Tucked away in a little visited part of the labor law (5 USC 7120(c)) is an obligation that unions with exclusive recognition over federal employees must file annual financial reports with the IRS and Department of Labor. Unfortunately, a small number of unions fail to do so each year and some even chronically fail year after year. National unions have the power under law to step in and take control of locals that fail to comply, but few seem to have the internal political courage to correct these infractions before they embarrass the larger union.  In fact, it seems to us that this is not going to get fixed until agencies other than IRS and DOL do what they can to enforce the law.

To begin, let’s sketch out why this is a problem. While neither the IRS or DOL report is so detailed that any instance of waste, fraud or abuse just leap off the page at the reader, they can provide strong hints that something could at least be better than it is.  They reveal how much locals are paying their officers and stewards on top of their official time allotments, how a local’s funds are being invested, how much is spent versus collected each year, who received loans from the union, etc. Basic stuff, but to a trained reviewer they can signal where to look deeper.

Agency negotiators can often benefit from these reports when bargaining over a union demand that it pay for some expense or services, e.g., buy it office equipment, supplies or even access to on-line research services. And both unions and agencies benefit from prompt filing because it removes the potential that some enterprising reporter or opportunistic Congressional leader is going to uncover a pattern of noncompliance and publicly skewer both.  Agencies need only close their eyes and try to imagine how they would respond in a Congressional hearing room if asked such questions as, “Did you ever bother to even check to see if the union collecting your employees’ dues complied with federal law?” or “If you did know there was a problem, what did you do about it?” or “Given that you are paying for a union’s on-line subscription service when it has over $100,000 in surplus funds why should I not assume that you are in bed with and improperly supporting this union?”

And then there is the problem the lack of timely reporting can cause union members. Aside from denying them basic information they need to politically assess their own leaders, a delay of three or more years in filing the IRS Form 990 results in an automatic loss of tax exempt status for the local.  Once lost all their dues money is taxable, sending a sizeable chunk of it to IRS rather than into dealing with management each year.  IRS 990s are available free to agencies via several web services, e.g., Guidestar.org.

Early in FLRA’s history it rejected the idea that agencies could file charges with the Authority to enforce reporting requirements. (See AFGE, 8 FLRA 718 (1982))  Its message was that the only option available was to work through the agency whose report is overdue, e.g., IRS or DOL.  However, it should have acknowledged a second option, namely, that agencies can go to the bargaining table to not only demand timely filed copies of each report, but to penalize a union if it fails to file timely. For example, an agency could propose the following:

The union will provide the agency Labor Management Officer a copy of its annual reports to the DOL and IRS within five work days after they are due at those agencies.  If for any reason the union fails to timely provide copies, the agency has the right to cease providing union representatives official time for any activity other than that for which it is required by statute or regulation, e.g., bargaining. Official time will again be authorized once the union delivers copies of the reports to the agency, but without retroactive effect to replace any personal leave taken.

If unions find agency involvement offensive their national leaders can muster up the political fortitude to amend their Constitutions to include automatic internal penalties as NATCA has done, e.g.,

SRD-8 Dues Rebate Checks (4/06)  Dues rebate checks shall be withheld for any NATCA Local failing to meet Department of Labor or Internal Revenue Service deadlines for LM forms or IRS reporting requirements. Dues rebate checks withheld under this provision shall be released to the Local once the Executive Vice President receives proof that the Local has complied with all DoL or IRS 990 reporting requirements.

Cutting off a big chunk of a union’s official time until it complies with the law is likely to get a far higher degree of compliance than IRS or DOL intervention—or even relying on some national union leaders to police their own entities.  IRS is dangerously understaffed after a trumped-up but nonetheless withering two year Congressional campaign to sabotage the agency. DOL promptly sends out letters reminding unions to file when their reports are overdue, but it never seems to send anyone out to enforce their law when the mail is ignored.  Even when it does act, it can easily take half a decade to enforce the law. (See AFGE, 60 FLRA 223 (2004))

Frankly, we do not care who gets this problem corrected, as long as we remove the potential for all federal employee unions getting dragged through the media mud for failing to comply with simple filing requirements.  That will not play well with the public given that agency employees spend much of their lives demanding reports from them on a near infinite range of matters.

About AdminUN

FEDSMILL staff has over 40 years of federal sector labor relations experience on the union as well as management side of the table and even some time as a neutral.
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