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									Council of Prison Locals – C33




FIDICUARY RESPONSIBILITES
                   PRESENTED BY



           NST- Roger Payne
     Council of Prison Locals – C33

Who Are The Financial Officers ?
•   Vice-President
•   Treasurer
•   Executive Board
•   Or individuals that make financial
    decisions or reviews for the Local
    – Audit Committee
    – Budget Committee
    Council of Prison Locals – C33


                         Goals
• Make the Financial Officer a financially savvy
  individual




• To keep the Financial Officers out of Jail !!
    Council of Prison Locals – C33


        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
 Council of Prison Locals – C33


   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:
 Council of Prison Locals – C33

        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.

    •   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.
Council of Prison Locals – C33



       AFGE Articles that Govern the Financial Officers




     AFGE National Constitution
Council of Prison Locals – C33


                      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.
      Council of Prison Locals – C33


                           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.
Council of Prison Locals – C33




 Conducting a Local Audit
  Council of Prison Locals – C33


              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
   Council of Prison Locals – C33

      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
    Council of Prison Locals – C33



                       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
  Council of Prison Locals – C33

                       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.
  Council of Prison Locals – C33



               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.
 Council of Prison Locals – C33


                      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.
      Council of Prison Locals – C33

                            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 have
prior 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
Council of Prison Locals – C33




    Bonding Requirements
      Council of Prison Locals – C33



    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.‖

•   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

•   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:
   Council of Prison Locals – C33


   (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
                           *
           10% = Amount of Coverage Required

AFGE recommends that your coverage be 100% of your total
assets.
    Council of Prison Locals – C33



                        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.
Council of Prison Locals – C33


 What Agencies and Individuals
must Financial Officers report to?
                   Internal Revenue Service



                   Your Local




                   AFGE
Council of Prison Locals – C33

          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.
        Council of Prison Locals – C33

              When do I have to report to the IRS?

•   For the year 2008 all Locals must file an "Annual Information Return" with the
    IRS.

•   - If your 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 can file a 990EZ or a 990

•   - If your 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

•   - If your gross receipts are less than $25,000 you can FILE a 990-N (e-postcard)
     Council of Prison Locals – C33


When are the Form 990’s Due ?

• You must file 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
   Council of Prison Locals – C33


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
  Council of Prison Locals – C33


 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:
    •   Salaries
    •   Payment for Lost Time (LWOP)
    •   Annual Leave Reimbursements
    •   Stipends
         Council of Prison Locals – C33


     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) :

•    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).
   Council of Prison Locals – C33


    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
   Council of Prison Locals – C33


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
   Council of Prison Locals – C33

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
 Council of Prison Locals – C33


        Reporting to your Local
            Membership
The Financial Officers have a responsibility to
keep the Membership informed of:

   –   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
Council of Prison Locals – C33


Other Areas for Consideration &
        Responsibilities
  •   Retention of Documents and Other Items
  •   Use of a Credit Card
  •   Completing the IRS 1099 requirements
  •   Making Loans to Members
Council of Prison Locals – C33




Retention of Documents and
   Other Important Items
    Council of Prison Locals – C33


    Recommended Retention of
    Documents and other Items
General Local Files:
•  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
    Council of Prison Locals – C33


    Recommended Retention of
    Documents and other Items
Local Membership Records
      –   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
      – 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
Council of Prison Locals – C33




   Use of Local Credit Cards
  Council of Prison Locals – C33


             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.
Council of Prison Locals – C33




           Taxable &
     Non-Taxable Payments
               to
     Officers and Members
     Council of Prison Locals – C33


 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
     Council of Prison Locals – C33


 Payments that are Not-Taxable

• Officer Allowances
    – When:
        •   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
     Council of Prison Locals – C33


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
Council of Prison Locals – C33




               IRS 1099 Reporting
   Council of Prison Locals – C33


   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.
     Council of Prison Locals – C33


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)
Council of Prison Locals – C33


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
       Council of Prison Locals – C33



       What must I Include on the
                1096
Your Organization’s:
   – 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
Council of Prison Locals – C33




 Making Loans to Members
   Council of Prison Locals – C33

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 BCANNOT 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.
Council of Prison Locals – C33



     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
    Council of Prison Locals – C33



          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
Council of Prison Locals – C33


      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
      Council of Prison Locals – C33

            AFGE’s Quick Books Pro
       Financial Officers Training Overview
•   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

•   Establishing a Local Credit Card Account
    Council of Prison Locals – C33


       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

								
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