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U.S.Department of Labor
Employment Standards Administration
Office of Labor-Manangement Standards
Washington, D.C. 20210
September 30, 2008
Mr. Cary R. Nelson
President
American Association of University Professors
1012 14th Street, N.W.
Washington, D.C. 20005
RE: International Compliance Audit Program (I-CAP)
American Association of University Professors ( AAUP)
LM File Number 000-325
Dear President Nelson:
The Office of Labor-Management Standards (OLMS) within the Department of Labor
recently completed a compliance audit of the American Association of University
Professors (AAUP) to assess its compliance with the provisions of the Labor-
Management Reporting and Disclosure Act of 1959 (LMRDA). The audit was
conducted under the OLMS International Compliance Audit Program (I-CAP).
On September 18,2008, the I-CAP Team conducted an exit interview with you and
Howard Bunsis, Secretary-Treasurer, via telephone; Ernest Benjamin, Executive
Director; Ann Franke, Legal Consultant; and Rachael Levinson, Senior Legal Counsel.
During the exit interview, the I-CAP Team reviewed audit findings, specified actions
that the AAUP must take to correct the deficiencies identified, and recommended
actions to enhance the union's internal controls. This letter captures the audit's findings
as generally discussed during the exit interview. It does not purport to be an
exhaustive list of all possible problem areas, since the audit was limited both in scope
and duration.
Reporting Violation - LMRDA Section 201(a)
Section 201(a) of the LMRDA requires that every labor organization that amends its
constitution and bylaws file a copy of the revised documents when the union files its
next annual financial report with OLMS.
The AAUP's most recent constitution, amended on June 10,2006, had not been
filed with OLMS at the start of the audit. Copies of this constitution have now
been filed. The Form LM-2 instructions require that if the AAUrs constitution
and bylaws were changed in the reporting period (other than rates of dues and
fees), a dated copy of the new constitution and bylaws must be submitted to
OLMS with the Form LM-2 for that reporting period (and as an electronic
attachment to the Form LM-2). The I-CAP Team informed the AAUP of its
responsibility to submit all future changes to its constitution to OLMS as an
electronic attachment to its next Form LM-2.
Reporting Deficiencies - LMRDA Section 201(b) - 2006 Form LM-2
Section 201(b) of the LMRDA requires that every labor organization file with OLMS an
annual financial report that accurately discloses the union's financial condition and
operations. The following deficiencies were noted on the AAUP Form LM-2 for the
fiscal year ending December 31,2006. The deficiencies identified in this section must be
corrected in an amended Form LM-2 for the report period ending December 31,2006.
Further, subsequent Form LM-2 filings must be prepared so as not to contain these
deficiencies.
2. The AAUP incorrectly answered "No" to Item 13 (Losses or Shortages). The
audit revealed that the AAUP wrote off $289 in missing petty cash at the end of
the fiscal year ending December 31,2006. The Form LM-2 instructions require
the union to answer "Yes" to Item 13 if the union experienced a loss, shortage, or
other discrepancy in its finances during the reporting period and describe the
shortage in detail in Item 69 (Additional Information). The AAUP must answer
"Yes" and describe the shortage in detail in item 69 (Additional Information).
3. The AAUP reported beginning baIances in Items 22 (Cash), 23 (Accounts
Receivable), 25 (U.S. Treasury Securities), 26 (Investments), 27 (Fixed Assets), 28
(Other Assets), 30 (Accounts Payable), and 33 (Other Liabilities) on the Form LM-
2 for fiscal year ending December 31,2006 that were different than the ending
balances on the Form LM-2 for fiscal year ending December 31,2005. For
example, the beginning balance in Item 23 (Accounts Receivable) on the 2006
Form LM-2 report was reported as $1,681,210, whereas the ending baIance in
Item 23 on the 2005 Form LM-2 was reported as $1,071,211, a difference of
$609,999. The AAUP reported in Item 69 (Additional Information) of the 2006
Form LM-2 that the balances were "adjusted to 2005 audit". This is not an
adequate explanation as to the reason for the adjustments. These changes must
be explained in greater detail in Item 69.
