TOARC (The Ontario Aggregate Resources Corporation) is a corporation entrusted by the Ontario provincial government to collect and disburse government fees for haulage of aggregates (gravel, crushed rock and sand). Each year these fees total roughly $9,000,000.

TOARC was created in 1997 by APAO (Aggregate Producer's Association of Ontario) and is wholly owned by APAO. APAO is the trade organization for the Ontario aggregate industry.

The publicly available information from TOARC consists of:

1. 1997-1999 TOARC Annual Reports,
2. 1997-1999 MAAP Annual Reports (MAAP, i.e., Management of Abandoned Aggregate Properties, is a part of APAO), and
3. A booklet of statistics from TOARC.

TOARC with its relationships to other organizations and its flow of funds to/from related organizations is complex. The available information describing these relationships and this flow of funds is sparse. This complexity easily leads to confusion. The following two tables try to explain this arrangement. Table 1 discusses TOARC along with APAO, MAAP, the Trust, and MNR. Table 2 discusses the three funds that make up the Trust, namely, the Collection Fund, the Old Rehab Fund and the New Rehab Fund. Following these two tables, Figure 1 uses a box-and-arrow diagram to describe the annual flow of funds among these organizations.

Table 1. TOARC and Related Organizations

Organization	Name of Organization	Notes on the Organization
TOARC	The Ontario Aggregate Resources Corporation	TOARC is wholly owned by APAO (see below). The sole purpose of TOARC is to administer the Trust (see below), collecting and disbursing Ontario Provincial funds.  Collects haulage fees (6 cents per tonne, total about $9M per year) for Province of Ontario. There is no external audit of this collection of fees. Disburses approximately $600,000/year in Trust funds (from Old Rehab Fund) to APAO (to MAAP).
APAO	Aggregate Producers' Association of Ontario	Trade organization for Ontario aggregate operators. Wholly owns TOARC and appoints all TOARC directors.
MAAP	Management of Abandoned Aggregate Properties	MAAP is part of APAO.  MAAP is funded by government money (by Trust money) disbursed by APAO-owned TOARC. MAAP's funds come from the Old Rehab Fund and are used to rehabilitate pits abandoned in 1989 or before, as well as for research on rehabilitation.
The Trust	Aggregate Resources Trust	Created by Province of Ontario in 1997 to hold three funds: Collection Fund, Old Rehab Fund and New Rehab Fund. Province of Ontario owns the Trust's money, i.e., all the money in Collection Fund, Old Rehab Fund and New Rehab Fund. Province of Ontario entrusts TOARC to administer the Trust and its three funds.
MNR	Ontario Ministry of Natural Resources	MNR entrusts TOARC to administer the Trust and to collect and disburse the Trust's money. This includes collecting and disbursing annual pit license and wayside fees. The Trust's money is divided into three funds: Collection Fund, Old Rehab Fund and New Rehab Fund (see below).

 

Table 2. The Three Funds in the Aggregate Resources Trust

Fund	Official Name of Fund	Notes of Fund
Collection Fund	Aggregate Resources Fund	Collects fees from license and wayside fees (6 cents per tonne). Also holds royalty payments and annual fees.
Old Rehab Fund	Abandoned Pits and Quarries Rehabilitation Fund	Holds money to rehabilitate pits abandoned in 1989 or before.  Old Rehab Fund money is disbursed by TOARC (controlled by APAO) to MAAP (part of APAO). This money is used to carry out rehabilitation (about $600,000/year). Before 1997, the Old Rehab Fund was held for the Province by APAO. Each year receives half cent per tonne (out of the total six cents per tonne, total of about $600,000/year) of haulage fees.
New Rehab Fund	Rehabilitation Fund	Holds money to rehabilitate pits whose licenses were revoked after 1989. Initially, in 1998, the New Rehab Fund contained $59M from previously existing Rehabilitation Security Deposits owned by the Province of Ontario.  During 1998 and 1999, $49M of the New Rehabilitation Fund was refunded to licensees/permittees, at the order of the MNR, leaving $10 million in the New Rehab Fund.

 
 

This section describes interactions of TOARC with related parties and organizations, using the diagram in Figure 1.

APAO members, who are licensees, elect APAO directors. The top left box shows the aggregate licensees and permittees. These include APAO members. APAO restricts its active members to organizations that actually extract aggregates. APAO has roughly 86 active members. (This count of 86 considers that large operators, such as Lafarge Corporation, have a single APAO membership). APAO members elect the Directors of APAO, as shown by the arrow from the Licensees & Permittees box to the APAO box.
 

