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- Getting Ready
- Audit Overview
- Disbursements
- Receipts
- Assets
- LMRDA Compliance
- Wrapping Up
- Audit Planner
- Letter Requesting Access to Financial Records
- Financial Questionnaire
- Completed Financial Questionnaire
- Disbursements Reconciliation Worksheet
- Receipts Reconciliation Worksheet
- Liquid Assets Inventory
- Fixed Assets Inventory
- Ending Bank Balance Reconciliation Worksheet
- LMRDA Requirements Relating to Union Funds
- LMRDA Recordkeeping Requirements
- LMRDA Bonding Requirements
- Internal Financial Controls
- Completed Audit Report
This Guide features a 10-step audit designed to help Trustees from small unions
carry out their duties. For purposes of this Guide, a small union is considered
to be one with annual receipts of less than $50,000. Trustees from larger unions
with more complex recordkeeping systems may also find this Guide helpful.
The Office of Labor-Management Standards (OLMS) of the U.S. Department of Labors
Employment Standards Administration has prepared this Guide to further the aims
of the Labor-Management Reporting and Disclosure Act of 1959, as amended (LMRDA).
More commonly known as the Landrum-Griffin Act, the LMRDA has several provisions
designed to promote the financial integrity of unions, including those pertaining
to financial reporting, recordkeeping, bonding, and loans. The LMRDA applies
to unions which represent private sector employees and U.S. Postal Service employees.
The Civil Service Reform Act of 1978 (CSRA) has similar provisions which apply
to most unions which represent federal government employees.
Your Role
As an elected or appointed Trustee you will play a key role in making sure
that your unions funds and other assets are properly accounted for and
used solely for the benefit of your union and its members. Few tasks could be
more critical to the well-being of any organization.
Your specific duties and responsibilities may be outlined in your union's constitution
and bylaws or otherwise defined by your parent body. However, your primary task
as a Trustee is to ensure that all union resources (money/assets) are used for
legitimate union purposes as authorized by your membership in accordance with
your constitution and bylaws. In addition, you should ensure that your union
is properly submitting per capita taxes to its parent body and is complying
with legal requirements for financial reporting, recordkeeping, bonding, and
loans.
Whats in this Guide
This Guide is designed to be an easy-to-use reference based on the law and
regulations as well as the knowledge and experience of OLMS staff. It will take
you step by step through the audit process, help you identify your responsibilities
during each step, and provide suggestions to make your job easier. Most of the
seven chapters in the Guide refer to Figures (such as an audit planner, a financial
records request, a questionnaire, worksheets, and an audit report) relating
to the topics discussed. A fictitious union (Factory Workers Local 888) is used
in several of the Figures to illustrate recommended procedures. A general overview
of the way many unions maintain their financial records, a list of common financial
terms and their meanings, and a four-page Checklist for Conducting Audits
in Small Unions which summarizes the contents of this Guide are included
as References at the end of this publication.
We realize that unions operate differently, using different constitutions and
bylaws and audit procedures, and that Trustees and audit officials have varying
degrees of responsibility. For example, some unions want a greater day-to-day
financial role for Trustees (requiring that they sign all vouchers or co-sign
checks) while others want only periodic reviews of financial records. Likewise,
some unions have both Trustees and Audit Committees. Therefore, not all information
in this Guide will apply to all unions. You should disregard the parts of the
Guide that do not apply to you and consider the other parts as a supplement
to the practices and procedures specified by your parent body.
Who Should Use this Guide
This Guide should be used by the union officials responsible for conducting
audits (periodic examinations of local financial records). The general term
Trustee is used in this Guide to refer to those individuals elected
or appointed to serve in this capacity, or a similar capacity, whether for a
full term or a specific record examination. Although the Guide covers the basics
and is geared primarily to officials with little or no experience in conducting
an audit, it can be helpful to more experienced officials as well.
How to Use this Guide
Trustees or other audit officials should become familiar with the contents
of this Guide as soon as possible after being elected/selected. An initial review
will provide an overview of the entire audit process and point out all the steps
involved in conducting a meaningful examination of your unions financial
records.
You are not expected to remember all the procedures for conducting an audit
after your first review of this Guide. Instead, before each step of your audit
re-read the applicable chapter to refresh your understanding of what should
be done. Refer to the Guide frequently during the audit process. Although we
have tried to include all necessary information, the Guide does not specifically
address every situation that may develop. Some record examinations may involve
complex or unusual issues requiring you to seek further assistance.
Seeking Assistance
If you need advice or have questions about your responsibilities or provisions
of your unions constitution and bylaws, you should contact your unions
officers or parent body for help. In addition, OLMS staff in the field offices
referred to at the end of this Guide can answer your questions about the LMRDA,
related regulations, and this Guide.
Getting Started
Now that you are familiar with the purpose and contents of this Guide and how
best to use it, its time to get started. Read Chapter 1 and begin preparing
for your audit.
As you begin an audit of your unions financial records your job as a
Trustee may seem intimidating, particularly if you have never conducted an audit
or are unfamiliar with your unions books and records. However, if you
think of the audit process as a series of separate steps and understand your
responsibilities for each step, the entire process becomes more manageable.
At this early stage preparation is very important since good planning and organization
are key ingredients to conducting a meaningful audit. This chapter outlines
the first steps you should take to prepare for your audit, including meeting
with other Trustees to determine specific responsibilities, reviewing prior
audit records and results, obtaining certain information from the principal
financial officers of your union, and scheduling important audit activities.
Determining Responsibilities
The best way to get started is to review your unions constitution and
bylaws to determine your specific responsibilities as a Trustee. At least one
week before the audit you should discuss your roles with the other Trustees
either in person or by telephone and select a chairperson or team leader if
one is not already designated. If none of the Trustees has ever conducted an
audit, you should consider contacting members who have served as Trustees in
prior years to discuss their experiences, both positive and negative. You may
also wish to contact your parent body, as needed, to seek advice or information
about your duties.
Gathering Materials
After determining your general responsibilities, you should obtain and review
the following:
- Any forms, manuals, or handbooks issued by your parent body which pertain
to your duties.
- Your unions most recent constitution and bylaws, especially those
provisions dealing with dues rates, officer salaries and expenses, lost time
policies, officer duties, and procedures for approving the expenditure of
union funds. Each Trustee should have a copy of relevant sections of these
documents to refer to as necessary throughout the audit.
- Your unions most recent audit report.
- Your unions most recent LM-3 or LM-4 annual financial report filed
with OLMS.
You should also review Figures 1,
2, 3, and 4 which may be adapted for use in your audit.
Meeting with Principal Officers
Before the audit begins, you and your fellow Trustees should meet with the
principal financial officers of your union to:
- Seek their cooperation and support. Keep in mind that no one likes to have
someone looking over their shoulder.
- Determine the person you should deal with to obtain access to the unions
financial records and explanations regarding how these records are maintained.
Find out whether any of the unions records are maintained on a computer.
If so, make arrangements to obtain appropriate printouts of necessary financial
information.
- Decide where your examination of records should take place and what equipment
(calculators, photocopier, etc.) will be furnished by the union. Try to find
a quiet place where you are unlikely to be disturbed and where you will have
sufficient space to review the records.
- Determine if and when lost time or other union payments will
be made for your work. Recognize that it may be necessary to conduct some
of this work on your own time in order to carry out your responsibilities.
It is important that you obtain this information early in the process and deal
with the principal financial officers up-front in order to avoid
any later misunderstandings or problems.
Scheduling the Audit
After talking to the principal financial officers, you should meet as a group
to make some important decisions. First, decide the time frame (annual, semiannual,
quarterly) that your audit will cover. This may be governed by your parent body
constitution or local bylaws.
Next, decide when you want to begin the audit. If you have decided to review
your unions records for an entire year, then you may want to begin your
audit shortly after your unions annual financial report (LM-3 or LM-4)
has been submitted to OLMS. This will ensure that your audit does not interfere
with the ongoing operations of your union. You could also compare your own findings
regarding the finances of your union with the information on the LM report.
Finally, develop a detailed plan which lists all the important phases of the
audit or you may spend a lot of time and energy and still not get the job done
right. This plan can be used to show your progress as you work your way through
the 10-step audit and to identify specific responsibilities for each Trustee.
A sample audit planner is provided as Figure 1.
Requesting Records
Your next task will be to create a list of financial records needed for your
10-step audit and provide this to the principal financial officers of your union.
Otherwise, certain records such as membership meeting minutes may not be available
when needed. A sample letter requesting financial records is provided as Figure
2. Feel free to modify this letter to conform with the records used
in your union.
Financial records cannot be examined efficiently without some explanation of
how they tie together. If you are not completely familiar with how your unions
financial records are maintained, consider creating a short questionnaire for
the principal financial officers so that everyone has a common understanding.
Figure 3 can be modified for this purpose. A completed
version of this questionnaire is provided as Figure 4
to illustrate the type of information that should be obtained including any
applicable constitutional provisions.
Two References at the end of this Guide should be reviewed by first-time Trustees
before beginning an audit. Understanding Union Financial Records provides
helpful illustrations of the types of financial records maintained by many unions
and Union Financial Definitions provides easy to understand explanations
of the financial terms used throughout this Guide. Use these References as needed
during the audit.
Small unions may have hundreds of financial transactions every year. It would
take a considerable amount of time to examine each of these transactions in
detail. The next four chapters describe a 10-step audit which concentrates on
reviewing key financial areas and is specifically designed to save you time,
yet still provide for a meaningful, systematic review of your unions financial
books and records. The 10-step audit is not a traditional audit,
but rather a limited, focused review of financial records that was developed
for use by Trustees from small unions with little or no financial training or
experience. It is modeled after techniques successfully used by OLMS.
