It’s The Thought (And The Policies & Procedures) That Count
The holiday season is upon us once again and that means we will soon be giving and receiving a present or two or three. A lot of times, rather than gamble with getting the wrong gift – especially for those we don’t know as well as we should – we will give the one-size-fits-all gift of cash. We all do it and it’s actually pretty common practice, especially in the workplace. In fact, you might even be in talks with school administrators and board members about holiday bonuses or gift cards for school employees this very moment. But before you set a budget and execute, you have to ask yourself that very important question – are gift cards and/or holiday bonuses even allowable?
Read Also: Uniform Guidance Procurement Standards Compliance
Proceed With Caution
You can breathe a sigh of relief. Yes – they are allowable – with conditions, of course.
To be considered an allowable expense, school boards must first take a few precautionary steps. For starters, the budget for all purchases, including gift card purchases, must be approved by the board at an open board meeting to ensure that it qualifies as an expenditure with a proper public purpose. It’s very important to maintain the purpose of these purchases as well as required documentation and approval.
Also, these types of purchases cannot be made with federal grant or Title I funds. Furthermore, all district-issued cash, gift cards or property with a value of $25 or greater are subject to federal employment taxes through payroll disbursements.
State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951), finds that expenditures made by a governmental unit should serve a public purpose. Typically the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. That being said, even if a purchase is reasonable, an Ohio Attorney General Opinion indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Additionally, you should consider the effect on the employee’s W-2, as various gifts can qualify as a taxable fringe benefits. However, prior to taking this decision to a vote, the board should review their policy manual to see if these type of purchases even qualify as a proper public purpose per board policy.
Read Also: Fringe Benefits Are Not ‘Tax Free’ Benefits
Need help determining what qualifies as a taxable fringe benefit or are you looking for help developing a policy to define proper public purpose? Email the government services team at Rea & Associates. Our team works closely with all government entities, school districts and municipalities, to ensure financial integrity and continued compliance.
By Morgan Helmick, CPA (Medina)
For additional insight for government entities, check out the following articles:
Putting The Kibosh On Credit Card Abuse In Local Governments