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Internal financial statements of the Ontario Secondary School Teachers’ Federation for last year show the union maintains a substantial reserve fund called the Member Protection Account.

Mark Blinch/The Globe and Mail

Ontario's high school teachers' union was sitting on more than $65-million in financial reserves while negotiating a secret $1-million payment from the Liberal government to cover bargaining costs, The Globe and Mail has learned.

The union spent $1.8-million from that reserve fund on political activities and allocated hundreds of thousands more for bargaining expenses in the year before it negotiated the government payout.

Internal financial statements of the Ontario Secondary School Teachers' Federation for last year, obtained by The Globe, show the union maintains a substantial reserve fund called the Member Protection Account. The reserve's total balance at the end of the 2014 fiscal year – when the union began negotiating a new collective agreement with the province – was $65,674,933, up more than $5-million from the year before. The fund has been used to pay for such things as bargaining costs, political action and grievances.

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The revelations raise questions about the rationale for the $1-million government payment to OSSTF. Both the government and union have insisted it was necessary for taxpayers to compensate the union for the cost of collective bargaining because the province's new negotiating system made talks lengthier and more complex than before.

The $1-million for OSSTF was one of several payments, totalling $3.47-million, the government agreed to give to four teacher and support staff unions in three rounds of bargaining since 2008 to subsidize negotiating costs. The payouts were kept secret until The Globe uncovered them last month.

OSSTF president Paul Elliott did not respond to a request for comment, including questions about whether it was fair for taxpayers to cover the union's bargaining costs when OSSTF had extensive funds of its own.

Education Minister Liz Sandals's office refused to say whether the government knew OSSTF had this cash when it agreed to the $1-million payment. Spokeswoman Alessandra Fusco provided a statement reiterating that the government will ask teachers' unions to provide "an accounting and verification" of their negotiating costs.

The Member Protection Account has existed since at least 1991, the financial records indicate. The account is primarily a rainy-day fund to cover strike pay in the event of job action, sources with knowledge of the union's operations said. But the sources said there is nothing to prevent the union from using the funds for other expenses, such as its bargaining costs.

It appears the account was used to cover at least some of the union's bargaining expenses in 2014. The financial statements include line items for "resumption of bargaining costs" ($390,289); "special negotiations meetings" ($687,595) and "bargaining communications plan" ($88,705) paid from the account.

The account has been used for other purposes. The largest single expense from it in 2014 was "election readiness," at $1,839,650. Elections Ontario records show OSSTF poured money into last year's provincial election campaign, including $250,000 to help bankroll the Working Families Coalition, a union umbrella group that ran attack ads against the Progressive Conservatives.

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The account is kept separate from the union's operating budget. It is regularly replenished with income from the union's investments and surplus funds from the operating budget. In 2014, the union spent $6,410,912 from the Member Protection Account, but income from investments ($7,187,616) and transfers from the operating budget ($4,420,958) more than made up for it. The account balance grew from $60,442,834 to $65,674,933 over the course of the year.

The reserves appear to have been stable over the years: since 2011, the OSSTF documents show, the amount of money in the account has never fallen below $60.4-million.

Three other unions – the Ontario English Catholic Teachers' Association, the Association des enseignantes et des enseignants franco-ontariens (AEFO) and the Canadian Union of Public Employees, which represents some support staff – have also received payments from the government to help cover negotiating costs.

In an e-mail, AEFO president Carol Jolin dodged questions about his union's finances, but said the $500,000 AEFO will receive from the government for costs in the recent bargaining is justified.

"In the past, the government requested accounting reports and AEFO co-operated fully. We have no expectations that this would not be the case for this round of negotiations," he said. "That being said, the new bargaining framework imposed extraordinary costs."

One union, the Elementary Teachers' Federation of Ontario, has never received any payments. In a statement to The Globe, ETFO confirmed it also maintains a reserve fund, which it uses to cover all of its bargaining costs.

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"Like other unions, ETFO has a fund derived from member dues to cover strike pay and other expenses associated with strike and collective bargaining. That includes costs which are incurred in representing our members during bargaining," ETFO said in the statement.

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