All licensees must hold lottery proceeds in designated lottery trust accounts, for the purposes specified in the lottery licence application and approved by the licensing authority. The licensing authority may limit the amount that may be held in the trust account. Lottery proceeds must be used for the purposes approved by the licensing authority and cannot be accumulated for other purposes or over a period of time not approved by the licensing authority.
A licensed organization must open and maintain a separate lottery trust account, designated as a trust account by the branch of a recognized financial institution, in the Province of Ontario. The designated lottery trust account must be in Canadian funds. If the licensee (except for a Hall Charities Association in a non-pooling bingo hall) conducts more than one type of lottery event, it may hold either one designated lottery trust account for all lottery proceeds or a separate designated lottery trust account for each type of lottery.
A Hall Charities Association in a non-pooling bingo hall may hold either a separate designated lottery trust account for each type of lottery event to account for all lottery proceeds or a minimum of two (2) designated lottery trust accounts as permitted under the Financial Management and Administration of Non-Pooling Bingo Halls Terms and Conditions.
Licensees that are permitted to accept American currency must also maintain a trust account in American funds, as set out in Section 3.6.5, “Lottery trust accounts for American currency.”
If the licensee maintains only one lottery trust account, the licensee must keep a separate ledger for each type of lottery event and for each licence issued. The bookkeeping and accounting requirements for each type of lottery are covered in detail in the licence terms and conditions.
The trust account(s) must:
The fact that it is a trust account must be stated on the face of the cheques. If a licensee’s cheques do not currently state this fact, the licensee should ensure that the information is added when cheques are reordered.
The licensee must keep all records for a minimum of four (4) years. In addition to the account information, the licensee must keep a general ledger of all expenses supported by receipts and/or original invoices.
The following rules apply to lottery trust accounts:
See “9.12.1. Lottery trust accounts for bingo events” for further information. For pooling bingo halls, please see “10.8.1. Lottery trust accounts”.
The licensee must pay start-up costs, also commonly known as “seed money,” for the conduct and management of a licensed lottery event from the designated lottery trust account. However, if there are no funds or insufficient funds in the designated lottery trust account the licensee may write a cheque or make an electronic transfer from its general operating account to its lottery trust account to pay for the start-up costs.
Upon completion of the licensed lottery event the licensee must repay the funds by cheque or electronic transfer to its general operating account from its designated lottery trust account. In this instance, the licensing authority must monitor the repayment of the start-up costs and ensure that the repayment is made within an appropriate time period.
Licensing authorities may approve a portion of lottery proceeds to be used to pay for insurance premiums or the indemnification of officers, directors or trustees in some circumstances. Approval must be received prior to making the expenditure. The licensing authority must review each request on a case-by-case basis. To be an eligible use of proceeds, the charitable organization must demonstrate that this expense is necessary to advance its objects and purposes and is in compliance with the Charities Accounting Act. Hall Charities Associations must show that this expense is necessary in relation to the conduct and management of their licensed lottery events. If approved, the insurance or indemnity can be paid for within the maximum allowable administrative expenses set out by the Registrar.
In general, lottery proceeds cannot be accumulated. They are intended to provide a public benefit and must be used to do so in a timely manner. However, with the prior approval of the licensing authority, an eligible organization may accumulate lottery proceeds, subject to the terms and conditions imposed by the licensing authority.
To ensure compliance with lottery licensing policy and the terms and conditions of lottery licences, the licensing authority must monitor the use of revenues and the level of funds in the lottery trust account(s).
When an organization wishes to accumulate lottery proceeds it must apply to the licensing authority and demonstrate that:
Eligible organizations conducting bingo events in communities that border the United States may accept American currency during the conduct of bingo events, which may include break open ticket sales.
If a patron purchases bingo paper in American funds, any prizes won must be paid out in American funds. If the paper is purchased in Canadian funds, the prizes must be paid out in Canadian funds. House rules may be applied that may or may not require patrons to buy all bingo paper, including specials, in the same currency. These rules must be clearly displayed.
Eligible organizations that accept American currency must keep separate Canadian and American lottery trust accounts that have been designated as trust accounts by the branch of a recognized financial institution in Ontario, and must deposit the funds into the corresponding account. Hall Charities Associations in non-pooling bingo halls must maintain a separate American trust account for each type of licensed event.
All lottery expenses and eligible uses of proceeds must be paid from the Canadian account. The American account may only be used to deposit the American currency collected during the event, with the exception of withdrawals for a cash float for the conduct of a bingo event. Expenses, donations or any other withdrawals cannot be made from this account unless the licensing authority grants permission.
The maximum amount that may be accumulated in this account must not exceed the total value of the estimated prize board. When accumulated funds in the American account exceed the estimated prize board, they must be transferred to the Canadian lottery trust account. The date of the transfer, the exchange rate, and the premium or loss (at buying rate), as well as any eligible expenses (uses of proceeds) made from the Canadian account, must be recorded in the Bingo Hall Charity Association Report and in the financial ledgers.
Funds may be transferred from the American account to the Canadian account without the preapproval of the licensing authority but must be moved if the licensing authority requires them to be moved.
