Department of Labor Compliance Audit Program Review William V. Voorhees, CPA, Partner

Background The Labor-Management Reporting and Disclosure Act of 1959 provides Reporting and disclosure requirements Bill of Rights for union members Standards for elections Safeguards for protection of labor org. funds and assets The Secretary of Labor is charged with enforcing certain provisions of the Act The CAP review has been developed to verify labor organization compliance

Past and Present Very few audits performed between 1990 -2004 OLMS budget restrictions OLMS staff 425 in 1985 v. 242 in 2001 v. 382 in 2005 (projected) Creation of Division of International Union Audits Shifts in audit scope and procedures Increased focus on policies and procedures Increased focus on international and local unions Increased use of technology Form LM-2 – website Data mining software utilized Increase in OLMS budget ($42 million – 2004/2005 budget) 2004/2005 – increase $ 6.1 million 2005/2006 – increase $ 7.0 million

Commencement of CAP Audit Notification Four to 12 weeks lead times Pre-audit requests Financial Questionnaire Computer Questionnaire Preliminary records request list Requested two weeks after notification

Document Requests General Records Financial Records Requested Format Constitution and by-laws Surety bond information Instructional manuals (policy manuals) Copy of internal reviews and recommendation letters Affiliate information (mergers, trusteeships) Affiliate PCT rebate information Financial Records CPA workpapers (to prepare or reconcile Form LM-2 to the financial statements) Trial balance, general ledger, etc. List of union credit cards Officers expense report documentation Payroll data and related information Reconciliation of LM-2 to Form 990 and financial statements Affiliate loan information Requested Format Request documents electronically if possible Entire general ledger is requested in electronic format

Opening Interview Attendees Primary point of contact Internal representatives and DOL audit team Topics discussed Review CAP objectives Set schedule of audit Review the scope and ground rules of audit Document retention and copying privileges Overall communication plan

What Period is Under Audit? Selection of primary audit year (latest Form LM-2 filed) Audit will also included previous years for proper: Record retention Office/employee expense documentation DOL has ability to review and request all records available

DOL CAP Focus (Reporting Deficiencies - LMRDA §201) Classification of transactions – proper reporting Netting of transactions – unallowable Schedules 11 and 12 proper reporting Supplies inventory – must be tracked Fixed asset disclosures – all must be disclosed Canadian transactions converted to US dollars New Constitutions must be attached to Form LM-2 Filings of merged or terminated Locals Timeliness of Form LM-2 filing – due 90 days after year end

DOL CAP Focus (Inadequate Record Keeping - LMRDA §206) All records must be maintained for five years following latest filing Mileage logs for automobiles Expense reimbursement documentation: Actual receipts – all receipts required Itemized receipts for meals Documentation of the business purpose Support for all information on the Form Membership count Item 69 disclosures

DOL CAP Focus (Internal Financial Controls) Segregation of duties Written policies and procedures surrounding financial activity (i.e. investments, bonding, etc.) Authorization of disbursements and contracts Maintenance of books throughout the year Reconciliation of Form LM-2 to general ledger Safeguard of union assets (cash receipts, etc.) Petty cash Check signing responsibilities

Exit Interview DOL and union representative will meet to discuss draft of closing letter Review audit results Outline specific steps to remedy problem areas Discuss Form LM-2 amendments* * Due 30 days after closing letter issuance

Conclusion BE PREPARED!!!! Review or develop policies/procedures surrounding all significant areas Perform internal CAP audit Review record retention (electronic) Review affiliate education program Ensure sound overall internal control and financial structure Create policies and procedures surrounding Form LM-2 Be responsive and cooperative with DOL