The Importance of Effectively Monitoring Gifts and Entertainment – Part 2: LMRDA

Advisory firms continue to monitor gifts and entertainment by reviewing all statutory and regulatory requirements, one of which is the reporting requirements of the Labor-Management Reporting and Disclosure Act of 1959 ("LMRDA"). Firms may be subject to the LMRDA as a result of their relationships with unions and union-affiliated pension and welfare trusts. The LMRDA requires organizations that (1) have one or more employees, and (2) engage in specific financial transactions or arrangements with labor unions, to file annual reports disclosing payments and gifts.

According to the DOL, firms that do business with and provide services to union-affiliated pension plans are subject to LM-10 reporting requirements. A broad range of payments are covered by the LM-10 reporting requirements, including meals, travel expenses, gifts, tickets to sporting or entertainment events, social events/parties, fees paid to attend union-sponsored events, and payments to charities. Gifts and payments must be reported unless: (1) the total value of all "sporadic or occasional gifts, gratuities, or favors of insubstantial value" to any one union or union employee is $250 or less in any fiscal year and (2) the payment is unrelated to the recipient's status in a labor organization.

In closing, it is important that firms consider dedicating time and resources necessary for the following: (1) implementing tighter controls and authorization requirements for union-related expenditures; (2) establishing and communicating comprehensive policies and procedures; (3) determining what, or to what extent, covered payments and gratuities will be permitted; (4) conducting periodic internal reporting audits; and (5) implementing good recordkeeping practices.

Next week, stay tuned for guidance on Pay-to-Play. For help on this subject or on other compliance topics, please contact Genevieve Tenorio at (619) 278-0020 or genevieve.tenorio@corecls.com.