[1984] OLRB Rep. August 1125
0002-84-M Reginald Robert, Complainant, v. United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of The United States and Canada (Local 800), Respondent
BEFORE: S. A. Tacon, Vice-Chairman, and Board Members I. M. Stamp and M. A. Ross.
APPEARANCES: John A. Desotti and Reginald Robert for the complainant; A. T. Ahee, M. Zangari and R. Schofield for the respondent.
DECISION OF THE BOARD; August 23, 1984
This is a complaint under the Labour Relations Act relating to the furnishing of a financial statement.
Section 85 of the Act is as follows:
85.-( 1) Every trade union shall upon the request of any member furnish him, without charge, with a copy of the audited financial statement of its affairs to the end of its last fiscal year certified by its treasurer or other officer responsible for the handling and administration of its funds to be a true copy, and, upon the complaint of any member that the trade union has failed to furnish such a statement to him, the Board may direct the trade union to file with the Registrar of the Board, within such time as the Board may determine, a copy of the audited financial statement of its affairs to the end of its last fiscal year verified by the affidavit of its treasurer or other officer responsible for the handling and administration of its funds and to furnish a copy of such statement to such members of the trade union as the Board in its discretion may direct, and the trade union shall comply with such direction according to its terms.
(2) Where a member of a trade union complains that an audited financial statement is inadequate, the Board may inquire into the complaint and the Board may order the trade union to prepare another audited financial statement in a form and containing such particulars as the Board considers appropriate and the Board may further order that the audited financial statement, as rectified, by certified by the person licensed under the Public Accountancy Act or a firm whose partners are licensed under that Act.
There was no dispute that the complainant, Mr. Reginald Robert, was a member of Local 800 and entitled to request a financial statement under section 85 of the Act.
Mr. Robert testified that he first requested a financial statement at the monthly membership meeting in October 1982 and that Mr. Schofield, the Assistant Business Manager, who was chairing the meeting replied that the office was in shambles and the union was in the process of computerizing the financial records but, when this was completed, financial statements would be distributed to those members who requested a copy. Mr. Robert stated that he took the statement at face value and dropped the matter for a while. In the spring of 1983, when Mr. Robert was speaking with Mr. Schofield by telephone on another matter, he said he asked how the financial statement was coming along and was told that the statement was not yet complete. In the summer of 1983, Mr. Robert stated that, during a further telephone call with Mr. Schofield on another matter, he again inquired about the financial statement and was informed that the statement was still not finished. In December 1983, Mr. Robert testified that he went to the local office with a Mr. Dan Pepper and personally spoke with Mr. Schofield yet again seeking a copy of the financial statement. According to Mr. Robert, Mr. Schofield replied that the statement was ready but locked up and only Mr. Zangari, who was out of town at that time, had a key.
Mr. Robert said he then decided he should send a written request and did so on February 14, 1984. On receipt of Mr. Zangari's letter of February 16, 1984, stating that the 1983 financial statement would not be available until June, Mr. Robert wrote another letter to the Executive Board of the Local dated February 21, 1984.
Mr. Robert then testified that he instructed a lawyer, Mr. Poupore, to write to Mr. Ahee, counsel for the respondent, requesting a copy of the financial statement for 1982. Counsel for the respondent objected to the introduction, through Mr. Robert, of copies of two letters allegedly from Mr. Poupore. The Board received the letters but reserved its decision on admissibility. After due consideration, the Board hereby rules the copies of the letters are inadmissible for the purpose of proving whether the letters were, in fact, sent or received. However, the Board also notes that nothing turns on this point.
At the March general membership meeting, Mr. Robert stated that he received a financial statement for the year 1982, with a cover letter titled "Accountants' Comments" signed by a firm of Chartered Accountants, Resnick, Layton, Witkin & Wise. That cover letter states, in part, ..... However, in accordance with the terms of our engagement, we have not performed an audit and consequently do not express an opinion on these financial statements.
