Surviving a Union Audit

What's a union audit? The term actually itself covers two different kinds of audits performed by the Service Employees International Union (SEIU) Local 32BJ, which represents more than 85,000 doormen, porters, security guards, superintendents and other such workers in the tri-state area as well as in Pennsylvania, Virginia and Washington, D.C.

The first kind, true union audits, are primarily to ensure that union-membership dues are being properly transmitted. Those audits, says Greenbaum, director of property management at Mark Greenberg Real Estate, "just take an hour or two. We have our payroll people do it." But what most people colloquially call "union audits" are, per Local 32BJ spokesperson Matt Nerzig, actually the big, comprehensive audits done by Building Service 32BJ Benefit Funds, the organization that handles things like pension and health insurance and which is administered by a board of labor and management trustees, the latter appointed by the Realty Advisory Board (RAB).

Benefit Funds is in the midst of a 2007-2009 project of conducting audits of every unionized building in its jurisdiction. "Our company had never been subject to it before, and we were surprised," says Lynn Whiting, director of management at The Argo Corporation. "I had seen little ones here and there, but this was the first time we had one for all our 32BJ buildings. The process took about a year," she adds. "A person would be here for a couple of weeks and then we might not see him again for a month."

The Process

The procedure is straightforward and, according to both union and RAB accounts, professional and not at all confrontational. "There'll be a letter saying there's an audit that's going to be performed, and asking you to contact [the union-assigned CPA] to pick dates when it's most convenient for everybody," says RAB president James Berg.

It's so routine, in fact, that not all managing agents feel the need to tell a board about it — and some boards don't even care to know.
"If a building is self-managed, obviously the board is involved," says Greenbaum. "Or if you're not comfortable that your management company is doing your payroll properly, you should ask about it," he adds. "I do see where the board needs to be involved if the auditor finds a problem, because if you're not making proper contributions, there are penalties and interest."

"Every agent should be sensitive as to whether a [particular] board wants that kind of information," says Berg, who sees it as a judgment call. "Certainly, if there's a finding from the audit, you should discuss that with a board."

What happens during an audit? At the time of its scheduling, the auditor sends the managing agent a list of the documentation required, generally items related to payroll. This might include the payroll portion of tax returns, payroll sheets, time cards and similar things. An audit generally covers three to four years.

Employers cover the cost of the audit; one CPA's letter to managing agents lists hourly rates of $65/hour for audit and administrative staff, $90/hour for a payroll-audit manager and $165/hour for a partner.

Given the size of some employers and the sometimes complicated nature of withholding rules, it's not atypical to find that buildings owe money or in some cases are even due money.

"There are times when overpayments have been made," says Berg, "sometimes as a result of managing agents changing and payments being made twice, or employees leaving during a certain time" in a pay-period cycle.

Conversely, "There are places that have wound up owing substantial sums of money," observes Greenbaum. And initial findings may change. "For example," says Berg, "you may find out that only 14 of 20 employees should actually be covered, because they're actually managers or they might be in some different union."

Employers cover the cost of the audit; one CPA's letter to managing agents lists hourly rates of $65/hour for audit and administrative staff, $90/hour for a payroll-audit manager and $165/hour for a partner. can protest a finding.

The issue of whether or not an employer and the union can negotiate like people at a barter market – "How about 10 percent off if I pay cash?" – is touchy, but some arrangements appear to be the norm. "They will work with you," says Whiting. "Of course, it depends on the circumstances. You can negotiate and say, 'Okay, we'll pay the principal, but not the interest and penalties,' and they might say, 'We'll waive those if you pay the rest within 30 days.'"

"I always welcome these kinds of things, because I like the checks and balances," says Greenbaum. And how apprised should a board be? "It's important to let a board know as much as they want to know. Some boards will say, 'Just tell us if there's a problem.'"

Adapted from Habitat March 2007. For the complete article and more, join our Archive >>