Greetings from SEIU Local 500, the union for MCPS supporting services employees!

Transcription

1 Dear MCPS Employee: Greetings from SEIU Local 500, the union for MCPS supporting services employees! SEIU Local 500's contract with MCPS requires that all bargaining unit employees working 20 or more hours per week hired on or after July 1, 1978, either become a member and maintain membership in SEIU Local 500 or pay an agency fee. This booklet explains your rights to choose to be a member of SEIU Local 500, or to be an agency fee payer. It also explains the procedures to follow if you do not agree with our determination of the fair share rate. We are happy to answer your questions about these matters. Please call us. We are confident you'll find joining is your best option. Through SEIU Local 500 representation, MCPS supporting service employees enjoy some of the highest pay and best benefits of any school employees in the state of Maryland. These benefits didn't just happen; they have been won through years of pressing for improvements by employees who joined together as union members. As union members retire from school system, new employees come into the union and continue the fight for decent working conditions and to fulfill the union's mission of raising the standard of living for ourselves and our families. Were it not for SEIU Local 500 members, we would not enjoy: One of the best contracts for public employees in the entire state of Maryland Significantly improved retirement benefits Wage increases that consistently exceed the rate of inflation Unique protections that have increased paid work hours of employees High-quality representation for all employees with grievances A strong defense against repeated efforts to erode employees' health benefits Increased resources for professional development and training A meaningful voice at the School Board, County Council, and in Annapolis MCPS employees need a strong SEIU Local 500. To be strong, we need YOU! Administrators, politicians, and supervisors take note when workers speak with a united voice. They know when employees join together under the union banner, and they know when employees do not have a unified voice. Compare the wages and benefits of working for MCPS with those where there is no union. A strong SEIU Local 500 has made a difference, and must continue to do so! For a little more than 25 cents a day, you can move from agency fee to full membership in SEIU Local giving you unique member benefits (like discounted movie tickets and legal consultation) while ensuring that SEIU Local 500 continues to provide a strong voice for MCPS workers. Invest in yourself -- join SEIU Local 500 today! The following pages explain your rights to be a member of the union or to refrain from doing so, as well as the rights you will be giving up if you opt to be an agency fee payer rather than a union member. We recommend that you read the pages carefully, call us with any questions. We believe the right choice for you and all MCPS employees is to become a member of SEIU Local 500. Respectfully, Merle Cuttitta, President

2 August 2014 NOTICE OF RIGHT TO LIMIT OBLIGATION TO UNION TO PAYMENT OF FEES EQUAL TO INITIATION FEE AND PERIODIC DUES Under the terms of the collective bargaining agreement in effect between Montgomery County Public Schools and SEIU Local 500 if you are a unit member who was employed by MCPS on or after July 1, 1978, you are obligated as a condition of employment to become a member of the union, and to remain a member or to pay service fees to the union. 1 If you elect not to join the union and thereby to limit your obligation to the union to the payment of these fees, you will lose all the rights of union membership, including the right to attend union meetings, the right to vote for union officers, and the right to take advantage of other privileges of membership, including a low-interest union credit card, legal services plan, and travel and insurance benefits. Moreover, we believe that the more workers who elect full union membership, the greater strength to improve your wages, hours and other working conditions through collective bargaining with your employer. However, if you elect to limit your obligation to the union to the payment of agency fees, the union will nevertheless continue to fairly represent you. NOTICE OF RIGHT TO OBJECT TO SUPPORTING UNION ACTIVITIES NOT GERMANE TO COLLECTIVE BARGAINING If you elect or have elected not to join the union and thereby limit your obligation to the union to the payment of agency fees, you have the right to refrain from providing financial support to union activities not germane to collective bargaining and representation. If you provide notice of your intent to limit your obligation to the union to payment of agency fees, the union will reduce your fees proportional to the percentage of the union s total expenditures that are not germane to collective bargaining and representation. This is identified as a fair share fee. SEIU Local 500 has determined that the fair share fee is 80.4% of regular dues for members. The current dues rate for members is $26.00 per pay period (for 20 pay periods). Therefore, the fair share fee is currently set at $ The fair share fee has been calculated based on the average of the last four years percentages of the union s expenditures for collective bargaining, grievances and arbitrations, contract administration and representation, as well as other relevant matters affecting the terms and conditions of your employment. For the years 2010 through 2013 those percentages were 81%, 81.5%, 82%, and 77%, averaging 80.4%. The actual figures are determined by annual audits by an outside independent auditor. 1 The Agency Shop provision in the current negotiated Agreement between the Board of Education of Montgomery County and SEIU Local 500. Article 22 Rights of the Union, Section B Agency Shop, includes the following: 5. This agency shop provision shall not be applicable to any employee who is a member of a religious organization, the established tenets or teaching of which oppose its members joining or financially supporting any collective bargaining organization, and who shall pay an amount of money equivalent to the Union s regular monthly membership dues to a nonreligious, nonunion charity, or to such other charitable organizations as may be mutually agreed upon by the employee and the Union to which such employee would otherwise be required to pay service fees, and who furnishes to the Board and SEIU Local 500 written proof of such payment.

