Irene Bovay v. Canadian Union of Public Employees, Local 16, 1985 CanLII 874

[1985] OLRB Rep. January 22

2155-83-M Irene Bovay, Complainant, v. Canadian Union of Public Employees, Local 16. Respondent

BEFORE: Robert D. Howe, Vice-Chairman, and Board Members W. H. Wightman and B. L. Armstrong.

APPEARANCES: Irene Bovay, Terry Davey, John Clark, Beulah Dunn and Anthony Bradley for the complainant; P. Jordison, Camille G. Masse, Ken Charlsley, Gilles Le Bel, Tim Edwards, Dianne Dumanski and Barb Edwards for the respondent.

DECISION OF THE BOARD; January 22, 1985

1. The name of the respondent is amended to "Canadian Union of Public Employees, Local 16".

2. The complainant, Irene Bovay, has complained pursuant to the provisions of section 85(2) of the Labour Relations Act that the audited financial statements furnished by the respondent (also referred to in this decision as "Local 16", the "Local", and the "Union") for the twelve-month period ending September 30, 1982, and for the six-month period ending March 31, 1983, are inadequate.

3. Section 85(2) provides:

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, be certified by a person licensed under the Public Accountancy Act or a firm whose partners are licensed under that Act.

4. The hearing of this matter commenced on February 21, 1984 in Sault Ste. Marie, and continued on May 7, 8, 30, 31, September 11, 12, 13, and November 14 and 15, 1984. During those ten days of hearing, the Board heard the evidence of 13 witnesses and received 59 exhibits. The hearing of this matter was substantially prolonged by the inability or unwillingness of the complainant's representatives, Terry Davey and John Clark, to confine themselves to adducing evidence and making submissions relevant to the disposition of this complaint.

5. In making the findings of fact contained in this decision, we have considered all of the aforementioned oral and documentary evidence, the submissions of the parties concerning that evidence, our assessment of the relative credibility of the witnesses, and the inferences which may reasonably be drawn from the totality of the evidence.

6. The audited financial statements in question (also referred to in this decision, for ease of reference, as the "Statements") were prepared by Dunwoody and Company, Chartered Accountants ("Dunwoody"), under the supervision of Donald Missere. Mr. Missere, who has been a Chartered Accountant since 1972, is a certified accountant with a public accounting licence under the Public Accountancy Act, R.S.O. 1980, c. 405. We found Mr. Missere to be a candid and credible witness, whose evidence we accept without hesitation or reservation.

7. The terms under which Dunwoody was engaged are summarized in the following letter from Dunwoody to the Union:

It is desirable to have a clear understanding of the terms of our engagement as auditors for the Union. In this regard, we are summarizing our understanding of these terms for the year ending September 30, 1982.

Our statutory function as auditors of the Union is to report to the members whether the annual financial statements present fairly the financial position and results of operations. To meet this obligation and in accordance with what is now generally accepted auditing practice in Canada, our audit will include an examination of the accounting system, internal controls and related data. Our assessment of the reliability of the accounting system and internal controls will affect the extent of our audit work.

Because the audit examination will be planned and conducted primarily to enable us to express a professional opinion on the annual financial statements, it will not be designed to identify and cannot necessarily be expected to disclose defalcations and other irregularities. Of course, the discovery of irregularities may still result from our examination and should any significant ones be encountered, they will be reported to you.

In properly organized accounting systems, reliance is placed principally upon the maintenance of an adequate degree of internal control to prevent or detect irregularities. If we believe that it is desirable and practicable to make important improvements in the system of internal control, or if material irregularities are encountered by us during our audit, we shall bring these to your attention.

The foregoing comments deal only with our statutory obligation as the Union's auditors. We are always prepared to broaden our procedures, if feasible, at your request.

We will prepare the financial statements annually or as requested by you, in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding year, preliminary to the expression of an opinion thereon.

We will carry out such bookkeeping as we find necessary preliminary to the preparation of the financial statements, and generally perform any additional services as may, from time to time be arranged.

Fees will be determined on the basis of time spent on this engagement. Any disbursements, made on your behalf, will be added to the billing. Interest will be charged on unpaid accounts after thirty (30) days, at the rate of 1 1/2% per a month (18% per annum) and a 2% discount will be allowed on any accounts paid in full within 15 days from date of billing.

We shall be pleased to discuss the terms of the engagement with you at any time and to explain the reasons for any items.

If the above terms are acceptable to you and the services outlined are in accordance with your requirements, please sign the copy of this letter in the space provided and return it to us.

The above terms of our engagement as auditors shall remain operative until amended.

The President of Local 16, Tim Edwards, and Olgilvie Russell, who was at that time the Treasurer of the Local, signed a copy of that letter on behalf of Local 16. They also signed an identical letter provided by Dunwoody in relation to the audit for the six-month period ending March 31, 1983.

8. Dunwoody was also provided by the Local with the Canadian Union of Public Employees' standard written "Instructions to Outside Auditors Conducting Local Union Audits". After reviewing those instructions, Mr. Missere expressed the view that they were, for the most part, standard audit procedures which were already covered by Dunwoody's standard engagement letter (quoted in the preceding paragraph of this decision). However, he also stated that there were "things in there that ... were not an auditor's job", such as "examination of all minutes to ensure proper order of business, including proper reading of motions and important information". He further testified, "The tests and procedures that we use [for the auditing] were up to our judgment. In order to be independent auditors that had to be the case."

9. The audits were performed by duly qualified members of the Dunwoody staff in accordance with generally accepted accounting procedures. After the working papers prepared by an articling student had been thoroughly examined by a supervisor, they were reviewed by a partner. There was then a review by a second partner in accordance with Dunwoody's internal requirements concerning "high profile audits".

