Transcript Secretary-Treasurers & Local Presidents Fiduciary

Council of Prison Locals – C33
FIDICUARY DUTIES AND
RESPONSIBILITES
OF THE FINANCIAL OFFICER
&
HOW TO GET THEM
ACCOMPLISHED
Council of Prison Locals – C33
Who Are The Financial Officers ?
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President
Vice-President
Treasurer
Executive Board
Or individuals that make financial
decisions or reviews for the Local
– Audit Committee
– Budget Committee
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Goals
• Make the Financial Officer a financially savvy
individual
• To keep the Financial Officers out of Jail !!
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General Responsibilities
A Local’s Financial Officer must have a strong sense of
responsibility. He or she is entrusted by the
Membership with the faithful performance of vital duties:
– Safeguarding the property of the Local and its
Members
– Collecting and disbursing Local funds
– Accurately recording all financial transactions
– Reporting to Federal & State Government Agencies
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Fiduciary Responsibilities
• Local Officers manage and handle funds which
belong to the Local and its Members, they hold
positions of trust known as “Fiduciary Positions”
• These Federally-imposed Fiduciary Duties are set
forth in Section 501 of the Labor-Management
Reporting and Disclosure Act of 1959 (LMRDA),
which provides that Union Officers must:
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Fiduciary Responsibilities
– Hold union’s money and property solely for the benefit of their
Union and its Members.
– Manage, invest, and disburse funds and property only as
authorized by the Union’s Constitution and By-Laws or by proper
resolution of its Membership.
– Refrain from financial or personal interests which conflict with
those of their Union; and account to their Union for any profits
received from transacting Union business.
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Union officials who violate these federally created fiduciary duties are subject to civil lawsuits in federal
or state court for money damages or other appropriate relief. In addition, there are criminal penalties for
embezzling or stealing Local property—fines up to $10,000, imprisonment for up to five years, or both.
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AFGE Articles that Govern the Financial Officers
AFGE National Constitution
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Article II Section 3
Independent Local
The Local is an autonomous organization.
Article IV Section 1
Dues & Initiation Fees
Dues shall be established and adjusted as may be necessary to ensure that
they allow adequate funds for the payment of Per Capita Tax and sufficient
funds for the operating expenses of the Local.
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Article V Section 2
Check Signing
The Treasurer shall sign and the President shall countersign checks
covering proper expenditures for the Local. In the absence of these
officers, such other Officers as defined by the Locals Bylaws, may
sign.
Article V Section 3
Bonding
The Officers, agents, shop stewards, employees or other
representatives of the Local who handle funds or property of the
Local shall be bonded.
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Article V Section 4
Annual Audits
In order for the bond to be effective, the Local shall file an Annual Audit Report (to
include a copy of the DOL LM Form and an approved Annual Budget) with the
National Secretary Treasurer (NST).
Article V Section 5
Open Records
All books, records, and financial accounts shall be open to the inspection of the
National Executive Council or any duly authorized representative.
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Article VI Section 1(a)
Local Officers
The general officers shall be elected by the total Membership and shall
constitute the Executive Board and shall consist of the President,
Treasurer, Secretary and others as the Local’s bylaws may prescribe
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Article VI Section 3
Presidents Duties
The President shall be the executive officer of the Local. He/she
shall exercise general supervision over the affairs of the local and
insure that all other officers comply with their responsibilities
and constitutional duties.
Article VI Section 3
Filling in for the President
If the President is unable to perform his or her duties. The President
will delegate the responsibilities of the office based on the local’s
bylaws.
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Article VI Section 5
Treasurer’s Duties
The Treasurer shall maintain a Bookkeeping System as prescribed
by the National Secretary-Treasurer. The Treasurer must make a
financial report at each regular meeting; keep an up-to-date roll of
the membership; make monthly membership changes (adds &
drops); make address change and report such to the NST. Perform
additional financial duties as assigned.
