DOL Proposes Additional Changes to Form LM-2 June 2008 ~ Issue 08-2 |
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Only five years ago, the Department of Labor (DOL) drastically changed Form LM-2 reporting requirements for labor organizations. Now labor organizations are faced with a new challenge—the DOL published a new series of proposed revisions to the form in the Federal Register on May 12, 2008. If the proposed changes are finalized, they will have a substantial impact on labor organizations that file Form LM-2 (those with total annual receipts of $250,000 or more) and potential impact on certain smaller labor organizations that file Form LM-3 (labor organizations with total annual receipts of $10,000 - $249,999). Why the Proposed Rules Were Issued According to the DOL, the proposed changes will provide a higher level of transparency to union members and the public about the financial activities of labor organizations, which will “…enable [members] to be responsible, informed, and effective participants in the democratic governance of their organizations; discourage embezzlement and financial mismanagement; prevent the circumvention or evasion of the statutory reporting requirements; and strengthen the efficient and effective enforcement of the [Labor-Management Reporting and Disclosure Act (LMRDA)]…” 73 FR 27357 (May 12, 2008). In summary, the various proposed changes to Form LM-2 are designed to: |
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Despite the dramatic changes in 2003, the DOL maintains that additional revisions to the form are necessary. Moreover, the DOL is using the previous changes as leverage to implement its new proposal, stating that its experience with the technology and software developed for the 2003 revisions demonstrate it is possible to capture the required information without placing undue burden on labor organizations. The proposed revisions to Form LM-2 came on the heels of the DOL’s latest attempt to implement Form T-1, which would require labor organizations with $250,000 or more in total annual receipts to file Form T-1 for each LMRDA trust in which they are interested, such as pension and welfare plans, apprenticeship programs, training funds, credit unions, strike funds, etc. (For more information, please read Lindquist Solutions 08-1 “It’s Back…Form T-1 Re-emerges” in the publications section of Lindquist LLP’s website: http://www.lindquistcpa.com/Pub/LS/Lindquist_Solutions_08-1.html.) Summary of Significant Changes of the Proposed Rule Statement B – Receipts and Disbursements Under the proposed rule, itemization will be required for individual receipts of $5,000 or more, or for any single entity or individual whose total receipts aggregate to $5,000 or more during the reporting period. The information required for the itemization schedule remains unchanged. The following chart shows the cash receipt categories and the effect of the added categories under the proposed rule:
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Schedule 3 – Sale of Investments and Fixed Assets and Schedule 4 – Purchase of Investments and Fixed Assets Two new columns will be added to Schedule 3 to identify (1) the names and addresses of those who purchase investments and fixed assets, if aggregate sales are $5,000 or more per purchaser, and (2) the date of such sale. Similar to Schedule 3, Schedule 4 will now have columns to identify (1) the name and address of the seller of investments and fixed assets, if aggregate sales are $5,000 or more per seller, and (2) the date of such sale. Schedule 11 – All Officers and Disbursements to Officers and Schedule 12 – Disbursements to Employees Travel-related expenses: For disbursements made on behalf of officers and employees, the distinction between direct and indirect disbursements with respect to travel expenses will be eliminated. Indirect disbursements include officer or employee expenses that are paid either directly to vendors or paid to vendors through a union credit card arrangement. Under the current rules, certain indirect disbursements for travel are not classified to the respective officers and employees (i.e. airfare, temporary lodging, etc.). Under the proposed changes, indirect disbursements for lodging and airfare will be classified to the respective officers and employees (Schedules 11 and 12). Benefits: Currently, officer and employee benefits are reported in the aggregate on a separate benefit schedule (Schedule 20). Under the proposed changes, an additional column for “Benefits” will be added to officer and employee disbursement schedules (Schedules 11 and 12), and fringe benefits will be reported by individual officer and employee on these schedules. Impact on Labor Organizations If the regulations go into effect as proposed, accounting systems will need to be reviewed and redesigned, and bookkeeping/accounting personnel will need to be trained to implement the significant changes:
Effective Date Under the current proposal, the rule will be effective 30 days after publication and will apply to a labor organization’s fiscal year beginning on or after the effective date of the final rule. Once the final rule is in effect, the DOL will revise the Form LM-2 software and make it available to filers, free of charge. Comments on the proposed regulations were originally due to the Office of Labor-Management Standards on or before June 26, 2008, but the comment period has now been extended to July 11, 2008.
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