10. Prior to the preparation of the Statements which form the subject matter of these proceedings, Camille Masse, an accountant in the employ of the Canadian Union of Public Employees ("C.U.P.E.") audited Local 16's books and financial records for the period from January 1, 1982 to January 31, 1983. The findings and recommendations which resulted from that audit (the "Masse audit") are contained in the following letter dated April 19, 1983 from Kealey Cummings, C.U.P.E. National Secretary-Treasurer, to Dianne Dumanski, Recording Secretary of Local 16:

Please be informed that Brother Cam Masse, Accountant, has recently completed an audit of the books and financial records of CUPE Local Union 16 for the period from January 1, 1982 to January 31, 1983. The following report outlines our findings and recommendations in the matter.

The audit encompassed complete verification of all 1982 and January, 1983 cancelled cheques, bank statements, receipts, ledger books, reading of Minutes, reviewing the local's existing By-Laws with recent amendments, miscellaneous documents and confirmation of funds in the local's various accounts.

In order to complete the audit, Brother Masse travelled to Sault Ste.Marie the week of February 6th, 1983. Some records were brought to Ottawa as the audit was incomplete and was finalized only this week. These records are being returned and entrusted into the care of Brother Russell on Saturday, April 23, 1983 by Brother Masse personally.

(1) We found that your local union has presently bond coverage for the positions of President and Secretary-Treasurer in the amount of $3,000.00 each.

We recommend that your local implement the following coverage immediately for the following positions:

President $6,000.00 Secretary-Treasurer $6,000.00

General Vice-President $3,000.00*

*The third signing officer to execute his/her authority only when one of the other two signing officers are absent for lengthy periods of time, i.e. illness or vacation.

Upon receipt of your local's request for the above-mentioned amounts, we will immediately alter your bond coverage and invoice your local accordingly at a later date.

(2) Our records indicate that the local union has last submitted a Trustees Report for the period ending March 31, 1982. In this regard, the local union is in violation of the CUPE Constitution. I refer you specifically to Articles B.3.10 and B.3.1 1 which state:

"B.3. 10 The Trustees shall audit the books of the Secretary-Treasurer and shall exercise general supervision over the property of the Local Union. At the first election of officers in a Local Union the Trustees shall be elected so that one shall serve for a period of three years, one for two years and one for one year. Each year thereafter the Local Union shall elect one Trustee for a three-year period or, in the case of vacancies occurring, elect Trustees to fill only the unexpired terms in order to preserve overlapping terms of office.

"B.3.1 1 The Trustees shall examine the books and records of the Secretary-Treasurer and inspect or examine all properties, bonds, and all other assets of the Local at least half yearly or every six months, and shall report to the next regular meeting of the Local Union following the end of each half year on the condition of the funds and accounts, the number of members in good standing, the number initiated, expelled or suspended, admitted or withdrawn, together with such other information they may deem necessary to the efficient and honest administration of the Local Union. They shall transmit a copy of such report to the National Secretary-Treasurer of the Canadian Union."

We trust that the Trustees Reports for the periods ending September 30, 1982 and March 31, 1983 will be forthcoming.

(3) We have received your February, 1983 per capita tax submission on March 29, 1983. This is to inform you that your local's per capita tax payments are presently one (1) month in arrears. We urge and recommend that these arrears be eliminated as soon as possible and that your local union remain current in this matter.

In this regard we refer you to the CUPE Constitution which states:

"Article B.4.5 — The initiation fees, per capita tax and other obligations owed by the Local Union to the Canadian Union shall constitute a preferred claim and must be paid promptly by the Local Union each month prior to the payment of any other obligation of the Local Union."

and Article 9.2(m) — "Any organization which does not pay its per capita tax on or before the time specified shall be notified of that fact by the National Secretary-Treasurer of the Union. Any organization three months in arrears in payment of per capita tax may be suspended from membership in the Union and can be reinstated only after arrears are paid in full."

On the subject of per capita tax, please be informed that the audit concluded that the local union is reporting its membership accurately.

(4) In the area of the local union's By-Laws, please be informed of the following comments and recommended changes where applicable:

i) Section 3, 2nd paragraph — We recommend a change in the quorum from twelve (12) members in good standing plus three (3) table officers to twenty-five (25) members in good standing plus three (3) table officers.

Furthermore, we recommend that you delete the remaining portion of this paragraph (the following sentence) as we believe it to be unadvisable to authorize (5) five executive officers to enact the regular business of the local union when a quorum of the general membership has not been established.

We are of the opinion that the alteration to the number of members necessary to obtain a quorum is more appropriate taking into consideration the size of your membership of approximately 600 members.

ii) Section 6 — 2nd paragraph: We recommend that you add the following: The General Vice-President shall only be authorized to act as a signing officer when one of the other two signing officers are absent for lengthy periods of time, i.e. illness or vacation.

iii) Sections 9 and 10: Change the appropriate sentences in the respective Sections to read — The Recording Secretary/the Secretary-Treasurer shall be empowered, with the approval of the Membership, to employ such stenographic or other assistance as etc.

iv) Section 13: We recommend that you alter the last sentence in the first paragraph to read: All bills paid and business transacted by the Executive Board during this period shall be reported and ratified at the regular September membership meeting.

v) Section 14: We recommend you replace paragraphs 6, 7, 8, 9 and 10 to read:

The local union recognizes that expenses are incurred by the committee members in the course of union business. In order to compensate for in-town transportation expenses, parking, sundries, coffee and occasional meals, a per diem expense of the amount of $10.00 will be allowed and paid upon receipt of a detailed expense voucher by the Secretary-Treasurer of the local union at a regular union meeting.

