Investor Relations | Corp. Gov. | Excessive and Luxury Expenditure
ORGANIZATION FUNCTIONAL AREA: LEGAL
POLICY FOR:: EXCESSIVE AND LUXURY EXPENDITURE
BOARD APPROVED: NOVERMBER 2011
LAST REVISION DATE: JULY 2010
DEPARTMENT/INDIVIDUAL
RESPONSIBLE
FOR MAINTAINING/UPDATING
POLICY: CEO
REPORTING AND TESTING
REQUIREMENTS: ANNUAL
Purpose
On February 17, 2009, the President of the United States of America signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”). ARRA requires any recipient of funds in the Capital Purchase Program of the Troubled Asset Relief Program (“TARP”) to adopt a company-wide policy regarding excessive or luxury expenditures.
Central Federal Corporation (“CFBK” or the “Company”) is a recipient of TARP funds. CFBK’s Board of Directors adopts this Policy for application to the Company and all of its subsidiaries, including CFBank. This Policy will be posted on CFBank’s website, and a copy of this Policy and any amendments to the Policy will be provided to the United States Department of the Treasury and the Office of the Federal Reserve Board of Governors.
Policy Statement
The Company prohibits excessive or luxury expenditures. In general, excessive or luxury expenditures are those that are unreasonable in relationship to the benefit conferred by them to CFBK and its stockholders. It is CFBK’s policy that all directors and employees of the Company and all of its subsidiaries use corporate assets in a prudent manner and are hereby precluded from engaging in excessive or luxury expenditures. All expenditures shall have a business purpose. This Policy does not prohibit bona fide and routine expense reimbursement. Expenditures incurred in the operation of the business of CFBK or CFBank shall be reasonable and appropriate under the circumstances. Any expenditure that is unreasonably high under the circumstances shall be considered to be extravagant. No Director or employee of CFBK or any of its subsidiaries shall engage in extravagant spending of CFBK or subsidiary resources.
Types of Potential Luxury Expenditures
Following are discussions regarding certain categories of expenditures. However, CFBank recognizes that no list of approved or prohibited expenditures can take the place of good judgment and strong internal controls.
Excessive or luxury expenditures can occur in the following areas:
- Entertainment
- Office renovations
- Aviation or other transportation services
- Other items activities or events for staff development, reasonable performance incentives or other similar measures conducted in the normal course of business.
Entertainment
Entertainment is defined as activities where Company funds are used for business-development purposes relating to a current or prospective customer, or to further enhance CFBK’s perception in the market. Entertainment expenses incurred are used to develop customer relationships and may include taking customers/ prospects to restaurants, theaters, sports events, concerts, golf and other activities. Expenditures for these purposes in the normal course of business are a necessary part of marketing efforts and are not deemed as luxury or a violation of this policy. Prior approval of expenditures for this purpose is not required; however, these expenditures shall be documented and approved through the normal accounts payable process.
Office Renovations
Renovations of office space are permitted only for approved projects that are part of the Company’s annual capital plan. Expenditures for renovations not included in the capital plan must be approved prior to commitment by the Audit Committee of the Board of Directors. An exception to this policy may be appropriate if the Company is confronted with an emergency situation, such as an act of nature, and the expenditure is necessary to make the facility operational or safe for employee and customer use. Exceptions made in emergency situations must be documented and reported to the Audit Committee as soon practical.
Air, Other Travel & Events
CFBank does not own or regularly lease private aircraft. Expenditures for private air travel are prohibited. Expenses incurred in connection with spouse’s travel to conferences or company sponsored events will be paid by the employee or Director.
Other Activities & Events
Meetings, conferences, and other events are intended to provide the board, management and employees with opportunities for education, development and recognition, business planning, market and industry networking, and related business purpose objectives. Events that do not have an educational, marketing, strategic planning, business development or other business purpose will generally not be subsidized. All the above described activities are subject to prior approval by the employee’s supervisor or, as the activities relate to a director, subject to written approval by the Chairman of the Board. Expenses incurred in connection with spouse’s attendance at activities described above will be paid by the employee or director.
Administration
CFBK and CFBank managers and supervisors shall only approve expense reports or requests that comply with the Company’s accounting policies and procedures. The President and CFO is responsible for the day-to-day administration of this policy. CFBK’s Audit Committee will continue to review all routine expenses submitted by the Principal Executive Officer (the “PEO”). The PEO will continue to review routine expenses submitted by any Senior Executive Officer (“SEO”), other employee or Director of CFBK or CFBank. The Audit Committee and the PEO will continue to evaluate submitted expenses in the context of reasonableness for CFBK and CFBank’s size and geographic location.
Expenses requiring prior Audit Committee approval may be submitted in writing via the President and CFO, who will summarize and present expenditures for approval. Documentation supporting and describing the expenditure’s business purposes rationale should be included with the expenditure request.
Any expense for the use or benefit of the PEO in excess of $25,000 per type and all expenses for his use or benefit in excess of $100,000 annually shall be submitted to the Audit Committee for prior approval. Any expense for the use or benefit of any other SEO or other employee or any Director in excess of $10,000 per type and all expenses for the use or benefit of any other SEO or other employee or any Director in excess of $50,000 annually shall be submitted to the PEO for prior approval.
Failure to obtain prior approval from the Audit Committee or the PEO, as the case may be, shall result in denial of expense reimbursement for any expense requiring prior approval under this Policy. Any employee or Director who engages in extravagant spending shall be subject to discipline up to and including termination.
Enforcement of Policy
All CFBank employees are subject to and are required to comply with this Policy. Questions regarding this policy, including the prior approval of any expenditure as to its reasonableness, shall be directed to any SEO, who shall make a determination, provided that these individuals shall not make a determination with respect to his or her own expenditures. Any employee who becomes aware of any violation of this Policy must report such violation to the VP, Enterprise Risk Management and Internal Audit at 330-576-1351. Individuals who violate this Policy, or who fail to report violations of this Policy, will be subject to disciplinary action up to and including dismissal. Violations of this Policy will be reported promptly to the Board of Directors.
Governance and Accountability
The Board of Directors will review and approve this policy at least annually and will approve any amendments or modifications to this policy. CFBK will post amended policies on its website. The CEO and the President and CFO will certify that the approval of any expenditure requiring the prior approval of the Audit Committee was properly obtained with respect to each such expenditure. The VP, Enterprise Risk Management and Internal Audit will maintain the CEO and CFO certifications contemplated above, review compliance with this Policy, and provide periodic reports to CFBK Audit Committee as necessary. The VP, Enterprise Risk Management and Internal Audit will report any violations of this Policy, as soon as possible after the discovery of such violations, to the Audit Committee.
