Olms interpretative Manual

METHODSOFACCOUNTING

216.005METHODSOFACCOUNTINGCASHVERSUSACCRUAL

The Department of Labor does not prescribe a particular method of accounting, and it wouldnot be necessary to convert accounting records from an accrual to a cash basis in order to preparerequired financial statements, as long as the method used accurately reflects the operations andfinancial condition of the organization.However, the accounts should be kept in a manner thatwillpermit the preparation ofthe required reports.

The statement of receipts and disbursements required by sections 201(b)(2) through201(b)(6), which is provided for in the Department’s Forms LM-2 and LM-3, is essentially anaccountingoftheinflowandoutflowofanorganization’scashduring the fiscalperiod.

Consequently, a profit and loss statement prepared on the accrual basis is not acceptable ascompliance with the above-mentioned sections of the Act since this reflects the income andexpenses of an organization in the fiscal period and not the disposition of its cash. Preparation ofa cash receipts and disbursement statement when the accrual method of accounting is usednormally requires only an analysis of the organization’s cash receipts and disbursements recordsin order to properly reclassify its cash transaction, where necessary, to conform to the types ofaccountingclassifications representedbylikeitemsontheprescribedforms.

The statement of assets and liabilities required by the statute is essentially an accrual type ofstatementandprovides forreportingallreceivables,payables,accrualsanddeferreditems.

Consequently, it should not be necessary for an organization which maintains its records on theaccrual system of accounting to change its procedures in order to prepare the statement of assetsand liabilities.

LABORORGANIZATIONFINANCIALREPORT-LM-3

219.001LMRDA,SECTION208

In exercising his power under this section the Secretary shall prescribe by general rulesimplified reports for labor organizations or employers for whom he finds that by virtue of theirsize a detailed report would be unduly burdensome but the Secretary may revoke such provisionfor simplified forms of any labor organization or employer if he determines, after suchinvestigation as he deems proper and due notice and opportunity for a hearing, that the purposesofthis sectionwould be servedthereby.

219.002 See 29 CFR 403.4219.005

See instructions for LM-3, I.(TechnicalRevisions:Dec.2016)
219.010RECEIPTSOFSUBSIDIARYORGANIZATIONINCLUDEDIN$250,000

To determine the eligibility of a labor organization to file a Form LM-3, the receipts of asubsidiary organization are considered part of the receipts of the labor organization.Thus, if thereceipts of a union and its subsidiary organization total $250,000 or more, the union is ineligibletofile a FormLM-3 even thoughthe union’sreceiptsalonewouldtotallessthan$250,000.

(TechnicalRevisions:Dec.2016)