Office of Labor-Management Standards (OLMS)
U.S, DEPARTMENT OF LABOR
OFFICE OF MOR-MANAGEMENT STANDARDS
EMPLOYMENT STANDARDS ADMINiSTRATION
21 1 W. FORT STREET. SUITE 1313
PHONE: (313) 226-6200
FAX: (313) 226-4391
Mr. Mark Trout, President
10410 Matthews Highway
Tecumseh, MI 48506
Re: Case Number - LM File Number: 006-687
Dear Mr. Trout:
This office has recently completed an audit of Steelworkers Local 2-513 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 and Financial Secretary Kim Meggison on June 23,2008, 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.
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 iabor organization must also retaln bank records for all accounts.
The audit of Local 2-513's 2007 records revealed the following recordkeeping violations:
1. Lost Wages
Local 2-513 did not maintained records to verify that the monthly allowance
payments to union officers totaling $3,913.57. The union must maintain records in
support of lost wage claims that identify each date lost wages were incurred, the number of hours lost on each date, the applicable rate of pay, and a description of
the union business conducted. The OLMS audit found that Local 2-513 failed to maintain all records relating to the lost time payments. During the exit interview, I
provided a sample of an expense voucher that identifies the type of information and documentation that the local must maintain for lost wages and other officer
The audit also disclosed that the union does not have a clear policy that identifies the specific circumstances under which lost time may be authorized to be incurred.
The lack of a detailed lost time policy and the union's failure to keep all records to support the lost time payments prevented OLMS from verifying that the payments that must be included in Item 18 (Payments to Officers and Employees) of Local 2- 513's Labor Organization Annual Report (Form LM-4) are the authorized amounts and, therefore, will be correctly reported. The union must keep a record, such as meeting minutes, to show the current lost time policy authorized by the entity or individual in the union with the authority to establish a lost time policy.
2. Lack of Monthly Allowance Payment Authorization
Local 2-513 did not maintain records to verify that the monthly allowance
payments paid to you, Vice President Steve Wilson, and Kim Meggison during the
audit year were the correct authorized amounts. The International Union Constitution, which you stated governs the practices and procedures of Local 2-
513, does not contain a provision for the president's, vice president's and financial secretary's monthly allowances. During the audit, the union was unable to
provide documentation to support the allowances paid to these officers. The union must keep a record, such as meeting minutes, to show the current wages
authorized by the entity or individual in the union with the authority to establish wages.
3. Grievance Meetings Per Diem Payments
The collective bargaining agreement with Marsh Plating Company and Local 2-513 provides a $30.00 per diem allowance to Local 2-513 union officials for every other grievance meeting attended. However, the internationai union constitution does not contain a provision regarding per diem colnpensation to officers for attending grievance meetings.
In addition, Local 2-513 failed to keep adequate records identifying the date, time and purpose of grievance meetings for which you, Mr. Wilson, and Ms. Meggison received per diem allowances. Consequently, the accuracy of the amounts that must be reported in Item 18 (Payments to Officers and Employees) of Local 2-513's LM-4 report cannot be verified. Therefore, Local 2-513 must maintain a clear written policy regarding per diem allowance payments and complete and contemporaneous records to support all meeting attendance payments.
4. Reimbursed Officer Expenses
Local 2-513 did not retain adequate documentation for reimbursement of a filing
cabinet purchased by you totaling $179.90. As previously noted above, labor
organizations must retain original receipts, bills, and vouchers for all disbursements. The president and treasurer (or corresponding principal officers) of your union, who are required to sign your union's LM report, are responsible for properly maintaining union records.
5. Failure to Record Receipts
Local 2-513 did not record in its receipts records a payment received totaling
approximately $176.23 that was included on a bank deposit ticket. Union receipts
records must include an adequate identification of all money the union receives. The records should show the date and amount received, and the source of the
6. Receipts Not Accurately Recorded
Entries in Local 2-513's check ledger reflect the date the union deposited money in the checking account, but not the date that the money was received by the local. Union receipts records must show the date of receipt. Tke date of receipt is required to verify, explain, or clarify amounts required to be reported in Item 26 of the LM-4 report. A labor organization must record receipts when it actually receives money and disbursements when it actually pays out money.
The audit disclosed several inconsistencies between the local's check ledger entries
reflecting the date when money was deposited and deposits reflected on the bank
statements. On five occasions the union failed to record the dates it received
money which was later deposited to the union's checking account.
In order to accurately report receipts on the LM report, the union must maintain at least one record documenting the date, source, and amount of receipts. Failure to record the date money was received could result in the union reporting some receipts for a different year than when it actually received the monies. In addition,
the audit also disclosed mistakes in the local's check ledger balances recorded on November 12,2006, and September 26,2007, due to erroneous mathematical
calculations. These errors resulted in an understatement of at least $1,275.17 to the union's book balance.
7. Failure to Maintain Financial Records
Local 2-513 failed to maintain checking account bank statements from October - December 2006 and June 2007. Local 2-513 also failed to maintain bank deposit slips for deposits made into the local's checking account on June 14,2007, in the amount of $1,004.26, July 12,2007, in the amount of $578.44, and October 5,2007, in the amount of $2,301.45.