vi) Section 16 — 4th paragraph: We recommend that you add the following: as submitted by the employer by proper invoice.

vii) Section 22 — 2nd paragraph: We recommend you add to the sentence — and reported to the membership.

viii) Section 16 — 2nd paragraph: We recommend you change this paragraph to read: Delegates elected to any convention or seminar shall be paid transportation expenses of the most economical mode, i.e. air, rail or automobile dependent on circumstances and as incurred. Mileage incurred on union business shall be reimbursed at the rate of thirty-five (35) cents per mile. An effort will be made to double up in automobiles if feasible. Also, receipted hotel accommodation will be reimbursed as incurred, and a per diem of $38.00 will be paid for each day out-of-town and an amount equal to any loss of wages necessitated by attendance at the convention or seminar.

The Treasurer shall inform the Executive of the current state of finances and the Executive will make its recommendation to the membership for approval on the mode of transportation, accommodation, number of days involved dependent on the information supplied by the Treasurer.

5. We note that the local is very active in the area of attendance at schools, conferences, seminars and conventions. We commend the local for its active involvement in aspects of CUPE and the Trade Union movement in general and we wish to encourage you to remain as active as your finances permit.

6. We recommend that at no time and for any reason blank cheques be pre-signed as this only leads to possible abuse of the local's funds.

7. In general, we found the books and financial records to be kept in very good order. We recommend, however, that an expense voucher be completed for each and every expense, excluding per capita tax and affiliation fees remittances. We also recommend that the expense vouchers be more detailed, that they make better reference to reasons for the expenditure and to the appropriate cheque number.

8. We have estimated your local's Net Worth as at January 31, 1983 to be as follows:

Plan 24 $ 6,022.80

Share Account 1,315.62 Term, Deposits 15,000.00

Current Account 2700..00

Total Liquid Assets: $25,039.01

Shares in UnionHall: 4.000.00

Total Assets: $29,039.01

Loan Payable: 4,705.07

Net Worth $24 333.94

The foregoing excludes any Office Equipment Assets.

In this matter, we strongly recommend that you dispose of the Loan Payable in the amount of $4,705.07 immediately to eliminate further interest expense.

9. The audit discovered that contrary to the local union's by-laws, lost time was directly paid to certain members from the local's Treasury. While we concur that vacation time should be reimbursed, we find it improper that wages be paid to members for weekends and "overtime". Although no provision is found in the local's by-laws we nevertheless discovered lost wages to have on occasion been paid at the rate of time and one-half.

Discrepancies in this matter are detailed as follows:

i) July 16, 1982, Margaret Hammond, 8 hours @ 1-1/2 while on vacation. On the same voucher is found a duplicate payment for July 16th, 1982 resulting in this day being paid at double time and one-half = $158.40.

ii) June 19, 1982, Margaret Hammond, 4 hours @ 1-1/2 = $48.00

iii) June 30, 1982, Chester Edwards, 3 hours @ 1-1/2 = $45.00

iv) August 26, 1982, William Shepherd, 7-1/2 hours = $72.60

v) August 17, 1982, William Shepherd, 6 hours = $58.68.

vi) August 20, 1982, William Shepherd, 6 hours = $58.68.

vii) August 17, 1982, Chester Edwards, 6 hours = $60.42.

viii) August 20, 1982, Chester Edwards, 6 hours = $60.42.

ix) August 26, 1982, Chester Edwards, 7-1/2 hours = $75.53

x) May 24, 1982, William Shepherd, 8 hours x $9.70 = $77.60.

xi) April 13, 1982, C. Edwards, 3-1/2 hours while on vacation but at time and one-half = $45.12.

xii) April 7, 1982, C. Edwards, 3-1/2 hours while on vacation but at time and one half = $45.12.

10. While conducting a cursory review of the expense vouchers, the audit found some 53 vouchers that either omitted proper details, i.e. reason for expense, number of miles claimed for mileage expense or did not have proper and normally required receipts attached.

In this matter, we recommend that all expense vouchers be properly detailed with receipts where applicable in order to provide a complete and accurate accountability of expenses.

It would be a horrendous task to detail in this report all 53 vouchers; we have therefore listed in the following a few examples chosen at random which we trust properly illustrates our concern in this matter.

a) July 26, 1982, C. Edwards: car transportation, gas, etc. $31.00. This voucher lacks detail. How many miles and for what purposes was this mileage claimed?

b) November 6, 1982, Sharon Russell: typing $20.00. This voucher again lacks detail. Typing what and for how many hours, etc.?

c) October 2, 1982, A. Heskett: donuts for union meeting, $24.40. We were unable to find a receipt attached to the voucher in this matter.

d) May 1, 1982, Patricia Shepherd: Correspondence, Xerox, Stamps, typing, etc., $23.90. This voucher obviously requires further detail. We were unable to find a receipt for stamps. What correspondence, how many Xerox copies, for what purpose, at what price? Typing what?

e) We found that many of the past table officers would consistently charge $13.00 per month for gasoline without substantiating their mileage.

11. The audit discovered an unusually high amount of restaurant and bar charges paid by the local union (and incurred by members of the past Executive). The totals in this matter are outlined in the following:

Rico's Restaurant $ 157.33

Canadian Motor Hotel 32.45

Cesina's 1,822.56

Total: $2,012.34

We were unable to find any details outlining the reasons for this large expenditure of the local union funds. We find the total to be abusive and excessive. We are of the opinion that this conduct can only be described as mismanagement of the local's funds.

To this end, we recommend that this type of expenditure cease immediately.