APAO as a lobbyist organization. APAO lists its membership benefits in government affairs as "lobbying" and "political fundraising". APAO's objectives in government affairs include: "Build and strengthen relationships with government officials, through repeated communications and on-going contacts. Achieve greater influence and input from APAO members into the policy-making process as it affects them, as well as insight into issues that may impact upon them." (Quotations from APAO web page: http://www.apao.com). In other words, APAO is a lobbyist organization, as illustrated by the arrow from the APAO box to the box for the Government of Ontario.

The Government owns the Trust. In 1997, the Government of Ontario established the Trust (Aggregate Resources Trust). In the same year, APAO created TOARC as a company wholly owned by APAO. On June 27, 1997, the Government entrusted the administration of the Trust to TOARC. The 1999 TOARC Annual Report states: "Pursuant to Section 4.01 of the Trust Indenture, the Trust's assets and the income and gains derived therefrom are property belonging to the Province of Ontario." This makes it clear that the Government and not APAO or TOARC is the owner of the monies in the Trust. This also makes it clear that interest on invested funds, such as the interest on the $11 million in the New Rehab Fund, is Government money. The arrow from the Government of Ontario box to the Aggregate Resources Trust box illustrates this ownership.

Appointment of TOARC directors by APAO. APAO appoints all seven Directors of TOARC (see arrow from APAO box to TOARC box). APAO has a convention for the apportionment of these seven directors, as follows. Four (the majority) are appointed from APAO. The other three are appointed this way: One is an operator who is not in APAO, one represents municipalities and "conservation authorities", and the final one represents the Conservation Council of Ontario (CCO). The current CCO representative is Mr. I. H. "Tony" Jennings; apparently Mr. Jenning's father, Mr. I. L. Jennings, is a former president of APAO. In addition, there is an "ex officio" director from the Ministry of Natural Resources. This way of appointing directors gives APAO clear control over TOARC.

No effective distance between board of TOARC and officers and board of APAO . The officers of TOARC, as listed in its annual reports, for years 1997, 1998, 1999 and 2000 are as follows:

• Roy Bertolo, 1997 President, 1998 Chairman, 1999 Vice-Chairman
• Richard Olsen, 1997 Vice President, 1998, 1999, 2000 Chairman
• Richard Seibel, 1997, 1998 Secretary/Treasurer
• David Sterrett, 1998, 1999, 2000 President
• Norm Flemington, 1999, 2000 Secretary/Treasurer
• Ken MacLean, 2000 Vice Chairman

TOARC administers the Trust. As shown by the arrow from the TOARC box to the Trust box, TOARC administers the Government-owned Trust. Note that the funds in the Trust are not owned by TOARC, nor by APAO, nor by the Licensees and Permittees.

Annual flow of funds. The annual flow of funds into and out of TOARC is documented by both Figure 1 and by Table 3, as will now be described. Each year TOARC collects government fees from Licensees and Permittees, placing the collected fees in the Collection Fund. These fees consist mostly of haulage fees, in which licensees pay the government fee of 6 cents per tonne of hauled aggregates. (Note: the fees were 8 cents per tonne before the establishment of TOARC.) The government dictates that the collected fees are to be disbursed as per Table 3. Figure 1 summarizes the same information. In Figure 1, the arrow for the flow of funds from the Trust to the Government of Ontario combines the three Government amounts from Table 3 ($5.0 million, $0.6 million and $2.6 million) into $8.2 million. The arrow from the Trust box to the MAAP box within the APAO box shows a flow of $0.6 million, for rehabilitation of abandoned pits.

There is an additional flow of funds ($740,000 in 1999) from the Trust to TOARC, for the expenses of running TOARC, as illustrated by the arrow from the Trust box to the TOARC box. (Aside: For reasons that are not entirely clear, this $740,000 to pay TOARC expenses is disbursed from the Trust's New Rehab Fund. This flow makes it appear that TOARC is running at the expense of future rehabilitation.)