The terms and conditions of lottery licences require organizations to provide the licensing authorities with a verified financial statement within 180 days of the organization’s year-end. The type of financial review required depends upon the licensee’s gross annual revenues from all sources. Licensees that receive less than $250,000 in gross annual revenues must prepare financial statements in accordance with the standards set out in the CPA Canada Handbook. Licensees that receive $250,000 or more in gross annual revenues must prepare financial statements in accordance with the standards set out in the CPA Canada Handbook and which have been audited by a public accountant.
The licensing authority may require an audited financial statement to be prepared at the licensee’s expense at any time.
Organizations that already obtain audited financial statements from an independent accounting firm may submit these statements. In addition, the organization must provide a Review Engagement Report or an Auditor’s Report addressing compliance with the terms and conditions and regulations of their lottery licence(s). A public accountant must prepare the audited compliance report in accordance with Section 5815 of the CPA Canada Handbook.
Organizations that realize less than $250,000 from all sources during their fiscal year must provide an annual financial statement verified by the two signing officers of the lottery trust account(s) and the organization’s Board of Directors. At its discretion, the licensing authority may also request a compliance report. The compliance report must be verified by the licensee’s Board of Directors.
For pooling bingo halls operating under the Bingo Revenue Model, see Section “10.7.1. Reporting requirements” for further information.
The licensing authority may require a complete financial picture of a licensee’s gaming operations before the expected delivery of an annual financial statement, or the licensing authority may require a thorough review by a third party. The licensing authority may require a licensee to provide an audited financial statement within the time period set out in the licence, or as specified by the licensing authority.
In order to safeguard the interests of both the public and the licensee, and to ensure that all prizes can be awarded, the licensing authority may require that an organization submit a financial guarantee covering the total value of prizes.
The licensing authority must require a financial guarantee for lotteries with a total fixed prize value of $10,000 or more, including taxes. When the total fixed-prize value is $10,000 or more, the licensing authority requires an irrevocable standby letter of credit as the form of financial guarantee. (See 3.6.8, “Letters of credit” for further information.)
Where deemed appropriate, the licensing authority may also require a financial guarantee for lotteries with a fixed prize amount below $10,000 where the prize is a percentage of the gross ticket sales.
Acceptable forms of financial guarantees are:
The Registrar may specify the form of financial guarantee that must be provided.
Guarantees for municipally issued licences must be made payable to the municipality and guarantees for provincially issued licences must be made payable to the Minister of Finance. A guarantee must begin on the date of the licence application and expire no sooner than 45 days after the licence expiry date. The financial guarantee must indicate the purpose for which it was issued and must be in a form acceptable to the licensing authority.
If a licensee is unable to award the prizes approved by the licence, the licensing authority may draw upon the financial guarantee to ensure that the prizes are awarded.
The licensing authority will return the financial guarantee to the organization as soon as the organization has distributed all prizes and submitted the list of winners and the required financial reports. Therefore, it is in an organization’s best interest to fulfil these obligations as soon as possible.
In the case of municipal licences, the municipality must inform the Registrar if the licensee is unable to award the prizes as approved in the licence. This information may have implications for future applications from the licensee.
With the exception of 50/50 draws, licensing authorities must obtain irrevocable standby letters of credit for lottery licences with a total prize value of $10,000 or greater, including taxes. A licensing authority may also require a letter of credit for a lower prize amount. A letter of credit or other financial guarantee may be required for 50/50 draws where deemed appropriate.
The letter of credit must:
The licensing authority may accept a letter of credit set up and paid for by a third party that permits draws to secure the licensee’s obligations.
A letter of guarantee is not an acceptable financial guarantee. A letter of credit must be made payable independent of any occurrence of default on any obligation by the licensee.
Payment under a letter of credit must not require the Minister of Finance or municipal licensing authority to provide a statement that amounts paid will be retained or used in connection with any obligation or pursuant to any agreement between the licensing authority and the licensee.
The licensing authority will return the letter of credit to the licensee once the licensee has distributed the prizes and submitted the list of winners and a financial report. If a licensee is unable to award the prizes as approved on the licence, the licensing authority may draw upon the letter of credit to ensure that the prizes are awarded as approved on the licence.
A municipality must inform the Registrar if a licensee is unable to award the prizes. A licensee’s inability to award prizes may have implications for the licensee’s future applications.
Licensees must complete accurate standard financial reports for each lottery event. The reports must be filed with the licensing authority in accordance with the reporting requirements of the terms and conditions of the lottery licence. Licensing authorities will report any inconsistencies to the AGCO.
The licensee must provide the licensing authority with a monthly report verified by the licensee’s Board of Directors, setting out all expenses paid from the proceeds derived from the charitable gaming event, as prescribed by the Registrar. The monthly report must be filed within 30 days of the end of the month covered by the report.
Where there is a Hall Charities Association (HCA), it must provide the licensing authorities and the Registrar with a financial report for each monthly period. The report is due 30 days following month-end and must include the necessary information, which includes all licensed lottery events held within the bingo hall. Further details are provided in chapter 10.
Electronic funds transfer (EFT) allows for the transfer of funds between accounts by electronic means. EFT may be used:
The provisions for licensees and HCAs that choose to implement EFT are detailed in the Financial Management and Administration of Pooling Bingo Halls Terms and Conditions (4242). In general:
The licensee and HCA must not use other forms of electronic banking such as:
EFTs must not be used to pay certain expenses including: