Welcome. Yours In Union Solidarity, Elizabeth Powell

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1 Welcome You have been elected/appointed to a position of trust. You will be provided with information relating to federal laws, constitutional responsibilities, and suggestions for building a stronger local/state union. If you have any questions, please do not hesitate to contact me or Roosevelt Stewart. Yours In Union Solidarity, Elizabeth Powell Trustee Audits 1

2 APWU National Secretary Treasurer s Training Presented by: Roosevelt Stewart Elizabeth Powell Secretary-Treasurer

3 Labor Management Reporting and Disclosure Act as amended 1959 Section 501 of the LMRDA outlines the general fiduciary responsibilities for officers and employees of the union. Union officials occupy positions of trust and therefore must ensure that the union s funds and other assets are used solely for the benefit of the union and its members. Trustee Audits 3

4 What Does a Trustee Do? 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 local constitution and bylaws. In addition, you should ensure that your union is complying with legal requirements for financial reporting, recordkeeping, bonding, and loans. Trustee Audits 4

5 Audit Objectives 1. Ensure that the local s funds and other assets are used solely for the benefit of the union and members 2. Confirm that the local is complying with legal requirements Trustee Audits 5

6 Audit Objectives 3. Determine whether the internal financial controls are adequate 4. Ascertain whether the local is complying with the financial procedures and practices of the national union. Trustee Audits 6

7 Audit Objectives Remember, you are not Columbo. Your job is to identify problems as well as acknowledge good practices, too. Trustee Audits 7

8 The Audit Does local constitution set time frames for the audit? If there is no constitutional language, a motion would be needed. The local constitution should be amended to provide for periodic internal audits. Trustee Audits 8

9 Beginning the Audit Arrange committee meeting Select chairperson Review constitution & bylaws Consider contacting prior trustees if none of the trustees has experience performing audits Trustee Audits 9

10 Beginning the Audit Send letter to the principle financial officers to make arrangements for audit to be held. Make reasonable request for time Seek their cooperation and support Trustee Audits 10

11 Meeting with Principal Officers Determine your contact person (usually the local treasurer or secretary treasurer) Decide where the audit will take place along with what equipment will be furnished by the union Determine whether lost time or other compensation will be necessary Trustee Audits 11

12 DOL Guidelines for Audits The DOL has a guide on its website that is very useful in conducting your audit. Although it is titled as a guide for small locals, it can be applied to financial reviews for larger locals. Download the Conducting Audits in Small Locals A Guide for Trustees booklet from the site. Trustee Audits 12

13 What is Required for an Audit? Your union s 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. Trustee Audits 13

14 Conducting the Audit It is suggested that you divide the work of the audit committee up into manageable segments. Review disbursements Review receipts Review and inventory assets Review DOL and IRS compliance Trustee Audits 14

15 Review information Latest Audit reports Latest LM reports Constitution and Bylaws Minutes Motions Trustee Audits 15

16 Disbursement Review Checks/Credit card Disbursement receipts Authority to Spend Funds The law Constitution and Bylaws Motion or Standing motion The Budget Trustee Audits 16

17 Receipts Review Check DCO for accuracy Rental receipts Raffles (cash/checks vs. tickets) Petty cash Trace cancelled checks to bank statements Trustee Audits 17

18 Assets Review Checking accounts Savings accounts Mutual funds and stocks or CD s Fixed Assets Rental income Insurance coverage Trustee Audits 18

19 Inventory of Fixed 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 lists. 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. Trustee Audits 19

20 Information Included on the Fixed Asset Inventory 1. Date Acquired. 2. Original Cost. 3. Item. 4. Serial Number (if applicable) If the item does not have a serial number, give it an internal inventory control number. 5. Location of the item. 6. Current depreciated value. Trustee Audits 20

21 Union Asset Accounts What should not happen There should not be: A union bank account that was closed or a withdrawal was made from an existing account with no indication of what happened to the money. Unexplained differences between a previous inventory of fixed assets and your current inventory of fixed assets. Trustee Audits 21

22 Union Asset Accounts What should not happen (cont d) 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 Trustee Audits 22

23 DOL/IRS Compliance Financial records kept for 5 years + current Meeting minutes (keep forever) Authorization for expenditures Local bond Current constitution filed with DOL Payroll taxes deposited LM report filed/990 report filed Employee documents Trustee Audits 23

24 Bonds Locals are currently bonded for at least $5, by the APWU DOL requires at least 10% coverage of liquid assets APWU recommends 100% coverage of liquid assets Trustee Audits 24

25 LMRDA Compliance (Loans) The LMRDA prohibits any loans to union officers or employees in excess of $2,000. The audit should determine whether the local made any loans during the audit period or had any such loans outstanding during the audit period. Trustee Audits 25

26 LMRDA Compliance (Loans) Payroll advances are considered loans to officers or stewards. Trustee Audits 26

27 LMRDA Compliance (Loans) Ensure that advances to officers could not be considered a loan as defined by DOL: Amount of advance does exceeds the reasonable expenses expected to be incurred for official travel. (That s why you would use the GSA as a guide for estimates of expenses.) Advance is not repaid or fully accounted for by vouchers and receipts within 30 days after completion or cancellation of the travel. Trustee Audits 27

