Office of Labor-Management Standards (OLMS)
U.S. Department of Labor
Employment Standards Administration
Office of Labor-Management Standards
Detroit District Office
211 West Fort Street
Detroit, MI 48226
(313)226-6200 Fax: (313)226-4391
February 7, 2007
Mr. Jay Haney, President
Local Lodge 1918
P.O. Box 747
Benton Harbor, MI 49023
Re: Case Number
Dear Mr. Haney:
This office has recently completed an audit of Machinists Local Lodge 1918 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 Machinists Local Lodge 1918 Secretary-Treasurer Priscilla Burks on November 20, 2006, 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.
The CAP, which covered the fiscal year ending December 31, 2005, disclosed several recordkeeping violations of Title II of the LMRDA. Section 206 requires, among other things, that the president treasurer or corresponding principal officers of each labor organization 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, all records used or received in the course of union business must be retained.
This includes, in the case invoices, receipts, and vouchers, but also adequate additional documentation, if necessary, 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 received.
In the case of receipts, the date, amount, purpose, and source of all money received by the union must be recorded in at least one union record. Bank records must also be retained for all accounts.
The audit revealed the following recordkeeping violations:
The June 11, 2005 membership meeting minutes indicate that raffle tickets for a big-screen television and a family picnic were being or going to be sold. However, no records to account for money collected from the sale of tickets and to identify the individuals who received tickets, records must be maintained, at a minimum, that identity the name of each person who sells tickets and the date and amount of money that each such person turns in to the union. Such records must show that the persons who sell tickets along with the money raised from sold tickets. Local Lodge 1918 must retain all unsold tickets. Local Lodge 1918 is not required, but is encouraged, as a means of more effective internal financial control, to keep additional records that identify the names of members who purchased tickets and the dates and amounts of such purchases.
With respect to the distribution of raffle prizes, the union can most easily satisfy the recordkeeping requirement by preparing a list of the names of individuals who receive items. In addition, the union must maintain adequate supporting records that document prize purchases.
These types of transaction must be reported on your union's Labor Organization Annual Report (Form LM-3) in Items 30 (Other Assets), 43 (Other Receipts), and 51 (Contributions, Gifts and Grants), as appropriate. In addition, the type and value of any property given away and the identity of the recipient (s) of such property must be reported in Item 56 (Additional Information).
Officer Expense Allowances
The union's bylaws that were in effect from January through April 2005 authorize a $30 monthly expense allowance for the secretary-treasurer. During that time, Ms. Burks received $100 per month. In addition, those bylaws and the revised bylaws that were in effect for the rest of the audit period did not provide any monthly expense allowance for delegates. Received $35 per month for four moths during the audit period. The union was unable to provide any documentation of authorization or approval of these amounts.
Although such expense allowances payments to officers may have been authorized or approved at past member detailed meeting minutes of these payments prevented verification of their legitimacy. You agreed to ensure that there is full understanding, either by the inclusion in the union's constitution and membership or executive board authorizations recorded in meeting minutes, about the level of salary, allowances, and expenses (if any) to which the union's officers, employees, and members are entitled. During the audit, the union provided copies of its bylaws which reflect current levels of compensation.
The date, amount, and business purpose of every expense must be recorded on at least one union record. Where meal expenses are incurred, the names of individuals present and the locations and names of restaurants must be recorded. Union officers failed to maintain adequate documentation for all expenses reimbursed during the audit period. For example, no supporting documentation was provided for an expense voucher that Ms. Burks submitted for an OLMS conference in September 2005, or for an expense voucher that you submitted for a conference in Chicago in October 2005.
The recordkeeping requirement for disbursements can be most easily satisfied with a sufficiently descriptive bill, invoice, receipt, etc. that identifies the vendor's name and address, the date and amount of the transaction, and the goods or services provided. If a receipt is not sufficiently descriptive, then the union should note the missing information on the receipt. If the business purpose of the disbursement or the identity of the recipient(s) of the goods or services is not self-evident, then the union must note such information on the receipt or some other record.
If the receipt is not provided by a vendor, then the union must create a record containing the above information with a notation that original documentation was not provided. The only exception to this policy is for expenses generated by the union (e.g., salary, lost time, etc.) which, nonetheless, must be supported by some other type of documentation (e.g. lost time vouchers, payroll records, executive board and membership authorizations and /or approvals, etc.).
The audit revealed that the local failed to include sufficiently descriptive information on all lost time vouchers. For example, the lost time voucher submitted for check number, payable to for $207.26, did not contain any descriptive information regarding the lost time hours claimed. At a minimum, lost time vouchers must indicate the date(s) when the lost time was incurred; the specific times and number of hours claimed; the wage rate per hour claimed; and the reason or purpose for incurring lost time. "Union business" or "miscellaneous" are insufficient descriptions and not acceptable Title II of the LMRDA.
The union's bylaws state that lost time claims are to be presented at union executive board meetings for approval. The union failed to maintain any executive board meeting minutes and did not consistently maintain detailed minutes for membership meetings. Had detailed minutes been maintained, they might have provided information that would have helped to explain or clarify the above and other financial transactions.
The audit noted some inconsistencies in the names of payees recorded on canceled checks and the cash disbursements journal. The union should carefully compare these records to avoid filing a deficient annual financial report with OLMS.
Adequate records were not maintained for all financial transactions involving Machinists Local Lodge 1918, in violation of Section 206 of the LMRDA. Contemporaneous, accurate, and complete records necessary to permit verification of the information required on your union's annual financial report must be preserved and kept available for examination for not less than five years after the report is filed.
The proper maintenance of union records is the personal responsibility of a union's president and treasurer. You should be aware that under the provisions of Section 209(a) of the LMRDA and Section 3571 and 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 also 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, not just the individuals who are responsible for filing the union's annual financial report.
You agreed that, in the future, Machinists Local Lodge 1918 will maintain adequate documentation as discussed above. Therefore, no additional enforcement action will be taken regarding these violations at this time.
The CAP disclosed a violation of LMRDA Section 201(a), which requires that a union submit a copy of its revised constitution and bylaws with its annual financial report when constitution or bylaws changes are made. Local Lodge 1918 amended its bylaws in 2001, but a copy was not filed with its annual financial report for that year.
The CAP also revealed violations of LMRDA Section 201(b), which requires labor organizations to file annual financial reports accurately disclosing their financial condition and operations within 90 days after the end of their fiscal year. The following deficiencies on the Labor Organization Annual Report (Form LM-3) filed by Machinists Local Lodge 1918 for the fiscal year ending December 31, 2005, were discussed with you and Ms. Burks during the exit interview (it should be noted that the audit conducted was not intended to identify all possible reporting violations):
- The beginning and ending cash figures (Items 25(A) and 25(B), respectively) do not agree with the corresponding figures in the union's records.
- All union officer expenses were not included in Item 24 (All Officers and Disbursements to Officers). With few exceptions, all direct and indirect disbursements to officers must be reported 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. An "indirect disbursement" to an officer is a payment to another party (including credit card companies) for cash, property, goods, servic