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ITEM 3.5 Revised Policy0tSTe F o MINNESOTA C DEPARTMENT INFORMATION Request for City Council Action ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE: Administration City Administrator/Finance Director Flaherty March 25, 2019 PRESENTER(s) REVIEWED BY: ITEM #: Consent City Attorney MacArthur 3.5 STRATEGIC VISION MEETS: I THE CITY OF OTSEGO: X Is a strong organization that is committed to leading the community through innovative communication. No Has proactively expanded infrastructure to responsibly provide core services. BACKGROUND/JUSTIFICATION: Is committed to delivery of quality emergency service responsive to community needs and expectations in a cost-effective manner. approved by the City Council on August 27, 2018. Revisions to the purchasing policy are being Is a social community with diverse housing, service options, and employment opportunities. 1) To add additional authorized employees for use of City credit cards. Is a distinctive, connected community known for its beauty and natural surroundings. AGENDA ITEM DETAILS RECOMMENDATION: City staff is recommending that the City Council adopt the revised purchasing policy. ARE YOU SEEKING APPROVAL OF A CONTRACT? ISA PUBLIC HEARING REQUIRED? No No BACKGROUND/JUSTIFICATION: It is important that the City periodically review existing policies. The City's existing purchasing policy was approved by the City Council on August 27, 2018. Revisions to the purchasing policy are being recommended for the following reason: 1) To add additional authorized employees for use of City credit cards. This draft policy was presented and reviewed with the Administrative Sub -Committee on March 13, 2019. There was concurrence for the draft revised purchasing policy to be placed on the agenda for a future City Council meeting. SUPPORTING DOCUMENTS ATTACHED: • Draft Revised Purchasing Policy • Resolution 2019-14 POSSIBLE MOTION PLEASE WORD MOTION AS YOU WOULD LIKE ITTO APPEAR IN THE MINUTES: Motion to approve Resolution 2019-14 adopting the revised purchasing policy. BUDGET INFORMATION FUNDING: BUDGETED: N/A Y CITY OF 0 Ot e MINNESOTA PURCHASING POLICY ADOPTED: August 27, 2018 (DRAFT REVISIONS — MARCH 2019) 1. POLICY Assure that all City expenditures are lawful by satisfying the following: A. Public Purpose: There must be a public purpose for the expenditure. B. Authority: There must be specific or implied authority for the expenditure in State Statute. C. Procedure: The expenditure must be properly approved by the City Council. 2. OBJECTIVES This policy has the following objectives: A. To ensure that all City expenditures are lawful, as outlined in Section 1 of this policy. B. To ensure that taxpayer dollars provide goods and services as economically as possible. C. To established uniform purchasing procedures for all City staff and across all departments. D. To ensure City expenditures are appropriately classified in the City's financial records. 3. PURCHASE ORDERS Purchase orders may be used for any purchase, but requirements for their use are more specifically outlined in Section 5 of this policy. In the instances where purchase orders are used, the following procedures are set forth: A. The vendor name, mailing address and contact information is required. B. A sufficient description and exact quantities of the respective purchase. C. A calculation of total cost, including applicable tax, shipping and handling charges. a. In the instance where exact costs are not known, an estimate is acceptable. b. In the instance where quotes were required, they should be attached. D. The source of funding and applicable expenditure code for the respective purchase. E. The purchase order shall be completed and signed prior to the respective purchase. 4. UNIFORM MUNICIPAL CONTRACTING LAW The City will follow procedures as set forth in Minnesota Statute §471.345. Purchases should not be separated into smaller components in order to eliminate an authorization threshold requirement. For the purchase of supplies, materials or equipment estimated to exceed $25,000, the City must consider the availability, price, and quality of the supplies, materials, or equipment available through the State of Minnesota's cooperative purchasing venture before purchasing through another source. Purchases of $25.000 or Less If the amount of the purchase is estimated to be $25,000 or less, the purchase may be made either upon quotation or in the open market, in the discretion of the governing body. If the purchase is made upon quotation it shall be based, so far as practicable, on at least two quotations which shall be kept on file for a period of at least one year after their receipt. Purchases Between $25,001 and $175.000 If the amount of the purchase is estimated to exceed $25,000 but not to exceed $175,000, the purchase may be made either upon sealed bids or by direct negotiation, by obtaining two or more quotations for the purchase when possible, and without advertising for bids or otherwise complying with the