[Eenc-board] Emailing: Conducting Audits
Diane Silver
diane at diane-silver.com
Mon Jan 30 16:27:16 EST 2006
Bob,
Thanks for doing this research. Since I missed the meeting, you may have
already discussed this, but will you (Bob) be continuing to take the
lead on recommending and then contracting with someone?
-- Diane
****************************
Diane Silver
Contra and Square Dance Calling
Appalachian Clogging and Swing Dance workshops
I can't believe this much fun is legal!
http://www.diane-silver.com
828 298 7084
diane at diane-silver.com
Sweeney Bob (PFI) wrote:
> After a fair amount of websearching, I located the following
> guidelines that may be most applicable to type of audit that the Board
> would like to have conducted on our books / accounting practices once
> every 3 years. Let me know if you believe that this information can be
> used to contact for that service..
> Am still looking for succinct definitions of the different types of
> financial audits.
> Also did this message go thru to you as a Board member listed in the
> rtpnet address list, Laura and Deb ? ( Am testing the system. )
> Bob
> ------------------------------------------------------------------------
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> LMRDA </esa/regs/compliance/olms/compllmrda.htm> > Conducting Audits
>
> Conducting Audits in Small Unions - A Guide for Trustees
>
> Table of Contents
>
> A Message to Trustees
>
> Chapters
>
> 1 - Getting Ready <#ch1>
> 2 - Audit Overview <#ch2>
> 3 - Disbursements <#ch3>
> 4 - Receipts <#ch4>
> 5 - Assets <#ch5>
> 6 - LMRDA Compliance <#ch6>
> 7 - Wrapping Up <#ch7>
>
> Figures
>
> 1 - Audit Planner <#fig1>
> 2 - Letter Requesting Access to Financial Records <#fig2>
> 3 - Financial Questionnaire <#fig3>
> 4 - Completed Financial Questionnaire <#fig4>
> 5 - Disbursements Reconciliation Worksheet <#fig5>
> 6 - Receipts Reconciliation Worksheet <#fig6>
> 7 - Liquid Assets Inventory <#fig7>
> 8 - Fixed Assets Inventory <#fig8>
> 9 - Ending Bank Balance Reconciliation Worksheet <#fig9>
> 10 - LMRDA Requirements Relating to Union Funds <#fig10>
> 11 - LMRDA Recordkeeping Requirements <#fig11>
> 12 - LMRDA Bonding Requirements <#fig12>
> 13 - Internal Financial Controls <#fig13>
> 14 - Completed Audit Report <#fig14>
>
> References
>
> Understanding Union Financial Records <#financial>
> Union Financial Definitions <#glossary>
> Checklist for Conducting Audits in Small Unions <#checklist>
>
> A Message To Trustees
>
> 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 Labor’s 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 union’s 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.
>
> What’s 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 union’s 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 union’s constitution and bylaws, you should contact
> your union’s 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, it’s time to get started. Read Chapter 1 and
> begin preparing for your audit.
>
> Chapter 1: Getting Ready
>
> As you begin an audit of your union’s financial records your job as a
> Trustee may seem intimidating, particularly if you have never
> conducted an audit or are unfamiliar with your union’s 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 union’s 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 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. Each Trustee should
> have a copy of relevant sections of these documents to refer to
> as necessary throughout the audit.
> * Your union’s most recent audit report.
> * Your union’s most recent LM-3 or LM-4 annual financial report
> filed with OLMS.
>
> You should also review *Figures 1* <#fig1>, *2* <#fig2>, *3* <#fig3>,
> and *4* <#fig4> 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 union’s financial records and explanations regarding how
> these records are maintained. Find out whether any of the
> union’s 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 union’s records for an entire year, then you may want to
> begin your audit shortly after your union’s 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* <#fig1>.
>
> 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* <#fig2>. 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 union’s financial records are maintained,
> consider creating a short questionnaire for the principal financial
> officers so that everyone has a common understanding. *Figure 3*
> <#fig3> can be modified for this purpose. A completed version of this
> questionnaire is provided as* Figure 4 <#fig4>* 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.
>
> /back to table of contents <#toc>/
>
> Chapter 2: Audit Overview
>
> 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 union’s 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 union’s 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 <#ch3>) will assist you in determining
> whether your union’s disbursements have been properly recorded
> and whether they were issued for approved, legitimate union
> purposes.