Besides the annual flow of funds illustrated in Figure 1, there are other significant flows of funds. In terms of dollar amounts, the largest transaction that TOARC has carried out involved rehabilitation security deposits. This transaction is described in the 1999 TOARC Annual Reports as follows:

• "Upon creation of the Trust, rehabilitation security deposits held by the Crown, as represented by the Minister, were to be transferred to the Trust. In addition, the Crown directed the APAO to transfer, on behalf of the Crown, the Abandoned Pits and Quarries Rehabilitation Fund to the Trust. By December 31, 1999, the Minister and the APAO had transferred $59,793,446 and $933,485, respectively, to the Trust".
• "TOARC has been directed by the Minister to refund approximately 3,000 individual licenses and permittee accounts based on the formula of retaining $500 per hectare disbursed on licenses and 20% of the deposit amount for aggregate permits. As a result, during 1998 and 1999 the Trust refunded approximately $48.7 million and an additional $12,436 will be refunded when the Crown so directs."

Request 1: Clarify Annual Reports of the Trust, TOARC and MAAP.

It is difficult to follow the TOARC, Trust and MAAP Annual Reports, and these are the only publicly available financial information on TOARC. Statement line items in the TOARC annual report or the Trust annual report, such as "advertising", "professional fees", "management fees", and "research costs" are not explained, and cannot be reasonably correlated with the legal mandate of the Trust and TOARC. MAAP's annual report does not make clear how much of its funds covered APAO expenses and what these expenses were.

The reports are complicated by the labyrinthine arrangement in which APAO, a lobbying organization, owns TOARC which is entrusted by the Ontario government to collect and spend government money (about 9 million per year), a significant portion of which is handed back to APAO's MAAP group ($0.6 million per year). The appearance or possibility of abuse in such an arrangement is obvious. In other words, TOARC collects and spends government money without sufficient transparency or accountability.

R1.1: Therefore, it is requested that the TOARC, Trust and MAAP annual reports, or accompanying material, contain detailed explanations of line items of expenses paid and collected as a part of the operation of the Trust.

R1.2: Since TOARC is acting as the trusted agent of the Province of Ontario, collecting and disbursing government funds, TOARC should make all its records available to the public.
 

Request 2: Produce proper audit of collection and disbursal of annual fees.

Ernst & Young, the auditors of the TOARC annual report, state that the revenue charges to licensees and permittees were "not susceptible to satisfactory audit verification". TOARC has not provided sufficient accountability for the public to judge if TOARC is honestly and reasonably collecting and disbursing government fees. In the 1999 annual report , the TOARC president Mr. Sterrett states that TOARC itself audited a sample of tonnage reports, but apparently this "audit" was not given to Ernst & Young, or else Ernst & Young found it insufficient.

R2.1: TOARC should develop and publish an external audit of its collection and disbursal of government fees. This audit should apply to all fee collections and disbursals past and future.
 

Request 3: Clarify refund of $49 million to licensees/permittees.

The 1999 TOARC Annual Report states that in 1998-1999 TOARC disbursed approximately $49 million dollars of government funds to licensees and permittees. Neither the purpose nor the details of this transaction are clear. Being such a large transfer, this transaction should be explained in detail. It appears that many directors of TOARC (or the aggregate companies employing them), benefited monetarily from this transaction.

It appears that this disbursal effectively dismantled the existing mechanism for encouraging or guaranteeing that pits be rehabilitated, as will now be discussed. The disbursed $49 million made up most of the value of the security deposits to guarantee pit rehabilitation. In 1997, Bill 52 was passed, according to which pit operators are supposed to "progressively rehabilitate" their pits. It appears that MNR has not enforced this progressive rehabilitation. Indeed, in 1996-97, MNR fired half of its enforcement officers. The bigger picture is that it appears that the disbursement of the $49 million to pit operators is part of a larger set of actions which removed most inducement for pit operators to rehabilitate their pits.

One of TOARC's mandates is to encourage rehabilitation. If it should be the case that TOARC's disbursal of these security deposit funds is effectively discontinuing or discouraging pit rehabilitation, then it is urgent that this situation should be corrected.

R3.1: TOARC should produce a clear and thorough explanation of the details, the purpose and the effect of the disbursal of these rehabilitation security funds.
 

Request 4: TOARC, MAAP and APAO should clarify that Aggregate Resource Fund money is government money.

As the 1999 TOARC annual report states, "the Trust's assets and the income and gains derived therefrom are property belonging to the Province of Ontario." TOARC and MAAP should make clear the simple truth that they are funded from government money.

R4.1: In all communications by TOARC, APAO or MAAP, it should be clear that Trust funds held, collected and disbursed by TOARC are the property of the Government of Ontario and not the property of APAO, TOARC, MAAP or aggregate pit operators.

R4.2: APAO and TOARC should not make statements implying that operators or the APAO are voluntarily providing funds to the Trust, or that APAO or TOARC decide the amount of payments to government bodies such as municipalities.