Audit Objectives
The 10-step audit, summarized below, has four primary objectives:
- To ensure that your unions funds and other assets are properly accounted
for and used solely for the benefit of your union and its members.
- To confirm that your union is complying with legal requirements for financial
reporting, recordkeeping, bonding, and loans.
- To determine whether the internal financial controls of your union are
adequate or need to be improved.
- To ascertain whether your union is complying with the financial practices
and procedures of your parent body.
Audit Design
The 10-step audit focuses on four major areas: disbursements, receipts, assets,
and compliance with the requirements of the Labor-Management Reporting and Disclosure
Act (LMRDA), as outlined below:
- Steps 1 and 2 (Chapter 3) will assist you in determining
whether your unions disbursements have been properly recorded and whether
they were issued for approved, legitimate union purposes.
- Steps 3 and 4 (Chapter 4) will help you determine whether
your unions receipts have been properly recorded and deposited into
your unions bank accounts.
- Steps 5 and 6 (Chapter 5) will aid you in accounting
for your unions assets (cash and equipment) and calculating their approximate
value.
- Steps 7-10 (Chapter 6) will help you determine whether
your union is complying with the LMRDAs requirements for financial reporting,
recordkeeping, bonding, and loans.
10-Step Audit
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Step 1 - Trace cancelled checks to the bank statements and disbursements
journal.
- Step 2 - Scan the disbursements journal and record unusual entries.
- Step 3 - Trace employer dues checkoffs to the receipts journal and bank
statements.
- Step 4 - Confirm that receipts from all other sources have been properly
recorded and deposited.
- Step 5 - Identify all bank accounts, verify their ending balances, and review
withdrawals/transfers.
- Step 6 - Inventory fixed assets.
- Step 7 - Confirm that the LM annual financial report for the latest completed
fiscal year was filed on time.
- Step 8 - Determine whether financial records were properly maintained.
- Step 9 - Ensure that all officers and employees who handle funds are adequately
bonded.
- Step 10 - Confirm that no officers or employees were loaned more than $2,000
by your union.
Optional Steps
In addition to these ten audit steps, Chapters 3-5 include eight optional steps
for disbursements, four optional steps for receipts, and three optional steps
for assets. These optional steps were designed to give you the flexibility to
tailor your audit to the specific circumstances of your union and to make your
audit as meaningful as possible. They are particularly recommended for use by
Trustees in larger unions.
Audit Tips
- Be fair and objective. Dont jump to conclusions before you have gathered
all the facts.
- Dont be afraid to ask for help from your fellow Trustees and the
principal financial officers.
- Be persistent and stay focused. Avoid long interruptions in your work.
- Make sure that all necessary records are available at the start of each
audit step.
- Consider assigning each person a separate part of the audit. For example,
one Trustee could audit disbursements, while another is reviewing receipts,
and a third is examining assets.
- Work together as a team even if each Trustee has individual assignments.
- Consider devoting an entire audit to one area, such as disbursements, if
audits are performed frequently (quarterly). Complete the other steps later
in the year.
- Concentrate on the completion of the 10-step audit before beginning any
optional steps or consider limiting optional steps to one part of the audit,
for example, receipts.
- Take notes of the work done, unresolved issues that may require further
work, preliminary findings, and recommendations for improvements. These notes
will help you complete your audit report and be an invaluable resource for
the next audit.
- Dont write or make marks of any kind on the union records except
as noted in this Guide.
- Keep the unions records in an orderly fashion so that they can be
returned the same way.
- Refer often to the four-page Checklist at the end of this Guide
and check the appropriate boxes to ensure that you have properly completed
the 10-step audit.
You will probably issue an audit report to document your work. If your
parent body requires that you submit a standard audit report form that
outlines the financial condition of your union, you should collect necessary
information for this report as you complete the audit steps described
in Chapters 3-6 of this Guide.
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Like any organization, your union must spend money to operate. Most unions
have a checking account which is used to make disbursements. Typical disbursements
from your unions checking account might include payments for per capita
taxes, hall rentals, office supplies, and lost time to officers. Members expect
that when their union spends money it will be for legitimate union purposes
and that these expenditures will be properly authorized. Documents, such as
your unions constitution, minutes of meetings, bills, and vouchers, will
help you determine why disbursements were made and whether they were authorized
by your membership in accordance with your constitution and bylaws.
Confirming that established disbursement practices are being followed is essential
to ensuring that your unions funds are being handled responsibly on behalf
of all members. Audit Steps 1 and 2 are designed to provide a simple but effective
method for examining your locals disbursements. They will assist you in
determining whether payments were for approved, legitimate union business. In
addition, they will enable you to determine if payments were properly recorded
in your unions records, allowing for accurate financial reporting to the
members of your union, your parent body, and various government agencies.
To complete Audit Steps 1 and 2, as well as any optional steps you may select,
you will need the following for the audit period: bank statements; cancelled
checks; disbursements journal (or check stubs if a journal is not maintained);
minutes of membership and Executive Board meetings; and all documents in support
of disbursements such as bills, invoices, and vouchers. In addition, you will
need any financial forms provided by your parent body. First-time Trustees may
want to review the References Understanding Union Financial Records
and Union Financial Definitions at the end of this Guide before
beginning Audit Steps 1 and 2.
Trace Cancelled Checks to the Bank Statements and
Disbursements Journal
By completing Audit Step 1 you should be able to confirm the reliability and
completeness of your unions disbursements records.
- Select at least two months in your audit period. Your selection of months
may be made for a variety of reasons, including an unusually large number
of checks written during a specific month or payments for non-routine items
such as convention expenses or a union-sponsored picnic.
- Obtain the bank statements and all of the corresponding cancelled checks
for the period you have selected. Arrange the cancelled checks in numerical
order. Keep the cancelled checks together with the bank statements on which
they appear.
- Locate the cancelled checks for each of the entries on the bank statements.
Place a check mark, in pencil, on the bank statements for each cancelled check.
Make a list of any check numbers and amounts appearing on the bank statements
for which you cannot find a cancelled check.
- Compare the amounts on each cancelled check with the corresponding entries
on the bank statements. Make sure that the amounts on the cancelled checks
are the same as on the bank statements. Watch for amounts which may have been
changed after the checks were returned from the bank.
- Compare the information on these checks with the corresponding entries
in your unions disbursements journal. Make sure that the payee, the
amount, the date, and the purpose on each cancelled check are properly recorded
in the journal. Look for any discrepancies between the journal entries and
the checks. Turn the checks over and examine the endorsements, making sure
they match the payees on the front of the checks.
If no discrepancies are noted during Audit Step 1, proceed to the next step.
However, if you find any questionable items or have some areas of concern, refer
to Common Problems and Solutions and Significant Discrepancies
at the end of this chapter.
Scan the Disbursements Journal and Record Unusual
Entries
By completing Audit Step 2 you should be able to determine whether the checks
issued from your unions bank account were for legitimate union purposes.
- Review the disbursements journal for the entire audit period. Look at the
type and frequency of your unions disbursements. You will probably see
recurring payments for per capita tax, hall rental, and officer salaries and
expenses. Approval for these disbursements should be found in the constitution
and bylaws or the membership meeting minutes. Make a list of any entries which
appear to be questionable or out of the ordinary, such as:
- checks for unusually large amounts
- checks for unusual purposes
- large checks to unfamiliar payees
- checks payable to cash
- checks where no purpose is recorded
- checks written out of sequence
- duplicate payments for salaries or expenses to the same individual
- checks identified as loans (refer to Chapter 6)
- Review the supporting bills, vouchers, invoices, and membership meeting
minutes for all of the checks you have listed. Determine whether they were
for legitimate union purposes and whether they were properly authorized.
If you find any questionable items or have some areas of concern while conducting
Audit Step 2, refer to Common Problems and Solutions and Significant
Discrepancies at the end of this chapter.
Optional Steps
As time allows, consider conducting one or more of the following optional steps
or proceed to Audit Step 3. Some of these optional steps
may be required by your parent body.
- Reconcile total disbursements entered in your unions disbursements
records for the audit period with the total charges shown on your unions
bank statements for the audit period. This will further verify the accuracy
of the entries recorded in your unions disbursements records. Figure
5 shows how to reconcile disbursements.
- List all salary and expense payments to selected union officials. Review
all supporting documents to verify that correct amounts have been paid.
- Examine selected claims for lost time to verify that appropriate amounts
and purposes have been documented.
- Examine credit card use and payments. Look for personal or excessive charges
and charges without supporting documents.
- Confirm that no checks listed as void in the disbursements
journal have been cashed.
- Examine signatures of authorizing officials on checks. Look for unsigned
checks or signatures on checks which appear to be different from a known signature.
- Review strike fund payments. Confirm that proper documents exist to support
these payments.
- List per capita tax payments to your parent body and ensure that all required
payments were made in a timely manner.
This is not an exhaustive list of optional audit steps. Based on your unions
recordkeeping system and any parent body requirements, you may choose to review
other areas of disbursements.
Common Problems and Solutions
Even the best maintained disbursements records may have some problem areas.
Frequently encountered problems are listed below with suggestions on how to
resolve them:
Problem: |
Cancelled checks are not available. |
Solution: |
Ask officers to obtain copies from the bank. |
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Problem: |
Bank statements indicate checks have been returned
for non-sufficient funds (NSF). |
Solution: |
Determine when the first NSF (bounced)
check was returned by the bank. Look for delayed deposits during the period.