> * Steps 3 and 4 (Chapter 4 <#ch4>) will help you determine whether
> your union’s receipts have been properly recorded and deposited
> into your union’s bank accounts.
> * Steps 5 and 6 (Chapter 5 <#ch5>) will aid you in accounting for
> your union’s assets (cash and equipment) and calculating their
> approximate value.
> * Steps 7-10 (Chapter 6 <#ch6>) will help you determine whether
> your union is complying with the LMRDA’s requirements for
> financial reporting, recordkeeping, bonding, and loans.
>
> 10-Step Audit
>
> 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. Don’t jump to conclusions before you have
> gathered all the facts.
> * Don’t 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.
> * Don’t write or make marks of any kind on the union records
> except as noted in this Guide.
> * Keep the union’s 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.
>
> /back to table of contents <#toc>/
>
> Chapter 3: Disbursements
>
> 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 union’s 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 union’s 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 union’s 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 local’s
> 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
> union’s 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./
>
> Step 1
>
> 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 union’s 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 union’s 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.
>
> Step 2
>
> 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 union’s bank account were for legitimate union
> purposes.
>
> * Review the disbursements journal for the entire audit period.
> Look at the type and frequency of your union’s 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:
> o checks for unusually large amounts
> o checks for unusual purposes
> o large checks to unfamiliar payees
> o checks payable to cash
> o checks where no purpose is recorded
> o checks written out of sequence
> o duplicate payments for salaries or expenses to the same
> individual
> o 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 <#step3>. Some of these
> optional steps may be required by your parent body.
>
> * Reconcile total disbursements entered in your union’s
> disbursements records for the audit period with the total
> charges shown on your union’s bank statements for the audit
> period. This will further verify the accuracy of the entries
> recorded in your union’s disbursements records.* Figure 5
> <#fig5>* 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
> union’s 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.
>
> 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.
>
> 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.
>
> Problem: No records to support disbursements exist.
> Solution: Review minutes for approval and, if necessary, ask officers
> about the payments.
>
> 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 union’s 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 union’s checking account has a negative balance or
> frequently reflects “bounced” checks.
>
> If you detect a serious problem in your union’s 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:/
>
> /back to table of contents <#toc> /
>
> Chapter 4: Receipts
>
> 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 union’s 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 union’s 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 union’s 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 union’s 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./
>
> Step 3
>
> 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 union’s receipts
> records and deposited into your union’s bank account.
>
> * Gather all of your union’s 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 union’s 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 union’s 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.
>
> Alternate Step 3
>
> 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 union’s receipts journal and deposited
> into your union’s 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 union’s receipts journal.
> * Trace the receipt entries from the journal to related entries on
> your union’s 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.
>
> Step 4
>
> 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 union’s receipts records and deposited into your union’s bank
> account.
>
> * Review the receipts journal for the entire audit period. Look
> for the type and frequency of non-dues money coming into your
> union, such as proceeds from:
> o the sale of jackets, hats, and other items
> o interest or dividends earned on your union’s bank accounts
> o checks identified as loan repayments (refer to Chapter 6)
> o income from hall rentals
> o vending machine receipts or rebates
> o union-sponsored raffles
> o parent body payments for conventions, strike fund
> assistance, or per capita tax rebates
>
> Make sure the amounts and frequency of these entries seem appropriate.
>
> * Select at least two months from your audit period in which
> non-dues receipts were recorded. Trace these receipts from the
> union’s receipts journal to the corresponding entries on the
> union’s bank statement. (You may find the bank deposit slips to
> be helpful if several receipts were deposited at the same time
> and only the total amount of deposit appears on the bank
> statements.)
>
> 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* <#step5>. Some of these
> optional steps may be required by your parent body.
>
> * Reconcile total receipts entered in your union’s receipts
> records for the audit period with the total deposits shown on
> your union’s bank statements for the audit period. This will
> further verify the accuracy of the entries recorded in your
> union’s receipts records. *Figure 6 <#fig6>* 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
> union’s bank account.
> * Complete *Alternate Step 3* <#alt3> *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
> union’s bank account.
>
> This is not an exhaustive list of optional steps. Based on your
> union’s recordkeeping system and any parent body requirements, you may
> choose to review other areas of receipts.