By letter dated March 28, 1984, Mr. Robert next lodged a complaint with the U. A. General Executive Board in Washington, D.C. against Local 800, and specifically Mr. Zangari, with respect to the failure to provide an audited financial statement for 1982. In a subsequent letter of May 24, 1984, to Mr. St. Eloi, Director of Canadian Affairs, U.A., Mr. Robert clarified that he had not, as yet, filed a formal complaint with the Ontario Labour Relations Board but merely a notice of intention to file if the Local did not provide the requested financial statement. Since, in Mr. Robert's view, what he received at the March general membership meeting was an unedited financial statement, he proceeded with his complaint before this Board.
Counsel for the complainant sought to introduce evidence which, in his view, indicated that the Local was attempting to intimidate and coerce Mr. Robert for filing a complaint under section 85 of the Act. The union objected on the grounds that the matter before the Board solely concerned section 85. The Board ruled that alleged violations of other sections of the Act were not properly before this Board at this time. However, the Board noted that the complainant was entitled to file additional complaints dealing with alleged violations other than section 85, if he so wished. The Board also notes that section 80 of the Act makes it unlawful for an individual to be discriminated against or intimidated because, inter alia, he has instituted proceedings before the Board.
In cross-examination, Mr. Robert stated that he had attended about six monthly membership meetings over the past two years and acknowledged that at each such meeting the monthly financial statement was read to the members. The complainant admitted that the members then voted to accept or reject the financial statements as read.
The next witness, Mr. Fred Shaw, testified he was a member of Resnick, Layton, Witkin & Wise, a firm of Chartered Accountants specializing in work for union, union-related and other non-profit organizations. Mr. Shaw's evidence may be summarized as follows. The firm was engaged to prepare the local's financial statement for 1982 and did so, in accordance with the procedures and format used in previous years. The firm performed an accounting function for the Local and did not audit the financial statement. That is, the firm, examined and reviewed the financial records in Sudbury and prepared the financial statement. As necessary, the firm discussed the records with Mr. Zangari and the union's bookkeeper. Mr. Shaw testified that an audit of the financial statement, however, would have involved roughly twice as much time and would have included independent testing of the financial records.
Mr. Michael Zangari testified that he has held the position of Business Manager from
1979 to the present, has been a member of the Local since 1967 and also holds the office of Financial Secretary-Treasurer. In this latter position, he stated that he is responsible for the finances of the Local. That is, his duties include reviewing all monies received and expenditures, investing funds, preparing monthly and annual financial statements and such like. The Local employs a full-time bookkeeper who works under the supervision of Mr. Zangari. Cheques are signed by both Mr. Zangari and the President of the Local. Mr. Zangari stated that he reads the complete, itemized monthly financial statement at each monthly membership meeting, opens the matter for discussion or questions and then the membership votes to accept or reject the statements. He testified that a similar procedure is followed with respect to the annual financial statements.
Mr. Zangari agreed that he gave the complainant an unsigned copy of the financial statement for 1982 at the March 1984 monthly membership meeting. He explained the statement was not signed because it had not been approved by the membership at that time. The financial statement was subsequently accepted by the membership at the June 1984 monthly membership meeting.
At the hearing, counsel for the respondent entered, as Exhibit 13, the financial statements of the union for 1981 and 1982 with a covering affidavit, which Mr. Zangari acknowledged as his. Item 5 of the affidavit states: "That this financial statement referred to above, was audited by myself, in my capacity of financial secretary-treasurer, and by the general membership of the respondent union on a continuing monthly basis."
During cross-examination, Mr. Zangari admitted that he had no professional qualifications with respect to auditing accounts nor is he paid separately by the union to audit its books. In Mr. Zangari's view, he audits the books and the membership audits him at the monthly membership meeting. Mr. Zangari acknowledged, however, that the members "will have to take our word for it" when questioned as to how members would know whether the accounts, as read out at the monthly membership meeting, were accurate. Mr. Zangari also acknowledged that he had seen audited financial statements, namely, the trust fund documents, which are required to be audited by a firm of chartered accountants.
