U.S. Department of Labor
Office of Labor-Management Standards
Milwaukee District Office
310 West Wisconsin Avenue, Suite 1160W
Milwaukee, WI 53203
(414) 297-1501 Fax: (414) 297-1685
June 21, 2011
Mr. John Schmitt, President/Business Manager
Laborers District Council – Wisconsin
4633 LIUNA Way
De Forest, WI 53713
Case Number:
LM Number: 068223
Dear Mr. Schmitt:
This office has recently completed an audit of Laborers District Council – Wisconsin (WLDC)
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 on June 20, 2011, 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 WLDC’s 2010 records revealed the following recordkeeping violations:
1. Credit Card Expenses
WLDC did not retain adequate documentation for credit card expenses incurred by union
officers and employees totaling at least $5,500. For example, WLDC officers and
employees charged more than $14,000 on their union-issued credit cards for lodging,
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June 28, 2011
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airfare, and airline-related baggage expenses. However, receipts and other supporting
documentation for at least $4,600 of lodging, airfare, and baggage expenses were not
retained. The only records retained for those expenses were the credit card statements, and
credit card statements alone are not sufficient to fulfill LMRDA recordkeeping
requirements.
As noted above, labor organizations must retain original receipts, bills, and vouchers for all
disbursements. In addition, in the case of these types of travel expenses, the records
retained must also identify the union business purpose of the travel that required the
expenses be incurred. The president and treasurer (or corresponding principal officers),
who are required to sign your union’s LM report, are responsible for properly maintaining
union records.
2. Meal Expenses
WLDC did not require officers and employees to submit itemized receipts for meal
expenses totaling at least $4,400. In most instances, the only records retained in support of
meal expenses were the credit card signature receipts and credit card statements. Itemized
receipts provided by restaurants to officers and employees must be retained. In the case of
the WLDC, many of the expenses were incurred at restaurants that routinely provide
customers with itemized receipts. The 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.
WLDC records of meal expenses did not always identify the titles of the persons incurring
or receiving the benefit of restaurant charges. In most instances, WLDC maintained credit
card signature receipts identifying the date, amount, names of all persons incurring the
expense, business purpose of each expense, and the names of the restaurants where the
expenses were incurred. However, Local WLDC failed to retain records identifying the
titles of all persons who incurred the restaurant charges. 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
3. Union Owned Vehicles
WLDC did not maintain records necessary to verify the accuracy of the information
reported in Schedules 11 (All Officers and Disbursements to Officers) and 12
(Disbursements to Employees) of the LM-2.
WLDC incurred expenses totaling at least $16,600 for gasoline and other expenses related
to the operation of union owned automobiles during fiscal year ended September 30, 2010.
However, officers and employees assigned union automobiles did not maintain records,
such as mileage logs, documenting business versus personal use of the vehicles. Instead,
each officer or employee who is assigned a union owned automobile prepared an annual
report for the calendar year 2010 that identified their estimate of the total number of
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June 28, 2011
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business miles, commuting miles, and non-commuting miles driven for income tax
reporting purposes.
For each trip they take using a union owned or leased vehicle, officers and employees must
maintain mileage logs that show the date, number of miles driven, whether the trip was
business or personal, and, if business, the purpose of the trip. As further discussed below,
such records are required to be retained to support information regarding automobile
expenses that are required to be reported in Schedules 11 (All Officers and Disbursements
to Officers) and 12 (Disbursements to Employees) of the LM-2.
4. Reimbursed Auto Expenses
Office Manager Donna Neustadter received reimbursement for business use of her personal
vehicle, but did not retain adequate documentation to support payments to her totaling at
least $900 during 2010. For mileage reimbursement claims, Ms. Neustadter submitted
expense vouchers that identified only the total number of miles she claimed she drove for
union business. The vouchers failed to identify the dates of travel, the mileage
reimbursement rate claimed, or the number of miles driven on each trip.
In the case of reimbursed mileage expenses, the WLDC must maintain records which
identify the dates of travel, locations traveled to and from, and number of miles driven. The
record must also show the business purpose of each use of a personal vehicle for business
travel by an officer or employee who was reimbursed for mileage expenses.
Based on your assurance that WLDC 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-2) filed by the District Council for the fiscal year
ended September 30, 2010 was deficient in the following areas:
1. Election Date
WLDC reported an incorrect election date in Item 19 (Next Regular Election). The report
indicates that the next election will be held in August 2012. However, you confirmed that
this date is incorrect and WLDC’s next regularly scheduled election in August 2011.
2. Disbursements to Officers
WLDC did not include some indirect disbursements to officers in Schedule 11 (All Officers
and Disbursements to Officers) and Schedule 12 (Disbursements to Employees). Article IX
Uniform District Council Constitution states, “Travel expenses may also be provided for an
Executive Board member's spouse who accompanies the Executive Board member during
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June 28, 2011
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travels in connection with the performance of the member's duties and responsibilities.
During the audit year, the credit card statements show that at least $350 was disbursed for
travel expenses for your wife and Assistant Business Agent Pat Ervin’s wife. These
disbursements for spouses’ travel are considered indirect disbursements to officers and
employees for LM-2 reporting purposes and must be reported in Column G (Other
Disbursements) of Schedules 11 and 12. Nothing was reported in Column G for any officer
or employee. It appears that these payments were erroneously reported in Schedules 15
through 19.