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Article VIII Section 2
Executive Board Duties
It shall be the duty of the Executive Board to devise and initiate actions
that may be necessary in the interim between the Local’s meetings. All
actions shall be subject to Local approval.
Article VIII Section 3
Expenditures
Expenditures by the E-Board in excess of $500 per month must
haveprior approval of the Membership, or be an approved budget
item. Any expenditure authorized by the E-Board must be reported
in writing at the next Membership meeting
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Article VIII Section 4
Annual Budget
The Executive Board of the Local shall prepare an Annual Budget (subject
to the Membership's approval) insuring that revenues are sufficient to
meet its financial obligations.
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Conducting a Local Audit
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AFGE Annual Audit
Each local is required to conduct an Audit at least once a
year and make a certification using Audit Certification
Form 41 to the National Secretary-Treasurer showing that
an audit has been completed.
It is mandatory that you conduct an Audit:
• At the close of each Year End
• • When there is a change in Financial Officers
• • Or, if there is a suspicion of any wrong doing
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Conducting Local Audits
Who should be on the Audit Committee or conduct the Audit:
Annual Internal Audit
– The President should appoint an odd number of members (3-5)
that do not have signature authority on any accounts
Annual External Audit
– You may hire outside Accountants or Bookkeepers to perform the
audit also
Monthly Audits by the Financial Officers
– AFGE suggests that the Financial Officers conduct an audit of the
Savings, Checking, Investment and Credit Card Account
Statements on a monthly basis to insure that all items have been
reconciled. A review of the checkbook and dues deduction listings
is also recommended
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Bonding Requirements
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Bonding is a type of insurance policy that insures an organization
against financial loss caused by persons who handle the finances for the
Local. The insurance policy is called a “bond”—often a “security bond” or
“fidelity bond.”
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Federal Labor Law requires bonding to protect Unions from financial losses
caused by “fraudulent or dishonest acts” by Union Officers or Employees
All AFGE Locals are covered under a blanket bond and charged annually
for the coverage
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In order for your bond to be in effect you must conduct a Annual Audit and
submit to AFGE a Form 41 with a copy of your LM Report and the approved
Annual Budget.
The Labor-Management Reporting and Disclosure Act (LMRDA) establishes
specific bonding requirements:
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(LMRDA) Bonding Requirements
A bond, like any insurance policy, has a maximum recovery amount.
Per the Department of Labor the bond must be equal to at least 10
percent of the assets the Local.
A quick formula for computing required coverage:
Current Assets (Cash, Investments) + Total Receipts
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10% = Amount of Coverage Required
AFGE recommends that your coverage be 100% of your total
assets.
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What Agencies and Individuals
must Financial Officers report to?
Internal Revenue Service
Your Local
AFGE
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IRS Requirements
AFGE Locals are exempt from federal income taxes by the
Internal Revenue Service by being a 501c (5) organization.
AFGE’s Group Exemption Number is 0194. Generally AFGE
Locals are not exempt from Sales Taxes.
– Locals must pay employment taxes on salaries, lost time or annual
leave reimbursements paid to their officers or members. The
members receiving these types of payments must report the income
and pay taxes.
– Locals must report all income to the Internal Revenue Service
whether it is taxable or not. The exemption from tax does not extend
to all types of Local income. Certain types of income are taxable and
must be reported to the IRS on form 990T.
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When do I have to report to the IRS?
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Beginning with the year 2008 all Locals must file an "Annual Information Return"
with the IRS.