requirements of competitive bidding. All quotations obtained shall be kept on file for a period of at least one year after their receipt. Purchases of $175,000 or More If the amount of the purchase is estimated to exceed $175,000, sealed bids shall be solicited by public notice in the manner and subject to the requirements of the law governing purchases by the particular municipality. Exceptions The City may contract for the purchase of supplies, materials, or equipment without regard to the competitive bidding requirements of this section if the purchase is through the State of Minnesota's cooperative purchasing venture or a national municipal association's purchasing alliance or cooperative created by a joint powers agreement that purchases items from more than one source on the basis of competitive bids or competitive quotations. Other exceptions may include: professional services, insurance contracts, purchases from other government agencies, real estate, sole source vendors and others as defined by Minnesota Statute §471.345. 5. AUTHORIZATION The following thresholds have been established to provide efficient procedures while still retaining effective oversight. Purchases of $5,000 or Less Budgeted: If the respective purchase is specifically outlined in the department budget, the respective Department Head is authorized to make the purchase, and purchase orders are not required. Not Budgeted: If the respective purchase is not specifically outlined in the department budget, a purchase order is required, and needs to be signed by the Department Head making the purchase and the City Administrator. Purchases Between $5,001 and $10,000 Budgeted: If the respective purchase is specifically outlined in the department budget, the respective Department Head is authorized to make the purchase, and purchase orders are not required. Not Budgeted: If the respective purchase is not specifically outlined in the department budget, the proposed purchase must be presented to the City Council for approval. A purchase order is required, and needs to be signed by the Department Head making the purchase and the City Administrator. Purchases Between $10,001 and 525,000 Budgeted: If the respective purchase is specifically outlined in the department budget, a purchase order is required, and needs to be signed by the respective Department Head making the purchase and the City Administrator. Not Budgeted: If the respective purchase is not specifically outlined in the department budget, the proposed purchase must be presented to the City Council for approval. A purchase order is required, and needs to be signed by the Department Head making the purchase and the City Administrator. Purchases of $25,001 or More The proposed purchase must be presented to the City Council for approval. A purchase order is required, and needs to be signed by the Department Head making the purchase and the City Administrator. 6. BILLING ADDRESS Vendors should invoice the City, and not an individual department or person. The billing address for the City is: City of Otsego Attn: Accounts Payable 13400 901h Street NE Otsego, MN 55330 Invoices may also be directly emailed to the Finance Department using accountspayable@ci.otsego.mn.us. 7. PAYMENT PROCEDURES In accordance with Minnesota Statute §471.425, the City has 35 days from receipt of the invoice to process payment. All invoices received shall be forwarded to the Finance Department. The Accountant will match invoices with other supporting documentation (Purchase Order, Quotations, Etc.) and distribute into separate folders for each Department Head. Department Heads are responsible for reviewing all aspects of the invoice and verifying the validity of the expenditure. The Department Head is also responsible for providing the budget account coding so that expenditures are appropriately classified in the City's financial records. The Department Head will authorize the expenditure for payment by including a date stamp and signature (or initials). Department Heads should notify the Finance Department of any invoices in dispute and the dispute should be documented on the invoice or with a memorandum accompanying the invoice. Certain routine transactions as defined by the Finance Director are excluded from Department Head review and approval. Such transactions may include, but are not limited to: payroll, employee benefits, workers compensation, and liability insurance and utility bills. All payments shall be summarized within a Claims List that will be presented to the City Council at their regularly scheduled meetings. The City Council will take action on the Claims List as part of the Consent Agenda. Once the Claims List has been approved by the City Council, the Finance Department will release payment to the vendor. In some instances, payments may need to be released prior to City Council approval. Such instances may include, but are not limited to: payroll, employee benefits, electronic funds transfer (eft), to receive early payment discounts or to avoid late penalties. Such payments will be authorized at the discretion of the Finance Director and will be presented to the City Council within the Claims List at the next scheduled regular City Council meeting. 