Union Financial Management - Best Practices For Locals”

1. Union Financial Management - Best Practices For Locals”

2. AGENDA • Introduction – AFT Financial Services. Who are we? • Workshop Objectives • Constitution and Bylaws • Duties and Responsibilities • President’s Role • Treasurer’s Role • Roles and Responsibilities of the Governing Board • Code of Ethics • Loans to Officers and Employees • Important Dates – 990s, LM-2s, Payroll • Record Retention • Affiliate Accountability • Good Standing • Local’s Compliance Scorecard • Bad Standing • Audit/Financial Review Reports • Selecting an Independent CPA • Cost of having a CPA firm do an Audit • Best Practices for Affiliate Finances – Internal Controls

3. AGENDA • Employees & Contractors • Samples of Required Reports • Budget • Financial Statements • IRS Form 990 • Additional Information • Agency Fee Information • Guidelines for Financial Review Committees • Accounting for COPE Funds

4. American Federation of Teachers, AFL-CIO Financial Services Workshop For Local Officers Financial Services Department Personnel: John J. Feldman III, CPA – General Manager for Finance (jfeldman@aft.org) Marcia Reid – Accountant (mfortson@aft.org) Julie Hoffsten, CPA, MA – Department Director (jhoffste@aft.org) Yhasmine Bryan, MBA – Senior Associate Director (ybryan@aft.org) Kay Neipert, CPA, MBA, CFE – Senior Associate Director (kneipert@aft.org) Martha Winston, CPA – Assistant Director (mwinston@aft.org) Tope Fajingbesi, CPA, MBA – Assistant Director (tfajingb@aft.org)

5. AFT Financial Services How may we assist YOU? • We provide the following services: • Training • Budget preparation assistance • Preparation of IRS returns • DOL – Labor Management reporting forms • Help with payroll issues • Perform financial reviews and fraud investigations • Other financial related matters

6. Workshop Objectives At the end of this session you will: • Know what your local needs to do to meet the AFT’s constitutional requirements • Know what your local needs to do to meet government requirements • Have tips and ideas for managing your local’s finances • Be able to access a variety of financial resources on the AFT LeaderNet

7. Project Member Recruitment Establishes Local Local Officers Elected Local adopts Constitution & Bylaws Members Pay Dues Meets Members’ Needs Projects & Locals • Project • Assists Local in maintaining membership levels

8. Constitution and Bylaws • Constitution and bylaws should be tailored towards your specific local. • AFT maintains model constitutions based on size of each local that can serve as a guide (included in appendix). • AFT can help your local navigate through specific issues. You may contact: David Strom (AFT legal) or Bill Harty (Union Leadership Institute) for assistance. • The constitution is a living document and should be revised to correct persistent and fundamental issues e.g. Quorum issues. • The guiding principle should always be goodwill and the best interest of the local. • AFT’s new constitution, adopted in July 2012 is available on LeaderNet (http://leadernet.aft.org).

9. DUTIES AND RESPONSIBILITIES

10. President’s Role The President serves as an elected officer under the constitution and by-laws of the prospective local. As CEO, the president: • Has a fiduciary responsibility to the members of its local; • Is the Chief officer and overseer of the operations of the local; • Chairs all Executive Board meetings; • Appoints members of standing committees (with the approval of the board) and special committees.

11. Treasurer’s Role • Prepare the proposed budget (along with the budget committee) for each fiscal year and present it to the Executive Board annually for approval; • Present approved budget and financial reports to the membership; • Maintain all financial records; • Maintain, update and reconcile monthly membership records to the per capita remittances; • Account for all receipts and disbursements of funds; • Countersign all checks; • Notify members of non-payment of dues.

12. Roles and Responsibilities of the Governing Board Members • Understand the organization’s mission and work together to ensure the mission is fulfilled; • Establish policies and priorities; • Maintain ethical standards of confidentiality and recognize conflict of interest; • Understand the budget and monitor the in-flow and out-flow of funds; • Enhance the public image of the local.

13. Members • Attend Meetings • Be in good standing • Participate on Committees & Activities • Ask Questions • Is Not an Officer

14. Important Dates • Annual return Form 990 – due 4 1/2 months after your fiscal or calendar year end (i.e. 6/30 = 11/15 or 12/31 = 5/15) • Failure to file 990 for three year will result in revocation of tax exemption. • Affiliates are covered by AFT’s group exemptions, no need to apply for your separate exemption. • Contact us if you are unsure of your coverage. • Department of Labor (LM2/LM3/LM4) – due 3rd month after your year end (90 days). • Annual Receipts >$250K (LM2), <$250K (LM3), <$10K (LM4) • For unions subject to the Labor-Management Reporting and Disclosure Act of 1959, as amended • Covers labor organizations that represent employees who work in private industry, U.S postal service and most federal government employees • Labor organizations that represent only state, county or municipal employees are not covered by these laws

15. IRS 990 REQUIREMENTS

16. Payroll –Dates to Remember • January 31: 941 Quarterly Return (1st Quarter), send W-2s, Wage and Tax Statements to each employee, and furnish other payees with 1099s. • February 28: Send W-3 to the Social Security Administration. • April 30: 941 Quarterly Return (2nd Quarter) • July 31: 941 Quarterly Return (3rd Quarter) • October 31: 941 Quarterly Return (4th Quarter)

17. Facts about IRS Form 1099-MISC Threshold amount for issuing the form Who receives one from the local ? • Lawyers and accountants who belong to the following: • Individual practitioner • Member of a partnership • Member of a Professional Corporation (PC) • and • Rent paid to a partnership or trust Get the EIN or Social Security number When in Doubt, Send One Out !!

