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Dewey searching for new formula for bonuses

Cape Gazette of Lewes, Delaware

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Audit identifies need to establish new method of calculation

Dewey Beach Town Manager Marc Appelbaum said he doesn't want to change the practice of giving year-end employee bonuses; he wants to change how those bonuses are calculated.

"Our year-end results have come into question because some people thought it shouldn't be based on the budgeted amount, and how we beat our budget," said Appelbaum during a Dec. 13 town council meeting.

Appelbaum said the method used to calculate year-end bonuses has become controversial because it's based on surplus revenue at the end of the year.

Appelbaum said the bonus has always been paid on the town-approved operational budget, not the auditor-approved report.

"The auditor said this needs to be clarified, so I want to clarify it by eliminating it and coming up with something else," said Appelbaum. "I will come up with something else that will yield a similar dollar amount that will be clearer."

Earlier this year the TGM Group, an independent auditor from Salisbury, Md., reported an unmodified audit of Fiscal Year 2014 - April 1, 2013, to March 31, 2014 - for the town.

During an Aug. 8 meeting, Appelbaum said it was the highest standard given by an accounting firm, and council unanimously approved the report.

As part of standard operating procedure, the auditor recommended changes to Dewey's budgeting process. The implementation of the Generally Accepted Accounting Principals method of budget keeping, which is what the auditors used for their evaluation, topped the list of proposed changes.

The town's budget is currently based on a cash method - cash coming in versus cash going out - and is what the town has always used.

Following the approval of the audit by the town, the auditor sent a management letter to town officials listing additional deficiencies and providing recommendations for adjusting them. Included in that letter were concerns over how employee bonuses are calculated.

Resolution 138, created in October 2009, says that nonseasonal employees receive an annual appreciation bonus of $250 and a conditional bonus of $250 if the independent auditor agrees the town met its budgeted goal for a particular fiscal year.

Nonseasonal employees are also eligible for a performance bonus each year. The bonus is based on the amount of surplus as defined by the independent audit.

Appelbaum said the resolution is confusing because the auditor's report is GAAP-based, but the town's budgeted goal is not. Using the cash-based method, the town reported a $260,000 surplus at the end of FY14, while the independent auditor, using GAAP, reported a $50,000 surplus. Appelbaum did not have an alternative bonus calculation at the meeting, but he said he would come back with a suggestion for council's January meeting. He said the bonus for the current fiscal year, which began April 1, would be based on any new method.

Commissioner David Jasinski agreed a change was needed, but said it was important that the bonuses are similar in amount and that an alternative be proposed soon so town employees don't think bonuses are being taken away.

Council voted 4-1 in favor of rescinding the resolution contingent on having a replacement program with approximately the same funding by the end of February.

Commissioner Anna Legates was the lone no vote. She said she voted no because she didn't feel council had properly discussed the auditor's management letter, and she was still trying to wrap her head around the differences between a GAAP-based budget and the cash-based method used by the town.

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Original Publication Date: January 2, 2015

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