4. The $1,681,210 amount reported by the AAUP as the beginning balance in Item
23 (Accounts Receivable) included a $32,022 net reduction as an "allowance for
doubtful accounts". The AAUP described this amount as adjustments for the
difference between amounts billed versus the amounts actually owed and
received. The AAUP, however, was unable to provide documentation to support
the validity and accuracy of this account or these adjustments. The LM-2
instructions for Item 23 require that if accounts receivable are carried on the
union's books as net (gross accounts receivable less the allowance for doubtful
accounts), the union should report the allowance for doubtful accounts in Item
69 (Additional Information). Further, the LM-2 instructions for Schedule 1
(Accounts Receivable Aging Schedule) require that all accounts receivable that
were liquidated, reduced or written off during the reporting period be itemized
in Schedule 1 and further detailed in Item 69 (Additional Information).
5. The AAUP did not iternize on Schedule 1 (Accounts Receivable Aging Schedule),
Lines 1 through 24, all accounts receivable of $5,000 or more that were more than
90 days past due at the end of the report period. LM-2 instructions require the
reporting in Schedule 1 or all individual accounts receivable of $5,000 or more
that were 90 days or more past due at the end of the reporting period or that
were liquidated, reduced or written off during the reporting period. The audit
revealed approximately $265,753 of accounts receivable that should have been
itemized on Schedule 1. The AAUP must iternize these receivables on
Schedule 1.
6. The AAUP did not report all loans receivable on Schedule 2 (Loans Receivable).
The audit revealed that the AAUP made two loans, $4,000 to the Lincoln
University chapter and $10,000 to the Akron University chapter that were
outstanding during the audit period and were not reported on the Form LM-2.
The LM-2 instructions require the reporting in Schedule 2 of all direct and
indirect loans owed to the union at any time during the report period by
individuals, business enterprises, benefits plans, and other entities including
labor organizations.
7. The AAUP reported $1,184,078 in sales of investments in Schedule 3 (Sale of
Investments and Fixed Assets) and $1,081,143 in purchases of investments in
Schedule 4 (Purchase of Investments and Fixed Assets), but failed to report any
amounts in Line 14 ("Less Reinvestments") of Schedules 3 and 4. The AAUP
reported the full amount of sales and purchases of investments as net sales and
purchases in Item 43 (Sale of Investments and Fixed Assets) and Item 60
(Purchase of Investments and Fixed Assets). The audit determined that
sigruficant amounts of these sales and purchases were actually "reinvestments."
The Form LM-2 instructions for Schedules 3 and 4 require unions to enter on
Line 14 the total amount from the sale or redemption of U.S. Treasury Securities,
marketable securities, or other investments that was promptly reinvested (i.e.,
"rolled over") in the U.S. Treasury Securities, marketable securities, or other
investments during the reporting period.
Generally, "prompt" means reinvesting (or "rolling over") the funds in a week or
less without using the funds for any other purpose during the period between
the sale of the investment and the reinvestment. The AAUP must therefore
report the amount of "reinvestments" in Line 14 of Schedule 3 and 4 and report
only the net sales and purchases of investments in Items 43 and 60.
8. The AAUP failed to report the value of its investments at book value in Schedule
5 (Investments) and Item 26 (Investments). The Form LM-2 instructions require
the union to report the value of its investments at book value, which is defined as
the lower of cost or market value. The AAUP inaccurately reported an amount
higher than cost. The AAUP must report the investments at book value.
9. The AAUP incorrectly reported $142,078 of "money market funds" as marketable
securities in Schedule 5 (Investments) and Item 26 (Investments). The Form LM-
2 instructions require the total of all the union's cash, including savings accounts,
certificates of deposits, and money market accounts, to be reported in Item 22
(Cash).
10. The AAUP incorrectly "netted" the difference between interest income received
by the AAUP and broker fees paid by the AAUP in Item 40 (Interest Income).