3 If you are a current member and you are changing your status from union member to non-member, you must state this in the notice of your decision. Upon receipt of notice of your decision, the union will reduce your fees proportional to the percentage of the union s total expenditures that are not germane to collective bargaining and representation. The union will also provide you with financial information sufficient for you to assess whether the union has correctly calculated this percentage. You can view these financial documents verified by the union s independent Certified Public Accountant which provide the basis on which the chargeable fair share fee was calculated, at or you can call the Union office at (toll-free, at ), to request a copy of the financial documents. If you choose to challenge the union s determination of the chargeable fair share fee, you must do so by mailing notice of your challenge to Merle Cuttitta, President, SEIU Local 500, 901 Russell Avenue, Suite 300, Gaithersburg, Maryland Your challenge must indicate that you are dissenting from the union s determination of the chargeable fair share fee, and must be postmarked no later than thirty days from the date the union mailed the financial documents to you. You should include your name, address, social security number, job title, and work location. Although it is not required, you may consider sending the notice by certified mail, for your own protection. Any amount of allegedly nonchargeable expenses reasonably in dispute and under challenge will be kept in a separate interestbearing escrow account. All disputes regarding the fair share fee established by the union will be resolved through an arbitration procedure administered by the American Arbitration Association, in which an impartial arbitrator, following a hearing, will determine any challenges to the Union s criteria, expenditures and conclusion regarding the fair share payment. No later than the next November 30, SEIU Local 500 will notify the AAA of all challenges received by that date. The AAA will then schedule a single consolidated hearing for all such challenges pursuant to its rules for impartial determination of union fees (copies available from AAA), and advise you and any other challengers of the identity of the arbitrator independently selected by the AAA to adjudicate the dispute. The AAA will then notify you and the union of the date on which a hearing will be held. The union will bear the cost of the arbitrator s fees. However, each party is responsible for bearing its own legal costs, including acquiring transcripts and any and all additional expenditures due to preparing and/or presenting its case. There shall be no more than one fair share arbitration hearing each year. The arbitrator shall have authority to determine a fair share fee and order any adjustments therein and refunds to the challenging employees or to the union from the interest-bearing escrow account, which in the opinion of the arbitrator are warranted. The union will provide a verbatim transcription of the hearing and pay for a copy of the transcript for the arbitrator, as well as a copy for the union. The fair share fee reflects your share of the Union s expenditures for collective bargaining, grievances and arbitrations, contract administration and representation, as well as other matters germane to collective bargaining and relevant matters affecting the terms and conditions of your employment. The categories of activity that have been included in calculating your fair share fee include the following criteria, which have been approved by the courts: 1. Gathering information from employees concerning collective bargaining proposals. 2. Gathering information in preparation for the negotiation of collective bargaining agreements. 3. Negotiating collective bargaining agreements. 4. Adjusting grievances and conducting arbitrations pursuant to collective bargaining agreements, as well as representing employees under employment-related laws or regulations. 5. Conducting ratification proceedings for negotiated agreements. 6. Providing information on the negotiations, or provisions in collective bargaining agreements, as well as on matters relating to representation in the collective bargaining process and contract administration. 7. Purchasing books, reports, and advance sheets used in matters relating to representation in the collective bargaining process and contract administration. 8. Paying technicians and professionals in labor law, economics, and other subjects for services used in (a) negotiating and administering collective bargaining agreements, and (b) processing grievances and conducting arbitrations. 9. Publishing those portions of newspapers and newsletters which relate to bargaining and representation. 10. Participating in lawful impasse procedures, and fact finding, mediation, arbitration, and economic action intended to secure favorable collective bargaining agreements and favorable resolution of grievances.

