This chapter contains explanations of policy on the following subjects:
In simple terms, a lottery scheme may be defined as any scheme that has the following three components:
Therefore, a lottery scheme exists if money is paid or some other consideration is given for a chance to win a prize.
There are many types of lottery schemes for which licences are not available. The licensing authority will confirm whether or not a licence is available for a proposed lottery scheme. If the proposed event is one for which a lottery licence is available, the organization must apply for a lottery licence. The organization is responsible for ensuring that all its schemes are operated legally.
Licences are available for certain types of games of chance and games of mixed chance and skill.
Games of chance, sometimes called “mechanical games,” do not involve any element of skill. Games of chance are the most popular form of gambling. There are hundreds of these games, including raffles, bingo, wheels of fortune and break open tickets.
In games of skill, the element of chance is virtually non-existent. Checkers, chess, bowling, tennis, golf and all sports contests are examples of games of skill.
Games of “mixed chance and skill” combine both elements and include most games played with cards. Blackjack is an example of a game of mixed chance and skill.
Organizations may conduct contests resembling lottery schemes to promote their products and increase sales. Although there is no formal definition of a contest, contests are often operated by commercial for- profit organizations or their representatives. These organizations cannot be licensed to operate a lottery because they are not charitable. Therefore, the company must ensure that the contest does not fall within the definition of a lottery scheme.
Prior to conducting a contest, organizations may first wish to:
Only those games for which a licence is available from the Registrar may be licensed.
The Criminal Code (Canada) prohibits the following lottery schemes:
In Three-Card Monte, the dealer shows three cards (usually aces), two red and one black, then shuffles them face down. The player tries to guess the location of the black ace. A variation of the game is played with three cups or walnut shells and a pea.
A coin table is enclosed by a rail and has a highly polished square surface, with many small, coloured circles. The players toss pennies or other coins from outside the rail onto the layout and receive a prize if the coin lands inside the circle.
A punchboard is made of pressed paper full of holes each containing a printed slip. Players pay to punch out a slip, and win a prize if the slip has a lucky word or number.
The Registrar will not issue licences for the following lottery schemes. This is not an exhaustive list; any new lottery schemes should be proposed to the Registrar for review before any further action is taken.
A licensee must not allow any person apparently under the age of 18 to participate as a player in any game of chance, or the age of 19 if alcohol is included in the prizes.
Advertising is an integral part of the conduct and management of lottery schemes, therefore the licensee is responsible for the design, placement and cost of advertising.
Licensees must consult the licensing policies for each type of lottery and the terms and conditions of their licences for specific advertising and promotion restrictions.
See also “9.7.1. Bingo advertising and promotion”. For pooling bingo halls operating under the Bingo Revenue Model, see “10.10.1(d) Marketing fund”.
All content, including graphics, used to advertise and promote licensed lottery events must comply with the following guidelines:
There are areas of the province without a local municipal council. These include unorganized territories, First Nations communities and Crown lands.
For the purposes of lottery licensing, an unorganized territory is any geographic area without a local municipal council. Eligible organizations in unorganized territories must apply to the Registrar for a lottery licence.
In addition, only the Registrar may issue licences for events to be conducted in First Nations communities (except in the case of First Nations with delegated authority) and on Crown lands, such as military bases.
Prior to making a decision to suspend or cancel a lottery licence, the licensing authority must consider the implications, with regard to the integrity of the gaming event and public expectations. The licensing authority may suspend or cancel a licence if it is in the public interest to do so.
If a licence is cancelled or suspended for an indefinite period, the licensee must refund all ticket purchases. In appropriate circumstances, the licensing authority may allow the licensee to complete the event, then take administrative action after all prizes have been awarded. For example, the licensee’s future licence applications may be denied, or licences may be issued with additional terms and conditions.
If the licensee believes that it cannot fulfil the terms and conditions of its licence, it may apply to the municipality or the Registrar to have its licence cancelled. The licensing authority must not cancel a licence if the licensee has requested the cancellation solely on the basis of insufficient sales. The licensee must show that cancellation of the licence is in the public interest. Should the licensing authority grant the request, the licensee must refund all ticket purchases and wind down the event in an orderly manner.
See also “1.5.1. Refusing, cancelling or suspending a licence” for further information.