Ask officers for an explanation of the NSF checks and, if necessary, suggest
that the disbursements records be properly noted. |
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Problem: |
The disbursements journal entries do not match
the corresponding information on the bank statements or on the cancelled
checks. |
Solution: |
Determine the reason for the discrepancies. Ask
officers for an explanation, such as failure to reconcile the disbursements
journal with the related monthly bank statements and, if necessary, suggest
that the principal financial officers correct the records. |
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Problem: |
No records to support disbursements exist. |
Solution: |
Review minutes for approval and, if necessary,
ask officers about the payments. |
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Problem: |
The union does not maintain a disbursements journal. |
Solution: |
Review check stubs and/or check register. |
Significant Discrepancies
The situations listed below may suggest that your unions financial
records are unreliable or that union funds have been misused:
- Basic disbursements records have not been maintained.
- Serious discrepancies in the records have been detected which cannot be
easily resolved.
- Missing disbursements records, such as cancelled checks, bills, or vouchers,
are not produced as promised and an adequate explanation is not provided.
- Alterations have been made on cancelled checks.
- Your unions checking account has a negative balance or frequently
reflects bounced checks.
If you detect a serious problem in your unions records or a possible
misuse of union funds, contact your parent body or the nearest OLMS office for
assistance.
Parent Body Requirements
Note any additional audit procedures or standard audit forms relating to
disbursements which your parent body requires you to use:
Local unions receive most of their money from their members in the form of
dues payments. A common method of paying union dues is through dues checkoff.
In this arrangement the employer periodically withholds the amount of dues from
members wages and sends the money collected to the union or its parent
body. In other instances, members pay their dues directly to the union. Generally
these payments are deposited into the unions checking account. Members
entrust their dues money to the responsible union representatives and expect
that the funds paid in will be available for the union to draw upon for authorized
union activities. Ensuring that all of the money received by your union has
been deposited into your unions bank account is a key component to a successful
audit. Audit Steps 3 and 4 will help you trace the receipts of your union into
your unions bank account and verify that receipts from all sources have
been recorded and deposited.
To complete Audit Steps 3 and 4, as well as any optional steps you may select,
you will need the following for the audit period: bank statements; deposit slips;
receipts journal (or other records if a journal is not maintained); all documents
which identify the source of your unions receipts, such as employer checkoff
statements; individual dues receipts; and member ledger cards. In addition,
you will need any financial forms provided by your parent body. First-time Trustees
may want to review the References Understanding Union Financial Records
and Union Financial Definitions at the end of this Guide before
beginning Audit Steps 3 and 4.
Trace Employer Dues Checkoffs to the Receipts Journal
and Bank Statements
By completing Audit Step 3 you should be able to confirm that employer checkoff
receipts are properly recorded in your unions receipts records and deposited
into your unions bank account.
- Gather all of your unions checkoff receipts records for the entire
period including checkoff statements from your employer or parent body.
- Compare, for each month in your audit period, the amounts posted on all
the checkoff statements with the corresponding entries in the unions
receipts journal. Look for any discrepancies.
- Select at least two months from your audit period. Trace the checkoff receipt
entries from the journal to related entries on your unions bank statement.
Make a note of any discrepancies.
The following Alternate Step 3 must be substituted for Step 3 above only if
all members payments to the union (for dues, working dues, fees, etc.)
are made directly to union officers or employees and not through employer checkoff.
Trace Direct Dues Payments to the Receipts Journal
and Bank Statements
By completing Alternate Audit Step 3 you should be able to confirm that cash
and checks for dues paid directly to the union by members are properly recorded
in your unions receipts journal and deposited into your unions bank
account.
- Select five or ten members names at random and choose at least two
months from your audit period.
- Compare payments shown on individual dues receipts or member ledger cards
for these members to individual entries or combined member totals in your
unions receipts journal.
- Trace the receipt entries from the journal to related entries on your unions
bank statements. Make a note of any discrepancies.
If no discrepancies are noted during Audit Step 3 or Alternate Audit Step 3,
proceed to the next step. However, if you find any questionable items or have
some areas of concern, refer to Common Problems and Solutions and
Significant Discrepancies at the end of this chapter.
Confirm That Receipts from All Other Sources Have
Been Properly Recorded and Deposited
By completing Audit Step 4 you should be able to determine whether non-dues
money coming into your union has been properly recorded in your unions
receipts records and deposited into your unions bank account.
If you find any questionable items or have some areas of concern while conducting
Audit Step 4, refer to Common Problems and Solutions and Significant
Discrepancies at the end of this chapter.
Optional Steps
As time allows, consider conducting one or more of the following optional steps
or proceed to Audit Step 5. Some of these optional
steps may be required by your parent body.
- Reconcile total receipts entered in your unions receipts records
for the audit period with the total deposits shown on your unions bank
statements for the audit period. This will further verify the accuracy of
the entries recorded in your unions receipts records.Figure 6 shows how to reconcile receipts.
- Review the original initiation fee records for a one or two month period.
Confirm that these fees, which may be paid either through checkoff from the
employer or by direct pay from the member, have been properly recorded and
deposited into your unions bank account.
- Complete Alternate Step 3 if some, but not
all dues are collected directly from members.
- Make a list of any non-dues receipts that appear to be out of the ordinary,
such as recurring receipts that cease for no apparent reason, receipts from
unusual sources, receipts where no source is identified, and receipts for
unusual purposes or amounts. Examine supporting documents to confirm that
all such receipts have been properly recorded and deposited into your unions
bank account.
This is not an exhaustive list of optional steps. Based on your unions
recordkeeping system and any parent body requirements, you may choose to review
other areas of receipts.
Common Problems and Solutions
As with your unions disbursements records, you may have encountered some
difficulties while completing Audit Steps 3 and 4. Even the best kept receipts
records may have some problem areas. Frequently encountered problems are listed
below with suggestions on how to resolve them:
Problem: |
Bank records are not available. |
Solution: |
Ask officers to obtain copies from the bank. |
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Problem: |
Original checkoff records are not available. |
Solution: |
Ask officers to obtain copies from the employer. |
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Problem: |
Other original receipt records are not available. |
Solution: |
Ask officers for an explanation. |
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Problem: |
The receipts journal entries do not match corresponding
information on the bank statements or deposit slips. |
Solution: |
Determine the reason for the discrepancy. Ask
officers for an explanation, such as failure to reconcile the receipts journal
with the related monthly bank statements, and, if necessary, suggest that
the principal financial officers correct the records. |
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Problem: |
The entire amount of the checkoff check is not
deposited into your unions primary account. |
Solution: |
Look at the other bank accounts for deposits
of the remainder of these funds. Ask officers for an explanation of the
disposition of these funds. |
Significant Discrepancies
As with the review of your unions disbursements records, you might have
reasons to doubt the accuracy of the unions receipts records. The situations
listed below may suggest that your unions financial records are
unreliable or that union funds have been misused:
- Basic receipts records are not maintained.
- Serious discrepancies in the records have been detected which cannot be
easily resolved.
- Missing receipts records, such as employer checkoff statements, are not
produced as promised and an adequate explanation is not provided.
- Bank deposits are less than monies received for the same period.
- Undue delays occur between receipt dates and bank deposit dates.
- Cash receipts are frequently received but little or no cash is deposited
into the unions bank account.
- Your unions checking account has a negative balance.
If you detect a serious problem in your unions records or a possible
misuse of union funds, contact your parent body or the nearest OLMS office for
assistance.
Parent Body Requirements
Note any additional audit procedures or standard audit forms relating to
receipts which your parent body requires you to use:
When auditing assets, keep in mind that your union not only has money in its
bank accounts, which may be in the form of a checking account, a savings account,
or a certificate of deposit (liquid assets), but it may also own various types
of equipment, such as a computer, a photocopier, or a file cabinet (fixed assets).
The value of these assets must be included and accounted for during your audit.
Both liquid assets and fixed assets might be overlooked during your audit unless
your union keeps accurate and reliable records. Audit Steps 5 and 6 will help
you identify, account for, and determine the total value of your unions
liquid and fixed assets. By completing these audit steps you will ensure that
your union has an accurate, current inventory of all your unions liquid
and fixed assets, which can easily be updated as the need arises.
To complete Audit Steps 5 and 6, as well as any optional steps you may select,
you will need the bank statements, receipts and disbursements journals for the
audit period (or check stubs if journals are not maintained), any inventory
of fixed assets prepared prior to your audit, and any forms provided by your
parent body.
Identify All Bank Accounts, Verify Their Ending Balances,
and Review Withdrawals/Transfers
By completing Audit Step 5 you should be able to identify the bank accounts
maintained by your union during the audit period, determine the total amount
of money in these accounts, and verify that withdrawals from these accounts
were used for legitimate union purposes.
- Make a list of the name, location, type of account, and account number
for each of your unions bank accounts. Determine what happened to the
proceeds from any union accounts closed during the audit period. Determine
whether the initial deposit into any accounts opened during the audit period
can be traced from one of the unions other bank accounts.
- Prepare a liquid assets inventory, as illustrated in Figure 7, which shows the ending balances for each of your
unions bank accounts.
- Determine that all withdrawals from your unions savings, money market,
or certificate of deposit accounts during the audit period were used for legitimate
union purposes as approved by your membership.
If no discrepancies are noted during Audit Step 5, proceed to the next step.
However, if you find any questionable items or have some areas of concern, refer
to Common Problems and Solutions and Significant Discrepancies
at the end of this chapter.
Inventory Fixed Assets
By completing Audit Step 6 you should be able to identify the fixed assets
owned by your union and verify the location of these assets.
- Determine if your union prepared an inventory of fixed assets prior to
your audit period and, if so, verify the existence of all items on the list.
Confirm that any missing items were properly disposed of as approved by the
membership. Suggest that principal financial officers add or delete items
to update the inventory as appropriate.
- Assist the principal financial officers in creating an inventory of fixed
assets if one was not previously prepared. Use Figure 8
as a guide and list each item; the approximate date of purchase; either the
original cost, the estimated current value, or the value carried in your unions
books for the asset (cost less depreciation); and the location of each asset.
