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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
Buffalo District Office
130 South Elmwood Street, Suite 510
Buffalo, NY 14202-2465
(716) 842-2900 Fax: (716) 842-2901






November 9, 2012



Mr. Robert Roberts, President
Longshoremen, AFL-CIO
Local 1286
19 Arbour Lane
Buffalo, NY 14220-2319
Case Number:
LM Number: 032-348


Dear Mr. Roberts:

This office has recently completed an audit of Longshoremen Local 1286 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 James Felschow and you on November 8, 2012, 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 1286’s 2011 records revealed the following recordkeeping violations:

1. General Disbursements


Local 1286 did not retain adequate documentation for general payments made during the period totaling at least $2,175. For example, no documentation was retained for $125 to the R.A.S. Fund. Additionally contributions were made to Friends of Mark Schroeder and Friends of Tim Kennedy for $250 without any associated record.

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. Meal Expenses


Local 1286 did not require officers and employees to submit and retain itemized receipts for meal expenses with sufficient information totaling at least $600. The union must maintain itemized receipts provided by restaurants to officers and employees. These itemized receipts are necessary to determine if such disbursements are for union business purposes and to sufficiently fulfill the recordkeeping requirement of LMRDA Section 206.

Local 1286 records of meal expenses did not always include a receipt for the meal as well written explanations of union business conducted or the names and titles of the persons incurring the restaurant charges. For example, no receipts were retained for three lunches reimbursed to President Bob Roberts totaling $78.10. Additionally, the union business conducted was not recorded in the records.

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.

3. Lost Wages


Local 1286 did not retain adequate documentation for lost wage reimbursement payments to Committeeman Paul Patterson and union member totaling at least $550. 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 including a flat dollar amount, and a description of the union business conducted. The OLMS audit found that Local 1286 did not include the date of the loss or the number of hours. In addition, the check stub did not always include the union business conducted.

4. Receipt Dates not Recorded


Entries in Local 1286’s record reflect the date the union deposited money, but not the date money was received. Union 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 the labor organization must record receipts when it actually receives money and disbursements when it actually pays out money. 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 them.
Based on your assurance that Local 1286 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 1286 for the fiscal year ended December 31, 2011, was deficient in the following areas:

1. Disbursements to Officers (LM-3)


Local 1286 did not include some reimbursements to officers totaling at least $1,417 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 Expense).

The union must report most direct disbursements to Local 1286 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.

2. Contributions, Gifts, and Grants


Local 1286 did not include donations, contributions, and other gifts disbursed during the period totaling at least $1425 in the amounts reported in Item 51 (Contributions, Gifts and Grants). It appears the union erroneously reported these payments in Item 50 (Benefits).

The LM-3 Instructions state that the total of all disbursements for contributions, gifts and grants made by your organization should be reported in Item 51.
3. Professional Fees


The union improperly reported the amount paid in professional fees in Item 49 (Professional Fees). Local 1286 reported to have disbursed $3,080 in professional fees during the period. The OLMS audit found that only $1,287. 50 were disbursed in legal fees during the year.

4. Bond Amount


Local 1286 improperly reported the maximum amount recoverable under the union’s fidelity bond in Item 20. The union reported the amount of $10,000 when Local 1286 did not hold a surety bond during the fiscal year.

5. Number of Members


Local 1286 did not include the proper number of members the organization had during the period in Item 19. The union reported 40 members when the local only had a total of 25 members for the fiscal year and in several years past.


I am not requiring that Local 1286 file an amended LM report for 2011 to correct the deficient items, but Local 1286 has agreed to properly report the deficient items on all future reports it files with OLMS.

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 1286’s officers and employees are not currently bonded, however they must be bonded for at least $2,100. Local 1286 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 November 30, 2012.

Other Issue

Signing Blank Checks

During the audit, you advised that Secretary Treasurer Jim Felschow signs blank 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 1286 review these procedures to improve internal control of union funds.

I want to extend my personal appreciation to Longshoremen, Local 1286 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. James Felschow, Secretary Treasurer