4 11. Prosecuting and defending litigation or charges before administrative agencies relating to ratification, interpretation, or enforcement of collective bargaining agreements. 12. Supporting and paying affiliation fees to SEIU and subordinate bodies of the SEIU to the extent that such support and fees relate to the representational interests of the union in the collective bargaining process and contract administration. 13. Prosecuting and defending litigation or charges relating to concerted activity, the duty of fair representation and collective bargaining process and contract administration. 14. Providing social and recreational activities open to all represented employees. 15. Governing the union, and conducting union elections. 16. Conducting general membership meetings and conventions. 17. Lobbying directed to ratifying or implementing the collective bargaining agreement. 18. Payments for insurance, medical care, retirement, disability, and death-related benefits pro-rated with salaries for persons paid for services in carrying out the representational interests of collective bargaining and contract administration. 19. Operating and administrative costs, with expenses such as rent, utilities, automobiles, etc., pro-rated for the portion pertaining to collective bargaining. The fair share fee does not include any expenses, either direct or indirect, for the following activities: Training and voter registration, get-out-the-vote, and political campaigns. Supporting and contributing to charitable organizations. Supporting and contributing to political organizations and candidates for public office. Supporting and contributing to ideological causes and committees, including ballot measures. Supporting and contributing to activities concerning foreign affairs. Members-only benefits. Litigation not related to bargaining unit matters, collective bargaining and representation. Lobbying that is not directed toward ratifying or implementing the collective bargaining agreement. We believe that all of the Union s expenditures, both those germane and those not germane to collective bargaining and representation, benefit you. For example, the Union may support the extension of the family and medical leave requirements through legislation rather than collective bargaining. This would benefit all workers. Another example would be lobbying efforts by the Union for improvements to retirement benefits. This too is for the good of all employees. We therefore believe that it is in your interest to be a member. Published by SEIU Local 500, 901 Russell Ave, Suite 300, Gaithersburg, MD , Merle A. Cuttitta, President

5 SERVICE EMPLOYEES INTERNATIONAL UNION, CTW, CLC UNITED STATES DIVISION CONSOLIDATED STATEMENT OF EXPENSES AND ALLOCATION BETWEEN CHARGEABLE EXPENSES AND NON-CHARGEABLE EXPENSES SERIES 2 DECEMBER 31, 2012

6 SERVICE EMPLOYEES INTERNATIONAL UNION, CTW, CLC UNITED STATES DIVISION CONSOLIDATED STATEMENT OF EXPENSES AND ALLOCATION BETWEEN CHARGEABLE EXPENSES AND NON-CHARGEABLE EXPENSES SERIES 2 DECEMBER 31, 2012 TABLE OF CONTENTS Report of Independent Auditors 1 Consolidated Statement of Expenses and Allocation Between Chargeable Expenses and Non-Chargeable Expenses 3 PAGE Notes to Consolidated Statement 4-8

7 REPORT OF INDEPENDENT AUDITORS CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS ADVISORS 7501 WISCONSIN AVENUE SUITE 1200 WEST BETHESDA, MD PHONE FAX 566 WEST LAKE STREET SUITE 300 CHICAGO, IL PHONE FAX The International Executive Board of the Service Employees International Union, CTW, CLC We have audited the accompanying consolidated statement of expenses and allocation between chargeable expenses and non-chargeable expenses - Series 2 of the Service Employees International Union, CTW, CLC - United States Division (the International Union) for the year ended December 31, Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of this consolidated statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of the consolidated statement that is free from material misstatements, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on the consolidated statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated statement is free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

