The 90-day non-extendable deadline for calendar year LM-2 filers is fast approaching. The Department of Labor (DOL) Office of Labor-Management Standards (OLMS) previously issued a Compliance Tip Bulletin – Form LM-2 Common Reporting Errors – to help union officials and accountants who prepare Form LM-2s avoid some common reporting problems encountered by the DOL. The bulletin listed the top five deficiencies found by the DOL and contained several recommendations to help prepare an accurate LM-2. The bulletin was last revised in October 2015, but we thought reminders could be helpful for filers.
Recommendation 1 – Provide complete descriptions of type/classification and purpose for Schedules 14-19 itemization pages.
Based on the bulletin, 20% of all reporting errors were due to insufficient or incomplete descriptions on the itemization pages for Schedules 14-19.
Column B “Type or Classification” on the itemized pages for Schedules 14-19 should describe the type of business or job classification of the entity or individual for whom an itemization page is prepared. The name of the account from the chart of accounts is not sufficient.
For individual receipts/payments that equal or exceed $5,000, Column C “Purpose” must provide a brief statement or description of the reason the receipt/disbursement was made.
Recommendation 2 – Provide sufficient detail for information Items 10-21.
The second most common error was inadequate explanations when a “yes” is checked for questions in Items 10-18. When a filer marks “Yes” for items 10-18, it is expected that they adequately detail the explanation in item 69.
The bulletin specifically notes that for Item 21, Rates of Dues and Fees, cells must be populated for each type of dues or completed as “N/A”.
Recommendation 3 – Reconcile investments and fixed assets schedules.
Schedules 5 and 6 should reconcile with schedules 3 and 4, along with non-cash transactions and disposals in Item 69. If these schedules cannot be reconciled for any reason, then an explanation as to why must be added to Item 69. You may find it beneficial to include a reconciliation in Item 69, to avoid any confusion.
Recommendation 4 -Properly complete Schedules 11 and 12 deductions and reconcile with Item 67a
Item 67a shows the total amount of payroll taxes and other deductions withheld from officers and employees and must agree with the sum of the amounts reported on the Less Deductions lines of Schedules 11 and 12. Many filers leave the Less Deductions lines in Schedules 11 and 12 blank; however, the sum of these two lines must equal the total in Item 67a.
Recommendation 5 – Schedules 1-10 lack sufficient detail
The DOL noted LM-2 filers sometimes fail to provide required detail in Schedules 1-10.
In addition, they specifically noted any loans to officers or employees reported in Schedule 2, Loans Receivable, with beginning or ending balances greater than $2,000 may be in violation of LMRDA Section 503(a).
Additional common reporting errors noted:
- Schedules 15-19 included officer and employee travel related disbursement that should have been reported on Schedules 11 and/or 12
- Employer Payroll taxes were incorrectly reported on Schedules 18 or 19 as opposed to Item 65 (Direct taxes)
- Disbursements were improperly reported in Schedule 19 (Union Administration) instead of Schedule 18 (General Overhead)
- Disbursements to credit card companies were incorrectly reported as a single disbursement to the credit card company
- Fixed assets were not properly depreciated
If you have any questions or would like to speak to a representative at Calibre CPA Group regarding the information provided above, please do not hesitate to contact us.
Written By: Nathan Cironi | Auditor
