U.S. Department of Labor
Employment Standards Administration
Office of Labor-Management Standards
Detroit District Office
211 West Fort Street
Room 1313
Detroit, MI 48226
(313)226-6200 Fax: (313)226-4391
June 18, 2007
Mr. Gary Westbrook, Financial Secretary
Bakery, Confectionary, Tobacco Workers & Grain Millers AFL-CIO
Local 262-G
59 North
Croswell, Michigan 48422
Re: Case Number
LM File Number: 011-972
Dear Mr. Westbrook:
This office has recently completed an audit of Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) Local 262-G 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 BCTGM Local 262-G President Barry Broeckaert on December 7, 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.
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 262-G's 2005 records revealed the following recordkeeping violations:
1. Failure to Record Receipts
Local 262-G did not record in its receipts records any dues payments received from direct-paying members. Seven members paid a total of $125.30 of dues directly to Local 262-G. Local 262-G deposit records show that the dues were deposited into Local 262-G's checking account; however, the dues payments were never recorded in the receipts journal. Local 262-G receipts records must include an adequate identification of all money the union receives. The records should show the date and amount received, and the source of the money.
2. General Expenditures
Local 262-G did not retain adequate documentation for checks written to outside parties totaling at least $3,100. For example, check;Wn the amount of $500 was issued to the "Interfactory Fund" for union expenses. However, no receipts or billing statements were retained in support of that payment.
As previously 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 annual financial report (Labor Organization Annual Report, Form LM-3), are responsible for properly maintaining union records.
3. Lack of Salary and Lost Time Authorization
Local 262-G did not maintain records to verify that the salary and lost time totaling $3,959 reported in Item 24 (All Officers and Disbursements to Officers) on Form LM-3 were the authorized amounts and correctly reported. Local 262-G must keep a record, such as meeting minutes, to show the current salary and lost time authorized by the entity or individual in the union with the authority to establish such compensation.
4. Lack of Authorization for Officer and Employee Meal Allowance and Reimbursed Vehicle Expenses
Local 262-G did not maintain records to verify that the meal allowances and reimbursed vehicle expenses totaling $769 reported in Item 24 of Form LM-3 were the authorized amounts and correctly reported. The audit revealed that officers and members who conduct union business for eight or more hours in a day are given a meal allowance of $6 and are reimbursed for the use of their personal vehicles in the amount of 41 C per mile. The mileage reimbursement rate increased in 2005. Like salary and lost time, Local 262-G must keep a record, such as meeting minutes, to show the current meal allowance and mileage rate authorized by the entity or individual in the union with the authority to establish such compensation.
5. Special Purpose Fund
The audit revealed that Local 262-G maintains a "Flower Fund" at Eastern Michigan Bank that you did not disclose during the opening interview. You and Mr. Broeckaert stated that the Flower Fund pays for flowers at funerals (up to $35) and gift cards ($15) when members become ill. The fund's sole source of revenue is All Star Services in Port Huron, Michigan. All Star Services issues checks to Local 262-G for bottle return refunds produced by the vending machines located at the Michigan Sugar Company in Croswell, Michigan. Local 262-G failed to record in its receipt records any of the $929 it received from All Star Services. Local 262-G deposit records show that the payments were deposited into the Flower Fund; however, the payments were never recorded in the receipts journal. Local 262-G receipts records must adequately identify the source, date, and amount of all money received.
Local 262-G did not maintain Flower Fund bank statements for 10 of the 12 months audited. In addition, seven canceled checks (or images thereof) totaling $423.80 were not retained. Local 262-G must retain all bank records such as these.
Furthermore, adequate documentation for four checks totaling $220 was not retained. For example, check in the amount of $140 to Farmer Jack was issued for gift cards; however, no receipts were retained in support of that payment. Local 262-G must retain original receipts, bills, and vouchers for all disbursements.
6. Meeting Minutes
During the audit, you advised OLMS that Local 262-G membership meetings are held on the third Wednesday of the months of March through August and that travel expenses, including mileage and meals, are determined at the meetings. In addition, various provisions of the BCTGM Constitution require that the business of a local union be authorized or approved by the local union executive board or membership. The audit revealed that Local 262-G maintained no minutes of the membership meetings conducted in May, July, and August 2005. Executive board and membership meeting discussions pertaining to matters that must be reported on Form LM-3, including authorizations or approvals of disbursements, must be noted in meeting minutes that must be retained.
Based on your assurance that Local 262-G 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 BCTGM Local 262-G for fiscal year ending December 31, 2005, was deficient in the following areas:
1. Cash Reconciliation
It appears that the cash figures reported in Item 25 (Cash) are not the cash figures according to the union's books after reconciliation to the bank statements. 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. The balance of the Local 262-G Flower Fund must be included in Item 25.
2. Disbursements to Officers
Local 262-G did not include all payments to Mr. Broeckaert in the amount reported in Item 24 (All Officers and Disbursements to Officers). Local 262-G must report most direct disbursements to its 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 (Office and Administrative Expense).
3. Disbursements to Employees
Local 262-G did not include all payments to employees in Item 46 (Disbursements to Employees). Employees include individuals other than officers who receive lost time payments even if the labor organization does not otherwise consider them to be employees or does not make any other direct or indirect disbursements to them.
4. Special Purpose Fund
Local 262-G failed to report the money received in and disbursed from the "Flower Fund" in Statement B (Receipts and Disbursements). All Local 262-G funds must be reported, including any special purpose funds or accounts, such as strike funds, vacation funds, and scholarship funds, even if they are not part of Local 262-G's general treasury. However, transfers between the Flower Fund and Local 262-G's general fund do not represent the flow of cash in and out of the labor organization and, therefore, should not be reported as receipts and disbursements.
5. Trust Fund
Section 3(1) of the LMRDA defines a trust as "a trust or other fund or organization (1) which was created or established by a labor organization, or one or more of the trustees, or one or more members of the governing body of which is selected or appointed by a labor organization, and (2) a primary purpose of which is to provide benefits for the members of such labor organizations or their beneficiaries."
The audit revealed that Local 262-G made contributions to a fund that supports the activities of a committee established by Local 262-G and BCTGM Locals 259-G, 260G, and 261-G and known as the "Interfactory Fund." The committee was developed to handle issues affecting all four locals. The f