LM-2 Prep Tips, Part 2: Statement A and Schedules 1-10

Statement A of the Form LM-2 summarizes the union’s assets and liabilities.

It is supported by 10 different schedules: 7 that provide additional details for certain types of assets and 3 that provide details for certain types of liabilities. While preparing your LM-2, refer to the instructions for the complete and official guidance to properly complete the statement and schedules according to requirements issued by the Office of Labor-Management Standards.

Below are some things, in particular, to remember when preparing these pages and schedules of your form:

• Schedule 1 – Accounts Receivable
  • This schedule is required even if your organization maintains its books on a cash or modified cash basis; you must identify and report amounts due to the organization as of year-end. The DOL believes this reporting helps members understand how well the union is collecting amounts due.
  • Filers are not required to provide details for accounts less than $5,000 and under 90 days delinquent.
  • Describe in line 69 (additional information) details and circumstances regarding liquidation, reduction or write-off of accounts receivable, if any. If the organization expects to collect an amount that is later determined to be fully or partially uncollectible, this amount must be reported and disclosed.
• Schedule 2 – Loans Receivable
  • Advances, including salary advances, are considered loans. However, advances to officers/employees for travel expenses necessary for conducting business may be excluded if they meet certain conditions. The most common condition allowing advances to be excluded from the schedule is:
    • Advances for travel expenses that do not exceed expenses reasonably expected to be incurred and are fully repaid or accounted for (e.g., itemized receipts) within 30 days after completion or cancellation of travel.
  • If the beginning balance on this year’s form does not match the ending balances on the prior year form, explain the difference in item 69 (additional information). This can occur, for example, if misstatements were identified after the prior year filing and adjustments were posted to the financial records.
  • See part 1 of our series on loans often misreported by filers.
• Schedule 3 – Sales of Investments and Fixed Assets; Schedule 4 – Purchase of Investments and Fixed Assets; Schedule 5 – Investments Other Than U.S. Treasury Securities; Schedule 6 – Fixed Assets
  • Book value for investments or fixed assets should be reported at the lower of cost or fair market value. This does not follow current accounting treatment so this can create a difference between the amounts reported on the unions financial statements and the amount reported on the LM-2.
  • Check the numbers on the form by performing the following reconciliations:
    Investments:
    Beginning cost (Prior Year, Schedule 5, sum of Marketable Securities Total Cost and Other Investments Total Cost line)
    + Plus: Cost of purchases (Current Year’s Schedule 4 Column B)
    – Less: Cost of sales (Current Year, Schedule 3, Column B)
    – Less: Cost of current year’s investment disposals (Items 15 and 69)
    = Equals: Ending cost (Current Year’s Schedule 5, sum of Marketable Securities Total Cost and Other Investments Total Cost line)
    Fixed Assets:
    Beginning cost (Prior Year’s Schedule 6, Column B)
    + Plus: Cost of purchases (Current Year’s Schedule 4, Column B)
    – Less: Cost of sales (Current Year’s Schedule 3, Column B)
    – Less: Cost of current Year’s Fixed Asset Disposals (Items 15 & 69)
    = Equals: Ending cost (Current Year’s Schedule 6, Column B)
• Schedule 7 – Other Assets
  • Include all other assets that are not reported in other fields on Statement A. They may be classified by general groupings or bookkeeping categories. The DOL does not want filers to use descriptions like miscellaneous or other. Further, a description like prepaid expenses should be further separated between prepaid postage, prepaid insurance, etc. rather than reported as a single amount.
• Schedule 8 – Accounts Payable Aging Schedule
  • This schedule is required even if your organization maintains its books on a cash or modified cash basis; you must identify and report amounts owed by the organization as of year-end. The DOL believes this reporting helps members understand how well the union pays its bills.
  • Filers are not required to report details on amounts under $5,000 and under 90 days past due. Amounts that were liquidated/reduced/written-off during the year need to be itemized.
  • Describe in line 69 (additional information) details and circumstances regarding liquidation, reduction or write-off of any accounts payable.
• Schedule 9 – Loans Payable
  • Do not include loans secured by mortgages or similar liens on real property that must be reported in Item 32 (Mortgages Payable).
  • Refer to notes under Schedule 2 if beginning balance of Schedule 9 does not agree to the amount reported on the prior year form.
• Schedule 10 – Other Liabilities
  • Include all other liabilities that are not reported in other fields on Statement A. They may be classified by general groupings or bookkeeping categories. The DOL does not want filers to use descriptions like miscellaneous or other. Further, a description like accrued expenses should be further segregated by general type rather than reported as a single amount.

Looking for some guidance on the questions on Page 2? See other articles on this topic.

Author: Mark Buckberg, CPA, CFE, CFF | [email protected] and Ashleigh Hall, CPA | [email protected]