We wish to point out that we found a number of letters addressed to the past President and to the restaurant in question from Brother Russell requesting that this practice stop.

We therefore cannot hold Brother Russell responsible for these transactions.

We trust that the foregoing recommendations will be read, discussed and adopted by the membership of CUPE Local 16 at the April 23, 1983 Special Meeting.

Please communicate with this office if further assistance or clarification is required in these matters.

Mr. Missere was aware of that internal audit and of Mr. Masse's recommendations at the time that the Statements in question were being prepared by Dunwoody.

11. The Statements prepared by Dunwoody for the year ending September 30, 1982, consist of a title page, an Auditors' Report, a Balance Sheet, a Statement of Operations, and certain "notes" to the Statements. The Auditors' Report reads:

TO THE MEMBERS

CANADIAN UNION OF PUBLIC EMPLOYEES, LOCAL 16

We have examined the balance sheet of Canadian Union of Public Employees, Local 16 as at 30 September 1982 and the statement of operations for the year then ended. Our examination was made in accordance with general­ly accepted auditing standards, and accordingly included such tests and other procedures as we considered necessary in the circumstances.

Because of the lack of proper documentation in regards to certain expenditures (conventions and seminars — $1 1,415, executive and committee expenditures — $16,251), we were unable to satisfy ourselves that these expenses were properly recorded in the records of the Union.

In our opinion, except for the effect of adjustments, if any, had we been able to satisfy ourselves with respect to the above-mentioned expenditures, these financial statements present fairly the financial position of the Union as at 30 September 1982 and the results of its operations for the year then ended in accordance with accounting principles described in note 1 to the financial statements.

18 October, l983Dunwoody & Company

CHARTERED ACCOUNTANTS

12. The Balance Sheet for the year ending September 30, 1982 is as follows:

CANADIAN UNION OF PUBLIC EMPLOYEES, LOCAL 16

BALANCE SHEET

AS AT 30 SEPTEMBER 1982

ASSETS

CURRENT

Cash $ 7,422

Short term deposit receipts 15,000 Accounts receivable 4,894 $ 27,316

LONG TERM INVESTMENT, notes 1 and 2 2,717

$ 30 033

LIABILITIES

CURRENT

Bank loan, note 3 $ 6,405

Accounts payable $ 7,831 $12,236

NET ASSETS AS REPRESENTED

BY ACCUMULATED EXCESS OF

REVENUE OVER EXPENDITURE $30 033

COMPARATIVE FIGURES, note 4

On behalf of C.U.P.E., Local 16

13. The Statement of Operations for that period reads:

CANADIAN UNION OF PUBLIC EMPLOYEES, LOCAL 16

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED 30 SEPTEMBER 1982

REVENUE

Union dues $76,451

Interest 3,267 $79,718

EXPENDITURES

Committees and Executive

Honoraria 9,914

Other 16,25

Convention and seminars 11,415

Flowers, wreaths, gifts,

dances, etc. 6,354

Interest and bank charges 248

Office supplies and services 2,215

Professional fees 2,000

Telephone 413

Union membership fees and dues 46,357 95,167

LOSS FOR THE YEAR (15,449)

Accumulated excess of revenue over

expenditure, beginning of year 31,246

ACCUMULATED EXCESS OF REVENUE

OVER EXPENDITURE, END OF YEAR $15,797

14. The Dunwoody staff attempted to break down into greater detail the $11,415 "Conventions and seminars" expense, and the sum of $16,251 listed under "Other" expenditures in respect of "Committees and Executive". However, as indicated in the second paragraph of their report and confirmed by Mr. Missere's testimony before the Board, they were unable to do so because of lack of proper documentation. While it was possible to conclude from the Union's financial records that portions of those sums were allocable to a particular committee or other category, it was not possible for the Dunwoody staff to satisfy themselves that those portions were the only expenditures pertaining to that committee or category, as there were a number of expenditures which could not be allocated to any particular committee or category due to a lack of proper supporting documentation such as receipts and vouchers. Consequently, in the exercise of their professional judgment and expertise, they decided not to include those categories in the Statements.

15. The following notes were also attached to the Statements for the year ending September 30, 1982:

CANADIAN UNION OF PUBLIC EMPLOYEES, LOCAL 16

NOTES TO FINANCIAL STATEMENTS

30 SEPTEMBER 1982

1. SIGNIFICANT ACCOUNTING POLICIES

(a) Income and Expenses

Revenues and expenses are recorded on an accrual basis.

(b) Long Term Investments

Local 16 has a 20% interest in the C.U.P.E. building on Salisbury Avenue. These financial statements reflect only Local 16's portion of the expenses related to this building.

(c) Fixed Assets

Fixed assets, consisting of office fixtures and furnishings which tend to be relatively minor and to have short economic lives are fully expensed in the years of acquisition.

2. LONG TERM INVESTMENTS

Partnership interest in the

Local Union Building,

at cost$2,717

3. BANK LOAN

The bank loan is a demand note and requires monthly payments of $652, including interest of 19%. It is fully secured by term deposits.

4. COMPARATIVE FIGURES

There were no financial statements available for comparison purposes.

16. The Statements for the six-month period ending March 31, 1983 are similar in form. However, the Auditors' Report for that period does not contain any "qualification", such as that set forth in the second paragraph of the Auditors' Report for the year ending September 30, 1982 (as quoted above). Thus, the final paragraph of the Auditors' Report for that six-month period reads:

In our opinion, these financial statements present fairly the financial position of the Union as at 31 March 1983 and the results of its operations for the six months then ended in accordance with accounting principles described in note 1 to the financial statements, applied on a basis consistent with that of the preceding year.