The LM-2 instructions require the reporting of all cash receipts and all cash
disbursements. The LM-2 instructions do not permit "netting" which is
described as the offsetting of receipts against disbursements. The AAUP must
accurately report all interest income as cash receipts in Item 40 and all broker
fees paid as cash disbursements in Schedule 18 (General Overhead).
11. The AAUP incorrectly reported $149,160 of "corporate notes" in Line 25 (U.S.
Treasury Securities). Corporate notes are not U.S. Treasury Securities and are
instead reportable as "Marketable Securities" in Schedule 5 (Investments) and
Item 26 (Investments).
12. The I-CAP Team could not confirm the accuracy of the amounts reported on
Schedule 6 (Fixed Assets) because all assets codd not be identified and located or
the cost and value could not be verified. More specifically, certain office
furniture and equipment reported as fixed assets could not be identified or
located. The audit revealed that three Xerox copiers, the value of which had
been included in the AAUP's balance of fixed assets in Schedule 6, had actually
been disposed of prior to the end of the report period. Additionally, the cost and
date of purchase of certain assets on the AAUP's depreciation list could not be
'established. The Form LM-2 instructions require that the labor organization
accurately report details of all fixed assets, such as land, building, automobiles
and other vehicles, and office furniture and equipment owned by the labor
organization. In order to satisfy the reporting requirements for fixed assets and
report accurate and verifiable amounts in Schedule 6, all fixed assets must be
identified and located; a physical inventory must be conducted; and all asset
costs and values must be determined and accurately reported.
13. The AAUP incorrectly answered "No" to Item 15 (Acquisition or Disposition of
Assets in a Manner other than Purchase or Sale). The audit determined that
AAUP returned three obsolete Xerox machines to the vendor. As noted in the
above reporting deficiency, the AAUP still incorrectly included the value of these
assets in Schedule 6 (Fixed Assets). The AAUP must remove these balances from
Schedule 6, answer "Yes" to item 15, and report the detaiIs of the disposition in
item 69 (Additional Information) in order to accurately report fixed assets.
14. The audit revealed that AAUP operates a store for the online purchase of
merchandise by members at cost. The AAUP purchases, maintains, and sells this
union-related merchandise at cost. The AAUP, however, did not report the
purchase of this merchandise for resale in Item 59 (Supplies for Resale); or
receipts from the sale of this merchandise in Item 39 (Sale of Supplies); or the
value of its inventory of merchandise as an asset in Schedule 7 (Other Assets).
The AAUP must report these receipts, disbursements, and assets in accordance
with the LM-2 instructions.
15. The AAUP reported "Prepaid Other" as a description of assets in CoIumn (A) of
Schedule 7 (Other Assets). This description is not sufficient to identify the type
of assets, as required. The LM-2 instructions require that other assets must be
described in Column (A) and may be classified by general groupings or
bookkeeping categories, such as utility deposits or inventory of supplies for
resale, as long as the description is sufficient to idenhfy the type of assets. More
detailed descriptions in Column (A) of Schedule 7 are required.
16. The AAUP did not properly report accounts payable to Cadmus and MKTG
Services in Schedule 8 (Accounts Payable Aging Schedule). The individual lines
(Lines 1 through 24) of Schedule 8 should be used to report individual accounts
payable valued at $5,000 or more and that are 90 days or more past due at the
end of the reporting period or that were liquidated, reduced or written off
during the reporting period. The AAUP did not report the accounts payable to
Cadmus and MKTG Services even though both invoices were older than ninety
days and over. $5,000, and therefore should have been itemized in Schedule 8.
These accounts payable must be reported on an individual line in Schedule 8 and
must be properly categorized by age, as required in the Form LM-2 instructions.
17. The AAUP failed to report an additional $8,829 of account payables in Schedule 8
(Accounts Payable Aging Schedule) and Item 30 (Accounts Payable) that were
subsequently identified by the AAUP's accountant and noted by the I-CAP
Team. The AAUP must accurately report and categorize by age all accounts
payable in Schedule 8 and Item 30 as required in the LM-2 instructions.