>
> Common Problems and Solutions
>
> As with your union’s 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.
>
> Problem: Original checkoff records are not available.
> Solution: Ask officers to obtain copies from the employer.
>
> Problem: Other original receipt records are not available.
> Solution: Ask officers for an explanation.
>
> 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.
>
> Problem: The entire amount of the checkoff check is not deposited
> into your union’s 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 union’s disbursements records, you might
> have reasons to doubt the accuracy of the union’s receipts records.
> The situations listed below *may* suggest that your union’s 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 union’s bank account.
> * Your union’s checking account has a negative balance.
>
> If you detect a serious problem in your union’s 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:/
>
> /back to table of contents <#toc>/
>
> Chapter 5: Assets
>
> 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 union’s liquid and fixed assets. By completing these
> audit steps you will ensure that your union has an accurate, current
> inventory of all your union’s 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./
>
> Step 5
>
> 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 union’s 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 union’s other bank accounts.
> * Prepare a liquid assets inventory, as illustrated in *Figure 7
> <#fig7>*, which shows the ending balances for each of your
> union’s bank accounts.
> * Determine that all withdrawals from your union’s 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.
>
> Step 6
>
> 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 <#fig8>* 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 union’s 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 <#step7>. 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* <#fig9> 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 union’s accounts.
> Suggest that principal officers have any outdated signature
> cards removed.
>
> This is not an exhaustive list of optional steps. Based on your
> union’s recordkeeping system and any parent body requirements, you may
> choose to review other areas of your union’s 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 union’s 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 union’s savings
> account is not deposited into your union’s 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 union’s 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 union’s 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:/
>
> /back to table of contents <#toc> /
>
> Chapter 6: LMRDA Compliance
>
> 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 <#fig10>*. 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 LMRDA’s requirements for financial
> reporting, recordkeeping, bonding, and loans.
>
> Step 7
>
> 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 union’s 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.
>
> Step 8
>
> 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 <#fig11>*.
>
> * 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.
>
> Step 9
>
> 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 <#fig12>* 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.
>
> Step 10
>
> 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: /
>
> /back to table of contents <#toc> /
>
> Chapter 7: Wrapping Up
>
> By now you have spent a lot of time and energy examining your union’s
> 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
> union’s 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* <#fig13>.
> * Decide the best way to handle any unresolved issues.
>
> Meeting with Principal Officers
>
> Unless significant discrepancies have been detected in the union’s
> 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 union’s 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*
> <#fig14> 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 union’s disbursements were accurately reflected in the
> records and made for legitimate purposes.
> * The union’s receipts were accurately reflected in the records
> and deposited to your union’s bank accounts.
> * The union’s assets were properly accounted for.
> * The union appears to be complying with the LMRDA’s 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 <#fig14>*. If the 10-step audit has
> verified the accuracy of your union’s 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 union’s newsletter.
>
> A Final Word from OLMS
>
> 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 union’s
> 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 union’s
> 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.
>
> /back to table of contents <#toc>/
>
> Figures
>
>
> 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)
>
> /back to table of contents <#toc>/
>
> Figure 2:
>
> Letter Requesting Access to Financial Records
>
> 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
> 888’s 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
>
> /back to table of contents <#toc>/
>
> Figure 3:
> Financial Questionnaire
> 1. What sources of receipts does the union have?
>
>
>
> Yes
>
>
>
>
> No
>
> Dues/initiation fees by checkoff
>
> O O
>
> Dues/initiation fees paid directly by members
>
> O O
>
> Member assessments (building corporation, death benefit, etc.)
>
> O O
>
> Interest (savings, certificates of deposit, etc.)
>
> O O
>
> Rent
>
> O O
>
> Other Receipts:
>
> O O
> 2. How is this money recorded in the union’s financial records?
> 3. Who is responsible for making these entries in the union’s
> financial records?
> 4. What kinds of receipts records are maintained?
