Audit cites ‘apparent contraventions’ to municipal campaign rules by Horizon Ottawa

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An auditor’s report has recommended the City of Ottawa’s independent election compliance audit committee consider whether it should commence a legal proceeding against Horizon Ottawa over expenses incurred around an event held just before the last municipal election.

The committee meets on Tuesday.

Horizon is a lobby group that advocates for progressive approaches to municipal governance. At issue is HorizonFest, a music festival held in Strathcona Park on Sept. 10, 2022, with a number of speakers including councillor candidates Shawn Menard, Ariel Troster and Sean Devine.

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Horizon had registered as a third-party advertiser in the election on Aug. 24, 2022.

The application to audit Horizon’s election expenses was filed in June 2023 by retired developer Edward (Ted) Phillips, a former Taggart executive, in his personal capacity, according to Phillips’ lawyer, John George Pappas, who argued that promotion for HorizonFest began before Horizon registered as a third-party advertiser and that Horizon started to spend money on the event before registering.

Lawyer Kyle Morrow, who represented Horizon, argued HorizonFest lost about $6,200.

“I suggest that this is nothing more than a fishing expedition designed to silence and intimidate those who disagree with the complainant politically, and furthermore to impose on the taxpayer an unnecessary financial burden for an unnecessary audit,” Morrow said last year.

The election compliance audit committee voted in favour of the audit on July 31, 2023. The city appointed BDO Canada LLP as auditor on Dec. 8, 2023.

The 17-page audit report released Tuesday identified three “apparent contraventions” to campaign finance rules under the Municipal Elections Act, including: contributions accepted or campaign expenses incurred outside the advertising campaign period; verifying that contribution limits were adhered to and that contribution receipts were appropriately issued; and record-keeping practices.

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As part of the audit, a sample of expenses was examined to ensure the expenses were not incurred outside the advertising campaign period.

One sample was a bank of phone credits that included three phone credit invoices for $517.24 incurred by an employee and dated Aug. 17, 2022. The expenses were reimbursed from the organization’s third-party advertising campaign bank account on Dec. 31, 2022.

Horizon Ottawa confirmed the expenses were incurred before the advertising campaign period. However, the phone credits were utilized within the period. Upon review of evidence that could be made available, it was noted that at least one of the credits was used on Aug. 22, 2022, before the date of registration, the report said.

The second sample included nine HorizonFest expenses incurred by a Horizon representative and later reimbursed from the third-party advertising campaign bank account on Dec. 31, 2022. Three expenses were incurred before the third-party registration, including a liquor licence for $300 with an invoice dated June 17, 2022, a separate $50 charge for stage use dated July 12, 2022, and an $80 tarp purchased on Aug. 17, 2022.

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Horizon confirmed that the expenses were incurred prior to the advertising campaign period, but the items were used within the period, the report said.

The audit said expenses that were not deemed to be allowable under the Municipal Elections Act were incurred outside the advertising campaign period. “As a result, Horizon Ottawa appears to have contravened the campaign finances rules established by the MEA.”

The report said HorizonFest did not appear to meet the criteria of a fundraising function under the Municipal Elections Act, where a fundraising function represents an event or activity held by a registered third party for the purpose of raising funds in relation to third-party advertisements.

A cash donation jar was used to collect donations at HorizonFest, totalling $448.15.

According to the 2022 Third-Party Advertisers’ Guide, third-party advertisers are required to return any contribution made or accepted in contravention of the Municipal Elections Act as soon as they learn that it was an ineligible contribution, the report said. If the contribution can’t be returned, it must be turned over to the city clerk. As HorizonFest did not appear to meet the criteria of a fundraising function, and there were no records for every donation in this case, the money from the donation jar should have been returned or paid to the city clerk, the report said.

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The audit also noted some “apparent contraventions” of the Municipal Elections Act, including financial records for beverage sales at HorizonFest. These included credit-card and cash transactions that were deposited into the bank account of a Horizon representative using the Square point-of-sale system and later transferred to the Horizon’s advertiser bank account. Upon settlement, there was an “unexplained discrepancy” of $86.04 between the Square report and the amount deposited by Square into the representative’s bank account, the report said.

“Although the individual transferred the full deposit amount to Horizon Ottawa’s third-party advertiser bank account, the unexplained discrepancy suggests that Horizon Ottawa did not appropriately maintain financial records, nor did the organization identify or investigate the discrepancy with Square at the time of deposit,” the report said.

Horizon had contemplated appealing the audit, but dropped the matter last December after lawyers representing the city said they would seek legal costs if Horizon lost the appeal. Horizon operated on a budget of about $60,000 in 2023, co-ordinator Sam Hersh said at the time.

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