In further cross-examination, Mr. Zangari stated that the union constitution provided for a Finance Committee, elected by the members at the same time as other union officers, which could check the financial records if it so wished. Mr. Zangari concluded that the Finance Committee had never held a meeting, to his knowledge, and stated that the current Committee members were Mr. Defend, Mr. Giommi and Mr. Johnston. Mr. Zangari indicated that he believed these members were nominated from the floor at the last meeting held to elect union officers.
In response to questions from the Board, Mr. Zangari replied that sections 118 and 119 of the constitution, filed at the hearing as an exhibit, dealt with the Finance Committee but, beyond this, there was nothing in the constitution regarding record keeping or auditing of financial statements.
During reply, Mr. Zangari testified that Mr. Defend examined the books for one to one-and-one-half hours approximately a year ago but had not asked Mr. Zangari any questions.
Counsel for the complainant called one witness in reply. Mr. Ronald Johnston testified, firstly, that he had never been denied access to the books. Secondly, he stated that he had spoken with the other two Committee members on a job and they were going to get together but the meeting never materialized and, in fact, the Committee had not met during the past two years. In cross-examination, Mr. Johnston replied that he was partially aware of the union's constitution, that he had never been on the Finance Committee before and had no expertise in the area but figured that he'd "pick it up" as he went along.
In the Board's view, there is no real dispute over the facts. The Board notes that the testimony of Mr. Robert, in particular, was given in a forthright and straightforward manner. The Board is satisfied that the complainant requested a copy of the audited financial statement for 1982 in a timely fashion and an appropriate manner. Mr. Robert continued to take reasonable steps to obtain an audited financial statement for 1982.
The question then before the Board is whether the financial statement for 1982, marked as Exhibit 6 and given to Mr. Robert at the March 1984 monthly membership meeting or as submitted as Exhibit 13 at the hearing is an "audited financial statement" within the meaning of section 85(1).
Counsel for the complainant argued that the phrase "audited financial statement" must mean "a financial statement audited by a firm of Chartered Accounts" and that "Accountants' Comments" did not meet the required standard. Essentially, counsel submitted that with lesser meaning for the term "audited", section 85(1) would have no teeth, that there would be no means for a union member to know whether the financial statement presented was accurate or fraudulent. Counsel relied primarily on Canadian Union of General Employees, [1974] OLRB Rep. Dec. 878 (the Ledwith case) and distinguished Murray G. Strong, [1981] OLRB Rep. July 901 on the basis that, at least, in the Strong case, the accountant, who was a Chartered Accountant, had testified before the Board with respect to the preparation of the financial statement. Counsel for the complainant submitted that Strong did not stand for the proposition that someone who has the day-to-day control of the books and was the chief contact of the accountant could "audit" the financial statement. Further, it was the submission of counsel for the complainant that "Accountants' Comments" were not the equivalent of an audited statement and that this Board should not accept those "Comments" as the equivalent, given the evidence as to the differences between "Accountants' Comments" and an "audit" particularly with respect to the independent testing which is an integral part of the latter process. Finally, counsel for the complainant submitted that the issue before the Board only dealt with section 85(1) and not 85(2) at this time.
Counsel for the respondent union asserted that the union had, in fact, complied with section 85(1). That is, Exhibit 13 constituted a copy of an audited financial statement certified by the union's treasurer or other officer responsible for the handling and administration of its funds to be a true copy as required by section 85(1). Further, it was submitted that Exhibit 13 contained audited financial statements for both 1981 and 1982. Counsel for the respondent argued that the term "audit" should be given its ordinary meaning, namely, "to observe, account, check, hear" and not a specialized meaning, i.e., an audit performed by a Chartered Accountant firm. Counsel relied primarily on the Strong case, particularly paragraph 13 where the Board accepted a financial statement to be "audited" within the meaning of section 85(1) despite the fact that the statement was not audited by a firm of chartered accountants. The Ledwith case was distinguished on the basis that the union constitution in question had specifically stipulated that the financial statement was to be audited by a registered firm of chartered accountants and, here, there was no similar requirement in the constitution. Counsel submitted that Mr. Zangari had, in fact, audited the financial statement and, further, the membership had voted to accept the monthly financial statements and the annual financial statements. Finally, counsel argued that the Board should not construe section 85(1) to mean a financial statement audited by chartered accountants where section 85( 1) does not expressly refer to the Public Accountancy Act, as does section 85(2) and in view of the financial burden which could be thereby imposed on unions.