17. In the Statements for the six-month period ending March 31, 1983, the amount specified in the Statement of Operations for "Convention and seminars" expenditures is $661~ out of total expenditures of $44,250. The "Committees and Executive" expenditures included in that statement are:

Honouraria $5,104

Other 4,617

In his testimony before the Board, Mr. Missere stated that the "Convention and seminars" and "Other" expenditures were not deemed by Dunwoody to be sufficiently material to "qualify" the report for that period. He also testified that the lack of documentation was less material in respect of that six-month period than the previous twelve-month period. It was also his evidence that those two sums were listed in that fashion in the Statement of Operations for the six-month period ending March 31, 1983 for comparative purposes.

18. When the Statements had been completed, Mr. Missere met with the trustees and members of the Executive of Local 16 in late November of 1983 to review the Statements and the recommendations which he planned to set forth in a "management letter". It was the consensus at that meeting that Mr. Missere would present the Statements to the membership at the December 3, 1983 general membership meeting, and that if there was a request for further information, it would be provided at the January 9, 1984 general membership meeting. At least one of the reasons for proceeding in that fashion was that the complainant had been pressing Mr. Jordison and other Union officials to expedite the preparation and release of the Statements.

19. Pursuant to that arrangement, Mr. Missere attended the Union's general membership meeting on December 3, 1983 to present to the membership the Statements which had been prepared under his supervision. At that meeting members asked Mr. Missere a number of questions about the Statements and the Local's finances during the period covered by them. Mr. Missere was able to answer some of those questions immediately. For example, in response to the complainant's question, "Was the bank loan made without proper authorisation?", he replied, "Yes, as the loan had already been made prior to requesting authorization." The complainant also asked, "Did you find in your records anywhere that it cost this Local $2000 when [the complainant] charged Brother R. Russell for misrepresentation or $5000 to have Brother Jim Anderson come up to investigate possible trusteeship?" Mr. Missere replied in the negative, and advised the complainant that those costs were "not specifically noted". When the complainant asked the cost of the Dunwoody audit, Mr. Missere indicated that the cost to that point in time was between $3500 and $4000. He also noted that a "normal audit without searching for information would cost roughly $1000 or under", and that the substantially higher cost reflected the inadequate state of the Local's financial records, and the lack of internal controls which made it necessary for Dunwoody to examine more documentation than would normally be necessary.

20. At the December 3rd meeting, Mr. Missere was asked by member Della Rahn for a breakdown of the expenditures listed under "Convention and seminars" and under "Other" in respect of "Committees and Executive" expenditures. However, he was unable to provide details of those expenditures at that meeting because he did not have with him the "working papers" prepared by his staff in carrying Out the audit. In an attempt to provide at least a partial breakdown of the expenses in question, Mr. Missere agreed to provide the Union with a photocopy of the working papers concerning those expenditures. When the complainant asked how soon those figures could be made available, Mr. Missere told her that he could provide them by the following Monday. However, Mr. Jordison then stated that no facts or figures would be released to the membership without first being reviewed by the Executive of the Local. Mr. Jordison took that approach because he was of the view that the Executive of the Local was entitled, as a matter of fairness, to consider and examine the working papers prior to their presentation to the membership. However, the complainant and some of the other members of that sorely divided Local viewed it as an attempt to frustrate their desire to obtain further information concerning the Union's finances during the period in question. Consequently, the complainant proceeded to file the instant complaint with the Board (on December 14, 1983) without waiting to receive the working papers.

21. At the December 3rd Union meeting, Mr. Missere outlined some of the deficiencies in the Local's accounting practices which had been noted during the audit. He also indicated that he would be providing Local 16 with a "management letter" describing those deficiencies and recommending methods of eliminating them. Accordingly, Mr. Missere subsequently provided Local 16 with the following "management letter", in which he formally drew the Union's attention to various deficiencies in its accounting practices and made specific recommendations for improvement:

In accordance with our usual practice, we set out below certain matters concerning the Union's accounting practices which came to our attention during our recent work in connection with the audits for the periods ending 30 September 1982 and 31 March 1983 and our recommendations for improvement.

1. DISBURSEMENTS

The system of cash disbursements requires more control measures. At present, the treasurer is responsible for approving payment of invoices and all other disbursements and also for actually issuing the cheques. The Union membership approves the disbursements after they have already been made, at their monthly meetings. Double signatures are required but the cheques are signed with a stamp which has both required signatures on it. This system does not provide for adequate control over cash disbursements.

Approval of expenditures should be formalized to prevent the possibility of error and abuse. As each invoice is received it should be stamped. The stamp should indicate at least the following:

Date Received

Quantity checked

Prices checked

Extensions checked

Allocation

Approved by

Paid — Cheque #

— Date

All payments (except petty cash disbursements) should be approved by the Executive Board prior to disbursement.

If the Union continues to use a signature stamp for signing cheques, then each required signature should be on a separate stamp and kept and used only by the proper individual.

At present, payments are being made without adequate documentation. Every disbursement should be adequately documented, prior to approval to ensure that Union funds are not being misallocated.

For example, expense vouchers are not being completed for every reimbursement made to Union members. When expense vouchers are completed, they are often incomplete and receipts are seldom presented. Since members are not being required to prove that they actually made purchases or that the purchases were related to Union business, it is possible that the system could be abused.

Expense vouchers should be completed for every reimbursement made and detail should be provided. That is, the voucher should include the date of/reason for/amount of expense. Receipts should be attached and the voucher should be properly approved prior to payment. In cases where per diem amounts are allowed, proper documentation would include a pre-printed form, which would indicate the reason for the expenditure, the appropriate dates and the necessary approvals.