8 The total expenses reflected in Column A of the consolidated statement agree to the expenses in the audited consolidated financial statement of the International Union for the year ended December 31, 2012, as modified to remove certain expenses, as detailed on the consolidated statement of expenses and allocation between chargeable expenses and non-chargeable expenses - series 2. The allocation of expenses between chargeable (Column B) and non-chargeable (Column C) is based on the definitions and significant factors and assumptions described in Notes 2 and 3. Opinion In our opinion, the consolidated statement referred to above presents fairly, in all material respects, the consolidated expenses of the Service Employees International Union, CTW, CLC for the year ended December 31, 2012, modified as discussed in the preceding paragraph and the allocated expenses between chargeable and non-chargeable expenses, on the basis of the definitions and significant factors and assumptions described in Notes 2 and 3. This report is intended solely for the information and use of the Service Employees International Union, CTW, CLC and its agency fee payers and is not intended to be and should not be used by anyone other than those specified parties Bethesda, MD August 26,

9 Service Employees International Union, CTW, CLC United States Division Consolidated Statement of Expense and Allocation Between Chargeable and Non-chargeable Expenses Series 2 Year Ended December 31, 2012 Column A Column B Column C Total Chargeable Non-chargeable Expenses Expenses Expenses Note Expenses Program expenses Representation and organizing program Organizing Fund $ 54,307,591 $ 11,763,816 $ 42,543,775 3a Health Care Division 27,666,776 17,108,959 10,557,817 3a Public Division 13,402,473 6,535,405 6,867,068 3a Property Services Division 9,279,634 8,176,470 1,103,164 3a South/Southwest Division 10,915,178 7,776,936 3,138,242 3a Global organizing 1,107, , ,131 3a Research 2,934,138 1,857,898 1,076,240 3a Capital stewardship 2,758,569 1,659,695 1,098,874 3a Total representation and organizing 122,371,653 55,111,341 67,260,312 Membership services: Politics 7,094,782-7,094,782 3b Political Education 55,654,714-55,654,714 3c Committee on Political Education 25,536,766-25,536,766 3d Government Relations 11,482,646 2,534,146 8,948,500 3e Field Information Services 3,507,855 2,734, ,018 3f Contributions & Affliate Support 8,467,511 6,906,758 1,560,753 3g Member Leadership Program 4,377,111-4,377,111 3h Union Communication 6,817,660 5,005,617 1,812,043 3i Convention & Conferences 12,170,802 12,170,802-3j Strike & Defense Fund 7,436,378 7,436,378-3k SEIU Canada 9,043,071 9,043,071-3l Total membership services 151,589,296 45,831, ,757,687 Total program services 273,960, ,942, ,017,999 Administrative expenses IEB and Leadership support 11,848,419 10,225,530 1,622,889 3m Field operations support 3,084,793 2,718, ,527 3n Legal 6,209,691 3,433,917 2,775,774 3o Finance 4,959,024 2,108,109 2,850,915 3p Information Technology 5,640,104 2,397,640 3,242,464 3q Administrative Support 4,711,866 2,003,041 2,708,825 3r Union Administration 9,310,238 3,957,835 5,352,403 3s Building expenses 10,306,509 4,381,355 5,925,154 3t Total administrative expenses 56,070,644 31,225,692 24,844,952 Total operating expenses 330,031, ,168, ,862,951 Less: Canadian expenses paid directly from Canadian per-capita taxes (9,043,071) (9,043,071) - Political expenses paid from voluntary contributions (25,536,766) - (25,536,766) Total expenses, as modified $ 295,451,756 $ 123,125,571 $ 172,326, % 41.67% 58.33% See accompanying notes to statement