>
>
>
> Yes
>
>
>
>
> No
>
> Employer Checkoff Statements
>
>
>
>
> O
>
>
>
>
> O
>
> Individual Receipts
>
> O O
>
> Member Ledger Cards
>
> O O
>
> Receipts Journal
>
> O O
>
> Deposit Slips
>
> O O
>
> Check Stubs
>
> O O
>
> Bank Statements
>
> O O
>
> Savings Passbook
>
> O O
>
> Other Receipts Records:
>
> O O
> 5. Where is the union’s 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
>
> O O
>
> Cancelled Checks
>
> O O
>
> Bank Statements
>
> O O
>
> Savings Passbook
>
> O O
>
> Savings Withdrawal Slips
>
> O O
>
> Disbursements Journal
>
> O O
>
> Vouchers
>
> O O
>
> Payroll Records
>
> O O
>
> Bills/Invoices
>
> O O
>
> Other Disbursements Records:
>
> O O
>
> 11. How are disbursements approved, made, and recorded in the union’s
> 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:
>
> /back to table of contents <#toc>/
>
> Figure 4:
>
> Completed Financial Questionnaire
>
> Factory Workers Local 888
>
> 1. What sources of receipts does the union have?
>
>
>
> Yes
>
>
>
>
> No
>
> Dues/initiation fees by checkoff
>
> X O
>
> Dues/initiation fees paid directly by members
>
> X O
>
> Member assessments (building corporation, death benefit, etc.)
>
> O X
>
> Interest (savings, certificates of deposit, etc.)
>
> X O
>
> Rent
>
> O X
>
> Other Receipts:
>
> X O
> 2. How is this money recorded in the union’s 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 union’s
> financial records?
>
> /Treasurer Richard Roe/
>
> 4. What kinds of receipts records are maintained?
>
>
>
> Yes
>
>
>
>
> No
>
> Employer Checkoff Statements
>
>
>
>
> X
>
>
>
>
> O
>
> Individual Receipts
>
> X O
>
> Member Ledger Cards
>
> O X
>
> Receipts Journal
>
> X O
>
> Deposit Slips
>
> X O
>
> Check Stubs
>
> X O
>
> Bank Statements
>
> X O
>
> Savings Passbook
>
> X O
>
> Other Receipts Records:
>
> O X
> 5. Where is the union’s 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 Treasurer’s desk. Cash
> receipts also locked in Treasurer’s 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
>
> X O
>
> Cancelled Checks
>
> X O
>
> Bank Statements
>
> X O
>
> Savings Passbook
>
> X O
>
> Savings Withdrawal Slips
>
> X O
>
> Disbursements Journal
>
> X O
>
> Vouchers
>
> X O
>
> Payroll Records
>
> O X
>
> Bills/Invoices
>
> X O
>
> Other Disbursements Records:
>
> O X
>
> 11. How are disbursements approved, made, and recorded in the union’s
> 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./
>
> ------------------------------------------------------------------------
>
> Key Constitutional Provisions
>
> *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./
>
> /back to table of contents <#toc>/
>
> Figure 5:
> Disbursements Reconciliation Worksheet
> Factory Workers Local 888
> Audit Period Ending 12/31/00
>
>
> Disbursements Disbursements
> Month Per Union(1) Per Bank(2)
> October $2,397.22 $2,614.82
> November 2,056.19 2,731.53
> December 3,199.32 2,680.32
> Total $7,652.73 $8,026.67
>
> (3)Plus Service Charges +88.20 N/A
> (4)Less Outstanding Checks
> at Beginning of Audit Period N/A -312.09
> Plus Service Charges + 88.20 N/A
> (4)Less Outstanding Checks
> at Beginning of Audit Period N/A -312.09
> (5) Plus Outstanding Checks
> at End of Audit Period N/A +526.35
> Less Transfers N/A -500.00
> (7)Adjusted Total $7,740.93 $7,740.93
> ------------------------------------------------------------------------
>
> Notes
>
> *^(1) *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.
>
> *^(2) * This amount will generally be shown on the first page of the
> monthly bank statement.
>
> *^(3) * 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.”
>
> *^(4) * 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.”
>
> *^(5) * 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.”
>
> *^(6) * Funds transferred from one of your union’s accounts into
> another of your union’s 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.”
>
> *^(7) * The adjusted totals posted in each column should agree. If
> significant discrepancies are detected, double-check the accuracy of
> the amounts posted in your union’s disbursements records. If you have
> not done so already, use an adding machine tape to confirm the totals.
