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Holiday pay amounts to 12 days per calendar year with any unused days to be paid off on a qUfu-terly basis. These payments are actually being made ever} 4 months rather then quarterly. Compensatory time is an option for employees to convert overtime pay to future leave hours. The decrease in the liability from December 31,2000 to August 10,2001 is mainly due to the payout of compensated absences to several long-term term employees in 2001. Concerns, Comments and Suggestions The following concerns, COITh'TIents and suggestions are based on interviews conducted with the police chief, the city administrators (acting administrator) of each member city and a commissioner representative from each city. We also performed limited research on siIPilar benefit policies of other municipal police departments. Concern The primary concern expressed during our interviews was in regards to the funding of this liability. We heard different arguments as to whether the liability should be funded as it is eamed and accrued, or as it is paid out. Related to this issue is the negative impact on financial results and budget overruns caused by unexpected employee turnover in particular years. Comments The terms for compensated absences within your employee contracts is fairly common in other police departments. Due to the unusual work schedules required by police departments, the terms for these benefits have traditionally allowed a higher liability to accumulate in relation to annual compensation amounts, as compared to other city departments. In general, we have seen governments cut back or limit these types of compensation agreements because it conflicts with the basic funding process of these entities. Local governments and there respective joint ventures, such as your police department, are funded on an annual needs basis. This liability for compensated absences is being generated in one year, but will need to be paid for in some future year. This is generally acceptable if the amounts are reasonably small and consistent from year to year. This is not the case for the Centennial Lakes Police Department as the total liability as of December 31,2000 was 27% (17% for vested) of the department's salary costs for that year. It is a basic responsibility of the police commissioners to establish, approve and adhere to annual budgets for the use of public funds. We believe this includes planning for the funding of costs incurred currently, even though they will be paid in future years. The entire amount of the liability represents costs already incurred, but not yet paid or funded.