Finding Text
Criteria: The Organization is required to have internal controls that ensure it is following the policies and procedures it has put into place to safeguard its financial position. Condition: During our audit, we noted that the Organization has not been following its written policy related to accrued vacation. This policy states that on the anniversary of an employee’s hire date, the employee will lose any accrued vacation time in excess of 240 hours. However, the Organization has started paying employees at the end of each calendar year for vacation time lost during that calendar year. Cause: The change in the way the Organization handles accrued vacation came about partially due to the Organization being understaffed, which resulted in employees being required to work and forfeit vacation time, and partially due to the COVID-19 pandemic, which restricted travel, and the resulting sentiment that it was unfair for employees to lose vacation time that they were unable to take under these circumstances. Although the decision to begin paying employees for lost vacation time was verbally approved by the Organization’s President/CEO, the approval was not documented in writing, and the Organization’s written policy was not updated to reflect this change. Effect: The Organization is not adhering to its written policy on accrued vacation and is incurring an expense that has not been formally approved in writing by the Organization’s management or board. Recommendation: We recommend that either the Organization no longer pay employees for lost vacation time, in accordance with its current policy, or that the Organization update its written policy, with appropriate, documented approval from management and the board, to accurately reflect the manner in which it wishes to address accrued vacation. Management’s Response: Management’s Response: Under the current policy, vacation hours over 240 are typically lost on an employee’s anniversary date. During Covid, due to periods of low staffing, management chose to pay out excess vacation hours instead of forfeiting them, prioritizing client safety and agency culture. The agency has continued this approach. By the end of 2025, The HR Director and Senior Management will review the policy and submit recommendations to the Personnel Committee and Board on whether to allow future payouts or return to a "no payout" rule. Any updates will be reflected in the Employee Handbook.