In the case of Cesira's Restaurant, overpayments have been occasionally made because the treasurer has based some payments on invoices received, and some payments on statements received. These overpayments have been brought to the attention of the treasurer by the restaurant; however, had the restaurant failed to do so the double payments may have gone unnoticed by the Union.

If payments are to be made based on statements received then the invoices listed on any statement should be matched and attached to that statement to prevent double payment. Payments should be made consistently on the basis of invoices received or statements received but not both.

If union dues rebates are to be paid in the future, a copy of the member's T4 slips, showing the total union dues paid, and a copy of the yearly attendance records should be kept on file. As well, the Union should consider the income tax implications of this rebate.

Payments made to the school boards re lost time are also not adequately documented. The Union is invoiced by the school boards for any time missed by any union member with respect to Union business (except time lost due to meetings with the board). At present, the treasurer is responsible for approving these invoices, which he does on the basis of his knowledge of the activities of all Union members.

If possible, in future, the Union should receive a copy of the authorization for lost time signed by a member's supervisor. Properly completed this authorization should give the date of and reason for absence from the job. The invoices from the school boards should be matched to these authorizations prior to approval and payment. This measure would ensure that the Union is paying only for lost time due to legitimate Union business.

2. FILING SYSTEM

The present filing system is inadequate. Paid invoices should be kept separately from invoices payable. The form of the filing system can be kept simple, with invoices being kept in files according to purpose of expense (lost time, conventions and seminars, etc.), the most recent payments to the front of the file. Cheque stubs from receipts should also be filed separately. As previously mentioned, documentation for all disbursements should be acquired, and kept on file. This will provide evidence that payments have been made and what the payments were for. A well organized filing system will reduce the risk of double payments and provide protection to the individuals responsible for making the disbursements.

3. GENERAL

Although the Union membership is quite large, a few people seem to be on numerous committees and carrying the majority of the work load and responsibility for the Union. As recommended in the C.U.P.E. Constitution, the responsibilities should be more widely disbursed. Per the National Office recommendations, the quorum should be increased and five executive officers should not be able to enact union business when a quorum is not present.

Several instances have occurred of the union being committed to financial arrangements with neither Executive Board approval nor quorum approval. For instance, there is no motion carried to approve the bank loan, or the rolling over of term deposits. Lack of approval for other unusual purchases and commitments is also noted. As previously mentioned authority should be disbursed; however whatever the union decides with regard to quorum and Executive Board enacting Union business, the by-law must be adhered to.

4. TREASURER REPORTS AND ACCOUNTING RECORDS

Also included in the National Office recommendations and in agreement with the C.U.P.E. Constitution, the Trustee's Report should be completed every six months. This report should be expanded to include all receipts and disbursements for the period and the opening and closing bank balances for each period. Approval of each report should be indicated by the signature of the President and Secretary of the Local.

5. BUDGETS

The Union executive should be preparing budgets and comparing these budgets to actual operating results on a periodic basis. This procedure, if done properly, would help the Union to control various expenditures.

This report is not exhaustive and deals with the more important matters which came to our attention during the audit. We shall be pleased to discuss with you any matters mentioned in this report.

Yours very truly,

DUNWOODY & COMPANY

(signed) N. Donald Missere, C.A.

22. Mr. Missere mailed a number of working papers (prepared by Dunwoody staff during the course of the audit) to Mr. Jordison at the Local's office in Sault Ste. Marie early in the week following the December 3rd Union meeting. After they had been reviewed by the Executive of Local 16, those working papers were distributed to the membership by Mr. Jordison at the January 9, 1984 membership meeting. As a result of an oversight, the Dunwoody working paper concerning "Executive Expenses" was inadvertently omitted from the papers distributed to the membership at that meeting. The working papers that were distributed to the membership at the January 9, 1984 Union meeting provide several pages of details concerning the "Convention and seminars" and "Other" expenditures for the year ending September 30, 1982, including a number of details which would not generally be included in a financial statement. For example, they list specific payments to individuals in respect of conventions and conferences, and in respect of negotiations and grievance committee activities. They also identify a number of areas that cannot be particularized due to inadequate documentation, such as unreceipted expenses for typing, meals, and gasoline. Those working papers did not satisfy the complainant's desire for highly detailed information concerning the Local's expenditures during the period in question, not because of any inadequacy or defectiveness in the working papers, but because (in the words of Mr. Missere), "the purpose of the working papers was not to list in detail all the expenditures for submission to the Union; its purpose was to give [Dunwoody] an overview of everything that was in the account so that [Dunwoody] could form an opinion as to whether the expenditures were actually made, and whether they were properly documented."

23. In an attempt to satisfy the complainant's desire for further information concerning the respondent's expenditures during the period in question, the respondent agreed on February 21, 1984, with the encouragement of the Board, to permit the complainant to attend at Mr. Missere's office to review all of the Union's financial records from which the Statements were prepared by Dunwoody. Pursuant to that arrangement, the complainant attended at Mr. Missere's office for a total of 27 hours, and reviewed all of that documentation. She was accompanied by John Clark, an individual with many years of experience in the labour movement, including some experience as a treasurer and recording secretary of a local of the United Steelworkers of America. Although the complainant was given unimpeded access to all of those financial records, and was also permitted to confer with Mr. Missere concerning them, she remained determined to press forward in an effort to obtain a Board order that the respondent prepare another audited financial statement containing more detailed information.

