Government Fails to Promote Transparent Union Finances

Oct 10, 2012

Photographer: Andrew Harrer/Bloomberg.

It should come as no surprise to anybody who has been following the exploits of the Department of Labor (DOL) to learn that Secretary Solis and her team aren’t exactly doing a bang-up job in ensuring that union bosses adhere to federal disclosure requirements concerning union finances.  Indeed, a recent report by the DOL’s Office of Inspector General (OIG) details how DOL’s Office of Labor-Management Standards (OLMS) “does not assess whether union financial integrity, democracy or transparency have actually increased.” 

OLMS administers and oversees the Labor-Management Reporting and Disclosure Act (LMRDA), a law promoting transparency within labor organizations.  The law requires, among other things, labor unions to file annual financial reports with OLMS.  These reports help union members keep an eye on officers managing the union’s finances.

OLMS conducts audits of select unions each year to evaluate their compliance with the law’s reporting requirements.  The recent OIG report looks at how effective these audits have been and whether OLMS can properly measure its own performance.

How rigorous is the audit program?  Not very.  The OIG report states that “OLMS did not determine overall if its [audit program] was effective in detecting criminal and civil violations of the LMRDA to improve safeguards of union assets.”  In other words, OLMS cannot demonstrate whether it is effectively promoting union transparency and financial integrity.  As an example, according to the OIG report, in a sample of 513 audits, OLMS only identified violations in 81 (16%) of the audits.  However, when OIG reviewed the same 513 audits, it found that 473 audits (92%) contained violations of the federal disclosure requirements that should have been found by OLMS.  Whether attributed to OLMS’s incompetence or union favoritism, this glaring disparity is simply unacceptable.

This report will likely raise some eyebrows of those union-represented workers who – either voluntarily or involuntarily – pay dues or fees to labor unions:

  1. 92% of union financial reports contain errors? 
  2. OLMS – the agency that is supposed to promote union financial integrity – only caught 16% of them? 

With this report confirming poor governmental oversight and potential financial mismanagement of union funds, it’s no wonder why union membership continues to decline in the private sector, and why states such as Indiana enact Right to Work laws, which give workers the choice of whether they want to contribute some of their hard-earned money to a labor union. 

Ironically, OLMS is the office within the Labor Department which would collect new information from employers, consultants and attorneys should the Department’s persuader rule become finalized in its current form. (This rule would make it nearly impossible for businesses to get advice on expressing their views during union labor organizing campaigns.) Perhaps OLMS should figure out how to manage its current obligations before it subjects businesses to new onerous reporting requirements.

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