10 SERVICE EMPLOYEES INTERNATIONAL UNION, CTW, CLC UNITED STATES DIVISION NOTES TO CONSOLIDATED STATEMENT OF EXPENSES AND ALLOCATION BETWEEN CHARGEABLE EXPENSES AND NON-CHARGEABLE EXPENSES SERIES 2 DECEMBER 31, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Method of Accounting - The consolidated statements has been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. Basis of Presentation - The accompanying consolidated statement of expenses and allocation between chargeable and non-chargeable expenses was prepared for the purpose of determining the fair share cost of services rendered by the Service Employees International Union, CTW, CLC - United States Division (the International Union) for employees represented by, but not members of, the International Union and its affiliated local unions. This statement is not intended to be a complete presentation of the International Union s financial position, or changes in its net assets and its cash flows in accordance with generally accepted accounting principles. Consolidation - The accompanying consolidated statement includes the accounts of the United States Division and 1800 Massachusetts Avenue Corporation, a not-for-profit corporation formed to be a title-holding corporation for the International Union s existing headquarters building. All significant intercompany balances and transactions have been eliminated in consolidation. Tax Status - The United States Division is exempt from Federal income taxes, except on net income, if any, from unrelated business activities, under Section 501(c)(5) of the Internal Revenue Code Massachusetts Avenue Corporation is exempt from income tax, except on net income, if any, from unrelated business activities, under Section 501(c)(2) of the Internal Revenue Code. Subsequent Events Review - Subsequent events have been evaluated through August 26, 2013, which is the date the financial statements were available to be issued. This review and evaluation revealed no new material event or transaction which would require an additional adjustment to or disclosure in the accompanying financial statements

11 NOTE 2. DEFINITIONS The following definitions of chargeable and non-chargeable expenses are based on existing law and the International Union s interpretation of court cases. a. Chargeable Expenses - Chargeable expenses are those incurred by the International Union that reflect the share of the costs of operations of the International Union which are considered necessarily and reasonably incurred for the purpose of assisting local unions in the performance of their duties as a representative of the employees in dealing with the employer on labor management issues, including the costs of: negotiating and administering the collective bargaining contract; settling grievances and disputes by mutual agreement, or in arbitration, court or otherwise; activities and undertakings normally and reasonably employed to implement the duties of the local union as representative of the employees in the bargaining unit; and the maintenance of the International Union s and local unions existence. The following are examples of expenditures classified as chargeable: preparation for and negotiations of collective bargaining agreements; contract administration including investigating and processing grievances; meetings, conferences, administrative, arbitral and court proceedings and pertinent investigation and research in connection with work-related subjects and issues; handling work-related problems of employees; organizing employees of employers in competitive markets where SEIU already represents employees in the same markets; and providing legal, economic, and technical expertise on behalf of employees in all work-related matters. b. Non-Chargeable Expenses - Non-chargeable expenses are those expenses incurred by the International Union for the benefit and advancement of represented employees and their union which are not considered representational activities for non-members. Non-chargeable activities include those services that are ideological or political in nature; those that are exclusively for the benefit of full union members; and those that otherwise are not considered germane to the collective bargaining process. Activities that are classified as non-chargeable include the following: legislative and government activities outside the limited context of contract ratification or implementation; public relations and other efforts directed towards functional activities that are not considered germane to the collective bargaining process; political activity expenses which include support at the Federal, state, or local level; donations; per capita tax fees paid to a labor organization; organizing employees of units of government, and employees of employers in markets where SEIU does not already represent employees; and the cost of benefits that are not available to nonmembers

12 NOTE 3. SIGNIFICANT FACTORS AND ASSUMPTIONS USED IN THE ALLOCATION OF CONSOLIDATED EXPENSES BETWEEN CHARGEABLE AND NON-CHARGEABLE a. Representation and organizing expenses - Representation and organizing expenses are allocated to chargeable and non-chargeable expenses based on either the allocation of personnel costs which have been determined through a time study or the nature of the expense for non-personnel costs. b. Politics, government and community - Expenses related to politics have been determined to be fully non-chargeable. c. Political education - These expenses relate entirely to political and legislative activities and are considered to be fully non-chargeable. d. Committee on political education - Expenses incurred by the Committee on Political Education and the Political Education and Action Funds relate entirely to political and legislative activities and are considered to be fully non-chargeable. The total expenses as reported in the audited consolidated financial statement have been modified to remove from expenses the political expenses paid from voluntary contributions. e. Government relations - These expenses are allocated to chargeable and nonchargeable expenses based on either the allocation of personnel costs which have been determined through a time study or the nature of the expense for nonpersonnel costs. f. Field information services - These expenses are allocated to chargeable and nonchargeable expenses based on either the allocation of personnel costs which have been determined through a time study or the nature of the expense for nonpersonnel costs. g. Contributions and affiliate support - These expenses are allocated to chargeable and non-chargeable expenses based on either the allocation of personnel costs which have been determined through a time study or the nature of the expense for nonpersonnel costs. h. Member leadership program - These expenses related entirely to member-only activities and are considered to be fully non-chargeable. i. Union communication - These expenses are allocated to chargeable and nonchargeable expenses based on either the allocation of personnel costs which have been determined through a time study or the nature of the expense for nonpersonnel costs