18. The AAUP reported "Other Liabilities" as a description of other liabilities in
Column (A) of Schedule 10 (Other Liabilities). This description is not sufficient
to identify the type of liabilities, as required. The LM-2 instructions require that
other liabilities must be described in Column (A) and may be classified by
general groupings or bookkeeping categories, as long as the descriptions are
sufficient to identify the type of liabilities. More detailed descriptions in Column
(A) of Schedule 10 are required.
19. The AAUP reported the names of its officers and employees in order of first
name, last name, and middle initial in Column (A) of Schedules 11 (All Officers
and Disbursements to Officers) and 12 (Disbursements to Employees). The LM-2
instructions require the union to enter the last name, first name, and middle
initial of each officer and employee in Schedules 11 and 12, as appropriate.
20. The AAUP did not accurately report disbursements on Schedule 11 (All Officers
' and Disbursements to Officers) and Schedule 12 (Disbursements to Employees).
The Form LM-2 instructions require that direct and indirect disbursements to
each officer and employee that were necessary for conducting official business of
the labor organization be reported in Column (F). Specifically, disbursements to
one officer and one employee were overstated by approximately $555.69 and
$1,792.52 respectively in Column (F). Additionally, at least one employee's credit
card expenses totaling at least $2,438.92 were not included in the total expenses
reported in CoIumn (F).
21. The AAUP reported $1,013,707 in Item 67a (Withholdings Taxes and Payroll
Deductions - Total Withheld) which does not agree with the $1,021,253 total
amount for withheld taxes and all payroll deductions reported in Schedules 11
(All Officers and Disbursements to Officers) and Schedule 12 (Disbursements to
Employees). These figures should agree pursuant to the LM-2 instructions.
22. The AAUP did not report receiving any per capita tax in Item 37 (Per Capita
Tax). The AAUP reported receiving $4,768,635 in Item 36 (Dues and Agency
Fees). The audit discIosed that a portion of this $4,768,635 was actually
reportable as per capita tax in Item 37. The LM-2 instructions require including
in Item 37 the per capita tax portion of dues received directly by your
organization from members of affiliates, per capita tax received from
subordinates, either directly or through intermediaries, and the per capita tax
portion of dues received through a check-off arrangement whereby local dues
are remitted directly to an intermediate or parent body by employers.
23. Several itemization pages in support of Schedules 15 (Representational
Activities), 18 (General Overhead), and 19 (Union Administration)
disbursements contain inadequate descriptions of the type of business or job
classification in Column (B) and of the disbursement purpose in Column (C). In
several instances, the type of business or job classification in Column (B) was
inadequately described as "Professional Services", "Individual", "Consultant",
or "Vendor". In a few instances, the disbursement purpose in Column (C) was
inadequately described as "Professional Services". The Form LM-2 instructions
require reporting descriptions in Column (B) sufficient to adequateIy identify the
type of business or job classification of the entity or individual receiving
payments, such as printing company, office suppIies vendor, lobbyist, think tank,
marketing firm, legal counsel, etc. The Form LM-2 instructions require reporting
in Column (C) a brief statement or description of the reason the disbursement
was made, such as preparing organizing campaign pamphlets, staffing a help
desk, litigation regarding representation issues, etc. The AAUP must provide
more descriptive business types, job classifications, and purposes in Columns (B)
and (C) of Schedules 15,18, and 19.
Reporting Deficiencv - LMRDA Section 201(b) - 2007 Form LM-2
Although the I-CAP Team did not audit AAUP's fiscal year ending December 31,2007,
we noted the following deficiency on the AAUP Form LM-2 for the fiscal year ending
December 31,2007. This deficiency must be corrected in an amended Form LM-2 for
the report period ending December 31,2007. Additionally, if your union's 2007 Form
LM-2 contains any of the reporting deficiencies noted above with respect to the 2006
Form LM-2, then those deficiencies must also be corrected in your amended 2007 Form
LM-2. Further, subsequent Form LM-2 filings must be prepared so as not to contain
these deficiencies.