For Tax Year 2008 (to be filed in 2009 or 2010):
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- If gross receipts are less than $25,000 you should FILE a 990-N (e-postcard)
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- If gross receipts are greater than $25,000 but are less than $1,000,000 or your
total assets are less than $2,500,000 you should file Form 990-EZ
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- If gross receipts are greater than $1,000,000 or your total assets are greater
than $2,500,000 you are required to file Form 990
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2009 Tax Year – (Filed in 2010 or 2011) Form to File
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If gross receipts are normally less than $25,000, the local
should file the e-Postcard 990-N
• If gross receipts are less than $500,000 and total assets are less
than $1.25 million, the local should file the 990-EZ
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If gross receipts are greater than $500,000, or total assets are
greater than $1.25 million, the local should file a full 990
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2010 Tax Year and later– (Filed in 2011 or later) Form to File
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If gross receipts are normally less than $50,000, the local
should file the e-Postcard 990-N
• If gross receipts are less than $200,000 and total assets are less
than $500,000, the local should file the 990-EZ
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If gross receipts are greater than $200,000, or total assets are
greater than $500,000, the local should file a full 990
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When are the Form 990’s Due ?
• You must file the 990 e-postcard, the 990 or 990EZ form by the 15th
day of the 5th month, after your Local’s Year End. For a calendar
year you will report on 5/15.
• A Penalty of $20 @ day up to $10,000 may be charged if the Form
is filed late or an incomplete return is submitted.
• You can get an extension of 3 months by submitting an IRS
“Extension to File Form” 8868
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What happens if you fail to file the e-Postcard, Form 990 or Form
990-EZ?
• An organization that fails to file the required e-Postcard (or
information return) for three consecutive tax years will automatically
lose its tax-exempt status. The revocation of an organization’s taxexempt status will not take place until the filing due date of the third
year.
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For example, if your first e-Postcard is due on May 15, 2008 (for tax
year 2007) and you do not file in 2008, 2009, or by May 15, 2010,
you will lose your tax-exempt status effective on May 15, 2010.
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Annual Exempt Organization Return: Penalties for Failure to File
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If an organization fails to file a required return by the due date (including any
extensions of time), it must pay a penalty of $20 a day for each day the
return is late. The same penalty applies if the organization does not give all
the information required on the return or does not give the correct
information.
• In general, the maximum penalty for any return is the lesser of
$10,000 or 5 percent of the organization's gross receipts for the
year. For an organization that has gross receipts of over $1 million
for the year, the penalty is $100 a day up to a maximum of $50,000.
• If the organization is subject to this penalty, the IRS may specify a
date by which the return of correct information must be filed. If the
return is not filed by that date, an individual within the organization
who fails to comply may be charged a penalty of $10 a day. The
maximum penalty on all individuals for failures with respect to a
return shall not exceed $5,000.
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Can penalties for filing Form 990 late be abated?
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Failure to timely file the information return, absent reasonable cause, can
give rise to a penalty under section 6652 of the Code. Whether an
organization qualifies for the reasonable cause exception to the penalty will
be determined on a case-by-case basis taking into account all relevant facts
and circumstances.
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The regulations provide that a request for abatement of penalties based on
reasonable cause must be made in the form of a written statement,
containing a declaration by the appropriate person that the statement is
made under penalties of perjury, setting forth all the facts alleged as
reasonable cause. This statement should be made as an attachment to the
Form 990; please disregard the Schedule O instructions that ask for this
statement to be included in Schedule O.
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Can penalties for filing Form 990 late be abated? (continued)
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When requesting abatement of penalties for reasonable cause, your
statement should include supporting documentation and address the
following items:
The reason the penalty was charged. The daily delinquency penalty may
be charged for either a late filed return, an incomplete return, or both.
Explain what prevented the organization from complying with the law,
including:
what prevented the organization from requesting an extension of time to
file its return, if the organization did not request such an extension;
how the organization was not neglectful or careless, but exercised
ordinary business care and prudence; and
what steps have been taken to prevent the same situation from occurring
in the future
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Where do I get the IRS Forms?
You can get the forms from the IRS Web Site at :
http://www.irs.gov/formspubs/index.html
When on the Web Site enter the Form you are looking for in the “Search Box”
at the top of the screen. Example 990 or 990EZ or 8868
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When is the Local an Employer and
when must you pay Payroll Taxes?
