Running an effective apprenticeship fund requires the management of a wide variety of key stakeholders. Navigating this complicated landscape and avoiding potential pitfalls have long been concerns for a wide variety of apprenticeship program stakeholders, including training directors, coordinators and trustees.

The International Foundation Canadian Apprenticeship Program Answer Guide can help. This online, member-exclusive resource is designed to be a quick Q&A-style reference for those involved with apprenticeship programs. Below are eight popular questions from the Answer Guide that address trustee meetings, insurance issues, internal controls, fraud concerns and trust fund operations.

Trustee Meetings

What should be contained in the minutes of a trustee meeting for an apprenticeship program?

Minutes are an important part of trustee meetings because they serve as a formal record of what happened at a meeting in the event of future regulatory agency investigation or legal action.

Minutes should support the actions of the trustees. Good minutes clearly outline what happened at the meeting and present the decisions made by trustees at these meetings. Minutes should not, however, be a word-for-word account of everything said.

Minutes should be prepared as soon as possible after the meeting and should be approved at the following meeting.

How often should the trustees of an apprenticeship program meet?

There are two guideposts to assist in determining how often a board of trustees of an apprenticeship program should meet.

1. Plan documents. The governing trust document may specify how often trustee meetings are required. When this is the case, the provision in the trust document must be followed.
2. Need. Frequency of meetings is also dictated by how often trustees need to meet to perform business.

The end goal when scheduling trustee meetings is to ensure maximum attendance by trustees and essential plan professionals.

Insurance Issues

What types of insurance should an apprenticeship program have?

Apprenticeship programs can have many differences, some small and others large. Some programs rent their training facilities, and others own extensive training facilities. Because of the many differences in training programs, insurance needs can be vastly different.

An excellent method of determining the insurance needs of a training program is to utilize an insurance risk manager. A manager evaluates the risks of a program and recommends types of insurance and coverage amounts. Among the types of insurance a risk manager should consider, as might be applicable, are:

• General liability
• Fiduciary liability
• Directors and officers policy including educators liability
• Cyber-risk liability
• Fidelity bonds
• Commercial insurance
• Student accident insurance
• Workers’ compensation (WSIB)
• Auto liability
• Umbrella liability.

Internal Controls

What internal control systems should an apprenticeship program have?

Internal controls are processes designed to provide reasonable assurance regarding the safeguarding of apprenticeship program assets and the reliability of financial accounting and reporting systems.

An apprenticeship program has a number of internal control systems. They include:

• Cash receipts system
• Cash disbursement system
• Payroll system
• Inventory control system
• Training records system
• Information technology system.

An apprenticeship program may have excellent internal controls over some of these systems, while other systems could be less than adequate.

As part of an annual audit process, an external auditor will evaluate the internal controls of a program to identify weaknesses and make recommendations for improvements.

Why should an apprenticeship program have internal controls that ensure the accurate recording of transactions?

Ultimately, trustees are responsible for ensuring that they have an effective system of internal controls. Trustees may delegate the responsibility to create and maintain internal controls, but trustees must realize that they remain accountable for ensuring that proper internal controls are, in fact, in place. Trustees are encouraged to hire accounting professionals to advise them on the state of their internal control environment.

The cash disbursements journal of an apprenticeship program should be an accurate record of the cash disbursements of the organization. Accuracy can only be achieved if all cash disbursement transactions are recorded in the appropriate amount, in the appropriate account and in the proper accounting period. Errors in posting transactions can lead to financial statements that are misleading to those relying on them. Errors in recording transactions also can cause problems for an apprenticeship program’s external auditors. Auditors only test selected transactions and are thus dependent on a program’s internal controls. Auditors test internal control systems to ensure the validity of recorded transactions. Auditors rely on the trustees to ensure that proper internal controls are in place. The audit engagement letter signed by the trustees sets out that internal controls are the responsibility of “management,” which is the trustees.

Fraud Concerns

What types of fraud can be perpetrated in an apprenticeship program?

There are two types of fraud. The first is the theft of cash, inventory and equipment owned by the organization. The second is manipulation of the organization’s financial statements. Apprenticeship programs are subject to both of these types of fraud.

Here are some specific frauds that could occur in apprenticeship programs.

1. Using apprentices to do work for a fiduciary. This would be seen as an abuse as much as a fraud. Abuse cannot be condoned by trustees either.
2. Theft of cash
3. Tools, supplies and/or equipment diverted for personal use
4. Registration fees never turned in
5. Contributions from employers taken before being recorded by the apprenticeship program
6. Manipulation of the financial statements to make it appear that the program is doing better than it actually is.

How can fraud best be prevented and/or detected in an apprenticeship program?

There are certain steps an apprenticeship program can take or have in place to help prevent fraud.

1. Have a strong system of internal controls. See the above questions and answers related to internal controls for a full discussion on this issue.
2. Pursue unusual items in financial statements. Transactions that do not make sense or are difficult to understand should be investigated to determine if fraud exists.
3. Hold discussions with external auditors. The external auditor plans his/her examination to detect material errors and irregularities in the financial statements. Trustees of apprenticeship programs should annually have a frank discussion with the auditor to discuss where fraud might occur.
4. Trustees of a program should have an annual brainstorming session to discuss where fraud might be likely. The conclusions of such a session could then be shared with external auditors.
5. The program should have a conflict policy signed annually by all trustees and program employees. Such a policy may not prevent fraud; however, it does put everyone on notice that fraud will not be tolerated.

These steps may not prevent all fraud but, when properly implemented, they make it less likely that fraud will occur.

Trust Fund Operations

What are some of the common areas of scrutiny that trustees may want to keep in mind when evaluating the operations of the apprenticeship trust?

Areas of concern in apprenticeship programs commonly include:

• Failure to collect all contributions due
• Inadequate documentation and policies
• Failure to follow plan documentation and policies
• Lack of oversight of program vehicles, equipment and inventory
• Issues regarding training facilities being used for purposes other than intended
• Unreasonable instructor salaries and bonuses, or a lack of a proper process for changes related thereto
• Charitable donations that are not allowed in the trust document
• Staff holiday parties that are lavish, including gifts paid for by the trust
• Lavish graduation ceremonies
• Excessive or unsupported professional fees
• Trustee expenses not in accordance with plan policies
• Shared services with other entities (such as the local union or related benefit plans) that are not properly allocated or supported by an agreement
• Failure to hold regular trustee meetings
• Failure to keep minutes of trustee meetings.

Learn More About Apprenticeship Programs

The Apprenticeship Program Answer Guide is an online resource designed to be a quick reference for apprenticeship program coordinators, trustees and directors, and other interested constituents whenever a question arises. With a focus on practicality, the guide addresses apprenticeship program topics from top to bottom, with subjects ranging from recruiting to audits to trends and more. See the full list of Q&A’s here.

Justin Held, CEBS
Senior Research Analyst at the International Foundation 

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