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Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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Page 1: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

Council of Prison Locals – C33

FIDICUARY DUTIES AND RESPONSIBILITES

OF THE FINANCIAL OFFICER

& HOW TO GET THEM

ACCOMPLISHED

Page 2: 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 ?

• President• Vice-President• Treasurer • Executive Board • Or individuals that make financial

decisions or reviews for the Local – Audit Committee – Budget Committee

Page 3: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

Council of Prison Locals – C33

Goals • Make the Financial Officer a financially savvy

individual

• To keep the Financial Officers out of Jail !!

Page 4: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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

Page 5: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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:

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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.

Page 7: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

Council of Prison Locals – C33

AFGE Articles that Govern the Financial Officers

AFGE National Constitution

Page 8: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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.

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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.

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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.

Page 11: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

Council of Prison Locals – C33

Article VI Section 1(a)Local Officers

The general officers shall be elected by the total Membership and shallconstitute the Executive Board and shall consist of the President, Treasurer, Secretary and others as the Local’s bylaws may prescribe

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Council of Prison Locals – C33

Article VI Section 3Presidents 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 3Filling 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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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.

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Council of Prison Locals – C33

Article VIII Section 2Executive 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

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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.

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Council of Prison Locals – C33

Conducting a Local Audit

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Council of Prison Locals – C33

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

AFGE Annual Audit

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Council of Prison Locals – C33

Conducting Local AuditsWho 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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Council of Prison Locals – C33

Bonding Requirements

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Council of Prison Locals – C33

Bonding is a type of insurance policy that insures an organizationagainst 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:

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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.

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Council of Prison Locals – C33

What Agencies and Individuals must Financial Officers report to?

Internal Revenue Service

Your Local

AFGE

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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.

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Council of Prison Locals – C33

When do I have to report to the IRS? • 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):

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

2009 Tax Year – (Filed in 2010 or 2011)  Form to File  

•  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

• 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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Council of Prison Locals – C33

2010 Tax Year and later– (Filed in 2011 or later)  Form to File  

•  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

• 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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Council of Prison Locals – C33

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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Council of Prison Locals – C33

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 tax-exempt status will not take place until the filing due date of the third year. 

• 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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Council of Prison Locals – C33

Annual Exempt Organization Return: Penalties for Failure to File

• 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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Council of Prison Locals – C33

Can penalties for filing Form 990 late be abated?

• 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.

• 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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Council of Prison Locals – C33Can penalties for filing Form 990 late be abated? (continued)

• 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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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

Page 33: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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

Page 34: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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).

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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

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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

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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

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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

Page 39: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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

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Council of Prison Locals – C33

Retention of Documents and Other Important Items

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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

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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

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Council of Prison Locals – C33

Use of Local Credit Cards

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Council of Prison Locals – C33

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.

Local Credit Cards

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Council of Prison Locals – C33

Taxable & Non-Taxable Payments

to Officers and Members

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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

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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

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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

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Council of Prison Locals – C33

IRS 1099 Reporting

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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.

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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)

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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 VendorBox 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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Council of Prison Locals – C33

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

What must I Include on the 1096

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Council of Prison Locals – C33

Making Loans to Members

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Council of Prison Locals – C33

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.

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:

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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

Page 57: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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

Page 58: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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

Page 59: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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

Page 60: Council of Prison Locals – C33 FIDICUARY DUTIES AND RESPONSIBILITES OF THE FINANCIAL OFFICER & HOW TO GET THEM ACCOMPLISHED

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