13 NOTE 3. SIGNIFICANT FACTORS AND ASSUMPTIONS USED IN THE ALLOCATION OF CONSOLIDATED EXPENSES BETWEEN CHARGEABLE AND NON-CHARGEABLE (CONTINUED) j. Convention Fund - Expenses for the International Union s convention are considered to be fully chargeable. k. Strike and Defense Funds - Expenses of the strike and defense funds include financial assistance to local unions involved in legitimate strikes and lockouts, in defending the integrity and welfare of the local unions, and in providing financial assistance for educational programs including advertisements, leaflets, handbills, and other media-based messages concerning contract ratification. All expenses of the strike and defense funds are considered to be fully chargeable. l. SEIU Canada - Expenses incurred by the SEIU Canadian Division. m. IEB and Leader Support - These expenses are allocated to chargeable and nonchargeable expenses based on either the allocation of personnel costs which have been determined through a time study or the nature of the expense for nonpersonnel costs. n. Field operation support- These expenses are allocated to chargeable and nonchargeable expenses based on either the allocation of personnel costs which have been determined through a time study or the nature of the expense for nonpersonnel costs. o. Legal - These expenses are allocated to chargeable and non-chargeable expenses based on either the allocation of personnel costs which have been determined through a time study or the nature of the expense for non-personnel costs. p. Finance - These expenses are allocated to chargeable and non-chargeable expenses based on the chargeable and non-chargeable percentages of the program service expenses, IEB and Leadership support, field operations support and legal expenses. q. Information Technology - These expenses are allocated to chargeable and nonchargeable expenses based on the chargeable and non-chargeable percentages of the program service expenses, IEB and Leadership support, field operations support and legal expenses. r. Administrative Support - These expenses are allocated to chargeable and nonchargeable expenses based on the chargeable and non-chargeable percentages of the program service expenses, IEB and Leadership support, field operations support and legal expenses

14 NOTE 3. SIGNIFICANT FACTORS AND ASSUMPTIONS USED IN THE ALLOCATION OF CONSOLIDATED EXPENSES BETWEEN CHARGEABLE AND NON-CHARGEABLE (CONTINUED) s. Union Administration - These expenses are allocated to chargeable and nonchargeable expenses based on the chargeable and non-chargeable percentages of the program service expenses, IEB and Leadership support, field operations support and legal expenses. t. Building expenses - These expenses are allocated to chargeable and non-chargeable expenses based on the chargeable and non-chargeable percentages of the program service expenses, IEB and Leadership support, field operations support and legal expenses

15 SEIU LOCAL 500, INC. CONSOLIDATED STATEMENT OF EXPENSES AND ALLOCATION OF EXPENSES BETWEEN CHARGEABLE EXPENSES AND NON-CHARGEABLE EXPENSES AND REPORT OF INDEPENDENT AUDITORS YEAR ENDED SEPTEMBER 30, 2013

16 SEIU LOCAL 500, INC. CONSOLIDATED STATEMENT OF EXPENSES AND ALLOCATION OF EXPENSES BETWEEN CHARGEABLE EXPENSES AND NON-CHARGEABLE EXPENSES MODIFIED CASH BASIS YEAR ENDED SEPTEMBER 30, 2013 CONTENTS Report of Independent Auditors 1 Consolidated Statement of Expenses and Allocation of Expenses Between Chargeable Expenses and Non-Chargeable Expenses Modified Cash Basis 3 Notes to Statement 4 PAGE

17 REPORT OF INDEPENDENT AUDITORS To the Executive Board of SEIU Local 500, Inc. We have audited the accompanying consolidated statement of expenses and the allocation of expenses between chargeable and non-chargeable expenses (modified cash basis) for the Service Employees International Union, Local 500 (Local 500) for the year ended September 30, 2103, and the related notes to the statement. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of this statement in accordance with the modified cash basis of accounting as described in Note 1, the description presented in Note 2 and the significant factors and assumptions described in Note 3. Tthis includes determining that the modified cash basis of accounting is an acceptable basis for the preparation of this financial statement in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement that is free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on this statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