The Board has reviewed a number of decisions dealing with section 85 (and its predecessor sections) including: International Union of Operating Engineers, Local 796, [1967] OLRB Rep. 910; J. R. Canvin, [1968] OLRB Rep. 1113; Local 736. International Ironworkers Association of Bridge & Structural & Ornamental, [1968] OLRB Rep. Apr. 78; Victor Ledwith, supra; Amalgamated Transit Union, Local 113, [19791 OLRB Rep. Oct. 917; Murray G. Strong, supra; Edward Miller, [1983] OLRB Rep. Nov. 1864. In the Board's view, only the Ledwith and the Strong decisions are at all relevant to the precise issue before this Board, i.e., the meaning of "audited financial statement" in section 85(1).
In the Ledwith case, the union's constitution expressly imposed an obligation on the General Secretary-Treasurer to have the books audited each year by a registered firm of chartered accountants selected by the General Executive Board. That Board found that there was no way of knowing whether what was given to the complainant represented the financial statements audited in accordance with that provision. The General Treasurer had certified that the statement given the complainant was the audited financial statement whereas the Act required the officer to certify that what was given to the union member was a true copy of an audited financial statement. The Board found that the complainant had not been given an audited statement. However, because the union constitution expressly required annual financial statements to be audited by a registered firm of chartered accountants, the L edwith case cannot be read, as counsel for the complainant submits, as standing for the proposition that "audited financial statement" as used in section 85(1) means "audited by a registered firm of chartered accountants".
In the Strong case, it was "the uncontradicted evidence before the Board that the trustees of the respondent union have audited this financial statement" (at 904). The Board found that, despite the fact that the financial statement had not been audited by the respondent trade union's chartered accountants, the respondents had satisfied the requirement of section 76(1) [now section 85(1)] — of the Act. It is not clear in the decision just who comprised the trustees, what their functions were, or how they were selected. The decision, then, may be said to recognize that a union may comply with section 85(1) without having a financial statement audited by a firm of chartered accountants but does not answer the precise question before this Board, namely, has the respondent in this case satisfied the requirements of section 85(1).
In this Board's view, section 85(1) does not impose an absolute obligation that financial statements must be audited by a registered firm of chartered accountants. The term "audited" is not defined in the Act. Further, the specific reference to "a person licensed under the Public Accountancy Act or a firm whose parties are licensed under that Act "in section 85(2) strengthens the Board's view that, where the term "audited" appears in section 85(1), it should not be given a specialized meaning.
The dictionary definition of "audit" is as follows"
1 a: a formal or official examination and verification of books of accounts (as for reporting on the financial condition of a business at a given date or on the results of its operations for a given period) b: a methodical examination and review of a situation or condition (as within a business enterprise) concluding with a detailed report of findings: a rendering and settling of accounts 2: the final report following a formal examination of books of account: an account as adjusted by auditors: final statement of account 3: archaic: a judicial examination (as in a court) 4: AUDIT ALE 5: a check of publishers' records to verify claims as to the extent of a publication's circulation.
(Webster's Third New International Dictionary).
In the Board's view, an essential component of the "final or official examination and verification of books of accounts" is some "distance" between the person or group which conducts the examination and the person or group which recorded the accounts initially. This "distance" or "independence" need not be a formal, arms length relationship as found in an audit by a registered firm of chartered accountants. However, where a union asserts that the financial statements are, indeed, "audited" by someone other than a registered firm of chartered accountants (where the standards of "auditing" are set by the professional body), the Board must examine the particular circumstances involved, including factors such as who performed the "audit", under what conditions, the relationship of the "auditor" to the person having effective control of the financial records on a day-to-day basis, etc. A second essential component of an "audit" is the competence of the person or group conducting the examination. Again, the Board is not insisting on the level of expertise required for licencing under the Public Accountancy Act. However, it is necessary for the union to establish that the "auditors" were sufficiently familiar with accounting practices and record-keeping to ensure that a searching review of the books was, in fact, conducted.