24. When Mr. Jordison, the C.U.P.E. National Representative, became aware that, through oversight, Dunwoody had not been provided with the (Local 17) Treasurer's monthly reports for the period covered by the audit, he arranged to have them delivered to Mr. Missere near the beginning of May, with a request that Mr. Missere review them and advise whether or not they would affect the outcome of the audits. Mr. Missere subsequently examined those Reports and advised Mr. Jordison that the outcome of the audits would not be affected by them. In explaining that conclusion to the Board when he was called on September 13, 1984 to testify for a second time in these proceedings, Mr. Missere stated that for a proper audit to be conducted, the working papers for the audit have to be prepared on the basis of information obtained directly from the Local's registers and cash books, not from the Treasurer's monthly reports.

25. The complainant and her representatives contend that the financial statements for the year ending September 30, 1982 are inadequate because they do not contain a sufficiently detailed breakdown of expenditures. However, we accept Mr. Missere's evidence that lack of proper documentation of the type described in his "management letter" made it impossible for Dunwoody to be sufficiently satisfied of the accuracy and completeness of the sums allocable to specific areas of expense to include such a breakdown in the audited statements, despite their best efforts to do so. Thus, what is inadequate in the present case is not the financial statements, which were carefully prepared and audited by a reputable and experienced chartered accounting firm in accordance with generally accepted accounting principles, but rather the Union's financial records themselves.

26. Mr. Clark and the complainant suggested in their evidence that by referring to ledger entries, cancelled cheques, and other Union records, they were able to break down in a more detailed manner the expenses aggregated under "Convention and seminars" and "Other". However, neither Mr. Clark nor the complainant is a Chartered Accountant or a person licensed under the Public Accountancy Act, and neither of them is qualified to give expert testimony of the type necessary to refute Mr. Missere's expert evidence in this regard. Moreover, Mr. Clark conceded in his submissions on behalf of the complainant that it would not be possible to prepare an "audited" or "certified" financial statement with such a breakdown in the circumstances of this case, due to the aforementioned lack of proper documentation. Nevertheless, he suggested that an uncertified, partial breakdown could be prepared in this fashion. While that may well be true, a breakdown of that type is neither contemplated by section 85(2) of the Act, nor within the Board's jurisdiction to order under that provision.

27. The complainant's representatives further contend that the Statements are inadequate because they do not include certain items, such as the Union's public address system and typewriters, as assets. However, as indicated in Note 1(c) to the Statements, assets of that type are not included in the Balance Sheet because they are fully expensed in the years of acquisition. In this regard, we accept Mr. Missere's uncontradicted evidence that fully expensing such items in the years of acquisition is a normal accounting procedure for non-profit organizations such as the Local. Thus, we are satisfied that the fact that such items are not listed in the Balance Sheet does not render the Statements inadequate.

28. The complainant's representatives also rely upon Articles B.3.10 — .12 of Appendix "B" to the C.U.P.E. Constitution. Those Articles provide as follows:

Trustees

B.3. 10 The Trustees shall audit the books of the Secretary-Treasurer and shall exercise general supervision over the property of the Local Union. At the first election of officers in a Local Union the Trustees shall be elected so that one shall serve for a period of three years, one for two years and one for one year. Each year thereafter the Local Union shall elect one Trustee for a three-year period or, in the case of vacancies occurring, elect Trustees to fill only the unexpired terms in order to preserve overlapping terms of office.

B.3. 11 The Trustees shall examine the books and records of the Secretary-Treasurer and inspect or examine all properties, bonds, and all other assets of the Local at least half yearly or every six months, and shall report to the next regular meeting of the Local Union following the end of each half year on the condition of the funds and accounts, the number of members in good standing, the number initiated, expelled or suspended, admitted or with­drawn, together with such other information they may deem necessary to the efficient and honest administration of the Local Union. They shall transmit a copy of such report to the National Secretary-Treasurer of the Canadian Union.

B.3.12 Where a Local Union hires the services of a qualified accountant or accounting firm, the auditing of the Local Union's books shall be done in accordance with the procedures outlined in Article B. 13.11 of this Constitution.

In particular, they submit that the Statements are inadequate because Dunwoody did not audit the Union books completely in accordance with the procedures outlined in Article B.3.l 1.

29. Assuming without deciding that a trade union's constitution may in some instances be of relevance in determining the adequacy of its financial statements in the context of section 8 5(2) of the Act, we are of the view that the constitutional provisions quoted above do not assist the complainant's case. While it is true that Dunwoody did not report to the Local on such matters as "the number of members in good standing" and "the number inducted, expelled, or suspended, admitted or withdrawn", this does not in our view make the Statements prepared by Dunwoody inadequate within the meaning of section 85(2), in the circumstances of this case. The complainant did not suggest that she was unaware of that information. Moreover, the Masse audit's finding that "the local union is reporting its membership accurately" was not disputed by any of the witnesses who testified before us in these proceedings. There was also no evidence adduced that contradicts or renders unreasonable Mr. Missere's evidence that "as an independent outside auditor, [he] cannot act as a trustee". Mr. Missere further testified as follows (during cross-examination on November 14, 1984): "I cannot put myself in the position of a trustee. I am an independent auditor and I have to maintain my independence". Having regard to the totality of the evidence, we are satisfied that Dunwoody did comply with the provisions of Article 3.10 — .12 of the C.U.P.E. Constitution in all material respects. In particular, we find that through the Statements and the "management letter", Mr. Missere reported to the membership of Local 16 on the condition of its funds and accounts, together with all of the other information which he, in the exercise of his professional judgment, deemed necessary for the efficient and honest administration of the Local.

