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Best Practices: Documentation and Authorization of Expenditures within a Labor Organization

The Department of Labor’s Office of Labor-Management Standards (OLMS) enforces certain provisions of the Labor-Management Reporting and Disclosure Act (LMRDA).  The LMRDA requires, in part, that labor unions meet basic standards of fiscal responsibility and maintain records that are sufficient to permit those records to be verified, explained, and checked for accuracy and completeness.  To ensure compliance with these provisions and to safeguard assets, labor unions should establish best practices for documenting and authorizing expenditures.

Proper documentation of expenditures is a key element of the basic standards of fiscal responsibility required by LMRDA.  In general, a labor union should maintain adequate documentation to support all expenditures (bills, sales invoices, etc.).  This documentation should clearly identify the amount of the transaction, who the transactions was with, and what the transaction was for.

In some instances, labor unions may directly reimburse certain officers, employees, stewards, or committee members (“officials”) for expenses they incur while conducting union business.  In addition, some may provide union officials with union credit cards to be used for charging certain purchases and expenses they incur while conducting union business.  In these instances, a labor union should adopt clear policies in writing that establish guidelines and procedures over reimbursed expenses and credit card charges.

Expense Reimbursement Policy

An expense reimbursement policy should address the following in as much detail as possible:

  • Identify those individuals within the labor unions who are eligible to receive reimbursed expenses.
  • Define specific expenses are that are covered by the policy.
  • Establish documentation requirements needed for expense reimbursements. These requirements should clearly state the acceptable documentation such as airline receipts, itemized hotel receipts, and itemized receipts of other expenses incurred. Itemized receipts are required to be maintained. Mileage expenses should be supported by a log that lists the beginning and ending mileage for each day, the destination and the purpose of each trip. This level of record-keeping is required for mileage expenses.

The expense reimbursement claim, made by the union officer or employee, should refer to the specific union business or purpose of the expense.  Some labor unions require that a standard travel expense reimbursement form be completed when an official claims expenses. A standard expense reimbursement form has the advantage of providing the information the union needs to review and approve a claim in accordance with its expense reimbursement policy.

In addition to making the policy as detailed as possible, the labor union should periodically review and update it.

Credit Card Policy

A credit card policy should address the following issues in as much detail as possible:

  • Identify those individuals within a labor union authorized to have and use a credit card.
  • Define specific expenses that may be charged to the credit card and under what circumstances.
  • Identify prohibited uses of the credit card. A labor union should consider prohibiting the use of credit cards for ATM withdrawals, cash back at point of purchase, cash access checks, or other cash withdrawals. The policy should also prohibit the use of credit cards for personal purposes. In addition, the policy should address the consequences of prohibited credit card use. A policy that prohibits and/or restricts these uses will prevent, or at least inhibit, the misuse of credit cards.
  • Consider expenditure amount limits. A labor union may wish to set dollar limits for types of expenses that may be charged to the union credit card such as air travel, lodging charges, or certain types of amenities.
  • Establish documentation requirements for credit card charges. These requirements should clearly state the acceptable documentation required. Original, itemized receipts for each credit card charge, including itemized hotel invoices, transportation costs and itemized meal receipts from restaurants should be considered acceptable documentation. For meal expenses, union records must also include: (a) a written explanation of the specific union business conducted (it is insufficient to simply record “union business”); (b) the full names and (c) titles of all persons incurring the food and beverage charges.

The union’s credit card policy and procedures should be in writing and either added to the labor union’s bylaws or approved at an executive board or membership meeting and documented in the meeting minutes or other policy manual or document maintained by the labor union.  The labor union should periodically review credit card use, to ensure compliance with the credit card policy adopted.

In addition to the documentation of expenditures, another key element of the basic standards of fiscal responsibility is maintaining records of the authorization of those expenditures.  These records ensure that proper authorization has not only been given but that the authorization has been documented.   Typically, these authorization procedures are documented in by-laws within the labor union constitution.

Salary authorizations, authorizations for allowances such as payment of union dues for shop stewards, car allowances and other allowances, as well as payment of reimbursed expenses, should be documented. A record of such documentation must be maintained.

Any time authorization is obtained at a union meeting for non-recurring purchases such as purchases of equipment, as well as investments such as stocks or bonds, the authorization should be recorded in the minutes. The authorizing motion should be as specific as possible and detailed in the minutes.

Labor unions should also authorize recurring expenditures, such as monthly payments for utilities and rent. Some unions may adopt standing orders or policies that authorize payment of recurring expenditures. If such a standing order or policy has been adopted, the labor union should maintain records of authorizing such a policy or standing order. All authorizations obtained during union meetings should be documented in the minutes.

Many labor unions require membership approval for certain expenditures, such as all expenses over a stipulated dollar amount. In these instances, authorization obtained at union meetings should be documented in the minutes.

If you have questions, or would like more information on best practices regarding documentation and authorization of expenditures within your labor organization, please contact info@calibrecpa.com.

By Andrew J. Hein, CPA & Partner