>
> /back to table of contents <#toc>/
>
> Figure 6:
> Receipts Reconciliation Worksheet
>
> Factory Workers Local 888
> Audit Period Ending 12/31/00
> Receipts Receipts
> Month Per Union(1) Per Bank(2)
> October $2,796.50 $2,938.55
> November 2,566.80 2,832.45
> December 2,724.35 2,602.25
> Total $8,087.65 $8,373.25
>
> (3)Plus Interest +37.60 N/A
> (4)Less Outstanding Checks
> at Beginning of Audit Period N/A -398.00
> (5)Plus Outstanding Deposits
> at End of Audit Perios N/A +650.00
> Less Transfers N/A -500.00
> (7)Adjusted Total $8,125.25 $8,125.25
> ------------------------------------------------------------------------
>
> Notes
>
> *^(1) *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.
>
> *^(2) * This amount will generally be shown on the first page of the
> monthly bank statement.
>
> *^(3) * 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.”
>
> *^(4) *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.”
>
> *^(5) * 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.”
>
> *^(6) * Funds transferred from one of your union’s accounts into
> another of your union’s 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.”
>
> *^(7) * The adjusted totals posted in each column should agree. If
> significant discrepancies are detected, double-check the accuracy of
> the amounts posted in your union’s receipts records. If you have not
> done so already, use an adding machine tape to confirm the totals.
>
> /back to table of contents <#toc>/
>
> Figure 7:
> Liquid Assets Inventory
>
> Factory Workers Local 888
> Audit Period Ending 12/31/00
>
> Calculation of Ending Cash in Banks - All Accounts Account No. 1
>
> Name of Account General Fund
> Location of Account National City
> Type of Account Checking Account
> Account Number 2215607
> Balance per Bank Statement
> $1,378.11
> Balance per Bank Statement
> $1,378.11
> Account No. 2
>
> Name of Account General Fund
> Location of Account National City
> Type of Account Savings Account
> Account Number 2215608
> Balance per Bank Statement
> $2,510.50
> Account No. 3
>
> Name of Account General Fund
> Location of Account First Federal
> Type of Account Certificate of Deposit
> Account Number 1607126
> Balance per Bank Statement
> $1,500.00
> Total Ending Balance
> $5388.61
>
> /back to table of contents <#toc>/
>
> Figure 8:
> Fixed Assets Inventory
>
> Factory Workers Local 888
> Audit Period Ending 12/31/00
>
>
>
> Purchase Cost or Current
> Item Location Date Value
> 1.Filling Cabinet Office 1/7/75 $150.00
> 2.Typewriter Recording Secretary's Home 8/16/95 $250.00
> 3.Desk Office 1/7/75 $241.00
> 4.Chairs(4) Office 11/5/91 $295.00
> 5.Photocopier Office 2/12/94 $300.00
>
>
> Total $1,195.00
>
>
>
>
> /back to table of contents <#toc>/
>
> Figure 9:
> Ending Bank Balance Reconciliation Worksheet
>
> Factory Workers Local 888
> Audit Period Ending 121/31/00
>
> General Fund Checking
> National City #2215607 Ending Balance Per Bank:
>
> $1,378.11
> Plus Outstanding Deposits: Christmas Raffle
> +650.00
>
>
>
> $2,028.11
> Less Outstanding Checks: 1701 50.10
>
> 1704 450.00
>
> 1709 26.25
>
>
>
> -526.35
> Adjusted Bank Balance:
>
> $1,501.76*
> *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.
>
> /back to table of contents <#toc>/
>
> Figure 10:
>
> LMRDA Requirements Relating to Union Funds
>
> 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:
>
> Reports - Unions must file annual financial reports with the Office of
> Labor-Management Standards (OLMS) on one of three forms depending on
> the reporting union’s 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.
>
> Records - 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.
>
> Bonding - 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.
>
> Fiduciary Responsibility - 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 union’s constitution and bylaws.
>
> Embezzlement - 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.
>
> Loans - A union may not have outstanding loans to any one officer or
> employee at any time that in total exceed $2,000.
>
> Fines - A union may not pay the fine of any officer or employee
> convicted of any willful violation of the LMRDA.
>
> Elections - Union funds or other assets may not be used to promote the
> candidacy of any candidate in an election of union officers.
>
> Trusteeships - 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.
>
> Office Holding/Employment Prohibition - 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.
