U.S. Department of Labor
Office of Labor-Management Standards
Minneapolis Resident Investigator Office
900 Second Avenue South, Suite 450
Minneapolis, MN 55402
(612) 370-3111 Fax: (612) 370-3107
April 15, 2011
Mr. John Solberg, President
Graphic Communications, IBT, Local 379
318 Terrace View W
Mankato, MN 56001
Case Number:
LM Number: 026393
Dear Mr. Solberg:
This office has recently completed an audit of Graphic Communications, IBT, Local 379 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 Secretary-Treasurer Steve Kaiser on April 15, 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 Local 379’s 2009 and 2010 records revealed the following recordkeeping violations:
Mr. John Solberg
April 15, 2011
Page 2 of 5
1. Expenses for Contract Negotiations
Local 379 did not retain adequate documentation for most expenses incurred while
conducting contract negotiations with Perfecseal Company in 2009. The ledger shows that
the union split the cost of a meeting room at the Holiday Inn with Perfecseal for two
meetings. Two checks were issued to Perfecseal, which initially paid the full bill, to cover
the union’s half of the expense. However, the union failed to retain a bill for one of the
disbursements in the amount of $157.39. Also, slips of paper turned in by you and
disbursements records indicate that you were reimbursed for $320.55 for “expenses and
meals for negotiations,” but no receipts or invoices could be found in the union’s records to
support the expense reimbursements.
As noted above, labor organizations must retain original receipts, bills, and vouchers for all
disbursements. The president and treasurer (or corresponding principal officers), who are
required to sign your union’s LM report, are responsible for properly maintaining union
records.
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. Lost Wages
Local 379 did not retain adequate documentation for lost wage reimbursement payments to
you, Mr. Kaiser, or Executive Board Members Jim Pitman, John Brenner, and Kevin Waters
totaling at least $4,454. The lost wages were mostly incurred during the 2009 contract
negotiations with Perfecseal. Records must be maintained 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 audit found
that Local 379, kept a slip of paper for each officer showing how many total hours were lost
and the rate of pay, but did not list each date lost wages were incurred, the number of hours
lost on each date, or a description of the union business conducted.
During the exit interview, I provided a sample of an expense voucher that Local 379 may use
to satisfy this requirement and a copy of “Compliance Tip – Lost Time Payments” which can
be found on the OLMS website. The sample expense voucher and compliance tip identify
the type of information and documentation that the local must maintain for lost wages and
other officer expenses.
3. Receipt Records
Local 379 did not record in its ledger interest earned on certificates of deposit (CDs) totaling
at least $401 in 2009 and $366 in 2010. The bank statements show that interest is deposited
Mr. John Solberg
April 15, 2011
Page 3 of 5
on each of the union’s CD’s annually. Receipts records must include an adequate
identification of all money received. The records should show the date and amount received,
and the source of the money.
4. Receipt Dates not Recorded
Entries in Local 379’s ledger sometimes reflected the date the checks were deposited, but not
the date the money was actually received. For example, Mr. Kaiser indicated that the union
does not hold membership meetings in the summer months of June, July, or August.
Perfecseal still withholds dues from members’ paychecks during those months and issues a
check to the union each month. Dates on the dues checkoff reports and the checks from
Perfecseal indicate that the checks were issued to the union each month. However, the ledger
shows that those dues checks were not recorded on the books until September when they
were deposited.
Receipts records must show the date of receipt. The date of receipt is required to verify,
explain, or clarify amounts required to be reported in Statement B (Receipts and
Disbursements) of the LM-3. The LM-3 instructions for Statement B state that receipts must
be recorded when money is actually received, and disbursements must be recorded when
money is actually paid out. Failure to record the date money was received could result in
reporting some receipts for a different year than the one in which they were received.