R4.3: APAO and TOARC should not make statements implying that TOARC or MAAP are funded by APAO or by licensees or permittees.
 

Request 5: No Lobbying by TOARC.

TOARC's "sole purpose is to act as Trustee of the Aggregate Resources Trust" (from 1999 Annual Report). This sole purpose does not include lobbying. However, it appears that TOARC's presentation of cheques to municipalities is a lobbying exercise, as will now be discussed.

Annually, TOARC distributes cheques to municipalities in accordance with government requirements. These requirements are documented in Table 3 (above). TOARC often presents these cheques in a ceremony involving both the municipal Councillors and local aggregate operators. An example of such a ceremony is shown in a photograph in the 1998 TOARC annual report, page 7. On the same page, TOARC's lobbying sentiment is written this way: "Although the monies [presented to the municipality] are not specifically designated for a purpose under the Aggregate Resources Act, the Board [of TOARC] hoped the funds would be allocated to the Roads Department to support road projects and maintenance". The 1998 annual report goes on to describe these presentations by TOARC: $156,277.64 to Clarington, $168,679.75 to Flamborough, $22,711.08 to Sault Ste. Marie, $126,977.17 to Uxbridge, $30,389.42 to Pilkington and $140,133.26 to Puslinch.

TOARC's presentation of such cheques to municipalities in the presence of local pit operators is inappropriate if not unethical. These local operators seek to influence the Councillors of these municipalities (1) to pass by-laws to allow extraction, (2) to authorize the purchase of aggregates from these operators, etc., and their presence at a presentation of a large cheque helps provide these operators with the influence they seek. Therefore:

R5.1: TOARC should cease any activities which are lobbying or which have an appearance of lobbying.

R5.2: TOARC cheques to municipalities should not be delivered in the presence of APAO members.

R5.3: No TOARC officer or employee should urge municipal officials to use these payments from the Trust in an particular way, because this would be lobbying, which is not appropriate for TOARC.

R5.4: Any "education" or publicity activities on the part of TOARC and MAAP should present a balanced picture, including appropriate discussions of public concerns and potential environmental damage.
 

Request 6: MAAP annual reports should not promote the APAO goals, except when these explicitly follow from the Trust agreement.

The 1997-1999 MAAP annual reports appear to have a goal of promoting the APAO and its goals as a trade and lobbying organization. The MAAP annual reports promote the couple of dozen pits (about 40 hectares) it rehabilitates during the year, but fail to report on core rehabilitation issues, such as: How many un-rehabilitated pits are there? How big are they? How good or bad is their condition? When will they mostly be rehabilitated? Are we rehabilitating pits faster than operators are "disturbing" new areas and/or abandoning pits? MAAP is an integral part of APAO, so appearances and possibilities of conflict of interest are unavoidable. Clearly APAO and TOARC have quite different goals. It remains unclear how MAAP personnel, who are APAO employees, can separate their responsibilities to APAO from their responsibilities to TOARC.

R6.1: Publicity about rehabilitated pits, notably by MAAP, should not be designed to promote the particular goals of APAO, rather, the message delivered by MAAP should be balanced, including statistics of un-rehabilitated pits.

R6.2: TOARC and APAO should clarify the roles of personnel who are APAO employees but who are paid from TOARC funds. The amounts of all funds transferred from TOARC to APAO need to be spelled out in detail.

TOARC has the potential to be a continuing contributor to the good of the province, in helping to rehabilitate abandoned pits, in efficiently collecting and disbursing government fees/funds and in using knowledge of aggregate experts to guide the province to an enlightened approach to management of aggregate resources. However, this potential will not be realized unless TOARC is able to overcome challenges that arise from its complex foundations.

TOARC is rife with potential conflicts of interests, as is graphically shown by the cycles of arrows in the box-and-arrow diagram (Figure 1). Examples of TOARC's cyclic conflicts include:

• TOARC, owned by APAO, collects government fees from APAO members.
• APAO lobbies the government which owns the Trust which APAO-owned TOARC runs while TOARC disburses funds to APAO.
• TOARC, owned by APAO, disbursed $49 million of government funds to licensees and permittees, many of which are APAO members.

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Acknowledgements. The author thanks Mr. David Sterrett, Mr. Tony Jennings, Ms. Diane Cleveland, Ms. Jackie Fraser and Mr. Christopher McGuckin for providing information about TOARC and MAAP.

Postscript. The author welcomes any corrections to this document. Please contact Ric Holt, holt@uwaterloo.ca