Remember the Local is an Employer when it makes payments to
Officers, Stewards, Staff or others to perform duties or services for
the Local:
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Salaries
Payment for Lost Time (LWOP)
Annual Leave Reimbursements
Stipends
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IRS’s Description of an Employee
Here are several factors tending to indicate that an individual is an employee
under tax law (only one need exist) :
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The member’s compensation is measured by the hour, week, or month rather
than by the job.
The member is required to perform the services personally, without the ability
to delegate the task to somebody else.
There is a continuing working relationship between the member and the Local.
The Local supplies materials or facilities used by the member in performing the
services, such as an office, office supplies, a telephone, etc.
The Local provides instructions or training to the member; and the member
performs the services in question solely for the Local (and not for others).
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Labor Department Reporting
The LMRDA requires Locals to file an “Annual Financial
Report” with the U. S. Department of Labor.
If your Local has Gross Receipts of:
• More than $250,000, you must file an LM-2 Report
• Less than $250,000 and more then $10,000 you must file an
LM-3 Report
• Less than $10,000, you must file an LM-4 Report
• DC Government Locals are not required to file a LM Report
with DOL
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When are the Labor Department Reports Due?
The LM Forms are due 90 Days after the Local’s Year End
– If you are on a Calendar Year this is 3/31
– If you are on a Fiscal Year, it is 90 days from the close of
your Year End
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Where do I get Labor Department Forms ?
The best place is the Labor Department Web Site at :
http://www.dol.gov/esa/olms_org.htm
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Reporting to your Local
Membership
The Financial Officers have a responsibility to
keep the Membership informed of:
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All Income received by the Local (Dues and Other Income)
All Expenditures and Payments made on behalf of the Local
All Assets and Accounts held on behalf of the Local
The creating and reporting of Budget items allocated by the
Local
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Other Areas for Consideration &
Responsibilities
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Retention of Documents and Other Items
Use of a Credit Card
Completing the IRS 1099 requirements
Making Loans to Members
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Retention of Documents and
Other Important Items
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Recommended Retention of
Documents and other Items
General Local Files:
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By-laws and Amendments -------Permanent
Correspondence -------------------5 Years
Election Records-------------------2 Years beyond the term of office
Local Memorandums of
Understanding----------------------Permanent
• Minutes of Meetings--------------Permanent
(Membership & E-Board)
• Items that Document the
Local’s History --------------------Permanent
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Recommended Retention of
Documents and other Items
Local Membership Records
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Dues Deduction Forms (1187, 1188, etc.) -------------3 Years
EEO Case Files --------------------------------------------5 Years
Grievance Case Files--------------------------------------5 Years
(MSPB) Case Files ----------------------------------------5 Years
Workers’ Compensation Case Files---------------------5 Years
Financial Records
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– Correspondence -------------------------------------------5 Years
– IRS Forms--------------------------------------------------5 Years
– LM Forms--------------------------------------------------5 Years
– Financial Statements & Reports---------------------- Permanent
– Officer Bonds ------------------------------------------- Permanent
Many of these Retentions are mandated by the Department of Labor and IRS
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Use of Local Credit Cards
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Local Credit Cards
How to avoid problems when using Credit Cards :
• Credit Cards should be in the name of the Individual Local
Officer
• Monthly dollar amount limits should be placed on Credit
Cards
• No ATM or Debit capability should be allowed
• Credit Cards are to be used for Local business only. No
personal charges by an officer.
• A Credit Card Statement should not be considered
authorization for payment—You must provide receipts, hotel
statements, vouchers, etc.
• Use of a Credit Card should be defined in the Local’s
Bylaws.