The following policies apply to the HST:
For details on specific circumstances and any applicable taxes, please contact the appropriate financial authority.
For pooling bingo halls, please see also “10.11.1. Application of Harmonized Sales Tax (HST)”.
Licensees may employ Gaming-Related Suppliers and Gaming Assistants to provide the goods and services and professional assistance necessary for the conduct and management of lottery schemes.
The Gaming Control Act, 1992 and its Regulations govern the commercial sector that supplies the charitable gaming industry. Gaming-Related Suppliers and Gaming Assistants must be registered under the Act. Sections 2–10 of Regulation 78/12 define classes of Gaming-Related Suppliers and Gaming Assistants that require registration. These include:
Category 1 Gaming Assistant—An individual who is employed in the conduct, management or operation of a lottery scheme or in the operation of a charitable gaming site and who, in the opinion of the Registrar, exercises a significant level of decision-making authority or has significant supervisory or training responsibilities with respect to the lottery scheme or the site.
Category 2 Gaming Assistant—An individual who is employed in the conduct, management or operation of a lottery scheme or in the operation of a gaming site and who, in the opinion of the Registrar, does not exercise a significant level of decision-making authority or have significant supervisory or training responsibilities with respect to the lottery scheme or the site.
Gaming-Related Supplier—A person who manufactures, provides, installs, tests, maintains or repairs gaming equipment or who provides consulting or similar services directly related to the playing of a lottery scheme or the operation of a gaming site.
Seller—Someone who is permitted to sell break open tickets on behalf of a licensed charitable or religious organization.
Operator—A person who operates a gaming site.
Before issuing a licence to an eligible organization that plans to use the services of a Gaming-Related Supplier, the licensing authority must ensure that the Gaming-Related Supplier’s registration is valid. Municipalities can verify the registration status of a Gaming-Related Supplier by requesting a copy of the registration certificate.
If the registration certificate has expired, but the supplier has applied for a renewal and paid the renewal fee prior to expiry, the registration will be deemed to have been renewed until the Registrar grants the renewal or registration is revoked. The supplier must provide proof that the renewal application was made and the fee was paid prior to the expiry date. This proof could be in the form of receipt for the renewal fee or a dated courier’s receipt, signed by someone from the AGCO.
Municipalities can also quickly verify registration status by contacting the AGCO.
Please see “9.1.2. Bingo hall registration” for further information.
The Regulations under the Gaming Control Act, 1992 grant certain classes of persons exemption from registration.
See also Section 11 of Ontario Regulation 78/12 made under the Gaming Control Act, 1992 for further information on classes of person exempt from registration under the Act.
When a lottery licence is issued, the licensee becomes responsible for the conduct and management of the lottery event. Provisions in the Gaming Control Act, 1992 and its Regulations allow the licensee to use the services of a Gaming-Related Supplier to assist in the conduct of the event, but these suppliers may only perform certain tasks. Some tasks cannot be delegated, and must be performed by bona fide members of the licensed organization.
Refer to the relevant chapter for each type of licensed lottery event for further information.
The licensed organization must perform the following general administrative functions:
According to the terms and conditions for lottery licences, bona fide members of the eligible charitable organizations must conduct and manage the licensed lottery scheme. This is a legal requirement. Without the participation of bona fide members, as set out in the licence, the lottery becomes illegal. In such a case, the licensing authority may suspend licences for future lottery events. A bona fide member for the purposes of lottery licensing is an individual who:
A bona fide member cannot be a member of convenience. That is, he or she cannot have been admitted to the organization solely to assist in the operation of the lottery scheme.
A bona fide member of an organization that is a member of a Hall Charities Association cannot be a bona fide member of another member organization of the Hall Charities Association, unless that individual meets the membership requirements for the other organization as well.
The following conflict of interest guidelines have been established to give the public confidence in the integrity of charitable organizations conducting lottery events. As this is a sensitive issue, licensees must be vigilant in preventing any possibility of a potential or perceived conflict of interest.
Examples of conflict of interest
Conflicts of interest could jeopardize the public’s confidence in the integrity of licensed gaming events. Although conflicts of interest may not result in criminal charges, they could affect the reputation of the organization in question, and could even jeopardize the organization’s future licensing privileges. Conflict of interest guidelines are set out in the relevant chapter for each type of licensed lottery event.
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: