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June 25, 2008

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RH

Believe it or not, this is a common practice in the corporate world. Vendors get the benefit of having a "captive audience" of customers. The payroll deduction offers assurance of payment. In exchange, the employer (or employee association) does get a cut-can be based on gross sales of the product or the net income from the operation). It's usually a win-win situation.

The real issue, which you've hit on, is the proper level of accounting expertise in reconciling the payroll withholding accounts. As an employer, I'd be concerned whether or not the payroll taxes withheld from my employees were properly and timely deposited (failure to do so COULD cause the IRS to close the business). I'd also want to make sure any salary deferrals (your 401(k) or 403(b) amounts) were remitted to the plan administrator and invested so they'll be there when you retire!

There's a definite lack of control. Payroll shouldn't have turned over any funds to ANYONE to spend for a party until after the vendor was paid. That's when the jewelry sale profits retained by the city should have been spent.

Rick Wamre

If the business is yours or mine, I agree that it's no big deal to be putting together a payroll deduction plan for jewelry or whatever else, because if things become messed up, our time and money will be spent fixing the problem. But if DART, a public entity, becomes involved in something like this and it becomes messed up, it's our tax money paying to fix it. I just think it's an inappropriate program for a publicly funded entity.

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