This research undertakes a theoretical and empirical examination of (high performance bonus) systems in government, that is, incentive payments awarded by the federal government to state organizations or statewide programs to motivate and recognize high performance achievements. The paper draws from a multidisciplinary literature on incentives in organizations to first derive implications for the design and implementation of high performance bonus systems. An empirical analysis of the Workforce Investment Act performance bonus system and its effectiveness in recognizing and rewarding performance follows. The results of the theoretical and empirical investigation suggest that high performance bonus systems are more likely to encourage misrepresentation of performance and other strategic behaviors than to recognize and motivate exceptional performance or performance improvements.