24. In 2007, the AAUP experienced a loss of funds involving misappropriated
checks. The AAUP's bank reimbursed the AAUP for the misappropriated funds
and the AAUP did not file an insurance claim. The AAUP incorrectly answered
"No" to Item 13 (Losses and Shortages) and failed to describe the loss of funds in
Item 69 (Additional Information). The Form LM-2 instructions require Item 13 to
be answered "Yes" if the union experienced a loss, shortage, or other discrepancy
in its finances during the period covered. The Form LM-2 instructions further
require that the loss or shortage be described in detail in Item 69, including such
information as the amount of the loss or shortage or a description of the property
that was lost, how it was lost, and to what extent, if any, there has been an
agreement to make restitution or any recovery by means of repayment, fidelity
bond, insurance, or other means.
Inadequate Recordkeepinn - LMRDA Section 206
Pursuant to Section 206 of the LMRDA, every person required to file any report under
this title shall maintain records on the matters reported that will provide in sufficient
detail the necessary information from which the reports filed may be verified,
explained, or clarified and checked for accuracy and completeness. All required records
must be maintained for at least five years following the date the report is filed. Records
over five years must be maintained if necessary to verify reports filed within the last
five years. Records, such as meeting minutes that note approval for officer salary
increases, must be maintained for as long as they remain necessary to verlfy current
financial activities of the union. There were instances noted during this audit where the
AAUP did not comply with the recordkeeping requirements of Section 206. During the
exit interview, you were informed that adequate records necessary to document all
financial transactions, regardless of the amount, must be maintained for a minimum of
five years.
25. The AAUP did not maintain sufficient documentation to verify the accuracy of
the beginning and ending asset and liability balances reported in Items 22
through 35 on Statement A of the Form LM-2. The LM-2 instructions require the
union to retain complete records which sufficiently detail all necessary
information from which the reports filed maybe verified, explained or checked
for the accuracy and completeness.
26. The AAUP did not maintain sufficient documentation to verify the accuracy of
the reported accounts receivable balance in Schedule 1 (Accounts Receivable
Aging Schedule) and Item 23 (Accounts Receivable). For example, the AAUP
reported an unidentified accounts receivable difference of $4,936.51 and a
miscellaneous accounts receivable in the amount of $2,030. For both of these
accounts receivable balances, the AAUP did not have sufficient supporting
documentation.
27. The AAUP did not maintain sufficient documentation necessary to
differentiate amounts received for dues and agency fees (reportable in Item
36) from the amount received for per capita tax (reportable in Item 37). The
AAUP receipt records must include an adequate identification of all monies
the AAUP receives. The records should show the date, amount received,
and the source of the monies.
28. The AAUP did not maintain documentation in sufficient detail to verify the
accuracy and completeness of the membership figures reported in Item 20
(Number of Members) and Schedule 13 (Membership Status) on the Form
LM-2.
29. The AAUP did not maintain documentation in sufficient detail to verify,
explain, or clarify the source of all receipts reported in Items 36 through 49 on
the Form LM-2. Further, with respect to the $436,826 reported in Schedule 14,
Line 3 (All Other Receipts), the AAUP's supporting documentation did not
identify all sources of receipts, particularly those receipts that could have
potentially totaled more than $5,000 from any one individual source. The
AAUP aggregated deposits and did not always keep a separate record of
individual receipts. The AAUP records must include an adequate
identification of all monies the AAUP receives. The records should show the
date, amount received, and the source of each receipt of money.
30. The AAUP did not retain at least 15 voided checks, which should be retained to
verify non-payment.
31. The AAUP did not maintain signed copies of loan agreements documenting
AAUP loans to the Lincoln University chapter and the Akron University chapter.
The AAUP must maintain adequate backup documentation supporting any loan
disbursements, including signed loan agreements.
