Even with the most sophisticated systems where monthly dues are electronically transferred to their bank account, most unions still handle some incoming cash, either in the form of self-pay dues, raffle tickets, initiation fees, sale of union supplies or other sources. Whenever cash is handled, there can be problems. You want to make sure that all cash received is properly handled and accounted for. The recommended solution is a “segregation of duties” policy.
Segregation of duties is long-established accounting “checks and balances” intended to ensure that no one individual has exclusive control over any aspect of the finances, such as receipts or disbursements. Segregation of duties helps prevent and detect the misuse and/or embezzlement of funds.
When duties are not properly or completely segregated, it increases the possibility that union funds could be converted to personal use.
We recommend the following procedure for handling all incoming receipts:
- One staff member (or officer) first lists all incoming receipts;
- A second staff member (or officer) records all receipts to the journal or other book of original entry;
- A third staff member (or officer) prepares deposit slips and makes bank deposits; and
- The first staff member (or officer) reconciles receipts to the cancelled bank deposit slips.
In rare circumstances, where there aren’t enough officers or staff, the first officer or employee handles steps 1 and 4 and the second officer or employee handles steps 2 and 3.
Past experience has proven that the very best policy on segregation of duties will not work unless all officers and employees are trained in the policy and held accountable for it. This policy should be written and monitored regularly by officers, trustees or auditors.
John Lund is the Director of the Office of Labor-Management Standards.