Now that we have begun a new year, a "best practice" is to review your union's bonding insurance. This type of insurance is required by the Labor-Management Reporting and Disclosure Act (LMRDA) and almost always by international and local by-laws and constitution.
The required bond guarantees reimbursement to the union for any financial loss by fraudulent or dishonest acts by officers or employees, such as theft, embezzlement, or forgery.
LMRDA provides that any person who "handles" union funds or property must be bonded for at least 10% of the funds handled during the union's proceeding fiscal year, up to a maximum of $500,000. An individual is considered to be "handling" union funds if his or her duties or authority provide access to union funds resulting in a significant risk of loss of funds if that person engages in fraudulent or dishonest acts. Any officer or employee who has authority to sign checks on the union's accounts is "handling" union funds and must be bonded even though they may have no physical contact with the funds. Individuals who typically must be bonded include elected and non-elected union officers, employees such as business agents, trustees, key administrative and professional staff, and clerical personnel. Failure to cover the proper individuals is one of the most common violations of LMRDA during a Department of Labor examination.
The required bond must be obtained from a company on the U.S. Treasury Department's list of approved bonding companies. A copy of this list may be obtained from the nearest Office of Labor Management Standards (OLMS) office. It can also be found at: http://www.fms.treas.gov/c570/c570_a-z.html.
In many instances a local union may obtain the required bond from their International Union. Also keep in mind it is possible to obtain a "bad" bond from an approved company. Bonds that contain deductibles or will only reimburse the local based on some event or condition, such as criminal prosecution, are examples of unacceptable or "bad" bonds.
Consider the following tips to stay compliant with the bonding requirements:
1. Recalculate the required coverage amount at the end of the close of your fiscal year. As an additional service to our clients, your Legacy auditor will compute the minimum coverage amount during our annual examination and advise you of any required changes.
2. If the required amount increases from the prior year, obtain the amended coverage as soon as possible. The amount of your bond is reported on the LM Form your local files with the Department of Labor, which allows them to quickly and easily monitor your compliance.
3. Make sure everyone who "handles" funds is bonded.
4. Make sure your bonding company is included on the list of approved companies. Be aware the law prohibits obtaining a bond through a company in which a union representative has any direct or indirect interest.
By incorporating this simple and quick review in your annual best practices, you can ensure your local's compliance with this requirement. The Department of Labor offers additional tips and tools on bonding on their website at www.dol.gov.