Direct disbursements to officers and employees for reimbursement of expenses they
incurred while conducting union business must be reported in Column F of Schedules 11
and 12 (Disbursements for Official Business). In addition, indirect disbursements made to
another party (such as a credit card company) for business expenses union personnel incur
must be reported in Column F of Schedules 11 and 12. However, indirect disbursements
for business expenses union personnel incur for transportation by public carrier (such as an
airline) and for temporary lodging expenses while traveling on union business must be
reported in Schedules 15 through 19. Any direct or indirect disbursements to union
personnel for expenses not necessary for conducting union business must be reported in
Column G (Other Disbursements) of Schedules 11 and 12.
3. Salaries Reported as Allowances
WLDC did not correctly report salaries to some officers totaling at least $15,000 in
Schedule 11 (All Officers and Disbursements to Officers), Column D (Gross Salary
Disbursements). WLDC records general ledger and salary listing indicate part-time District
Council officers receive a monthly “salary/wage.” Furthermore, you advised that this is to
compensate the officers for the work that they do including time attending union meetings,
and is not intended to be a reimbursement to them for any specific expenses. Such
payments are considered salary for LM-2 reporting purposes and should be reported in
Column D of Schedule 11. These payments were erroneously reported in Schedule 11,
Column E (Allowances).
4. Automobile Expenses
Expenses related to the operation of union owned vehicles were not properly reported.
During the audit year, four officers and employees were assigned union-owned vehicles.
Information reported by the WLDC in Item 69 (Additional Information) states, “Schedules
11 and 12, Column F – All automobile expenses on behalf of officers and employees are
reported in Column F of the Schedule. It has been determined that more than 50% of the
automobile use is for official business.” However as previously explained above, no records
were maintained by officers and employees to enable OLMS to verify this information.
Further, year end tax reports, entitled “Statement from Employee to Employer Regarding
Use of the Employer-Provided Vehicle,” reflect that in calendar year 2009, Community and
Government Affairs Director Joe Oswald’s business miles were 11,964 and his personal
and commuting miles totaled 16,755. Further, the same records for 2010 indicate that in
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June 28, 2011
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calendar year 2010, Mr. Oswald’s business miles were 6,150 and his personal and
commuting miles total 21,159.
The LM-2 instructions provide two methods for reporting automobile-related expenses.
Direct and indirect disbursements for the operation and maintenance of union owned and
leased vehicles and the operation and maintenance of vehicles owned by union personnel
(including gasoline, repairs, and insurance) must be reported in Schedules 11 and 12. The
expenses may be divided and reported in Columns F and G based on miles driven for union
business (supported by mileage logs) compared with miles driven for personal use.
Alternatively, rather than allocating the expenses between Columns F and G, if 50 percent
or more of an officer's or an employee's use of a vehicle was for official business, the
expenses related to the vehicle assigned to the officer or employee may be reported in
Column F of Schedule 11 or 12 with an explanation in Item 69 (Additional Information)
that the officer or employee used the vehicle part of the time for personal business.
Similarly, if a vehicle assigned to an officer or employee was used less than 50 percent of
the time for business, all of the expenses related to that vehicle may be reported in Column
G with an explanation in Item 69 that the officer or employee used the vehicle partly for
official business.
Review of the LM-2 forms for fiscal years ending September 30, 2008, 2009, and 2010
indicate that nothing has been reported in Column G for any officer or employee. In the
case of the WLDC, union records reviewed during the audit, some amount must be reported
in column G for automobile expenses for at least Mr. Oswald and maybe additional officers
and employees, whose personal use exceeded 50% during one or more years.
I am not requiring that WLDC file an amended LM report for 2010 to correct the deficient items,
but WLDC has agreed to properly report the deficient items on all future reports it files with
OLMS.
Other Violation
Acquire/Dispose of Property by Affiliated Locals
The audit disclosed a violation of LMRDA Section 201(b) by WLDC’s affiliated local unions.
Each year WLDC purchases Milwaukee Brewers season tickets and distributes the tickets to the
“membership.” You advised that affiliated local unions request the tickets for distribution to
their members. During the audit year, WLDC distributed 28 sets (four seats per set) of tickets
and parking passes to Laborers Locals 113, 140, 268, 330, and 464, valued at $4,900. WLDC
correctly answered Question 15 (During the reporting period did your organization acquire or
dispose of any assets in any manner other than by purchase or sale?) yes and provided the
required additional information. Locals 113, 140, 330, and 464 answered Question 15 yes, but
failed to report the required additional information to identify the property that each received in
Item 69 (Additional Information). Further, Local 268 incorrectly answered Question 15 no. You
agreed to speak to the Locals and organizations’ accountant to ensure the deficient item is
properly reported on all future reports they file with OLMS.
Mr. John Schmitt
June 28, 2011
Page 6 of 6
Other Issue
Use of Signature Stamp
During the audit, you advised that it is WLDC’s practice for Office Manager Donna Neustadter
to prepare all union checks and to stamp the signature of you or Secretary Treasurer Kevin Lee
on union checks. You stated that each check is usually signed by you or Mr. Lee and Ms.
Neustadter stamps the second signature. Ms. Neustadter has possession of both signature
stamps. Article VII of the Uniform District Council Constitution requires that checks be signed
by the president and treasurer. 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, the use of a signature stamp for one or both signers does not attest to the authenticity
of the completed check, and negates the purpose of the two signature requirement. OLMS
recommends that WLDC review these procedures to improve internal control of union funds.
I want to extend my personal appreciation to Laborers District Council 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. Kevin Lee, Secretary Treasurer
Mr. Andy Hein, Certified Public Accountant