18. Affiliate Accountability

19. Is YOUR local in Good Standing?(Per the AFT Constitution & By-laws) • Current to the national office with per-capita payments not to exceed two months in arrears; • Current in per capita payments to your state federation; • Have submitted a copy of your most recent audit within six months of the fiscal year end? (i.e. F/Y/E 6/30 audits due to AFT no later than 12/31); • Membership information either updated or certified each month if no changes to members’ data is required; • A copy of your local’s constitution including amendments to the constitution and by-laws should be on file with AFT; • Names and addresses of current officers on file with AFT; • Names and addresses of executive board members on file with AFT.

20. If you answered “YES” to all of the above….YOU ARE IN GOOD STANDING!!!

21. If you answered “NO” to any of the above…. Then your local IS in “bad standing”!

22. If your local is in bad standing: • Staff assistance could be suspended • Financial assistance could be suspended • Delegates for AFT Convention will not be seated

23. Audit/Financial Review Reports

24. Audit Requirements In all cases, there should be a letter from local that certifies presentation to governing body and availability of audit to membership

25. Best Practices for Affiliate Finances Internal controls are necessary to safeguard a local’s assets and to ensure the integrity and accuracy of its records. The AFT has compiled a list of “best practices” that outline important checks and balances.

26. Minimum of two signatures should be required on all checks and bank accounts. Treasurer + 1

27. 2. Periodic written financial reports should be distributed to local leaders and members. • Quick Books offers pre built reports that can be customized, you can also use Microsoft Excel. • Monthly Bank Reconciliation with bank statements • Statement Showing Assets (Balance Sheet) • Statement showing Income & Expenses (Position) • Statement Showing Comparison Budget to Actual Expenses

28. 3. An annual audit or financial review should be performed by an internal audit committee or external accountant. • Ensure Audit Findings Addressed • Identify ways to control costs and maximize members dues. • Audit committee – 3 non executive board members

29. 4. An annual budget should be prepared and adopted/approved by the full executive board or membership. • Compare Budget to Actual Monthly • Avoid common budgeting pitfalls – unrealistic expectations, ignoring prior activities, using complex budgeting tools etc

30. 5. Monthly bank reconciliations should be completed, preferably not by the person responsible for writing the checks and/or recording disbursements. • Monitor Outstanding Items • Question Cash Withdrawals • Question NSF Fees • Sign Bank Reconciliation

31. Bank Reconciliation Statements • Why Reconcile? • Discover bank errors • Ensure all transactions are recorded • Discover errors such as fraudulent, erroneous/double payments • Reconciliations can be done manually, in Excel or using Quick Books. • Ensure that bank Charges are recorded in your records before reconciling.

32. Bank Reconciliation Sample Balance per bank statement $1,000 Less: Checks not yet presented • Check 101 ($50) • Check 107 ($100) ($150) Add: Deposits in transit • Dues check 08/01/12 $300 Balance per cash book $1,150

33. 6. All large, unusual, or non-budgetary expenditures should be approved by the executive board before disbursement. Approval should be documented in minutes of meetings

34. 7. Adequate reserves should be available in the event of cash shortfalls.

35. 8. Deposits should be made as soon as possible after the receipt of checks.

36. 9. No checks should be made payable to “Cash.” Petty cash accounts should be avoided.

37. 10. It is recommended that the local not provide credit cards or other bank cards to officers or staff.

38. 11. Original documentation should be required for all disbursements. • Attach to Check Request Form, then file. • Your Filling system either PROMOTES or PREVENTS fraud.

39. 12. Duties involving disbursements and other financial tasks should be segregated as much as possible.

40. 13. Checkbooks and financial records should be kept in secure locations, accessible only to those who have authority to write checks or who should have access to those records.

41. 14. Checks should be written in sequential order and should not be pre-signed.

42. 15. Executive Board minutes should be maintained. Minutes should indicate any approvals/discussion of a financial nature (i.e., discussion regarding the purchase of a computer and terms for such purchase, if approved). • Provides strong evidence.

43. 16. Insurance policies should be obtained, if necessary (i.e., a Fidelity Bond, which insures the local against employee dishonesty). Most of the necessary insurances that a local would require are available through the AFT. AFT Toll Free Number 1-800-238-1133

44. Types of Insurance • Fidelity Bond (theft, embezzlement) • Accidental Death and Dismemberment (serious accidental injury or death resulting from an accident) • Occupational Liability Insurance Plus Legal Action Trust (claims against members resulting from work) • Officials’ Liability (damages, judgments, out-of-court settlements and defense costs from complaints of wrongful acts on the part of the union or union representatives) • Workers’ Compensation

45. 17. A written accounting or procedures manual should be developed. Now available on AFT LeaderNet AFT Accounting Policy and Procedures

46. It is all about 3 Ps Protect the funds in your care Protect the union (by spending wisely and saving for the rainy day) Protect your integrity (by going the extra mile, listen to your conscience and protect your good name)

47. Navigating Rough Tides • Plan for the future • Understand Local’s True Income • Members dues = Pass Through ≠ Income • Be prepared to make cuts, deferrals and adjustments in spending. • Be realistic • Ask for help on time!

48. Accounting for *COPE Funds (*Committee on Political Education)

49. Accounting Standards for COPE Funds: • Two signatures required for each check. • Reconciliation of the accounts upon receipt of the statements. • Maintenance of cash receipts and disbursements journals • Regular reports to the COPE committee and union officers

50. Voluntary Funds a.k.a. “Hard Money” When are voluntary funds used?