November 7, 2011
By Salvatore Armao
The hard-working people who belong to labor organizations trust their union officials with the moneys they contribute — from membership dues to payments to union benefit plans. Unions owe it to their members to minimize opportunities for waste, fraud and abuse and keep these dollars safe. Here are a few things that unions can do:
Audit the books
Every union local should regularly examine its own financial accounts in an audit conducted by union trustees or an internal audit committee. These internal audits are in addition to audits conducted by outside agencies or even the Local’s independent certified public accountant. Overlapping audits play a key role in ensuring that the Local’s assets are fully accounted for and are solely used for the benefit of the Local and its members.
The union’s constitution and the by-laws of the Local will usually outline the auditing responsibilities and specific duties of the trustee or audit committee member.
Internal auditors should also make sure that the Local is submitting per-capita dues to its international union and complying with all applicable legal requirements for governmental reporting, bonding and loans.
All individuals employed by the local who handle union funds should be “bonded.” That means that union local buys fidelity bonds, which act as a kind of insurance policy against waste, fraud or abuse by employees. The Labor-Management Reporting and Disclosure Act requires bonding coverage of at least 10 percent of the amount of funds handled. The amount of bonding coverage should be updated annually, if necessary, depending on the amount of total assets at the end of each year.
In addition to regular internal audits, every union local should employ basic safeguards:
- Checkbooks or blank check stocks and their formal financial records should be kept in a secured location.
- Union local should require two signatures for transactions on all bank accounts.
- All deposits of cash receipts should be made in a timely manner.
- All bank statements and government correspondence should be given unopened to the business manager or controller before being given to the bookkeeper for reconciliation.
- All financial reports should be presented to the membership at their regularly scheduled meetings. An oral statement giving the cash balances in each of the accounts is not an adequate financial report. The report should detail the assets and liabilities along with the income and expenditures for the period.
Safeguards like these can minimize the opportunities for waste, fraud and abuse — stopping trouble before it starts.
For over 25 years, Armao, Costa & Ricciardi, CPAs, has been committed to providing accounting, auditing, tax, financial and wealth management and advisory services to labor unions and employee benefit funds. Visit us at www.acrcpa.com or call (516) 256-3200