8. TRAVEL All expenditures for travel will be in accordance with the City's travel reimbursement policy. 9. EXPENSE REIMBURSEMENT Employee expense reimbursements (i.e. mileage), are to be submitted on claim voucher forms with supporting documentation and should be provided to the Finance Department. The procedures set forth in Section 7 of this policy will be followed for approval and payment. 10. SALES TAX Most City purchases are exempt from sales tax. Vendors should be notified of this exemption when making a purchase and each vendor should be provided a Certificate of Exemption (ST3 Form) available by request from the Finance Department. 11. CONFLICTS OF INTEREST Employees are required to provide notice to the Finance Director of any conflicts of interest prior to entering into transactions on behalf of the City. No employee, officer, or agent must participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediately family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has financial or other interest in or a tangible personal benefit from a firm considered for a contract. The officers, employees, and agents of the City must neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. 12. EMERGENCY & DISASTER Under Minnesota's Emergency Management Act (Minnesota Statute §12.37), the City has the authority to make purchases or enter into contracts during emergencies without following many of the, otherwise, normally required procedures. The Emergency Management Act defines an "emergency" (Minnesota Statute §12.03 sub3) as an unforeseen combination of circumstances that calls for immediate action to prevent a "disaster" from developing or occurring. The Emergency Management Act defines a "disaster" (Minnesota Statute §12.03 sub2) as a situation that creates an actual or imminent serious threat to the health and safety of persons, or a situation that has resulted or is likely to result in catastrophic loss to property or the environment, and for which traditional sources of relief and assistance within the affected are unable to repair or prevent injury or loss. In the event of an emergency or disaster, the City will make declaration of a local emergency by following procedures as outlined in Minnesota Statute §12.29: A local emergency may be declared only by the Mayor. It may not be continued for a period in excess of three days except by or with the consent of the City Council. Any order or proclamation declaring, continuing, or terminating a local emergency must be given prompt and general publicity and filed promptly by the City Clerk. 13. SPECIAL EMERGENCY The City Attorney must be consulted with prior to making a purchase under this section. Under Minnesota Statute §365.37, Towns have the authority during a special emergency to make purchases without notice or competitive bidding. A special emergency is a situation requiring immediate action essential to the health, safety or welfare of the town. Although this exception is a Statute referring to Towns, Minnesota Statute §415.01, outlines that Cities have and may exercise within its limits any of the powers conferred to Towns. In the event a special emergency exists, the City Council has granted authority to the City Administrator to make the necessary special emergency purchase. At the next regular scheduled City Council meeting, the City Council will approve the respective purchase and will pass a resolution specifically referring to the special emergency and declaring the special emergency describing the reasons necessitating the immediate action for protection of the health, safety or welfare of its citizens. APPENDIX A: CREDIT CARD USE POLICY 1. USE OF CREDIT CARDS The City has authorized the use of credit cards under Minnesota Statute §471.382 by City employees to make purchases on behalf of the City. 2. AUTHORIZATION The City Administrator in consultation with the Finance Director will determine which personnel will be assigned a City credit card. The credit card will be issued in the employee's name. The authorized employees include: City Administrator City Clerk Finance Director Streets Operations Manager Streets Operations Foreperson Fleet Maintenance Technician Parks and Recreation Director Lead Parks Maintenance Parks Maintenance II Recreation Administrative Assistant Public Utilities Manager Public Utilities Foreperson Public Utilities Operators Employees that are not authorized account holders as identified in this policy, shall not retain credit card information or make purchases using a City issued credit card without prior approval from an authorized account holder. The Finance Director shall be responsible for the maintenance of the City credit card, including account maintenance, setting purchase limits, issuing physical cards, etc. 3. USERS All employees authorized to use a City credit card are