If you find any questionable items or have some areas of concern while conducting
Audit Step 6, refer to Common Problems and Solutions and Significant
Discrepancies at the end of this chapter.
Optional Steps
As time allows, consider conducting one or more of the following optional steps
or proceed to Audit Step 7. Some of these optional steps
may be required by your parent body.
- Reconcile the ending balances for each union bank account. This will establish
the amount of the ending cash in banks for the audit period. Figure
9 shows how to calculate this amount.
- Inspect the contents of any union owned safe or safe deposit box. Determine
if any assets such as certificates of deposit, stock certificates, or old
passbooks are missing, or if any assets not previously identified are found.
Confirm union ownership of these assets.
- Review signature cards for union bank accounts. Confirm that only current
officers are signatories on your unions accounts. Suggest that principal
officers have any outdated signature cards removed.
This is not an exhaustive list of optional steps. Based on your unions
recordkeeping system and any parent body requirements, you may choose to review
other areas of your unions assets.
Because small unions typically do not incur significant liabilities (debts),
the 10-step audit does not address this area. However, if your union has significant
liabilities such as delinquent taxes or unpaid bills, you may want to review
them as time permits.
Common Problems and Solutions
You may encounter some obstacles as you inventory your unions assets.
These may range from poor recordkeeping to a question on how best to record
the value of an asset. Two frequently encountered problems are listed below
with suggestions on how to resolve them:
Problem: |
Bank statements are not available. |
Solution: |
Ask officers to obtain copies from the bank. |
|
|
Problem: |
The entire amount of a withdrawal from the unions
savings account is not deposited into your unions checking account.
|
Solution: |
Look at the other bank accounts for the deposit
of the remainder of these funds. Ask officers for an explanation of what
happened to these funds. |
Significant Discrepancies
It is easy to lose track of a fixed asset, or sometimes even a bank account,
if accurate records are not maintained. The situations listed below may
suggest that your unions financial records are unreliable or that union
funds or assets have been misused:
- A union bank account was closed or a withdrawal was made from an existing
account with no indication of what happened to the money.
- Unexplained differences exist between a previous inventory of fixed assets
and your current inventory of fixed assets, such as a missing computer or
photocopier.
- Missing records, such as savings passbooks or stock certificates, are not
produced as promised and an adequate explanation is not provided.
- Assets such as stocks, bonds, and bank accounts are held in the name of
individuals instead of the union.
If you detect a serious problem in your unions records or a possible
misuse of union funds or assets, contact your parent body or the nearest OLMS
office for assistance.
Parent Body Requirements
Note any additional audit procedures or standard audit forms relating to
assets which your parent body requires you to use:
In 1959, Congress passed the Labor-Management Reporting and Disclosure Act,
as amended (LMRDA). The LMRDA has at least ten provisions designed to promote
the financial integrity of unions which are outlined in Figure 10. Four of these provisions will require special
attention during the course of your audit. Essentially, they require that unions
file annual financial reports with OLMS, maintain records that are sufficient
to clarify or support the information shown on these reports, secure adequate
bonding to provide protection against losses due to fraudulent or dishonest
actions, and restrict the amounts of loans made to officers and employees. Audit
Steps 7 through 10 will help you determine whether your union is complying with
the LMRDAs requirements for financial reporting, recordkeeping, bonding,
and loans.
Confirm That the LM Annual Financial Report for the
Latest Completed Fiscal Year Was Filed on Time
The LMRDA requires unions to submit an annual financial report (an LM report)
to OLMS within 90 days after the end of their fiscal year. Unions with annual
receipts more than $200,000 must file an LM-2 report. Unions with annual receipts
less than $200,000 may file a shorter LM-3 report. Unions with annual receipts
less than $10,000 may file an abbreviated LM-4 report.
- Locate your unions LM report for the latest completed fiscal year.
- If the LM report was filed but your union did not keep a copy, contact the
nearest OLMS office to obtain a copy of the report. Determine whether this
report was filed on time, and if not, remind the principal financial officers
that it must be filed on time in the future.
- If the LM report for the latest completed fiscal year was not filed, advise
the principal financial officers to complete and submit the report to OLMS
as soon as possible or contact OLMS for assistance.
Determine Whether Financial Records Were Properly Maintained
The LMRDA requires unions to keep financial records for five years after the
applicable LM reports are filed which are sufficient to clarify or verify the
information shown on these reports, as explained in Figure
11.
- Make a list of any significant financial records which you identified (during
Audit Steps 1-6) that were not maintained by your union, such as employer
checkoff statements, bank statements, bills, vouchers, and invoices. Advise
the principal officers of your union that these records must be maintained
for a period of at least five years, as required by the LMRDA.
Ensure That All Officers and Employees Who Handle Funds
Are Adequately Bonded
The LMRDA requires that all unions with property and annual receipts greater
than $5,000 secure a bond for at least 10% of the receipts and assets handled
by union officers and employees during the prior fiscal year to ensure against
losses resulting from fraudulent or dishonest acts. If bonding is required,
your union should have a bonding certificate, or other proof of bonding, which
indicates the total amount recoverable if a loss of union funds occurs. Many
parent bodies obtain coverage for their affiliate unions.
- Verify that your union is covered by a current bond.
- Confirm that the amount of the bonding coverage is at least 10% of the
receipts and assets handled during the prior fiscal year. You may use Figure 12
to calculate the approximate amount of coverage
required by the LMRDA. If your union does not have a bond or the bond coverage
is not adequate, you should suggest that the principal financial officer contact
your parent body for assistance. In addition, OLMS can provide the names of
companies on the U.S. Treasury Department list of approved bonding companies.
Confirm That No Officers or Employees Were Loaned More
than $2,000 by Your Union
The LMRDA places certain restrictions on the type and amount of loans that
can be made by a union. The law provides that loans made to a union officer
or union employee may not exceed $2,000 in total indebtedness at any time, and
all loans must be reported on the appropriate LM report. Your parent organization
may also have restrictions or prohibitions regarding loans.
- Verify that any loans made by your union to officers and employees did not
exceed $2,000 in total indebtedness at any time. If any loan exceeded this
amount, advise the principal officers that this is prohibited by the LMRDA
and appropriate repayments should be sought.
Parent Body Requirements
Note any additional audit procedures or standard audit forms relating to
financial reporting, recordkeeping, bonding, and loans which your parent body
requires you to use:
By now you have spent a lot of time and energy examining your unions
books and records to complete your 10-step audit. Your fellow members and your
parent body will be very interested in what you found. But first you must review
your findings, resolve any loose ends, decide how to document your work, and
report your findings. In many respects, wrapping up is the most important part
of your audit.
Taking Stock
Until now, you and the other Trustees may have been looking at your unions
receipts, disbursements, and assets on an individual basis rather than as a
group. Now you must get together to:
- Review and organize your audit materials.
- Confirm that the 10-step audit and any selected optional steps have been
completed.
- Determine whether changes are needed to comply with LMRDA requirements
for financial reporting, recordkeeping, bonding, and loans.
- Make a list of any internal financial control weaknesses (for example,
officers signing blank checks) or problem areas (for example,
late or incomplete payment of per capita taxes, failure to record receipts
and disbursements on forms provided by the parent body, etc.) and recommendations
for improvements. For further information about internal financial controls
see Figure 13.
- Decide the best way to handle any unresolved issues.
Meeting with Principal Officers
Unless significant discrepancies have been detected in the unions records
and parent body or other assistance has been requested to help resolve these
issues, you should meet with the principal financial officers of your union
to discuss your preliminary findings, resolve any remaining concerns, and recommend
changes to improve compliance with LMRDA requirements and adherence with sound
internal financial controls and with parent body financial practices and procedures.
Reporting Your Findings
At this point, your unions members and parent body probably want to know
what the general financial condition of your organization is, whether your audit
disclosed any problems and, if so, how they were resolved. If your union has
standard forms to document your work and report your findings to the membership,
fill them out. Otherwise, you may want to review the sample audit report shown
as Figure 14 which can be modified to better suit
your situation.
Completion of the 10-step audit allows you to make some broad statements about
the financial books and records of your union. For example, if no significant
problems for the audit period were uncovered, you can say your audit indicates:
- The unions disbursements were accurately reflected in the records
and made for legitimate purposes.
- The unions receipts were accurately reflected in the records and
deposited to your unions bank accounts.
- The unions assets were properly accounted for.
- The union appears to be complying with the LMRDAs provisions for
financial reporting, recordkeeping, bonding, and loans.
- The union appears to be using good internal financial controls to safeguard
its assets.
- The union appears to be complying with the financial practices and procedures
of your parent body.
Any additional findings or recommendations can be incorporated in your report
as shown in Figure 14. If the 10-step audit has
verified the accuracy of your unions books and records it should also
be relatively easy to create a balance sheet like that found in this figure
to report the general financial condition of your union.
Once you have decided what to say and how to say it, you should probably select
a spokesperson to respond to any questions. Your audit report should then be
submitted to your Executive Board, membership, and parent body, as applicable.
Copies of your report could also be posted on union bulletin boards or cited
in your unions newsletter.
Now that you have completed your audit, we would like to say thanks.
In your role as a Trustee, you have helped to ensure that your unions
funds and other assets are safeguarded and expended appropriately for
the benefit of your union and its members.
