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Office of Labor-Management Standards
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Office of Labor-Management Standards (OLMS)

U.S. Department of Labor
Office of Labor-Management Standards
Kansas City Resident Investigator Office
Two Pershing Square Bldg.
2300 Main Street, Suite 1000
Kansas City, MO 64108
(816) 502-0290 Fax: (816) 502-0288
April 29, 2011

Mr. Daniel Holdcroft, Secretary-Treasurer
Locomotive Engineers, IBT Div 502
10545 Flint
Overland Park, KS 66214

Case Number:

LM Number: 012017

Dear Mr. Holdcroft:

This office has recently completed an audit of Locomotive Engineers, IBT Div 502 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 President Robert Oberzan on April 14, 2011,
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 Division 502’s 2009 records revealed the following recordkeeping violations:

1. General Reimbursed Expenses
Division 502 did not retain adequate documentation for reimbursed expenses incurred by
union officers totaling at least $4,344. For example, receipts, bills, and vouchers were not


Mr. Daniel Holdcroft
June 28, 2011
Page 2 of 4

retained for “monthly expenses” reimbursed to Local Chairman Roger Taylor totaling at

least $3,250.

As 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.

2. Lost Wages
Division 502 did not retain adequate documentation for lost wage reimbursement payments
to Local Chairman Roger Taylor totaling at least $16,568. 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 Division 502 did not retain any
documentation to support the lost wage reimbursements to Taylor.

During the exit interview, I provided a sample of an expense voucher Division 502 may use
to satisfy this requirement. The sample identifies the type of information and
documentation that the local must maintain for lost wages and other officer expenses.

3. Lack of Salary Authorization
Division 502 did not maintain records to verify that the salaries reported in Item 24 (All
Officer and Disbursements to Officers) of the LM-3 was the authorized amount and
therefore was correctly reported. The union must keep a record, such as meeting minutes,
to show the current salary authorized by the entity or individual in the union with the
authority to establish salaries.

Based on your assurance that Division 502 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 LMRDA 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-3) filed by Division 502 for the fiscal year ended
December 31, 2009, was deficient in the following areas:

1. Disbursements to Officers
Division 502 did not include some reimbursements to officers totaling at least $4,474 in the
amounts reported Item 24 (All Officers and Disbursements to Officers). It appears the
union erroneously reported these payments in Item 48 (Office and Administrative
Expenses).


Mr. Daniel Holdcroft
June 28, 2011
Page 3 of 4

The union must report most direct disbursements to Division 502 officers and some
indirect disbursements made on behalf of its officers in Item 24. A "direct disbursement"
to an officer is a payment made to an officer in the form of cash, property, goods, services,
or other things of value. See the instructions for Item 24 for a discussion of certain direct
disbursements to officers that do not have to be reported in Item 24. An "indirect
disbursement" to an officer is a payment to another party (including a credit card company)
for cash, property, goods, services, or other things of value received by or on behalf of an
officer. However, indirect disbursements for temporary lodging (such as a union check
issued to a hotel) or for transportation by a public carrier (such as an airline) for an officer
traveling on union business should be reported in Item 48 (Office and Administrative
Expense).

2. Dues/Per Capita Tax
Division 502 incorrectly reported member dues received by the union. It appears the union
erroneously reported per capita tax that the union did not receive.

If an intermediate or parent body receives dues checkoff directly from an employer on
behalf of your organization, do not report in Item 38 the portion retained by that
organization for per capita tax or other purposes, such as a special assessment. The purpose
of Statement B is to report the flow of cash in and out of your organization during the
reporting period.

3. Cash Reconciliation
While the cash figures reported in Item 25 (Cash) were the correct figures according to
Division 502’s books after reconciliation to the bank statements, including per capita tax in
Item 38 (Dues) and Item 47 (Per Capita Tax) resulted in the union’s cash figures not
reconciling.

Division 502 filed an amended report during the course of the audit and has agreed to properly
report the deficient items on all future reports it files with OLMS.

I want to extend my personal appreciation to Locomotive Engineers, IBT Div 502 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
If we can provide any additional assistance, please do not hesitate to call. future officers.

Sincerely,

Investigator


Mr. Daniel Holdcroft
June 28, 2011
Page 4 of 4

cc: Mr. Robert Oberzan, President