Based on your assurance that Local 379 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 Local 379 for the fiscal year ended
December 31, 2009 was deficient in the following areas:
1. Item 24 (Disbursements to Officers)
Local 379 did not include lost wage payments to officers totaling at least $4,425 in the
amounts reported in Column D (Gross Salary) of Item 24. Officers receive semi annual
salaries ranging from $180 to $300 in addition to lost wages. Local 379 did report those
salaries in Column D of Item 24, but did not report lost wages paid to you, Mr. Kaiser, or Mr.
Pitman. It appears that some of the lost wages were erroneously included in the amounts
reported in Column E (Allowances and Other Disbursements) for you and Mr. Kaiser. In the
case of Mr. Pitman, nothing was reported next to his name. As noted in the LM-3
instructions, payments for gross salary of each officer and disbursements for lost wages
should be reported in Column D.
Mr. John Solberg
April 15, 2011
Page 4 of 5
Also, Local 379 did not report the name of Executive Board Member Kevin Waters and the
total amounts of payments to him in Item 24. All persons who held office during the year
must be reported in Item 24 regardless of whether they received any payments from the
union.
2. Statement A (Cash Balances)
It appears that the cash figures reported in Item 25 are not the cash figures according to the
union’s books after reconciliation to the bank statements. No book balance was maintained
for Local 379’s CDs and the checking account balance in the ledger is not accurate. The
ledger indicates that Local 379’s beginning cash balance was $19,491 on January 1, 2009.
However, $34,883 was reported in Item 25A (Start of the Reporting Period). The bank
statements indicate that the local had $35,322 in the bank on January 1, 2009. The
instructions for Item 25 state that the union should obtain account balances from its books as
reconciled to the balances shown on bank statements.
3. Dues and Interest Receipts
Local 379 underreported its receipts by approximately $1,860. The ledger and duplicate
receipts show that dues in the amount of $17,338 were collected; however, the local reported
$15,538 in Item 38 (Dues). Further, the bank statements show that $401 of interest was
earned on CDs, but the local reported $341 in Item 41 (Interest & Dividends).
4. Disbursements
Local 379 underreported its disbursements by approximately $187. The ledger and bank
statements show that Local 379 disbursed $20,044. However, $19,877 was reported in Item
55 (Total Disbursements).
Local 379 must file an amended Form LM-3 for the fiscal year ended December 31, 2009, to
correct the deficient items discussed above. I provided you with a blank form and instructions,
and advised you that the reporting forms and instructions are available on the OLMS website
(www.olms.dol.gov). The amended Form LM-3 should be submitted to this office at the above
address as soon as possible, but not later than May 2, 2011. Before filing, review the report
thoroughly to be sure it is complete, accurate, and signed properly with original signatures.
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.
Mr. John Solberg
April 15, 2011
Page 5 of 5
Local 379’s officers and employees are currently bonded for $2,500, but they must be bonded for
at least $5,500. Local 379 should obtain adequate bonding coverage for its officers and
employees immediately. Please provide proof of bonding coverage to this office as soon as
possible, but not later than May 2, 2011.
Other Issue
Tax Withholdings
The audit revealed that Local 379 may not be properly following state or federal requirements
for withholding of various taxes from payments to officers. While Local 379 itself may be
exempt from income taxes, payments made by Local 379 to officers and employees are not
exempt, except in certain circumstances. Mr. Kaiser advised that he’s never withheld taxes from
wages.
While this office has no authority to interpret the state or federal tax code, it is my understanding
that all salary and supplemental payments are subject to the withholding of income, Social
Security, and Medicare taxes and that Local 379 as an “employer” must also pay its share of
Social Security and Medicare taxes. Local 379 may be liable for the Federal Unemployment Tax
(FUTA) as well.
OLMS recommends that you contact the Minnesota Department of Revenue in St. Paul at (651)
282-9999, and the Internal Revenue Service (ask for “Circular E, Employer’s Tax Guide,” and
Form 990, which Local 379 may be required to file).
I want to extend my personal appreciation to Graphic Communications, IBT, Local 379 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: Mr. Steve Kaiser, Secretary-Treasurer