As a final step, you should place a copy of your audit report and all
related work papers, notes, etc., in a folder for use by your unions
Trustees when the next audit is conducted. Be sure to include a copy of
this publication which we hope you found helpful in fulfilling your important
responsibilities as a Trustee. |
Figure 1:
Audit Planner
|
Date Completed |
Activity |
|
Chairperson selected. (Chapter 1) |
|
Constitution/bylaws and other governing documents reviewed. (Chapter 1) |
|
Latest audit report and LM annual financial report reviewed. (Chapter 1) |
|
Initial meeting with principal financial officers to make arrangements for audit held. (Chapter 1) |
|
Time frames for audit determined. (Chapter 1) |
|
Principal financial officers notified of audit starting date and records needed. (Chapter 1) |
|
Financial Questionnaire prepared if necessary. (Chapter 1) |
|
Disbursements reviewed. (Chapter 3) |
|
Receipts reviewed. (Chapter 4) |
|
Assets examined. (Chapter 5) |
|
Latest LM annual financial reporting confirmed. (Chapter 6) |
|
Recordkeeping reviewed. (Chapter 6) |
|
Bonding coverage confirmed. (Chapter 6) |
|
Loan analysis completed. (Chapter 6) |
|
Audit Report completed. (Chapter 7) |
|
Audit Report to parent body and membership submitted. (Chapter 7) |
Figure 2:
January 10, 2001
Treasurer Richard Roe
Factory Workers, Local 888
2210 Elm Street
West Falls, VA 21521
Dear Mr. Roe:
As you know, the Trustees plan to start our quarterly audit of Local
888s financial books and records on Saturday, January 20, 2001 at
the union hall at 8:00 a.m. Please make available the latest Trustee Audit
Report, the latest LM annual financial report, and the following records
for the period October 1, 2000 - December 31, 2000:
Recording Secretary’s
Minutes Book
Receipts Journal
Bank Deposit Slips
Disbursements Journal
Savings Account Passbook
Certificates of Deposit
Checking Account Bank Statements
Cancelled Checks
Check Stubs
Vouchers
Receipts
Invoices
Member Ledger Cards
Dues Checkoff Statements
Fixed Assets Inventory
If we need any additional records or information, we will let you know.
Your cooperation is greatly appreciated.
Sincerely,
John Smith
Trustee
|
Figure 3:
|
1. What sources of receipts does
the union have? |
|
Yes |
No |
Dues/initiation fees by checkoff
|
|
|
Dues/initiation fees paid directly by members
|
|
|
Member assessments (building corporation, death benefit,
etc.)
|
|
|
Interest (savings, certificates of deposit, etc.)
|
|
|
Rent
|
|
|
Other Receipts:
|
|
|
2. How
is this money recorded in the unions financial records?
|
3. Who
is responsible for making these entries in the unions financial
records?
|
4. What
kinds of receipts records are maintained? |
|
Yes |
No |
Employer Checkoff Statements
|
|
|
Individual Receipts
|
|
|
Member Ledger Cards
|
|
|
Receipts Journal
|
|
|
Deposit Slips
|
|
|
Check Stubs
|
|
|
Bank Statements
|
|
|
Savings Passbook
|
|
|
Other Receipts Records:
|
|
|
5. Where is the
unions money kept on deposit? |
Type of Account |
Bank |
Account
Number |
Checking Account
Savings Account
Certificate of Deposit
Money Market
Other:
|
|
|
6. Does the union have any investments such as stocks
or bonds? If so, list.
|
7. Does the union have an inventory of fixed assets
showing date of purchase and cost?
|
8. Does the union have a safe or safe deposit box? If
so, specify location/contents.
|
9. Are all disbursements made by check?
|
10. What kinds of disbursements records are maintained?
|
|
|
Yes |
No |
Check Stubs
|
|
|
|
Cancelled Checks
|
|
|
|
Bank Statements
|
|
|
|
Savings Passbook
|
|
|
|
Savings Withdrawal Slips
|
|
|
|
Disbursements Journal
|
|
|
|
Vouchers
|
|
|
|
Payroll Records
|
|
|
|
Bills/Invoices
|
|
|
|
Other Disbursements Records:
|
|
|
|
11. How are disbursements approved, made, and recorded
in the unions financial records?
|
12. Did
any special situations occur (salary increases, convention expenses,
financial support from parent body, office break-in and related insurance
claims, etc.) during the audit period?
|
Key Constitutional Provisions
Officer Duties:
Officer Entitlements:
Spending Authorization:
Other: |
|
1. What sources of receipts does
the union have? |
|
Yes |
No |
Dues/initiation fees by checkoff
|
|
|
Dues/initiation fees paid directly by members
|
|
|
Member assessments (building corporation, death benefit,
etc.)
|
|
|
Interest (savings, certificates of deposit, etc.)
|
|
|
Rent
|
|
|
Other Receipts:
|
|
|
2. How
is this money recorded in the unions financial records?
Individual receipts are issued for all money received
except checkoffs. Copies of receipts are maintained in bound books.
All receipts (including bank interest) are recorded once a week
in receipts journal. At end of month all receipts deposited to
checking account.
|
3. Who
is responsible for making these entries in the unions financial
records?
Treasurer Richard Roe
|
4. What
kinds of receipts records are maintained? |
|
Yes |
No |
Employer Checkoff Statements
|
|
|
Individual Receipts
|
|
|
Member Ledger Cards
|
|
|
Receipts Journal
|
|
|
Deposit Slips
|
|
|
Check Stubs
|
|
|
Bank Statements
|
|
|
Savings Passbook
|
|
|
Other Receipts Records:
|
|
|
5.Where is the
unions money kept on deposit? |
Type of Account |
Bank |
Account
Number |
Checking Account
Savings Account
Certificate of Deposit
Money Market
Other: |
National City
National City
First Federal
None
None |
2215607
2215608
1607126
None
None |
6. Does the union have any investments such as stocks
or bonds? If so, list.
Six shares of employer stock so we get company reports.
|
7. Does the union have an inventory of fixed assets
showing date of purchase and cost?
Yes. Copy obtained. No changes during audit period.
|
8. Does the union have a safe or safe deposit box? If
so, specify location/contents.
No. Important papers locked in Treasurers
desk. Cash receipts also locked in Treasurers desk until
deposited.
|
9. Are all disbursements made by check?
Yes. We never make disbursements from undeposited
cash. We do not have a petty cash fund.
|
10. What kinds of disbursements records are maintained? |
|
Yes |
No |
Check Stubs
|
|
|
Cancelled Checks
|
|
|
Bank Statements
|
|
|
Savings Passbook
|
|
|
Savings Withdrawal Slips
|
|
|
Disbursements Journal
|
|
|
Vouchers
|
|
|
Payroll Records
|
|
|
Bills/Invoices
|
|
|
Other Disbursements Records:
|
|
|
11. How are disbursements approved, made, and recorded
in the unions financial records?
All checks are recorded sequentially in the disbursements
journal and on the check stubs. President and Treasurer must
sign all checks. All disbursements for month read to members
for approval at monthly membership meetings. All bills/invoices
kept in separate folders and marked to show check number/date
paid.
|
12. Did
any special situations occur (salary increases, convention expenses,
financial support from parent body, office break-in and related insurance
claims, etc.) during the audit period?
Officer salaries increased in November. See bylaw
change approved by International in October. In December the International
began sending per capita rebate (from surplus in their accounts).
See entries in receipts journal and related correspondence kept
in monthly receipts folders.
|
Officer Duties: Article 40, Section 1-12 The President
shall sign all vouchers and countersign all checks issued by Treasurer.
Recording Secretary will sign all vouchers and keep minutes of meetings.
Treasurer will receive all income, issue receipts, make deposits,
write checks, maintain a property inventory, and prepare monthly financial
report for membership meetings. The Trustees shall audit the records
quarterly using forms provided by the International. They will confirm
that all funds are deposited and that the financial officers are bonded.
They will issue a report to the local with a copy to the International.
If inaccuracies appear the General Secretary Treasurer has the authority
to conduct an audit and, if necessary, schedule a hearing.
Officer Entitlements: Article 50, 51 Lost time will be
paid only when official union business requires that a member forfeit
salary from his employer. Travelers are entitled to reimbursement
for the actual cost of lodging and transportation and a meal allowance
of $30/day. Officers are entitled to salaries specified in the local
bylaws.
Spending Authorization: Article 46 All disbursements
must be approved by the membership.
Other: Article 6, 48 Per capita taxes will be paid on
the fifteenth of each month. The International will provide bonding
coverage for all local officers and employees who handle funds. |
- If your union maintains check stubs rather than a
journal, you will have to add the amounts posted on each check stub for
the month to arrive at the total monthly disbursements.
- This amount will generally be shown on the first
page of the monthly bank statement.
- Normally, monthly service charges and fees for check
printing, bounced checks, etc., will be included in the total
disbursements per bank. If your union records do not include these charges,
add the total amount for your audit period to the total Disbursements
per Union.
- Checks are considered to be outstanding when they
are written during a designated period but do not clear the bank until a
later period. Like service charges, an adjustment must be made for outstanding
checks. To adjust for outstanding checks at the beginning of the period
you will have to subtract the total amount of outstanding checks from the
total Disbursements per Bank.
- To adjust for outstanding checks at the end of the
period, you will have to add the total amount of outstanding checks to the
total Disbursements per Bank.
- Funds transferred from one of your unions accounts
into another of your unions accounts are not considered to be union
disbursements and should not be included in the calculation of total disbursements.
The bank statement will reflect the amount of the transfer as a disbursement.
To adjust for a transfer of funds, subtract the amount of the transfer from
the total Disbursements per Bank.
- The adjusted totals posted in each column should
agree. If significant discrepancies are detected, double-check the accuracy
of the amounts posted in your unions disbursements records. If you
have not done so already, use an adding machine tape to confirm the totals.
|
- If your union maintains check stubs rather than
a journal, you will have to add the amounts posted as receipts on each
check stub for the month to arrive at the total monthly receipts.
- This amount will generally be shown on the first
page of the monthly bank statement.
- The bank will frequently include interest in the
total receipts per bank. If your union records do not include interest,
add the total amount for your audit period to the total Receipts
per Union.
