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Anatomy of a CAP Audit

In the first article of this series, we talked about the CAP audit program, and how unions are selected for a CAP audit. As a refresher, CAP stands for Compliance Audit Program, and is a program developed by the Office of Labor-Management Standards (OLMS) that assesses compliance with the Labor- Management Reporting and Disclosure Act (LMRDA) or Civil Service Reform Act (CSRA.)

In the second installment, we discussed the logistics of a CAP audit, and we compared and contrasted a CAP audit versus a financial statement audit, and in this installment, we’re going to break down the anatomy of a CAP audit, so let’s dive right in!

The CAP audit process starts with an announcement letter, where the OLMS investigator lets your union know that you have been selected for a CAP audit.  After that, there’s a phone call to plan the audit dates, and schedule the kick off meeting.  Around this time, there’s also a questionnaire sent to the union, to be completed in advance of the audit start date, and a request for the general ledger of the union to be sent electronically to OLMS.

There is a general request for data next (often followed by subsequent requests for additional information throughout the course of the audit.)  Items that are commonly requested include bank account statements and reconciliations, board and membership meeting minutes, disbursements records, leave and payroll records, membership and dues records, receipts records, investment records, fixed asset inventories, listings of asset and liability balances, independent auditor reports, and copies of the constitution, bylaws, and financial policies.  It’s important to note that the OLMS investigator will want original records, not copies.  As a reminder from the last article, if the OLMS investigator requests to take any original documents offsite, we strongly encourage the union to make copies of any original documents before they leave the union premises.

One important component of the CAP audit process is the interviews that will occur.  There is always an opening interview that the OLMS investigator will conduct with the primary financial officer of the union.  The union president frequently attends this meeting as well, and depending on the structure of the union, there may be other union personnel who are requested to attend.  There may then be additional interviews requested during the course of the audit with various union personnel.

At the conclusion of the audit, there is an exit interview, during which the OLMS investigator discusses any findings from the audit, and any recommendations.  If applicable, the OLMS investigator will also discuss any steps that the union must take to comply with laws, such as amending previous Form LM filings, or amending financial reporting during this meeting.  During the exit interview, union officers and employees have the opportunity to share their opinions and concerns.  If  there is additional information that comes to light during this meeting, the OLMS investigator may review the information and revise their recommendations accordingly.

After the exit interview, a closing letter is issued by the OLMS investigator to the union officers which includes any points of recommendation and required changes that are noted from the audit.  This letter is also posted to the OLMS website, where it can be accessed by members of the union and the general public.

Stop back soon for the last installment of this article series, where we’ll discuss some common areas of OLMS CAP examination focus, and processes that your union can put in place now to be ready if a CAP examination happens to you.

For questions or further assistance, please contact a member of Withum’s Labor Organization group.

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