To enforce financial integrity, the Office of Labor-Management Standards [OLMS] audited 250 labor unions in 2022 and conducted 176 criminal investigations. Of those investigations, 54 resulted in a conviction. With these statistics, the importance of following the law is clear.
Many of the regulations that apply to unions fall under the umbrella of an officer’s fiduciary duty. But what does this term mean and how can officers ensure they comply?
What is a Union Officer’s Fiduciary Duty?
Title V of the Labor Management Reporting And Disclosure Act [LMRDA] defines the fiduciary responsibilities of labor union officers. In short, these fiduciary responsibilities mean officers must put the union’s needs ahead of their own, make responsible financial decisions, and adhere to all applicable regulations.
Per the 1959 law, all officers, agents, shop stewards, and other people who hold positions of trust within the organization have a fiduciary duty. If a person in one of these positions fails to uphold this duty, they can be charged with a federal crime.
How Can Union Officers Uphold Their Fiduciary Responsibilities?
A fiduciary duty includes a range of tasks and responsibilities, most of them related to the finances of the organization. To adhere to these fiduciary responsibilities, union leaders must do the following:
Understand the Applicable Regulations
To adhere to laws and regulations, union officers must first understand them. This includes understanding LMRDA which outlines the union members’ bill of rights, the financial responsibilities of officers, election rules, and the applicable reporting requirements.
The annual reporting requirements vary based on the size of the union. Each year, the correct form(s) must be submitted electronically to the OLMS within 90 days of the fiscal year end. These reports must be signed by both the union president and treasurer, and the completed reports must be easily accessible by members. Additionally, a union must keep the records needed to verify the information in the reports for at least 5 years.
In addition to federal regulations, a union officer must understand the union’s bylaws – the set of rules establishing how the organization operates. It is also important to know the process for amending the bylaws and keep track of changes as they occur.
Make Responsible Financial Decisions
Officers have a duty to manage union funds for the benefit of members. This can include securing the organization’s funds against bank failure.
Insurance from the Federal Deposit Insurance Corporation [FDIC] provides the ultimate protection for cash reserves since it is backed by the full faith and credit of the United States government. However, FDIC coverage is limited to $250k per account ownership category at each member bank. Since unions often have assets far above this limit, securing adequate protection can be a challenge. Fortunately, advanced financial technology – commonly shortened to fintech – offers a solution. A fintech-powered deposit management company can spread cash reserves among a network of banks and credit unions. This allows union leaders to access government insurance for all their union’s cash.
Along with securing adequate protection, union leaders have an obligation to seek a competitive return for cash reserves. Fintech once again aids in this process. A deposit management company harnessing the latest fintech can provide access to competitive returns from financial institutions across the country.
Implement Financial Safeguards
While union leadership often wants to believe that every person in the organization is trustworthy, it is still important to guard against financial mismanagement – either intentional or unintentional. The OMLS publishes guidance to help unions implement these safeguards. Some of their suggestions are:
- Record all funds received and spent.
- Ensure records are thorough and reconciled often.
- Implement a two-signer system for expenses.
- Require prior authorization for large transactions.
- Conduct regular internal audits.
- Review safeguard procedures and update them as needed.
These safeguards are critical to the integrity of union financial management, but they can be cumbersome to implement – particularly for large organizations. Fortunately, there are options to ease the administrative burden.
Unions can streamline their cash management program by partnering with a fintech-powered deposit management firm. The right partner can ensure third-party verification of withdrawals, manage multiple-signer requirements, and even simplify transaction reconciliations.
Ensure Privileged Employees are Bonded
All union employees that handle money or property are required to be bonded – including officers, employees, and administrative staff. These bonds are intended to reimburse the organization for losses in the event they are caused by fraud or other dishonest acts.
The amount of the required bonds is at least 10% of the funds handled per year up to $500,000. Additionally, the bond requirement must be recalculated each year and the bonds must be obtained from a company approved by the U.S. Treasury.
Put the Needs of the Union First
Most importantly, officers need to put the needs of union members ahead of their own. That includes making financial decisions that protect and grow the organization’s funds, ensuring all regulations are upheld, and striving for fairness in every decision. If an officer does these things, they embody the meaning of a fiduciary.
The many requirements for an officer to meet their fiduciary duty can be challenging. That is why it is important to use all available tools to ensure the organization thrives. One tool that unions can employ to reduce their workload while strengthening safeguards is a partnership with the right deposit management firm.
Unions Earn More, Risk Less® with ADM
Labor unions face unique cash management challenges, such as unpredictable cash outflows. For this reason, they need a nimble deposit management partner that can create a customized cash management plan. That partner is the American Deposit Management Co. [ADM].
Our proprietary fintech helps unions secure the ultimate protection for all cash reserves – FDIC / NCUA coverage. Additionally, we help unions achieve nationally competitive returns without sacrificing necessary liquidity. We accomplish all this with one account and one consolidated monthly statement – making reconciliations a breeze.