32. The AAUP failed to maintain documentation for reimbursed expenses and credit
card expenses in 2004 and 2005, as well as 2006. Labor organizations must retain
original receipts, bills, and vouchers for all disbursements pursuant to Section
206. In certain instances, receipts, bills and vouchers were not retained for officer
and employee lodging, airfare, telephone bills, taxi, and meal expenses. Also,
employee expense vouchers did not include proper authorization signatures
prior to disbursement. The AAUP expense policy states that original receipts
and other supporting documentation should be maintained and submitted with
the employee expense report.
33. The AAUP records pertaining to meal expenses sometimes did not include the
full names and titles of all persons incurring those meal charges. In order to
comply with LMRDA Title 11, union records pertaining to meal expenses must
include the full names and titles of all persons incurring the restaurant charges as
well as written explanations of union business conducted.
34. In most instances, officers and employees did not submit itemized receipts for
meal expenses. Itemized receipts provided by restaurants to officers and
employees must be maintained by the AAUP. These itemized receipts are
necessary to determine if such disbursements are for AAUP business purposes
and to fulfill the recordkeeping requirement in LMRDA Section 206.
35. AAUP officers and employees who received mileage reimbursement for business
use of their personal vehicles did not retain adequate documentation to support
those mileage reimbursements. In one case, the mileage rate was incorrectly
noted, and resulted in an overpayment of AAUP funds. The AAUP must
maintain records which identify the dates of travel, locations traveled to and
from, number of miles driven, and business purpose of each use.
Inadequate Bondinn - LMRDA Section 502
Section 502 of the LMRDA requires that every person who handles funds or other
property of the union shall be bonded for no less than ten percent of the total funds
handled by those individuals or their predecessors during the preceding fiscal year, but
in no case more than $500,000. The audit disclosed a violation of LMRDA Section 502.
36. At the start of the audit, the AAUP had a blanket bond policy covering officers
and employees for up to $500,000. Coverage was through a commercial crime
policy that included a self-insurance deductible in the amount of $5,000. This
$5,000 deductible was improper as any type of self-insurance of union funds, in
whole or in part, fails to meet the requirements of Section 502. The AAUP's bond
policy was also deficient in that failed to define "employee" broadly enough to
cover noncompensated officials of the organization who handle funds. During
the audit, the AAUP retained a new commercial crime policy that no longer has a
deductible and covers all non-compensated dues collectors, shop stewards, and
shop chairman. However, the AAWs bonding coverage still does not meet the
requirements of Section 502. In order to fully comply with Section 502, the
AAUP must amend its coverage to include computer fraud and funds transfer
fraud, and from per occurrence recovery to per person recovery.
Office Holding- Prohibitions - LMRDA Section 504
Section 504 of the LMRDA prohibits persons convicted of certain offenses from holding
labor organization office or employment for a period of thirteen years from the date of
conviction or release from prison, whichever is later. It is also a violation of Section 504
for another person to willfully and knowingly hire, retain, employ or otherwise place
the barred person in a prohibited capacity
37. The AAUP does not conduct criminal background checks of officers or
employees. In order to ensure that individuals do not hold office or employment
in violation of LMRDA Section 504, the I-CAP Team recommends that the AAUP
establish a system for determining whether any officers or employees have
disqualifying criminal records. During the exit interview, the I-CAP Team
emphasized the importance of verifying background information.
Internal Controls
Adequate internal financial controls are essential to prevent the misuse of union funds
and to support financial responsibility and other obligations under Title I1 and Title V of
the LMRDA. Title V of the LMRDA stipulates, among other things, the fiduciary
responsibility of officers of labor organizations. As a general rule, weaknesses in
financial controls can lead to violations of Section 501 of the LMRDA.
38. The audit revealed several of the accounts payable invoices did not contain
approval documentation. The I-CAP Team recommends that the AAUP improve
procedures to document approvals of all invoices.
39. The AAUP does not have a detailed inventory of furniture, equipment, and other
assets that identifies all assets on hand. It is recommended that a physical
inventory be conducted and recorded to identify, locate, describe, and document
all fixed assets on hand and better safeguard these assets.