8. Bereavement Benefit Payments
The audit disclosed bereavement payments issued to two Local 2-513 members during the audit year. You and Ms. Meggison advised OLMS that the
bereavement benefit payments issued to local members has been the local's past practice since the early 1990s; however, the constitution does not contain a
provision for bereavement benefits. Membership and executive board meeting minutes were not maintained to document approval of bereavement payments
that were issued to local members during the audit year. Minutes of all membership or executive board meetings must be maintained and must report any
dishrsernent authorization sm ade at those meetings.
9. Miscellaneous Expenses
Local 2-513 did not maintain zde-qtiate supporting documentation for the following disbursements during the audit year: registration fees, hotel, and meal
expass iii the: imiount of $235.88 i~iiiiii-Af ~Stiew %'fiI~~iaitS" ~daiice at the Rapid Response Conference in Lansing, MI ; union dinner expenses paid to Honey
Baked Ham in the amount of $599.94; and union phone call expenses in the amount of $271.46 paid to Verizon West.
As previously noted above, labor organizations must retain original receipts, bills, and vouchers for all disbursements, in addition to, membership or executive board meeting minutes to document approval of disbursements. The president and financial secretary (or corresponding principal officers) of your union, who are required to sign your union's LM report, are responsible for properly maintaining union records.
The proper maintenance of union records is the personal responsibility of the
individuals who are required to file Local 2-513's LM report. You should be aware that
under the provisions of Section 209(a) of the LMRDA and Section 3571 of Title 18 of the
U.S. Code, willful failure to maintain records can result in a fine of up to $100,000 or
imprisonment for not more than one year, or both. Under the provisions of Section
209(c) of the LMRDA and Section 3571 of Title 18 of the U.S. Code, willful destruction or
falsification of records can result in a fine of up to $100,000 or imprisonment for not
more than one year, or both. The penalties provided in Section 209(c) and Section 3571
of Title 18 apply to any person who caused the violations, not just the individuals who
are responsible for filing the union's LM report.
During the exit interview, you and Ms. Meggison agreed to discuss union officer
monthly allowances and bereavement payments issued to members as outlined above
at Local 2-513's next general membership meeting on or about July 20,2008 to obtain
and document authorization of these disbursements and provide OLMS with a copy of
the meeting minutes. You both also agreed to provide OLMS with copies of paycheck
stubs for lost time claims submitted during the audit year. You agreed to obtain a copy
of the sales receipt for the filing cabinet purchased during the audit year and provide
OLMS with a copy of the receipt. Based on your assurance that Local 2-513 will retain
adequate documentation in the future, OLMS will take no further enforcement action at
this time regarding the above violations.
The audit disclosed a violation of LMRDA Section 201(b), whch requires labor
organizations to file annual financial reports accurately disclosing their financial
condition and operations. The Labor Organization Annual Report (Form LM-3) filed by Local 2-513 for fiscal year ending December 31,2006, was deficient in the following areas:
Item 9 (Place Records Kept) must be answered "yes" or "no". If the answer is "no", the address where the union's records are kept must be provided in Item
56 (Additional Information) Item 23 (Rates of Dues and Fees), lines (a) through (d) must be completed with an appropriate entry (such as dollar amount, "O", "none", number of hours pay, etc.) and lines (a) and (d) must report the calendar basis for payment (such as per month, per year, etc.), if appropriate.
Item 24 (Officers and Disbursements to Officers) columns (D) and (E) must be completed with the appropriate number or "0" for every line with an entry in
column (A). Line 10 must be completed with the appropriate number or "0". Items 40-43 (Cash receipts) must each be completed with the appropriate number
or "0". I am not requiring that Local 2-513 file an amended LM report for 2006 to correct the deficient items, but Local 2-513 has agreed to properly report the deficient items on all future reports it files with OLMS.
The audit disclosed a violation of LMRDA Section 201(b), which requires labor
organizations to file annual financial reports accurately disclosing their financial
condition and operations. Local 2-513 did not file the annual financial report Form LM- 4 for the fiscal year ending December 31, 2007. I provided you with blank forms and instructions, and advised you that the reporting forms and instructions are available on the OLMS website (www.olms.dol.gov). The delinquent Form LM-4 report should be submitted to this office at the above address as soon as possible, but not later than July 7,2008. Before filing, review the report
thoroughly to be sure it is complete, accurate, and signed properly with original signatures.
The audit disclosed the following other issues:
1. Signing Biank Checks
During the audit, you advised that Kim Meggison periodically signs blank checks.
Your union's constitution requires that the praident and treasurer sign all checks.
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 2-513 review these procedures to improve internal control of union funds.
2. Two Signatories on All Bank Accounts
To prevent, or at least inhibit, the misuse or embezzlement of their funds, most
organizations including corporations, banks, etc., install internal controls over the
handling of their finances. Adequate internal financial controls are essential in order for a union to fulfill its obligations under Titles I1 and V of the LMRDA. One
such control that OLMS recommends Local 2-513 adopt is a requirement of two signatories on all union bank accounts.
I want to extend my personal appreciation to Steelworkers Local 2-513 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 are passed on to future officers. If we can provide any additional assistance, please do not hesitate to call.
cc: Kim Meggison, Financial Secretary