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Office of Labor-Management Standards (OLMS)

U.S. Department of Labor Employment Standards Administration
Office of Labor-Management Standards
Houston Resident Investigative Office
2320 La Branch Street
Room 1107
Houston, TX 77004
(713)718-3755 Fax: (713)718-3757

December 10, 2008

Mr. Robert Robinson, Business Manager
Pluumbers AFL-CIO
Local 68
P.O. Box 8746
Houston, Texas 77249-8746
LM File Number 039-449
Case Number: -

Dear Mr. Robinson:

This office has recently completed an audit of Plumbers Local 68 under the Compliance Audit Program (CAP) to determine your organization's compliance with the provisions of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA). As discussed during the exit interview with you, Financial Secretary-Treasurer Michael Cramer, Business Agent Calvin Speight, Administrative Assistant - Local 68 Attorney Patrick Flynn, and Local 68 CPA Joel Killingsworth on December 8, 2008, the following problems were disclosed during the CAP. The matters listed below are not an exhaustive list of all possible problem areas since the audit conducted was limited in scope.

Recordkeeping Violations

Title II of the LMRDA establishes certain reporting and recordkeeping requirements. Section 206 requires, among other things, that labor organizations maintain adequate records for at least five years by which each receipt and disbursement of funds, as well as all account balances, can be verified, explained, and clarified. As a general rule, labor organizations must maintain all records used or received in the course of union business.

For disbursements, this includes not only original bills, invoices, receipts, vouchers, and applicable resolutions, but also documentation showing the nature of the union
business requiring the disbursement, the goods or services received, and the identity of the recipient(s) of the goods or services. In most instances, this documentation
requirement can be satisfied with a sufficiently descriptive expense receipt or invoice. If an expense receipt is not sufficiently descriptive, a union officer or employee should write a note on it providing the additional information. For money it receives, the labor organization must keep at least one record showing the date, amount, purpose, and source of that money. The labor organization must also retain bank records for all accounts.

The audit of Local 68's 2007 and 2008 records revealed the following recordkeeping violations:

1. Meal Expenses

Local 68 records of meal expenses did not always include written explanations of union business conducted or the names and titles of the persons incurring the
restaurant charges. For example, Business Agent Richard Lord's April 15, 2008 meals expense at the Hard Rock Cafe in Washington D. C. did not list all of the
guests on this occasion. Union records of meal expenses must include written explanations of the union business conducted and the full names and titles of all
persons who incurred the restaurant charges. Also, the records retained must identify the names of the restaurants where the officers or employees incurred
meal expenses.

2. Union Owned/Leased Vehicles

The union did not maintain records necessary to verify the accuracy of the information reported in Schedules 11 (All Officers and Disbursements to Officers)
and 12 (Disbursements to Employees) of the LM-2. Local 68 incurred expenses totaling at least $500 for automobiles during 2007 and 2008. However, Local 68 did not maintain records documenting business versus personal use of the union vehicles. The LM-2 instructions include specific rules for the reporting of automobile
expenses. The union must report operating and maintenance costs for each of its owned or leased vehicles in Schedules 11 and 12 of the LM-2, allocated to the
officer or employee to whom each vehicle is assigned.

For each trip they take using a union owned or leased vehicle, officers and employees must maintain mileage logs that show the date, number of miles
driven, whether the trip was business or personal, and, if business, the purpose of the trip.

3. Disposition of Property

Local 68 did not maintain an inventory of hats, jackets, and other property it gave away. The union must report the value of any union property on hand at the
beginning and end of each year in Item 28 of the LM-2. The union must retain an inventory or similar record of property on hand to verify, clarify, and explain the
information that must be reported in Item 28. The union must record in at least one record the names, dates, and amounts of union hats, t-shirts and other items given away.

Based on your assurance that Local 68 will retain adequate documentation in the future, OLMS will take no further enforcement action at this time regarding the above
violations.

Reporting Violations

The audit disclosed a violation of LNIRDA Section 201(b), which requires labor organizations to file annual financial reports accurately disclosing their financial
condition and operations. The Labor Organization Annual Report Form LM-2 filed by Local 68 for fiscal year ending June 30,2008, was deficient in the following areas:

1. Disbursements to Officers and Employees

Local 68 did not include some reimbursements to officers and employees / payments to officers and employees totaling at least $1,066 in Schedule 11 (All
Officers and Disbursements to Officers) and Schedule 12 (Disbursements to Employees). It appears that the local erroneously reported these payments in
Schedules 15 through 19.

