a rebate of up to a total of $1,000 dollars for contributions to candidates. Markham’s maximum rebate was $350 while Ajax’s program paid out no more than $150 to a contributor. All rebate programs are scaled so that the percentage rebated declines as the contribution total increases.

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What happens to campaign surpluses and deficits?

Occasionally a campaign will end with some funds unspent. This is very unusual for challengers and more common for incumbents who almost always raise more money than challengers.

When a campaign ends in surplus, the candidate gives the extra funds to the municipal clerk to be returned on the filing of nominations forms at a future election. In a few cases the surpluses are very large and probably serve as a deterrent to a serious challenger. In systems with parties, campaign surpluses and deficits usually pass to the constituency party to be spent or repaid in between elections.

Without parties, municipal candidates are permitted to keep surpluses and are effectively encouraged by the rule to try to raise surpluses to improve the odds of winning at a future election. Surpluses are a significant advantage giving the office-holder a head start on fundraising and reducing the time required hunting for funds and hearing from voters. In the 2006 election, 60 of the 116 incumbents brought forward a surplus from the 2003 election and for 27 candidates it was more than $10,000. For eight candidates, these surpluses were larger than the candidate’s 2006 spending limit, meaning that they could have campaigned almost entirely with money contributed in 2003.

Those who contributed to a candidate in 2003 but felt in 2006 that they should be voted out of office, were faced with the thought of having a portion of their earlier contribution support a candidate that they now oppose.

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Is there any review of campaign statements?

The only mechanism for ensuring that campaign statements are complete is the auditor’s signature on reports for campaigns that raised or spent more than $10,000. However since the auditor’s signature follows the standard disclaimer, "Due to the nature of the types of transactions inherent in an election campaign, it is impracticable through auditing procedures to determine that the accounting records include all donations of goods and services, and receipts and disbursements. Accordingly, my verification of these transactions was limited to ensuring that the financial statements reflect the amounts recorded in the accounting records …" it is questionable whether there is an effective oversight. City clerks’ offices appear to do no more and may not have the authority to do more than stamp filing dates on statements.

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How can citizens complain?

Citizens have three months following the filing of final financial statements in which to file a complaint about a candidates fundraising or spending. In most municipalities, complaints are considered by the council members in a closed session of council. In most instances, council members have voted to not investigate another councilor. Citizens may then appeal that decision to the courts who can order an audit and prosecution if the evidence warrants it.

Needless to say, having councilors decide on the validity of a complaint about another member of council is unlikely to be viewed as legitimate by the complainant or by citizens. Toronto and Ajax have recognized the need for an impartial body to decide on complaints and both have appointed independent compliance audit committees that can hear complaints and refer cases to public prosecutors.