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Logistics of a CAP Audit, and Comparing CAP Audits and Financial Statement Audits

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 this installment, we will discuss the logistics of a CAP audit and compare and contrast a CAP audit versus a financial statement audit.

Starting with logistics, typically CAP audits are performed by OLMS investigators, sometimes working individually and sometimes in a team. The amount of time that the audit takes varies widely- it can take weeks, months, or perhaps even longer to complete. It is impossible to place a time frame on the duration of the compliance audit because much of it depends on the size of the union, the availability and condition of the union’s records, types of compliance issues that are found by the CAP audit team, and the level of cooperation that the CAP audit team receives from the union officials that they are working with.

While this could be different in the current remote work environment that many of us are operating in due to COVID, the OLMS team will generally try to do their work at the union location. Some situations, such as insufficient working space for the OLMS team, or lack of union officials or employees onsite at the union location, that may necessitate the OLMS investigators to take union records back to their site and perform their procedures there instead. If that situation occurs, the OLMS team will give the union a receipt for any records removed from the premises. We recommend that the union make copies of any records taken offsite by OLMS.

A CAP audit typically covers the union’s most recent fiscal year; however, the audit can be expanded to additional years if deemed appropriate by the OLMS investigators. There are many pieces of documentation requested and areas examined during a CAP audit, and we will detail those in the next installment of our series.

Moving to comparing a CAP audit and a financial statement audit, it is easy to think that an audit is just an audit, and that they are all alike, but that is not true in this case. A CAP audit focuses on the financial and business aspects of a union’s operations, but it is also designed to assess compliance with aspects of the LMRDA or CSRA. On the other hand, financial statement audits focus on the financial and business aspects of a union’s operation, with the goal of testing selected balances to enable the auditor to gain comfort and issue a “clean” opinion on the audited financial statements.

The CAP audit team may rely on the union’s financial statement auditors for their opinions on various union operational matters under consideration; however, that is not always the case. A CAP audit’s goal is different from a financial statement audit, so the CAP examinations are typically more detailed and broader in scope than a financial statement audit.

Stay tuned for the next installment of our CAP article series, where we will outline the anatomy of a CAP audit and discuss action items that you can take now to help your union prepare for a potential CAP audit.

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

Labor Union

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