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Taxable &
Non-Taxable Payments
to
Officers and Members
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Payments that are Not-Taxable
• Business Related Expenses
– When:
• Expense is for union business
• Detail vouchers are provided showing: time, place, and business
purpose
• Documentation is submitted in a timely manner
• Any unused funds are returned to the organization
All 4 factors must be met or payment is Taxable
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Payments that are Not-Taxable
• Officer Allowances
– When:
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Expense is for union business
Expense vouchers are provided
Documentation is submitted in a timely manner
Any unused funds are returned to the organization
All 4 factors must be met or payment is Taxable
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Payments that are Not-Taxable
• Reimbursed Travel Expenses
– When:
• Expense is for union business
• Expense vouchers are provided showing: time, place, and business
purpose
• Documentation is submitted in a timely manner
• Any unused funds are returned to the organization
All 4 factors must be met or payment is Taxable
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IRS 1099 Reporting
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When are you Responsible for
Completing a 1099
When non-payroll payments are made and exceed $599 annually for
an individual or vendor
What type of payments require a 1099:
– Membership Recruitment payments made to a member or officer
– Payments made for services performed by: Arbitrators, Accountants,
Legal Services, Consultants Etc.
– Items or Equipment purchased for the Officers or Members i.e.
personal cell phones, laptops Etc.
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When Must I Complete the 1099
• 1099’s must be given to the Individual or Vendor by January 31st
• Copies of all 1099’s must be filed with the IRS by February 28th
along with an Annual Summary (Form 1096)
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What must I Include on the
1099
The Individual’s:
– Name
– Address
– Social Security Number
– Your Organizations Federal Tax ID (EIN #)
– The total amount paid to the Individual or Vendor
Box 1- Rent, Box 6- Medical & Health Care,
Box 7-Nonemployee Compensation and Box 14-Attorney Fees
Note: Payments made through payroll are reported on IRS
Form W-2
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What must I Include on the
1096
Your Organization’s:
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Name
Address
Federal Tax ID (EIN #)
A count of the total number of 1099s issued (Box 3)
The total dollar amount reported for all 1099’s (from corresponding 1099
Boxes)
– Contact Name and Phone #
– Copies of all 1099s issued
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Making Loans to Members
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AFGE does not recommend making Loans to Members.
Recovery of defaulted loans are costly and difficult. If you
choose to make a loan remember the following:
They must be Approved by the Membership
The Executive Board CANNOT Approve Loans!
A Loan cannot be more than $2000 per Individual.
For any Loan, there should be a very clear Standard
Criteria that the Local has adopted.
Remember what the Local does for ONE member, you
must do for ALL members.
All outstanding advances in excess of $2000 are
considered by DOL as a loan.
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Quick Books Pro Financial
System
The suggested approach for AFGE Locals and Councils is the AFGE
Customized Accounting System through the use of Quick Books Pro
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AFGE’s Quick Books Pro
Financial Officers Training Overview
• Establishing your Local’s Quick Books File
• Creating a Standardized Chart of Accounts
• Establishing your Checking Account
• Establishing your Petty Cash Account
• Establishing your Saving Account
• Allocating your Income & Expenses
• Producing Checks
• Making Fund Transfers
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AFGE’s Quick Books Pro
Financial Officers Training Overview
• Reconciling your Bank Statements
• Creating Fixed Asset Accounts
• Creating Reports
• Treasurers Report
• Treasurers Detail Report
• LM and IRS Reporting
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AFGE’s Quick Books Pro
Financial Officers Training Overview
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Establishing a Local Payroll
• Setting up your Employees
• Paying your Employees
• Paying Payroll Taxes
• Producing your Payroll Tax Forms
• Form 940
• Form 941
• W2’s
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Establishing a Local Credit Card Account
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AFGE’s Quick Books Pro
Financial Officers Training Overview
• Satisfying your Regulatory Requirements
• IRS 990 Reporting
• Labor Department Reporting (LM 2, 3 & 4)
• Creating a Budget
• Protecting your Financial Records
• Allowing access to your records
• Backing up your financial records