- Outstanding deposits (also called deposits in transit)
are deposits made to the bank and entered in the union records during
a designated period which do not appear on the bank statement until a
subsequent period. Like interest, an adjustment must be made for outstanding
deposits. To adjust for outstanding deposits at the beginning of the period,
you will have to subtract the total amount of the outstanding deposits
from the total Receipts per Bank.
- To adjust for outstanding deposits at the end of
the period you will have to add the total amount of the outstanding deposits
to the total Receipts per Bank.
- Funds transferred from one of your unions
accounts into another of your unions accounts are not considered
to be union receipts and should not be included in the calculation of
total receipts. The bank statement will reflect the amount of the transfer
as a deposit. To adjust for a transfer of funds, subtract the amount of
the transfer from the total Receipts per Bank.
- The adjusted totals posted in each column should
agree. If significant discrepancies are detected, double-check the accuracy
of the amounts posted in your unions receipts records. If you have
not done so already, use an adding machine tape to confirm the totals.
|
*This
amount should agree with the figures shown in the union records. If significant
discrepancies are detected, double-check the figures and, if necessary,
seek an explanation from the principal financial officers. |
The Labor-Management Reporting and Disclosure Act of 1959, as amended
(LMRDA), establishes a number of requirements relating to the handling
and reporting of union funds:
Unions must file annual
financial reports with the Office of Labor-Management Standards (OLMS)
on one of three forms depending on the reporting unions total annual
receipts. Unions with $200,000 or more in receipts and those in trusteeship
must file the Form LM-2. Unions with less than $200,000 in total annual
receipts which are not in trusteeship may file the shorter Form LM-3 and
unions with less than $10,000 in total annual receipts which are not in
trusteeship may file the abbreviated Form LM-4. The reports are public
information and are available from OLMS for any person to examine or purchase
copies.
Unions must retain the
records necessary to verify the annual financial reports (Form LM-2/3/4)
for at least five years after the reports are filed and must permit members
to examine the records for just cause.
In unions with more than
$5,000 in property and annual receipts, officers and employees who handle
union funds or property must be bonded to provide protection against losses
by acts of fraud or dishonesty on their part.
Union
officers have a duty to manage the funds and property of the union solely
for the benefit of the union and its members in accordance with the unions
constitution and bylaws.
A union officer or
employee who steals or otherwise misappropriates union funds or other
assets commits a federal crime punishable by a fine and/or imprisonment.
A union may not have outstanding
loans to any one officer or employee at any time that in total exceed
$2,000.
A union may not pay the
fine of any officer or employee convicted of any willful violation of
the LMRDA.
Union funds or other
assets may not be used to promote the candidacy of any candidate in an
election of union officers.
If a union is in
trusteeship, no funds of the union can be transferred to its parent body
other than the normal per capita tax and assessments payable by subordinate
bodies not in trusteeship.
Persons convicted of certain crimes may not hold union office or employment
for up to 13 years after conviction or after the end of imprisonment.
If you have any questions about the LMRDA, contact the nearest OLMS office
for assistance.
|
Section 206 of the Labor-Management Reporting and Disclosure Act of 1959,
as amended (LMRDA), outlines the general recordkeeping requirements for
unions. The Office of Labor-Management Standards (OLMS) finds that about
thirty-five percent of the unions audited by OLMS failed to maintain adequate
records. The overwhelming majority of these violations were unintentional;
the responsible union officials often did not understand what specific
records had to be kept for the required five-year period. However, because
of the wide diversity of recordkeeping systems used by international and
national unions and their affiliates, it is not possible for OLMS to precisely
define what records must be maintained by every union.
As a general rule, all types of records used in the normal course of
doing business must be maintained by unions for five years. This includes
such financial records as receipts and disbursements journals, cancelled
checks and check stubs, bank statements, dues collection receipts, per
capita tax reports, vendor invoices, and payroll records. OLMS has found
that, for the most part, unions do maintain these types of basic financial
records but often fail to keep other records which help explain or clarify
financial transactions such as:
- credit card slips and itemized receipts for each credit card charge
- member ledger cards for former members
- the unions copy of bank deposit slips
- bank debit and credit memos
- vouchers for union expenditures
- internal union financial reports and statements
- minutes of all membership and Executive Board meetings
- accountants work papers and other internal worksheets used
to prepare financial statements
All types of financial records and other related records that clarify
or verify financial transactions must be maintained for five years after
the applicable LM reports are filed. If the principal financial officers
or Trustees have any questions about recordkeeping responsibilities, the
union records in question should be retained or advice from the nearest
OLMS field office should be sought.
|
Section 502(a) of the Labor-Management Reporting and Disclosure
Act of 1959, as amended (LMRDA), establishes bonding requirements
for certain union officers and employees. Every union covered by
the LMRDA is subject to these bonding requirements except for unions
whose property and annual receipts do not exceed $5,000 in value.
Essentially the law provides that any person who handles
union funds or property must be bonded for at least 10% of the funds
handled during the unions preceding fiscal year up to a maximum
of $500,000. An individual is considered to be handling
funds or other property of a union if the union could suffer a loss
if the individual performed his/her duties fraudulently or dishonestly.
Handling funds is not limited to physical contact with money but
is based on various factors. For example, a person who receives
dues, fees, etc., from members clearly handles union funds. Also,
however, any officer or employee who has authority to sign checks
or make withdrawals from a savings account is handling union funds
even if he/she has no physical contact with the funds. Individuals
who typically handle funds include union officers (both elected
and non-elected), employees such as business agents, trustees, key
administrative and professional staff, and clerical personnel. The
required bond must be obtained from a company on the U.S. Treasury
Department list of approved bonding companies.
An easy way to compute the approximate amount of bonding coverage
required using information from your union records or from your
unions most recently completed LM report follows: |
|
Cash on hand and on deposit at the start of the year |
$ |
____________ |
|
Plus total receipts for the year |
+ |
____________ |
|
Equals total funds handled |
= |
____________ |
|
Multiply by 10% |
X |
_____.10____ |
|
Equals amount of coverage required |
= |
$ |
____________ |
If you have any questions about the bonding
requirements or their application to your union, contact the nearest
OLMS office and request copies of an explanatory pamphlet, Bonding
Requirements Under the LMRDA and CSRA, which includes a checklist
to more accurately calculate the amount of coverage required by the
LMRDA. Copies of the LMRDA bonding regulations, 29 CFR Part 453, are
also available from OLMS. |
|
Section 501 of the LMRDA outlines the general fiduciary responsibilities
for officers and employees of unions. Union officials occupy positions
of trust and therefore must ensure that the unions funds and other
assets are used solely for the benefit of the union and its members. Unfortunately,
if a union or other organization does not have an adequate system of internal
financial controls, some individuals may use or be tempted to use some
of the organizations funds for their own purposes or become careless
and mix the organizations money with their own.
To prevent, or at least deter, the misuse or embezzlement of their funds,
most organizations including corporations, banks, international unions,
etc., establish internal controls over the handling of their finances.
Adequate and effective internal controls require a separation of functions
and responsibilities among a number of individuals who are actively involved
in handling the unions finances and who provide a system of checks
and balances over each others activities. An entirely adequate
system of internal controls is not always possible in small unions which
employ no more than one full-time or part-time officer or employee to
handle the unions financial affairs and cannot afford the services
of an independent accountant. However, some effective internal controls
can usually be established even in one- person operations. For example,
union executive boards or other governing bodies should consider taking
the following actions to safeguard union funds by requiring that:
- the unions financial officer issue pre-numbered receipts to
members for all money collected from them and maintain records showing
the dues payment status of each member.
- the unions financial officer make regular, frequent deposits
of dues and other union funds to the unions bank account.
- the unions financial officer maintain receipts and disbursements
journals (or similar records) to record all monies received and spent
by the union.
- there are constitutional provisions or membership or executive board
meeting authorizations for the level of salary, allowances, and expenses,
if any, to which the unions officers are entitled.
- prior authorization be obtained for large or unusual financial transactions.
- signature stamps not be used on checks and that checks be signed
only after they are completely filled out and the cosigner knows the
purpose and legitimacy of each transaction.
- all checks drawn on the unions bank account have a second signature.
- the financial officer give a report of the unions finances
at each membership or executive board meeting.
- Trustees or Audit Committees conduct periodic audits and provide
reports to the membership.
Although establishment of internal financial controls will not absolutely
prevent misuse or embezzlement of union funds, internal controls such
as those listed above will deter most individuals from misusing union
funds. Trustees and other union officers who have further questions about
internal financial controls should seek the advice of their parent body
or the nearest OLMS field office.
|
|
On 2/3/01 the undersigned Trustees completed an examination
of the books and records and certify that to the best of our knowledge
the information in this report is true and correct:
-
Disbursements were accurately reflected in the union's records
and issued for legitimate purposes.
-
Receipts were accurately reflected in the union's records and
deposited to the unions bank accounts.
-
Assets (cash and equipment) were properly accounted for.
- The union appears to be complying with the Labor-Management
Reporting and Disclosure Act's provisions for financial reporting,
recordkeeping, bonding, and loans with the following exceptions:
Checkoff statements for the period were not initially available.
Copies were obtained from the employer and the Treasurer has
promised to retain future copies received.
The bank statement and cancelled checks for October 2000
were not available. Copies were obtained from the bank and placed
with other records.
Original bills for the Christmas party were not retained.
The Treasurer said he will tell the committee chairman to keep
and turn over all Christmas party bills next year.
Our LM-3 report for fiscal year ending 12/31/99 was timely
submitted to OLMS. The Treasurer is working on our LM-3 report
for fiscal year ending 12/31/00 and will file it before the
March 31, 2001 deadline.
