APWU Bonding Requirements

(This article first appeared in the September/October 2019 issue of the American Postal Worker magazine) 

A requirement of 501(c)(5) organizations is to maintain compliance with the Labor Management Reporting Disclosure Act (LMRDA). Sec. 502 (a) of the LMRDA states:

Every officer, agent, shop steward, or other representative or employee of any labor organization (other than a labor organization whose property and annual financial receipts do not exceed $5,000 in value), or of a trust in which a labor organization is interested, who handles funds or other property thereof shall be bonded to provide protection against loss by reason of acts of fraud or dishonesty on his part directly or through connivance with others.

The bond of each such person shall be fixed at the beginning of the organization’s fiscal year and shall be in an amount not less than 10 per centum of the funds handled by him and his predecessor or predecessors, if any, during the preceding fiscal year, but in no case more than $500,000. If the labor organization or the trust in which a labor organization is interested does not have a preceding fiscal year, the amount of the bond shall be, in the case of a local labor organization, not less than $1,000, and in the case of any other labor organization or of a trust in which a labor organization is interested, not less than $10,000.

Such bonds shall be individual or schedule in form, and shall have a corporate surety company as surety thereon. Any person who is not covered by such bonds shall not be permitted to receive, handle, disburse, or otherwise exercise custody or control of the funds or other property of a labor organization or of a trust in which a labor organization is interested.

No such bond shall be placed through an agent or broker or with a surety company, in which any labor organization or any officer, agent, shop steward, or other representative of a labor organization has any direct or indirect interest. Such surety company shall be a corporate surety which holds a grant of authority from the Secretary of the Treasury under the Act of July 30, 1947 ( 6 U.S.C. 6-13), as an acceptable surety on Federal Bonds: Provided, that when in the opinion of the Secretary a labor organization has made other bonding arrangements which would provide the protection required by this section at comparable cost or less, he may exempt such labor organization from placing a bond through a surety company holding such grant of authority.

(b) Any person who willfully violates this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both.”

One purpose of the LMRDA is to protect union funds and assets from losses caused by improper uses. The law requires any person who “handles” union funds or property to be bonded during the union’s preceding fiscal year. The LMRDA requires affiliates to have fidelity insurance for a minimum of 10 percent of the funds handled by an individual, not to exceed $500,000.

National APWU automatically pays for coverage of $5,000 for each local. However, it is strongly advised local officers obtain bond coverage of 100 percent of all liquid assets. Examples of liquid assets are those assets that are quickly and easily negotiable, such as cash on hand, deposits in any type of financial institution, certificates of deposit, U.S. Treasury securities, corporate stocks and bonds, and accounts and loan receivables. To determine how much coverage is required, local officers should add total liquid assets plus total receipts X 10%. Property of a relatively permanent nature, such as land, buildings, furniture, and fixtures, are not considered a liquid asset.

Local Presidents and Treasurers should have received correspondence from the Secretary-Treasurer’s Department specific to their bond renewal effective date of coverage, including information if a local needs to request an increase or decrease in the amount of coverage.