The union must report in Column F of Schedules 11 and 12 (Disbursements for Official Business) direct disbursements to officers and employees for reimbursement of expenses they incurred while conducting union business. In addition, the union must report in Column F of Schedules 11 and 12 indirect disbursements made to another party (such as a credit card company) for business expenses union personnel incur. However, the union must report in Schedules 15 through 19 indirect disbursements for business expenses union personnel incur for transportation by public carrier (such as an airline) and for temporary lodging expenses while traveling on union business. The union must report in Column G (Other Disbursements) of Schedules 11 and 12 any direct or indirect disbursements to union personnel for expenses not necessary for conducting union business.

2. Automobile Expenses

Local 68 did not include in the amounts reported in Schedule 11 (All Officers and Disbursements to Officers) and Schedule 12 (Disbursements to Employees)
disbursements for the operation and maintenance of union automobiles totaling at least $500. The LM-2 instructions provide two methods for reporting automobile-related expenses. The union must report in Schedules 11 and 12 direct and indirect disbursements for the operation and maintenance of union owned and leased
vehicles and the operation and maintenance of vehicles owned by union personnel (including gasoline, repairs, and insurance). The union may divide the expenses
and report them in Columns F and G based on miles driven for union business (supported by mileage logs) compared with miles driven for personal use. Alternatively, rather than allocating the expenses between Columns F and G, if 50 percent or more of an officer's or an employee's use of a vehicle was for official business, the union may report all of the expenses relative to the vehicle assigned to the officer or employee in Column F of Schedule 11 or 12 with an explanation in Item 69 (Additional Information) that the officer or employee used the vehicle part of the time for personal business. Similarly, if a vehicle assigned to an officer or
employee was used less than 50 percent of the time for business, all of the expenses relative to that vehicle may be reported in Column G with an explanation in Item
69 that the officer or employee used the vehicle partly for official business. Local 68 must file an amended Form LM-2 for fiscal year ending June 30, 2008, to
correct the deficient items discussed above. I explained to you the filing procedures and the availability of filing software on the OLMS website (www.olms.dol.gov). The amended Form LM-2 must be electronically filed as soon as possible, but not later than January 15,2009. Before filing, review the report thoroughly to be sure it is complete and accurate, and properly signed with electronic signatures.

Other Violation

The audit disclosed the following other violation:

Inadequate Bonding

The audit revealed a violation of LMRDA Section 502 (Bonding), which requires that union officers and employees be bonded for no less than 10 percent of the total funds those individuals or their predecessors handled during the preceding fiscal year. Local 68's officers and employees are currently bonded for $500,000. However, the Commercial Crime Policy Declarations revealed that there was a $1,000 deductible for forged or altered checks. During the audit, Local 68 obtained adequate bonding coverage without any deductible for any loss coverage for its officers and employees.

Other Issues

1. Expense Policy

As I discussed during the exit interview with you, the audit revealed that Local 68 does not have a clear policy regarding the types of expenses personnel may claim
for reimbursement and the types of expenses that may be charged to union credit cards. OLMS recommends that unions adopt written guidelines concerning such
matters.

2. Personal use of Credit Cards

The audit revealed that Local 68 permits officers and employees to use union credit cards to pay for personal expenses. Although officers and employees
promptly repaid Local 68 for the personal expenses charged, OLMS does not recommend policies that allow personnel to make personal purchases with union
credit cards because this may lead to misuse of union funds.

3. Use of Signature Stamp

During the audit, you advised that it is Local 68's practice for you and Financial Secretary-Treasurer Michael Cramer to use an embossed signature stamp to stamp
your signatures on union checks. Michael Cramer indicated that no one but he reviews the checks before they are issued. Local 68's policy requires that checks be
signed by the business manager and treasurer. The two signature requirement is an effective internal control of union funds. Its purpose is to attest to the
authenticity of a completed document already signed. However, the use of a signature stamp does not attest to the authenticity of the completed check, and
negates the purpose of the two signature requirement. OLMS recommends that Local 68 review these procedures to improve internal control of union funds.

4. Signing Blank Checks

During the audit, you advised that you and Financial Secretary-Treasurer Michael Cramer sign blank checks. Your union's policy requires that all checks be signed
by the business manager and treasurer. The two signature requirement is an effective internal control of union funds. Its purpose is to attest to the authenticity
of a completed document already signed. However, signing a blank check in advance does not attest to the authenticity of a completed check, and negates the
purpose of the two signature requirement. OLMS recommends that Local 68 review these procedures to improve internal control of union funds.

I want to extend my personal appreciation to Plumbers Local 68 for the cooperation and courtesy extended during this compliance audit. I strongly recommend that you make sure this letter and the compliance assistance materials provided to you are passed on to future officers. If we can provide any additional assistance, please do not hesitate to call.

Sincerely,
Investigator
cc: Michael Cramer, Financial Secretary-Treasurer