required to sign a credit card user agreement form, which will be retained on file by the Finance Director. The credit card user agreement also needs to be signed by the City Administrator. The terms of the credit card user agreement form are considered a part of this policy. Upon termination of employment with the City, the City issued credit card will be returned to the Finance Director on or before the employee's last day of employment. The Finance Department must be notified immediately of any problems, issues or discrepancies an employee has with the use of the City credit card. 4. PURCHASES Each card holder will be responsible for ensuring that purchases made with their card comply with Minnesota Statutes, the City's Purchasing Policy, and this Credit Card Use Policy. Personal use of the City issued credit card is prohibited. Improper use of the credit card may result in disciplinary action as outlined in the City's Personnel Policy. Purchases that do not comply with City policies, or that are not approved by the City Council, may become the personal responsibility of the card holder and/or purchaser. In any instance where a product or service purchased with a City issued credit card is returned or canceled the transaction must be refunded to the credit card account. This policy does not restrict the use of personal credit cards for purchases/payments eligible for reimbursement from the City in accordance with the City's Purchasing Policy. 5. DOCUMENTATION The billing statement from the credit card issuer does not contain sufficient information to document a purchase made. Appropriate documentation is required for all purchases to verify compliance with this policy and the City's Purchasing Policy. A copy of the invoice or receipt for payment must be included to verify the amount charged on the card. Receipts from vendors that only list the total charged are not considered sufficient documentation. The receipt must identify all products or services purchased, shipping charges, and sales tax. A printed confirmation of an internet purchase may be sufficient to comply with this requirement. If an invoice is not immediately available, the invoice must be forwarded to the Finance department when it becomes available and another form of documentation must accompany the original charge. The City will not be responsible for interest charges accruing as a result of untimely submission of credit card receipts. Department Heads are responsible for reviewing all aspects of the invoice and verifying the validity of the expenditure. The Department Head is also responsible for providing the budget account coding so that expenditures are appropriately classified in the City's financial records. The Department Head will authorize the expenditure for payment by including a date stamp and signature (or initials). 6. REVIEW AND PAYMENT All credit card statements will be reviewed by the Finance Department for compliance with this policy and to ensure all charges have been accounted for. Additional documentation may be requested from a card user to ensure compliance with this policy and the City's Purchasing Policy. The City will not use the credit card account for carrying debt, and payment of the entire outstanding balance of City issued credit cards will typically be made through the City's normal vendor payment process. The Finance Director reserves the right to pay the credit card bill outside the normal vendor payment process if necessary to avoid finance charges. 7. CASH WITHDRAWALS No employee of the City shall use the City credit card to access an ATM for cash withdrawals. 8. VENDOR CHARGE ACCOUNTS The City has established charge accounts with a handful of vendors to expedite the purchasing process with those respective vendors. These accounts may or may -not have physical cards accompanying them. All sections of this policy are also attributable to the respective vendor charge accounts. If an account has been established with a vendor, all purchases should be made through that process, unless extenuating circumstances exist. CITY OF OTSEGO COUNTY OF WRIGHT STATE OF MINNESOTA RESOLUTION NO: 2019-14 APPROVING REVISED PURCHASING POLICY WHEREAS, the City previously adopted a purchasing policy on August 27, 2018; and WHEREAS, the City has made certain revisions within the purchasing policy; and WHEREAS, the City Council has met to discuss and review the revised policy; and WHEREAS, the City Council has determined that the revised policy shall be in force and effect upon the date of adoption of this resolution. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OTSEGO, MINNESOTA: That the revised Purchasing Policy as attached hereto is hereby adopted effective immediately. That the Purchasing Policy previously adopted on August 27, 2018 is no longer in force and effect. ADOPTED by the Otsego City Council this 25th day of March, 2019. I:r6l 1LW CITY OF OTSEGO Jessica Stockamp, Mayor Tami Loff, City Clerk MOTION made by Council Member and SECONDED by Council Member IN FAVOR: OPPOSED: