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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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