30. The complainant's representatives also question the adequacy of the Statements on the basis that they make no reference to "petty cash". However, having regard to all of the evidence, we find that the occasional use of the term "petty cash" in the Union's financial records is a misnomer, as no "petty cash" fund exists in the sense in which that term is generally used for accounting purposes. Mr. Missere described such a fund in the following terms: "You have $100 cash, or vouchers on hand to support that, at all times. Every once in a while you reimburse the petty cash fund for the vouchers that you have on hand." By way of contrast, it is evident from the testimony of Olgilvie Russell that the term "petty cash" was used by him in the Union's financial records to describe funds advanced to a Union committee chairperson to cover future meal expenses, because, in his view, the money became "petty cash" in the hands of the committee chairperson, to be used to purchase meals for the committee.

31. It is abundantly clear from the evidence that Local 16 has been in a state of turmoil for several years. Various complaints have been filed with the Board by or on behalf of the present complainant and her friend, Glenna Davey (who is the wife of Terry Davey, one of the complainant's two representatives in the present case), and there have also been a number of internal Union proceedings. The primary matter which prompted the complainant to institute proceedings concerning financial reporting within the Local was her concern about the inaccuracy of statements by Clarence Dungee, a C.U.P.E. National Representative formerly assigned to service Local 16, and Olgilvie Russell, a former Treasurer of Local 16, that those earlier proceedings were "breaking the Local". Messrs. Dungee and Russell also told the membership that it had cost the Local $5000 to have Jim Anderson come up to investigate possible trusteeship, and that it might cost the Local as much as $25,000 depending on how far Glenna Davey wanted to proceed with the matter.

32. When Mr. Russell told the membership at a meeting of the Local in September of 1982 that Local 16 "was broke because of the expenses of the 'Davey case"', the complainant asked Mr. Russell to provide a "financial report of every cent that was spent on the 'Davey case"'. When that report was not forthcoming, the complainant persisted in her request by visiting Mr. Russell at his residence, raising the matter at Union meetings, and writing to an assistant to the President of C.U.P.E. That letter, which also complained about members of the Executive "spending money on alcoholic beverages and fancy restaurants", resulted in the President's assistant going to Sault Ste. Marie to investigate the matter. Thereafter, the President directed Mr. Masse to audit the books of Local 16. Since the information which the complainant was seeking with respect to the precise cost of the "Davey case" was not contained in the Masse audit, she continued to demand that it be provided to her.

33. In February of 1983, the complainant filed a complaint with the Board under section 85 of the Act, alleging that Local 16 had failed to furnish her with a copy of the audited financial statement of its affairs to the end of its last fiscal year (Board File No. 2293-82-M). That complaint was withdrawn (by leave of another panel of the Board) when Local 16 agreed to retain Dunwoody to prepare the Statements which form the subject matter of the present proceedings. (The complainant also charged Mr. Russell under the C.U.P.E. Constitution for failing to maintain adequate control over the Local's finances and for disseminating inaccurate information concerning the costs incurred by the Local in respect of the "Davey case". After Mr. Russell was found guilty by a trial committee, he appealed to the National Executive Board. That appeal was still pending at the time when this evidence was adduced before the Board).

34. After Mr. Jordison was assigned to replace Mr. Dungee as the C.U.P.E. National Representative in respect of Local 16, he attempted to alleviate the concerns of the complainant and Mrs. Davey by publicly stating that the "Davey case has not broken the Local", and by urging them to "forget the past" and concentrate on improving the current situation within the Local. However, that approach has not met with success, as evidenced by the complainant's strong determination to proceed with the present case, notwithstanding the fact that the Union has permitted her to thoroughly review all of the Union's financial records from which the Statements were prepared by Dunwoody, and notwithstanding the fact that the Board indicated more than once during the course of these proceedings that it was far from apparent that the proceedings were serving any useful purpose in view of the fact, which was evident from the initial day of hearing, that inadequate documentation had prevented and would continue to prevent Dunwoody (or any other licensed accountant) from preparing or certifying an audited financial statement containing particulars of the type desired by the complainant concerning the Local's expenses for the period in question.

35. It is clear that even if the preparation of more detailed financial statements were not precluded by a lack of adequate documentation concerning various expenses of the Local during the period in question, no such statements in a form of the type identified by Mr. Missere as being in accordance with generally accepted accounting principles would satisfy the complain­ant, as the highly detailed breakdown of expenditures which she desires would not be included in any such statement. As the Board wrote in Murray G. Strong, [1981] OLRB Rep. July 901, at paragraph 14:

.... A financial statement is a statement of net assets and a summary of income and expenses of a particular operating entity and does not set forth the minutiae of details of the source and origin of every cent which is received and disbursed. This minutiae of details is to be found in the vouchers and bank statements of an operating entity. . .

36. The Masse and Dunwoody audits have been of considerable assistance to Local 16 in revising its accounting procedures and attempting to place its financial affairs in order. Many of Mr. Masse's and Mr. Missere's recommendations have been implemented. For example, detailed expense vouchers, with receipts attached where appropriate, are now completed for every expenditure and detailed records are maintained with respect to "lost time" payments. Expenditures (other than those expressly provided for in the C.U.P.E. Constitution or Local 16 By-laws, such as per capita payments by the Local to C.U.P.E.) are not made until after they have been considered by the membership at a Union meeting and approved by motion. The use of a signature stamp for signing cheques has been eliminated. The Union's filing system has been improved by Barbara Edwards, the current Treasurer of the Local, with the assistance of Mr. Missere. There is nothing in the evidence which suggests that further improvements would be likely to result from the preparation of additional audited financial statements for the period in question, or that the preparation of such statements would serve any other useful purpose in the circumstances of this case.

37. For all of the foregoing reasons, this complaint is hereby dismissed.