- The union appears to be using good internal financial controls
with the following exception:
The President has been pre-signing checks. He has agreed
to sign them only after they have been fully completed.
- The union appears to be complying with the financial practices
and procedures of our parent body with the following exceptions:
Per capita tax payments were usually submitted 1-2 months
late. The Treasurer has promised to submit them on time in the
future.
We have not been using all the forms (receipts, vouchers,
journals) required by our parent body. New forms have been ordered
and will be used in the future.
|
|
Cash Balance (Last Audit Report) |
$5,004.29 |
|
|
Plus: Total Receipts
Less: Total Disbursements |
$8,125.25
$7,740.93 |
|
|
Cash Balance (This Audit Report) |
$5,388.61 |
|
|
Members at End of Period |
201 |
|
- Fixed Assets Inventory
- Ending Bank Balance Reconciliation Worksheet
John Smith 2/8/01
Mary Brown 2/8/01
Frank Miller 2/8/01 |
|
Unions receive money, deposit it into bank accounts, and spend it for a variety
of reasons. The LMRDA requires that records of every union financial transaction
be maintained and that summaries of these transactions be reflected on the Labor
Organization Annual Report (LM-2, LM-3, or LM-4). Typical receipts, disbursements,
assets, and liabilities records maintained by Factory Workers Local 888, a fictitious
union, are described below.
Unions obtain their funds chiefly from dues paid by union members. Other sources
may include fees, assessments, interest, and dividends. All funds going into
a union are referred to as "receipts." Receipts records generally
consist of dues checkoff statements and individual dues receipts issued to members
who pay their dues directly to the union. The checkoff statement which
is sent by the employer along with the dues check should be retained
in your union records. A typical checkoff statement and check are illustrated
below:
In this checkoff statement you will notice that dues were not deducted
for Benjamin Barnhart for the month of June. He must pay his dues directly to
the union's Treasurer.
When dues are paid directly to the union, the member is usually given an individual
dues receipt. The original receipt should be given to the dues paying member.
A duplicate (carbon copy) of the receipt should be kept in a bound book and
retained in your union's receipts records. An individual dues receipt for Benjamin
Barnhart is illustrated below:
All receipts should be posted in your union's financial records (receipts journal,
checkbook register, and/or check stubs). To keep track of receipts, many unions
rely on a receipts journal. Note that the checkoff check from Johnson
Controls and the direct dues payment from Benjamin Barnhart are posted in the
illustration below:
Once receipts are recorded in your union's financial records, a bank deposit
slip like that shown below should be prepared and a duplicate retained by
your union. Note that this deposit slip only shows the total amount of the checks
and cash recorded in the receipts journal above.
All deposits will be reflected on your union's monthly bank statements.
In the following illustration, you will see a deposit made on July 10, 2000
in the amount of $2,920.85. The union financial records explaining this deposit
consist of the receipts journal, duplicate deposit slip, direct pay receipt,
and checkoff statement.
Unions spend money for a variety of reasons like per capita tax payments, lost
wages, expenses, office supplies, or postage. Prior to disbursing money, many
unions require that a voucher be completed. Frequently other documents
such as bills and invoices supporting the claim are stapled to the voucher.
An example of a voucher is shown below:
The following check is payable to Walter Smith, who has submitted the voucher
shown above, for payment of lost time. Smith is the payee on the check
illustrated below. The check is signed (or approved) by President Joe Abel and
Treasurer Richard Roe. They are the signatories of this check. When this
check is negotiated, Walter Smith will sign his name on the back of the check
showing that he received the proceeds from this check. His signature is referred
to as an endorsement and he is considered to be the endorser.
After a check is charged to the union's account, the cancelled checks for the
month are generally returned to the union along with the monthly bank statement.
The amount of the check will be posted on the bank statement and on the bottom
right-hand corner of the check as shown below. The check stub, to the left of
the check, provides additional information (lost time hours) about this transaction.
A record of every check the union issues must be maintained. The checkbook
register and/or check stubs often function as a disbursements journal, or a
listing of all checks written. Some unions also keep a separate disbursements
journal so that they can allocate similar kinds of disbursements into separate
columns. This makes it easier to calculate how much money is being spent for
similar purposes. An example of a disbursements journal page is shown below.
Note that the check to Walter Smith is shown in this illustration:
All cancelled checks will be reflected on your monthly bank statements.
These statements will generally identify the check numbers and the amounts of
the checks which were charged against your union's account during the month.
In the following illustration, check number 1607 to Walter Smith for $118.27
was negotiated and charged against the union's account on July 14, 2000. The
voucher (and any attached documents), check stub, disbursements journal, and
cancelled check all explain (or support) the disbursements shown on these bank
statements. Many unions require that all disbursements be approved by their
members. In these instances, the membership meeting minutes may provide further
details regarding the purpose of these disbursements.
Unions retain both liquid (cash, or easily convertible to cash) and fixed (furniture,
computers, etc.) assets. The assets of most concern in an audit are liquid assets,
which most often are in the form of checking and savings accounts, certificates
of deposit, cash, and sometimes stock in the employer company. An illustration
of a passbook savings account follows:
A statement savings account may also be maintained. Periodic statements (monthly,
quarterly or semi-annually) will be sent from the bank and reflect the transactions
during the period.
Another common form of savings for a union is a certificate of deposit
(CD). Unlike a passbook savings account, the money in the CD cannot be easily
withdrawn for a designated time period without payment of a penalty. Interest
is paid by the bank on the CD and may be deposited to the union's checking or
savings account or deposited into the certificate. These terms should be specified
on the CD or clarified with your union officers. In the illustration below,
the certificate of deposit specifies that the interest on this CD will be applied
to the CD when it matures on August 6, 2001.
Some unions own stock for investment purposes or buy stock in the company that
employs their members so they can get financial statements about their employer.
The stock certificate will generally identify the number of shares of
stock held by the union. In the illustration below, Factory Workers Local 888
is the owner of six shares of stock in Johnson Controls Incorporated.
Unions also retain fixed assets like buildings, automobiles, computer equipment,
and furniture. In addition to inventories of fixed assets showing their original
cost, estimated current value, or book value, unions should also retain various
documents showing ownership of these assets, such as property deeds, mortgage
payment statements, car titles, and equipment warranties. These documents should
be kept in a secure place, such as a safe deposit box at the union's bank.
Any bill owed by a union but not yet paid is considered to be a liability.
Liabilities might include an electric bill which has not been paid, taxes payable
to the IRS, mortgage payments, or any other financial obligation. Another example
of a liability would be per capita taxes owed to your parent body. In the monthly
per capita tax report shown below, Factory Workers Local 888 is submitting
a late payment (in September 2000) for its June 2000 per capita taxes.
Some parent bodies require that their affiliates use prescribed forms to record
their receipts, disbursements, assets, and liabilities. If you have any questions
concerning the types of records which are required by your parent body, you
should review your constitution or contact your parent body for assistance.
A system of recording and
conveying information about an individual or organization in financial terms.
Anything of value owned by the
union such as cash, furniture, etc.
A systematic examination of financial
books and records involving analyses, tests, and confirmations to determine
their accuracy, completeness, and compliance with established standards.
An established process
in which purchases and/or other disbursements are approved by union officers
or members.
The amount of money in a bank
account on a particular date as recorded by the financial institution on bank
statements.
A statement sent by the
bank to a checking account customer, such as a union, showing deposits, checks
cleared, service charges, interest earned, and ending balances for a specified
period, usually one month.
Insurance protecting an organization,
such as a union, against financial loss through fraud or dishonesty.
The amount of money in
a bank account on a particular date as recorded by the union in its financial
records.
The amount shown in the unions
records for a particular asset, normally the cost of the asset less accumulated
depreciation.
An original check which
has cleared through the bank.
Money, negotiable checks, certificates
of deposit, and balances in savings and checking accounts.
A comparison of
the unions account balances with the records of the bank (bank statement),
listing differences to bring the balances into agreement.
A certificate
from a bank stating that a customer, such as a union, has a specified sum on
deposit which will earn a specific rate of interest for a specific period of
time.
The authorized withholding
of dues, fees, or other assessments from union members wages by an employer
for transmittal to the union.
The part of a check or receipt
retained as a record of payment.
An internal memorandum used
by banks to increase the fund balance in an account containing a brief explanation
of why the account was increased. A duplicate copy of the memorandum is forwarded
to the customer with the regular bank statement.
An internal memorandum used
by banks to decrease the fund balance in an account containing a brief explanation
of why the account was decreased. A duplicate copy of the memorandum is forwarded
to the customer with the regular bank statement.
A bank document prepared
by the account holder, such as a union, that reflects the amount deposited into
an account.
A systematic process by
which the original cost of a long term asset, such as a building, is reduced
and carried on the unions books at a lesser figure. (See book value)
Payments of dues or other
fees made directly to the union by members by cash or check (as opposed to payments
received indirectly through a checkoff arrangement with the employer).
Money paid out by the
union.
A chronological
list of all union payments made in which the date, check number, amount, payee,
and purpose are recorded.
A comparison
of the unions disbursement records with the records of the bank (bank
statements), listing differences to bring the balances into agreement.
A periodic payment to a union by
members which establishes them as members in good standing. The amount is generally
included in the bylaws and constitution and is approved by a secret ballot vote
of the membership.
One to whom ownership of a
negotiable document, such as a check, is transferred by endorsement.
Signature appearing on the
back of a union check as evidence of the legal transfer of ownership, especially
in return for cash or credit indicated on its face.
The requirement in law
that union officers hold and manage union funds only for legitimate union purposes.
The unions constitutional
officer whose responsibilities include the handling of union receipts, disbursements,
and assets.
