Labor unions are subject to oversight by the U.S. Department of Labor (the “DOL”), including various mandates by the DOL affecting the transactions and procedures of labor organizations. This is meant to provide transparency for the proper handling of dues and the appropriate use of its resources. But whether it is to comply with DOL rules and regulations or to ensure that its funds are managed with due care, an organization’s internal control environment has the most significant impact to its success in meeting these goals.
Organizations go to great lengths to establish proper procedures and internal controls to prevent, detect and deter embezzlement or misuse of funds. To build a strong control environment, organizations establish clear segregation of duties among employees who are part of the financial operations and a system of “checks and balances” that foster an environment that safeguards the union’s assets. Other elements of a strong control environment include:
- Policies and procedures for membership database management, cash management, bank reconciliations, purchases, expense reporting, payroll, financial statement closing and reporting, and more;
- Restricted access rights for users of the organization’s systems that enforce the established policies and procedures, accompanied by system reporting that provides an audit trail of users’ activities which is periodically reviewed by management
- Internal audit function whereby policies and procedures are reviewed and transactions are tested for compliance with the policies.
But for many small labor organizations, their size prevents the ideal separation of financial duties. Often, just one person is handling the finances. Diligence around internal controls is paramount and so alternative controls need to be established.
Technology is Your Ally
An accounting solution like NetSuite helps to automate internal controls and can assist management with simple, intuitive reports for help with:
- Preparing bank reconciliations;
- Tracking receipts and reporting expenses;
- Documenting transaction approvals by key personnel;
- Generating analytics to assist in decision-making;
- Recording, tracking and managing data and inputs for external reporting.
NetSuite ERP’s functionality makes it simple for users to ensure compliance with accounting standards and government regulations. Furthermore, customizable user roles and permissions support segregation of duties with audit trail reporting. Even for small organizations, these system capabilities can be significant to establishing and maintaining a strong internal control environment.
No system or process is foolproof. However, establishing internal controls and utilizing a robust accounting system will certainly contribute significantly to deterring and restricting misuse of union funds. If you are interested in learning more about how NetSuite’s internal controls can help you to minimize your union’s risk of misuse or embezzlement of union funds, make arrangements to discuss with one of our consultants today.
Labor Organization Practice Group