In this case, Mr. Zangari stated that he audited the financial records and the membership audited him. The Board does not consider that Mr. Zangari's review of records he compiled initially to be an "audit"; in the Board's view, a person cannot "audit" himself or herself and still comply with section 85(1). Further, the Board does not consider that a vote to accept financial statements as read out at a membership meeting as a sufficient "formal or official examination" to constitute an "audit". The members simply cannot effectively verify the contents of the statements in the context of a membership meeting where financial statements are merely read aloud. Mr. Zangari himself acknowledged, on cross-examination, that the members, essentially, would "have to take our word for it" with respect to the accuracy of the financial statements. Neither Mr. Zangari's review of the books nor the membership's vote to accept the financial statements met the test of distance and competence as set out above by the Board. The Board, as well, does not accept the "Accountants Comments" as the equivalent of an audit within the meaning of section 85(1) since that procedure does not involve an independent testing of the financial records.
The evidence also showed that the union's constitution did not specifically address record-keeping or auditing of financial records. Sections 118 and 119 do provide for a Finance Committee. The responsibilities of this Committee include examining the bank books and bank accounts and counting the money in the possession of the Financial Secretary and Treasurer. Further, the Committee shall, if necessary, require a bank statement from the cashier of the bank in which the Local monies are deposited and report their findings at the first regular meeting in the following month. The Finance Committee shall have the power to examine the accounts of the different officers any time they deem it necessary and officers interferring with the Committee's functions in this regard shall be fined.
There was no dispute that the Finance Committee has not met for at least the past two years. The Board notes that the Committee, therefore, has not fulfilled its obligations under the constitution. Although not directly relevant, the Board is rather puzzled by Mr. Zangari's testimony that, in his view, it is entirely up to the Finance Committee to arrange their own meetings, in light of the central responsibility of the Business Manager as "trustee of the welfare of the members of the Local Union" (Section 104) and Mr. Zangari's own testimony that elected officers find it difficult to attend membership meetings because of the geographically disperse locations of job sites. If mere attendance at scheduled meetings is difficult, it would be even more difficult for members of the Finance Committee to arrange meetings without the assistance of the Business Manager. Had the Finance Committee actively carried out its functions, the Board might have reached a different conclusion in this matter.
However, based on the evidence, the Board finds that what the union submitted, at the hearing was not an audited financial statement certified as required by section 85(1). What Mr. Robert received at the March 1984 monthly membership meeting certainly did not fulfill the requirements of section 85(1). Therefore, the Board hereby directs the respondent to file with the Registrar, not later than October 20, 1984, a copy of its audited financial statement for the year 1982 verified by affidavit of its treasurer or other officer responsible for the handling and administration of its funds and to furnish a copy of such statement to the complainant, together with a copy of the affidavit. Given all of the circumstances, the Board directs that the financial statement for 1982 be audited by a person licensed under the Public Accountancy Act or a firm whose partners are licensed under that Act.
At the hearing, the respondent submitted financial statements for 1981 and 1982. As noted in paragraph 6, the complainant was initially seeking an audited financial statement for 1982. The complainant later requested the audited financial statement for 198 1 as well, in part asserting that, as the initial request was in October 1982, section 85(1) would entitle the complainant to the audited financial statement to the end of its last fiscal year. i.e. 1981. However, the Board is less concerned with this later technical agreement than with the substance of the complainant's requests, first orally and then in writing, for the 1982 statement. Further, the Board would stress that, for the union to comply with the Board's direction in respect of the 1982 fiscal year, will necessarily involve setting out the comparative figures for 1981. Thus, the complainant will receive data for the 1981 fiscal year; what the complainant will not receive is the comparative data for 1980.
The complaint is, therefore, resolved as directed above.