28 LMRDA Compliance (Loans) Ensure that travel advances to officers could not be considered as income, and have to reported to the IRS: Advance was not within 60 days of the travel or expense Advance was not accounted for after 30 days of the travel or expense Excess amount of advance was not return within 120 days of the travel or expense Repayment or accounting for the advance was not made within 120 days of the written request for repayment Trustee Audits 28

29 Confirm Documents Filed LM Reports Other LM forms 990s Other IRS forms and Retained Building Corp/LLC papers (see Secretary Treasurer s webpage for DOL and IRS forms) Trustee Audits 29

30 Audit Complete Prepare report Provide written report to Executive Board Present report to the members of the local Trustee Audits 30

31 Audit Report Develop recommendations for improving compliance with the LMRDA s provisions for financial reporting, record keeping, bonding, and loans, and adherence with sound internal financial controls and National APWU financial practices and procedures. Trustee Audits 31

32 Audit Report Prepare an audit report which includes a summary of information about the completion of the 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 be prepared to respond to any questions. Trustee Audits 32

33 Audit Tips Be fair and objective. Be persistent and stay focused. Make sure all necessary records are available Don t be afraid to ask for help Remember, bad financial practices are not theft; but it can hide theft. Trustee Audits 33

34 More Audit Tips Take notes of work done (unresolved issues, preliminary findings, and recommendations). Keep the local s records in order. Work as a team Don t write or make marks on the local s records Do not discuss issues outside of audit team and its report Trustee Audits 34

35 Common Problems and Solutions Problem: Cancelled checks are not available Solution: Ask officers to obtain copies from the bank Trustee Audits 35

36 More Common Problems and Solutions Problem: Checks returned for NSF Solution: Ask officers for explanation Trustee Audits 36

37 More Problems and Solutions Problem: Disbursement journal entries don t match bank statements. Solution: Determine the reason for the discrepancies. Trustee Audits 37

38 Common Discrepancies Original receipts are not maintained Missing records Bank deposits don t match monies received Extended time between receipt dates and deposit dates. Negative balances in checking account (Non Sufficient Funds) Trustee Audits 38

39 Internal Financial Controls Unfortunately, if a local union does not have an adequate system of internal financial controls, some individuals may use or be tempted to use some of the local s funds for their own purposes or become careless and mix the local s money with their own. Trustee Audits 39

40 Internal Financial Controls What actions can be taken Cont d Prior authorization be obtained for large or unusual financial transactions. All checks drawn on the local s bank account have a second signature Control your local signature stamps. Checks should be signed only after they are completely filled out and the cosigner knows the purpose and legitimacy of each transaction. The financial officer give a report of the local s finances at each membership and executive board meeting. Trustee Audits 40

41 Internal Financial Controls(cont d) To prevent, or at least deter, the misuse or embezzlement of funds, most locals establish internal controls over the handling the locals 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 union s finances and a system of checks and balances over each other s activities. Trustee Audits 41

42 Internal Financial Controls (cont) An entirely adequate system of internal controls is not always possible in a small local which has no more than one full time or part time officer to handle the local s financial affairs and cannot afford the services of an independent accountant. However, some effective internal controls can usually be established even in a one person operations. Trustee Audits 42

43 Internal Financial Controls What actions can be taken For example, the union executive boards or other governing bodies should consider taking the following actions to safeguard union funds by requiring that: The local financial officer issues pre numbered receipts to members for all money collected. The local s financial officer make regular, frequent deposits of dues and other union funds to the local s bank account. Trustee Audits 43

44 Internal Financial Controls What actions can be taken The local s financial officer maintains receipts and disbursements journals (or similar records) to record all monies received and spent by the union. There are constitutional provisions, membership or executive board meeting authorizations, for salaries, allowances, and expenses, to which the local s officers are entitled. Trustees or Audit Committee conduct periodic audits and provide reports to the membership. Trustee Audits 44

45 Internal Financial Controls What actions can be taken Cont d Although establishment of internal financial controls will not absolute prevent misuse or embezzlement of union funds, internal controls such as those listed previously will deter most individuals from misusing union funds. Trustees and other union officers who have further questions about internal financial controls should seek advice from the APWU National Secretary Treasurer s Department. Trustee Audits 45

46 Remember the Audit Objectives Ensure that the union s funds and other assets are used solely for the benefit of the union and members Confirm that the union is complying with legal requirements Trustee Audits 46

47 Remember the Audit Objectives Determine whether the internal financial controls are adequate Ascertain whether the union is complying with financial procedures and practices of the national union Trustee Audits 47

48 Elizabeth Powell, our Secretary Treasurer would like to thank you for all you do for APWU. Your feedback is very important to us because it will help us improve training. Please feel free to comment, both negative and positive, about this training. Please feel free to your comments to or contact the Secretary Treasurer s Department. Trustee Audits 48

A Message To Trustees

A Message To Trustees Conduct ing Audits in Small Unions A Guide for Trustees U.S. Department of Labor Alexis M. Herman, Secretary Employment Standards Administration Bernard E. Anderson, Assistant Secretary Office of Labor-Management