>
> /back to table of contents <#toc>/
>
> Figure 11:
>
> LMRDA Recordkeeping Requirements
>
> 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 union’s 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
> * accountant’s 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.
>
> /back to table of contents <#toc>/
>
> Figure 12:
>
> LMRDA Bonding Requirements
>
> 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 union’s 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
> union’s 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.
>
> /back to table of contents <#toc>/
>
> Figure 13:
>
> Internal Financial Controls
>
> 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 union’s
> 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 organization’s
> funds for their own purposes or become careless and mix the
> organization’s 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 union’s finances
> and who provide a system of “checks and balances” over each other’s
> 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 union’s
> 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 union’s 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 union’s financial officer make regular, frequent deposits of
> dues and other union funds to the union’s bank account.
> * the union’s 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 union’s 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 union’s bank account have a second
> signature.
> * the financial officer give a report of the union’s 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.
>
> /back to table of contents <#toc>/
>
> Figure 14:
>
> Completed Audit Report
>
> Factory Workers Local 888
> Period: /_10/1/00 - 12/31/00_/
>
> 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:
>
> _Primary Findings_
>
> 1.
>
> Disbursements were accurately reflected in the union's records
> and issued for legitimate purposes.
>
> 2.
>
> Receipts were accurately reflected in the union's records and
> deposited to the union’s bank accounts.
>
> 3.
>
> Assets (cash and equipment) were properly accounted for.
>
> 4. 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./
>
> 5. 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./
>
> 6. 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./
>
> _Financial Condition Statement_
> 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/_
> _Attachments_
>
> 1. Fixed Assets Inventory
> 2. Ending Bank Balance Reconciliation Worksheet
>
> _Signatures_
>
> _ /John Smith 2/8/01/ _
>
> _ / Mary Brown 2/8/01/ _
>
> _ /Frank Miller 2/8/01 / _
>
> /back to table of contents <#toc>/
>
> References
>
> Understanding Union Financial Records
>
> 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.
>
> Receipts
>
> 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:
>
> {Check off Statement}
>
> {Dues Check}
>
> 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:
>
> {Individual Dues Receipt}
>
> 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:
>
> {Receipts Journal}
>
> 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.
>
> {Bank Deposit Slip}
>
> 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.
>
> {Bank Statement}
>
> Disbursements
>
> 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:
>
> {Voucher}
>
> 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.
>
> {Check Stub and Cancelled Check}
>
> 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:
>
> {Disbursements Journal}
>
> 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.
>
> {Bank Statement}
>
> Assets
>
> 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:
>
> {Passbook Savings Account}
>
> 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.
>
> {Certificate of Deposit}
>
> 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.
>
> {Stock Certificate}
>
> 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.
>
> Liabilities
>
> 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.
>
> {Per Capita Tax Report}
>
> 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.
>
> /back to table of contents <#toc>/
>
> Union Financial Definitions
>
> A
>
> accounting - A system of recording and conveying information about an
> individual or organization in financial terms.
>
> asset - Anything of value owned by the union such as cash, furniture, etc.
>
> audit - A systematic examination of financial books and records
> involving analyses, tests, and confirmations to determine their
> accuracy, completeness, and compliance with established standards.
>
> authorization - An established process in which purchases and/or other
> disbursements are approved by union officers or members.
>
> B
>
> bank balance - The amount of money in a bank account on a particular
> date as recorded by the financial institution on bank statements.
>
> bank statement - 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.
>
> bond - Insurance protecting an organization, such as a union, against
> financial loss through fraud or dishonesty.
>
> book balance - The amount of money in a bank account on a particular
> date as recorded by the union in its financial records.
>
> book value - The amount shown in the union’s records for a particular
> asset, normally the cost of the asset less accumulated depreciation.
>
> C
>
> cancelled check - An original check which has cleared through the bank.
>
> cash - Money, negotiable checks, certificates of deposit, and balances
> in savings and checking accounts.
>
> cash reconciliation - A comparison of the union’s account balances
> with the records of the bank (bank statement), listing differences to
> bring the balances into agreement.
>
> certificate of deposit - 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.
>
> checkoff - The authorized withholding of dues, fees, or other
> assessments from union members’ wages by an employer for transmittal
> to the union.
>
> che