40. The AAUP did not have written procedures for handling petty cash. Although
the AAUP was able to articulate procedures, the AAUP should develop and
implement formal written policies and procedures to ensure petty cash funds are
adequately safeguarded and used strictly for the AAUP's purpose.
41. AAUP policy requires two signatures on all checks for $1,000 and over.
However, the sample of canceled checks examined by the I-CAP Team included
several checks over $1,000 with only one signature. The two signature
requirement is an effective internal control of AAUP funds. The I-CAP Team
recommends that AAUP adhere to the two signature requirement, not only on
checks for $1,000 and over, but on all checks.
42. The audit revealed that no AAUP officer reviews or approves AAUP bank
transfers. The Chief Financial Officer, an AAUP employee, regularly initiates
and completes AAUP banks unilaterally and on his own authority. Neither the
AAUP nor the bank requires any additional approval prior to transfers. Internal
controls should be improved over bank transfers to ensure the propriety of all
fund transfers. The I-CAP Team recommends that an AAUP officer approve all
fund transfers in advance and in writing.
43. The AAUP check request form requires the signature approval the Director of
Finance and the Department Head for the department from which the check is
requested. A sample review of the check request forms and supporting
documentation revealed that 74% of the sample did not have the Director of
Finance's signature approval and 61 % did not have the Department Head's
signature approval on the check request form. The I-CAP Team recommends
that AAUP follow its procedures and require that all check request forms have
the signatures of both the Director of Finance and the appropriate Department
Head before the disbursement is executed. The I-CAP Team recommends that
Department Heads also review, initial and date the source documents to ensure
that all AAUP funds are being used only for AAUP purposes.
44. The audit revealed that AAUP procedures for voiding checks were not being
followed. The I-CAP Team recommends that the AAUP follow its own
procedures for voiding checks, remove the approving signature lines, properly
identify and record voided checks in the general ledger, and maintain all voided
checks within the accounting department for future reference.
45. The AAUP did not have written procedures for processing cash receipts and cash
disbursements during the fiscal year ending December 31,2006. In 2007, the
AAUP developed and implemented written procedures for processing cash
receipts. The I-CAP Team recommends that the AAUP develop and implement
written policies and procedures for processing cash disbursements.
46. The audit revealed that no AAUP principal officer is involved in any aspect of
the "receipt" process, i.e., the process involved from the time money is received
until it is deposited by the organization. In order to improve internal controls,
the I-CAP Team recommends that, at a minimum, the AAUP National Secretary-
Treasurer review the monthly bank reconciliations performed by the Staff
Accountant.
47. The AAUP does not have any written policies or procedures for the
capitalization of fixed assets. In order to better safeguard assets and improve
recordkeeping and reporting, the I-CAP Team recommends that the AAUP
develop and implement written policies procedures for the capitalization of fixed
assets.
48. The I-CAP Team conducted a petty cash count and discovered that $344.65 could
not be accounted for and was missing from the AAUP petty cash fund. Section 501
of the LMRDA contains civil and criminal provisions with regard to use of labor
union money and property.
49. As noted above in issue #24 of this closing letter, the AAUP experienced a loss of
funds involving misappropriated checks in 2007. Section 501 of the LMRDA
contains civil and criminal provisions with regard to use of labor union money
and property.
As discussed during the exit interview, the AAUP must submit, within thirty days from
the date of this letter, a response letter to this closing letter, an amended Form LM-2 for
the fiscal year ending December 31,2006, and an amended Form LM-2 for the fiscal year
ending December 31,2007. The response letter should identify the corrective actions
implemented by the AAUP based on the results of this compliance audit. We will
schedule an on-site follow-up in approximately six months to review corrective actions
taken, to discuss the amended Form LM-2 reports filed by the AAUP, and to continue
cooperative efforts to prevent and correct LMRDA deficiencies.
Please accept my appreciation for the cooperation and courtesy extended by you and
your staff during this compliance audit. If you have any questions, please do not
hesitate to contact me.
Sincerely,
James D. Devine, Chief
Division of International Union Audits
cc: Howard Bunsis, Secretary-Treasurer
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