18 Opinion In our opinion, the consolidated statement of expenses and allocation between chargeable and non-chargeable expenses (modified cash basis) referred to above presents fairly, in all material respects, the total expenditures of Local 500 for the year ended September 30, 2013, and allocation of the expenses between chargeable and non-chargeable based on the descriptions presented in Note 2 and the significant factors and assumptions described in Note 3. Basis of Accounting We draw attention to Note 1 of the consolidated statement, which describes the basis of accounting. The consolidated statement is prepared on the modified cash basis of accounting, which is a basis other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to that matter. Other Matters We have audited in accordance with auditing standards generally accepted in the United States of America to consolidated financial statements of Local 500 for the year ended September 30, 2013, and our report thereon dated TBD expressed an unqualified opinion on those statements. The total expenses reflected in Column A of the consolidated statement agree to the expenses in the audited consolidated financial statement (modified cash basis) of the Local Union for the year ended September 30, 2013, as modified to remove certain expenses, as detailed in Note 4. The allocation of expenses between chargeable and non-chargeable is based on the definitions and significant factors and assumptions described in notes 2 and 3. The accompanying statements was prepared for the purpose of determining the fairshare cost of services rendered by Local 500 for employees represented but not members of Local 500. The accompanying statement is not intended to be a complete presentation of Local 500's financial statements. Intended Use of This Report This report is intended solely for the information and use of the Service Employees International Union, Local 500, its affiliates and the agency fee payers and should not be used for any other purposes. Bethesda, MD March 4,

19 SEIU Local 500, Inc. Statement of Expenses and Allocation of Expenses Between Chargeable Expenses and Non-Chargeable Expenses Modified Cash Basis Year Ended September 30, 2013 Column A Column B Column C Total Chargeable Non-Chargeable Expenses Expenses Expenses Note Chapter activities $ 466 $ 466 $ - 3a Contract and maintenance 1,789,520 1,789,520-3b Organizing 576, ,247-3c Childcare 155, ,470-3d Affiliation fees 1,858, , ,972 3e Legislative and political education 248, ,863 3f Other contributions 2,725-2,725 3g Management and general office 800, ,042-3h Total expenses $ 5,432,173 $ 4,204,613 $ 1,227,560 Percentage 100% 77% 23% See accompanying notes to statement

20 SEIU LOCAL 500, INC. NOTES TO STATEMENT OF EXPENSES AND ALLOCATION OF EXPENSES BETWEEN CHARGEABLE EXPENSES AND NON-CHARGEABLE EXPENSES YEAR ENDED SEPTEMBER 30, 2013 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Method of Accounting - The statement has been prepared using the modified cash basis of accounting. Expenses are recognized when paid rather than when incurred. For purposes of this statement the activity of the MCCSSE PAC Fund, which is not funded with membership dues, has been excluded. b. Depreciation - Depreciation and amortization of buildings, improvements, furniture and equipment are generally computed over the estimated useful lives of the related assets by the straight-line method. c. Tax Status - SEIU Local 500, Inc. and the Building Corporation qualify for tax exempt status under the provisions of the Internal Revenue Code (IRC) and are, therefore, not subject to tax under present income tax laws, except that any unrelated business income is subject to certain taxes. d. Management Estimates and Assumptions - The presentation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from the estimates. NOTE 2. DESCRIPTION OF THE BASES FOR CLASSIFYING CHARGEABLE EXPENSES AND NON- CHARGEABLE EXPENSES a. Chargeable Expenses - Chargeable expenses are those expenses incurred by Local 500 for representational activities. Representational activities are those duties that Local 500 performs as a representative of the employees in dealings with the employers, including collective bargaining, contract administration, grievance arbitration, and other activities germane to the collective bargaining process