All records relating
to the receipt, management, and disbursement of union funds. These include,
but are not limited to, receipts records, minutes of meetings in which financial
decisions are made, bank statements, expense vouchers, cancelled checks, debit
memoranda, receipts and disbursements journals, etc.
Those assets acquired for
use by the union with no intention of selling them until their usefulness is
diminished, such as land, buildings, office equipment, furniture, etc.
Money earned on union bank
accounts or investments or the charge or cost for using money, frequently expressed
as a rate per period, usually one year, called the interest rate.
A detailed list of goods purchased
by a union or services rendered to a union with an account of all costs.
An obligation or a debt.
Cash, or assets that can
be easily converted to cash, such as savings accounts and certificates of deposit.
Time spent by an individual,
away from his/her regular job, on union business.
Reimbursement for
wages lost while conducting union business.
Individual collection
records for union members which contain all of the pertinent information concerning
a members dues, fees, and assessment payments to the union.
To transfer ownership of a
financial instrument (like a check) to another (such as a bank) in return for
a thing of value (usually cash).
A situation
where the balance in an account is not sufficient to cover the amount of checks
written on the account. Such checks are commonly referred to as bounced
checks.
Checks written by
the union which have not yet been deducted from the unions checking account
balance by the bank.
Deposits that have
been recorded by a union but have not yet been received (and recorded) by the
bank. Also called deposits in transit.
A person to whom money is paid.
A per member assessment,
usually by a parent body, that unions must remit periodically.
A document which the union provides
to confirm that money has been collected or which a vendor provides to confirm
that goods or services have been provided to the union.
Can refer to documents cited
above or money received by a union.
A chronological listing
of union receipts including the date, amount, source, and purpose of each receipt.
A comparison
of the unions receipts records with the records of the bank (bank statement),
listing differences to bring the balances into agreement.
A method of calculating the
correct amount of cash in a bank account by taking the opening balance of the
account, adding any receipts, deducting any disbursements (not including outstanding
checks), and comparing the result with the bank statement ending balance.
The individual authorized
by the union to sign checks.
Cards signed at the
bank, for a specific account, with the signatures of those authorized to make
transactions on the account.
Checkoff lists,
bills, invoices, and other documents maintained by the union to verify the accuracy
of the entries made in the union records and deposits and withdrawals made on
the unions accounts.
To follow a receipt of a payment
(to the union) to an entry in the unions receipts journal and then from
these entries to a related deposit slip and corresponding entry on the unions
bank statement; or to follow a union disbursement from authorization of expenditure
through the invoice, bill, check stub or other record into the unions
disbursements journal and then from the journal to the related cancelled check
and corresponding entry on the unions bank statement.
The movement of cash
between accounts held by the union. Such transactions do not represent receipts
or disbursements, as the union neither receives nor disburses cash.
A union check made invalid
because of a mistake made in its preparation.
A union claim form for reimbursement
of expenses, mileage, lost time, etc., which documents the date, amount, and
purpose of the payment owed to the preparer of the voucher.
Bank document prepared
by the account holder, such as a union, that reflects the amount withdrawn from
an account.
This checklist has been developed by the Office of Labor-Management Standards
(OLMS) to help Trustees and other persons with financial responsibilities in
small unions (annual receipts less than $50,000) audit the financial records
of their unions and ensure compliance with certain requirements of the Labor-Management
Reporting and Disclosure Act of 1959, as amended (LMRDA). This checklist features
a 10-step audit that concentrates on reviewing key financial areas and
is specifically designed to save time, yet still provide for a meaningful, systematic
review of financial books and records. The 10-step audit is not a traditional
audit but rather a limited, focused review that was developed for Trustees from
small unions with little or no financial training or experience. It is modeled
after techniques successfully used by OLMS. The 10-step audit should help Trustees
carry out their primary responsibility to ensure that union funds and other
assets are properly accounted for and used solely for the benefit of their union
and its members.
|
Meet with the other Trustees or audit officials
to discuss general responsibilities, assign duties, and select a team leader. |
|
Review any forms, manuals, and handbooks created
by your parent body which outline your duties and responsibilities, including
any required standard audit report forms. Also review your unions
constitution and bylaws, especially those provisions dealing with dues rates,
officer salaries and expenses, lost time policies, officer duties, and spending
approval procedures. |
|
Obtain and review your unions most recent
audit report and LM-3 or LM-4 annual financial report. |
|
Meet with the principal financial officers of
your union to seek their cooperation and support. Find out if any special
situations occurred (salary increases, convention, supplemental financial
support from parent body, office break-in and related insurance claims,
etc.) during the audit period. |
|
Determine the person you should deal with to
obtain access to necessary financial records and explanations on how these
records are maintained. |
|
Select an audit period, develop a general timetable
for completion of your work, and confirm that all necessary financial records
(including Executive Board and membership meeting minutes) will be available. |
|
Contact your unions parent body or one
of the OLMS offices listed on the last page of this pamphlet if questions
arise about any phase of your audit. |
Disbursements Steps 1 & 2
Trace
cancelled checks to the bank statements and disbursements journal.
Locate all cancelled checks for at least two months in your audit period
and confirm that the amounts of each check match the amounts for the corresponding
entries on your unions bank statements. Compare these checks with
the corresponding entries in the disbursements journal. Confirm that the
payee, date, and purpose are properly recorded in the disbursements journal.
Scan the
disbursements journal and record unusual entries.
Examine your unions disbursements journal for the entire audit period
and make a list of any disbursements that appear to be unusual or out of
the ordinary. Review the supporting bills, vouchers, invoices, and membership
meeting minutes for all of these disbursements and confirm that they were
made for legitimate union purposes, as approved by the membership.
Receipts Steps 3 & 4
Trace
employer dues checkoffs to the receipts journal and bank statements.
Locate all checkoff statements for the period and confirm that each checkoff
check is recorded in your unions receipts journal. Select at least
two months and confirm that the amounts recorded in the receipts journal
match corresponding entries on your unions bank statements. Alternatively,
if all dues are received directly from members, conduct similar procedures
to make sure that this dues money was properly recorded and deposited.
Confirm
that receipts from all other sources have been properly recorded and deposited.
Locate all original receipts for at least two months and confirm that all
non-dues checkoff income (interest, rent, refunds) cited on these records
matches corresponding entries in the receipts journal. Trace these entries
from the journal to corresponding entries on your unions bank statements.
Assets Steps 5 & 6
Identify
all bank accounts, verify their ending balances, and review withdrawals/ transfers.
Locate all bank statements for the audit period. If any bank accounts were
closed during the period find out what happened to the proceeds from these
accounts. Make a list of all active bank accounts at the end of your audit
period. Record the ending balances for each bank account as shown on your
unions bank statements. Add together these figures to calculate the
total liquid assets at the end of the audit period. Determine that all withdrawals
during the audit period from savings accounts, money market accounts, or
certificates of deposit were used for legitimate union purposes, as approved
by the membership.
Inventory
fixed assets.
Prepare an updated inventory of your unions fixed assets such as
a computer, a photocopier, or a filing cabinet by determining whether any
assets previously held were disposed of during the audit period and whether
any assets were acquired during the audit period. Create a list showing
all fixed assets at the end of the audit period; either their original cost,
estimated current value, or value as carried in your unions books;
and their location.
While completing Steps 1 - 6 you may well encounter difficulties
understanding your unions records or the necessary records to
complete the steps may not be immediately available. If this occurs,
you should talk to the principal financial officers to resolve these
concerns. However, you may also encounter significant problem areas
such as altered checks, falsified records, missing assets, or a possible
misuse of funds. If this occurs, you should contact your parent body
or the nearest OLMS office for assistance. |
LMRDA Compliance Steps 7 10
Confirm that the LM annual financial report for the latest completed fiscal
year was filed on time.
Locate your unions LM-3 or LM-4 annual financial report for the latest
completed fiscal year and confirm that it was filed on time (within 90 days
after the end of your unions fiscal year) with OLMS. If not, advise
the principal financial officers to complete and submit it to OLMS as soon
as possible.
Determine
whether financial records were properly maintained.
Verify that the records maintained by your union are sufficient to clarify
or verify the information shown on your unions LM-3 or LM-4 annual
financial reports. If not, advise the principal financial officers that
these records must be maintained for at least 5 years after these reports
are filed.
Ensure
that all officers and employees who handle funds are adequately bonded.
Confirm that all officers or employees (in unions with property and annual
receipts greater than $5,000) who handle funds are bonded for at least 10%
of the funds handled during the previous year to ensure against losses due
to fraudulent or dishonest acts. If not, suggest that the principal financial
officer contact your parent body or OLMS for assistance.
Confirm
that no officers or employees were loaned more than $2,000 by your union.
Determine whether your union made any loans to its officers or employees
during the audit period or had any such loans outstanding during the audit
period. If any loan exceeded $2,000 at any time, advise the principal financial
officers that this is prohibited by the LMRDA and that appropriate repayments
should be sought.
Audit Report
|
Meet with the other Trustees to discuss the overall
findings, to confirm that all audit steps have been completed, and to determine
whether any unresolved issues remain. |
|
Develop recommendations for improving compliance
with the LMRDAs provisions for financial reporting, recordkeeping,
bonding, and loans, and adherence with sound internal financial controls
and parent body financial practices and procedures. |
|
Meet with the principal financial officers of
your organization to discuss your findings, resolve any remaining concerns,
and request consideration for your recommendations. |
|
Prepare an audit report which includes summary
information about the completion of the 10-step audit, a brief statement
of the financial condition of your union, and any related issues or recommendations.
|
|
Present the audit report to your Executive Board
and membership, as appropriate, and respond to any questions. |
|
Submit your audit report to your unions
parent body, if required. |
Additional information about the Labor-Management Reporting and Disclosure
Act or the Civil Service Reform Act may be obtained from OLMS
field offices.
| |
|