Slide 1:FIDICUARY RESPONSIBILITES & FINANCIAL MANAGEMENT PRESENTED BYRoger Payne, NST

COUNCIL OF PRISON LOCALS 33

Slide 2: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

Slide 3:Goals of this Class

Make the Financial Officer a financially savvy individual To keep the Financial Officers out of Jail !!

Slide 4: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

Slide 5: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 “Fiduciary Duties” are imposed on Union Officers by law: 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:

Slide 6:Fiduciary Responsibilities Under Section 501 of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA) 

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.

Slide 7:AFGE Articles that Govern the Financial Officers

AFGE National Constitution

Slide 9: 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.

Slide 10:Conducting a Local Audit

Slide 11: 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 when there is a suspicion of any wrong doing

AFGE Annual Audit

Slide 12: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

Slide 13:Records Needed to Perform an Audit

Checkbook Savings, Checking, and Investment Account Statements, Cancelled Checks, Deposit Slips, and Credit Card Statements Dues Deduction Listings Local Constitution and By-Laws Minutes of Local Meetings Minutes of E-Board Meetings LM-2, LM-3, OR LM-4 Reports for Past Two (2) Years IRS 990 for Past Two (2) Years Annual Budgets Prior Audit Committee Reports Form W4’s for Past Two (2) Years (Payroll) Current Financial Roster Inventory of all Fixed assets (i.e.., Computer, Office Furniture) Payroll Tax Returns, Forms 940, 941, W-2’s and 1099’s

Slide 14:RED Flag Items During an Audit

One Signature Checks Pre-signed Checks by ONE OFFICER Checks Written Out of Sequence Checks Written to CASH Checks written to INDIVIDUALS Advance Payment of Salary to Employees Unbalanced Checkbooks with no Deposit Records

Slide 16: 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.

Slide 17: 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 changes and report such to the NST. Perform additional financial duties as assigned.

Slide 18: 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.

Slide 19:Bonding Requirements

Slide 20:Bonding Requirements for your Local

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:

Slide 21:(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 X  10% = Amount of Coverage Required AFGE recommends that your coverage be 100% of your total assets. 

Slide 22: 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

Slide 24:What Agencies and Individuals must Financial Officers report to?

Internal Revenue Service (IRS) Department of Labor (DOL) Your Local Membership & AFGE Headquarters

Slide 25: 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.

Slide 26:When do I have to report to the IRS ?

Locals must file an “Annual Informational Return” with the IRS. If your gross receipts are less then $25,000 you will need to file a 990-N (E-Postcard) If your gross receipts are greater than $25,000 but less then $100,000 you are required to file a Form 990EZ If your gross receipts are greater than $100,000 you are required to file a Form 990

Slide 27:When are the Form 990’s Due ?

You must file the 990, 990EZ or the 990-N 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

Slide 28:Annual Electronic Filing Requirement for Exempt Organizations — Form 990-N (e-Postcard)

Tax-exempt organizations whose gross receipts are normally $25,000 or less are required to electronically submit Form 990-N, also known as the e-Postcard. The Pension Protection Act of 2006 added this filing requirement to ensure that the IRS has current information about your organization.

Slide 29:Due Date of the e-Postcard

The first e-Postcards are due in 2008 for tax years ending on or after December 31, 2007. The e-Postcard is due every year by the 15th day of the 5th month after the close of your tax year. For example, if your tax year ended on December 31, 2007, the e-Postcard is due May 15, 2008. You cannot file the e-Postcard until after your tax year ends.

Slide 30:Information You Will Need To File the e-Postcard

Employer identification number (EIN) Tax year Legal name and mailing address Any other names the organization uses Name and address of a principal officer Web site address if the organization has one Confirmation that the organization’s annual gross receipts are normally $25,000 or less If applicable, a statement that the organization has terminated or is terminating (going out of business)

Slide 31: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 You may also go to the AFGE Web Site under NST Financial Officers Resources and get the Forms

Slide 32: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

Slide 33: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).

Slide 34: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

Slide 35: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

Slide 36: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

Slide 37: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

Slide 38: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

Slide 39:Retention of Documents and Other Important Items

Slide 40: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

Slide 41: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

Slide 42:Use of Local Credit Cards

Slide 43:Local Credit Cards

Slide 44:Taxable & Non-Taxable Payments to Officers and Members

Slide 45: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

Slide 46: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

Slide 47: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

Slide 48:

IRS 1099 Reporting

Slide 49: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.

Slide 50: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)

Slide 51: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

Slide 52: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

Slide 53:Making Loans to Members

Slide 55:AFGE Local’s Financial System

The suggested approach for AFGE Locals and Councils is the AFGE Customized Accounting System through the use of Quick Books Pro