21 NOTE 2. DESCRIPTION OF THE BASES FOR CLASSIFYING CHARGEABLE EXPENSES AND NON- CHARGEABLE EXPENSES (CONTINUED) Activities that are classified as chargeable include the following: preparation for and negotiation of collective bargaining agreements; contract administration including grievance activities; economic actions including strike related expenses such as strikes, picketing, boycotts and demonstrations to maintain a unified front in support of collective bargaining objectives; expenses of litigation incident to negotiating and administrating contracts, settling grievances and disputes, arbitrations, and conducting other litigation before administrative agencies; publications to the extent they report on Local 500 s representational or administrative activities; membership education and training pertaining to grievance handling and arbitration; legislative and government activities which are worker related including preparation of literature, correspondence, demonstrations and meetings; organizing (including internal organizing); governance of Local 500 including conventions, Executive Board meetings and expenses; internal administration of Local 500 including formulating policy, judicial administration, financial administration, and maintenance of membership status; and, per capita tax or fees paid to various labor organizations to the extent they are expended for germane items. b. Non-Chargeable Expenses - Non-chargeable expenses are those expenses incurred by Local 500 for the benefit and advancement of the members and their union which are not considered representational activities for nonmembers. Non-chargeable activities are those services that are ideological or political in nature, exclusively for the benefit of members, and those that are not considered germane to representing non-members in the collective bargaining process. Activities that are classified as non-chargeable include the following: legislative and government activities which are citizen related; litigation costs that are not germane to member representation; public relations and other efforts directed toward functional activities that are not considered germane to representing non-members in the collective bargaining process; political activity expenses which include support at the Federal, state or local level; and publications to the extent they report on non-administrative or non-representational activities. Other non-chargeable examples include: charitable contributions; per capita tax or fees paid to a labor organization to the extent they are spent on non-chargeable items; and, the cost of benefits that are not available to non-members

22 NOTE 3. SIGNIFICANT FACTORS AND ASSUMPTIONS USED IN THE ALLOCATION OF EXPENSES BETWEEN CHARGEABLE EXPENSES AND NON-CHARGEABLE EXPENSES a. Chapter Activities - The costs incurred associated with meetings with members or administrators regarding enforcement of the contract, conferences and trainings specific to the Chapter including representation, safety or other collective bargaining matters. These costs are considered to be chargeable based on the description of chargeable costs in Note 2a. b. Contract and Maintenance - The costs incurred during grievance and arbitration activities are considered to be chargeable based on the description of chargeable costs in Note 2a. c. Organizing (Including Internal Organizing) - The costs incurred pertaining to recruitment of members are considered to be chargeable based on the description of chargeable costs in Note 2a. d. Childcare - The cost incurred related to the childcare division are considered chargeable based on the description of chargeable costs in Note 2a. e. Affiliation Fees - The payment of per capita taxes to the International Union were allocated between chargeable and non-chargeable based on the International's chargeable and non-chargeable percentage as reported in their statement of expenses and allocation of expenses between chargeable expenses and non-chargeable expenses for the year ended December 31, All other affiliation fees are considered to be non-chargeable. f. Legislative and Political Education - Costs incurred in the education of voters, voter registration drives and communication surrounding political matters affecting Local 500 members are considered to be non-chargeable based on the description of non-chargeable costs in Note 2b. g Other Contributions - Charitable or civic contributions are considered to be non-chargeable. h. Management and General Office - Administrative costs incurred in the ordinary course of business are considered to be chargeable based on the description of chargeable costs in Note 2a. These costs include office supplies, stationary, telephone expense, utilities, etc

23 NOTE 4. RECONCILIATION TO AUDITED FINANCIAL STATEMENTS The expenses included in this statement are based upon the total expenses of $5,955,750 reported in the audited financial statements of Local 500 for the year ended September 30, The total expenses per the financial statements have been modified for certain adjustments, as shown below: Total expenses as reported in the audited financial statements $ 5,955,750 Salaries funded by SEIU (481,258) Third-party rental revenue (36,522) MCCSSE PAC Fund expenses paid from a fund of voluntary contributions from members (5,797) Total expenses as reported on this statement $ 5,432,173 NOTE 5. SUBSEQUENT EVENTS REVIEW Subsequent events have been evaluated through March 4, 2014, which is the date the financial statements were available to be issued. This review and evaluation revealed no new material event or transaction which would require an additional adjustment to or disclosure in the accompanying financial statements