The licensing authority must handle requests from organizations wishing to use lottery proceeds for building or renovation projects in the same manner as any other request for the use of lottery proceeds. The organization must show that the building fund constitutes an eligible purpose.
2.8.1 (A) Eligibility criteria for building funds
The licensing authority may approve an eligible organization to use up to a maximum of 50 per cent of net lottery proceeds for the capital costs of construction, repair or the leasehold improvement of real property including land and buildings, if:
- the property is owned by the eligible organization or is leased on a long-term basis from a non- profit organization; and
- the organization can show that a public benefit will result.
The following types of construction or renovation may qualify:
- the construction of a new wing for a public hospital;
- the construction or renovation of a church;
- the renovation of part of a building owned by a service club that the club makes available to charitable organizations free of charge; and
- the construction of a community centre, available to all local residents for activities beyond the municipality’s mandate, provided that the building is not owned and operated by the municipality.
2.8.1 (B) Approval process for building funds
The licensing authority may approve a building fund under the following conditions:
- The operation of the building is required for the direct delivery of the charitable objects or purposes of the organization.
- The building provides a public charitable benefit to the community or is available free of charge to other non-profit organizations within the community and used for their approved charitable purposes.
- The organization must obtain prior approval from the licensing authority before accumulating lottery proceeds in a building fund.
- The licensing authority must add special terms and conditions to ensure protection of the building fund.
- If the organization does not own the building, it may still be eligible to set up a building fund if it has a valid long-term lease in a building owned by a non-profit organization.
Where the building is not used solely for eligible purposes, the maximum amount of lottery proceeds approved for the building fund must be proportional to the percentage of time the building is used to provide a public charitable benefit.
If the applicant organization wishes to use lottery proceeds for the renovation or construction of a building, it must submit the following information to the licensing authority for review prior to, or with the licence application:
- an explanation of the capital expenditure, a written estimate of the amount needed for the building fund, and the amount of net lottery proceeds to be used (up to a maximum of 50 per cent );
- a budget of the proposed project, including an itemized description of all individual costs;
- the total cost to be incurred;
- a budget for the organization, listing all expenses and all income for the appropriate fiscal year;
- architectural plans (where applicable), especially for new facilities or extensive renovations;
- an explanation of how the use of lottery proceeds for the building fund will affect the organization’s service delivery and why the operation of the building is required for the direct delivery of its charitable objects or purposes;
- proof of ownership or a copy of the lease and documentation regarding the non-profit organization that owns the building;
- a plan of how the assets will be disbursed in case of the organization’s dissolution;
- copies of written estimates, including labour and material costs for the project;
- details of the main uses of the proposed building or renovation project and an explanation of other uses for the facility; and
- other sources of funding available for the project.
All of these criteria will not be relevant in all cases. The licensing authority will base its decision on whether the building/facility will be of benefit to the community or a charitable group, and what happens to the proceeds if the building/facility is sold.
Please note that general maintenance costs are not eligible as part of a building fund.
The licensing authority may grant an organization permission to use a specific amount of proceeds from any licensed lottery event for a building fund. A maximum of 50 per cent of the net lottery proceeds may be allocated to the building fund, once approval has been given for the fund. The licensing authority must approve a specific amount of proceeds, rather than a percentage, and must specify the period of time over which funds may accumulate in the building fund. The period of time will be limited and reasonable and must not exceed two years without further approval.
2.8.1 (C) Reporting requirements for building funds
The eligible organization must:
- submit regular financial reports, as required by the lottery licence;
- prepare a document outlining the value of the lottery proceeds applied to the building fund.
2.8.1 (D) Selling or mortgaging property purchased with a building fund
The organization must obtain prior approval from the licensing authority in order to sell or mortgage any property acquired or renovated through a building fund made up of lottery proceeds. The organization must also prepare a document outlining the value of the lottery proceeds applied to the building fund and obtain prior approval on how the proceeds will be distributed upon the sale.
When the property is sold, the organization must calculate the value of the lottery funds contributed to the building fund and must direct that amount of money to other eligible charitable organizations in the community.