Loading...
HomeMy WebLinkAbout[06] Finance Policies+rrrs~ c~~ 5r. J[ASH rH MEETING DATE: AGENDA ITEM: SUBMITTED BY: Council Agenda Item 6 March 2, 2009 Finance Policies Finance BOARD/COMMISSION/COMMITTEE RECOMMENDATION: PREVIOUS COUNCIL ACTION: BACKGROUND INFORMATION: The City is required to have finance polices in place as one of the new GASB regulations. Since all Cities are required to have such policies, there are many samples or models to follow. The information included in this packet has been modified for St. Joseph and are a combination of resources from the State Auditor's Office, League of MN Cities, and area Cities. These are internal controls and polices. The Staff is also working on a Human Resource Manual that will be similar in nature. The Council approved a similar document for the Police Department as they are also required to have a policy manual that is approved by the Council BUDGET/FISCAL IMPACT: None. ATTACHMENTS: Finance Policy Book REQUESTED COUNCIL ACTION: Adopt the presented Finance Policy. . ~. CITY OF ST. OSLPH 1 wWW.cityof stjoseph.com City of St. Joseph Policy Book The City of St. Joseph has an important responsibility to its taxpayers, employees, staff and community to establish policies and procedures with specific guidance for financial and economic systems. Minnesota and federal laws provides general guidance the City must follow. City officials provide further guidance to staff to carry out the City's functions through policies, Administrator resolutions, motions, and City Code and Ordinances. ~udy Weyrens The Policy Book is not meant to be a compilation of every function the City is responsible for. Rather, the Policy Book is meant to be a reference guide on specific financial and economic Mayor systems for staff and City Council to use. AI Rassier The scope of these policies generally spans, among other issues, accounting, auditing, financial Councilors reporting, internal controls, personnel management, operating and capital budgeting, revenue Steve Frank management, cash and investment management, expenditure control, asset management, debt Bob Loso management, and planning concepts, in order to: Renee Symanietz Dale ~1Uick 1. Demonstrate to the citizens of St. Joseph, the investment community, and the bond rating agencies that the City is committed to a strong fiscal operation. 2. Provide precedents for future policy-makers and financial managers on common financial goals and strategies. 3. Provide a standard for the City's internal control system. 4. Present fairly and with full disclosure the financial position and results of the financial operations of the City in conformity with U.S. Generally Accepted Accounting Principles (GAAP) 5. Determine and demonstrate compliance with finance-related legal and contractual issues in accordance with provisions of the State of Minnesota and other pertinent legal documents and mandates. This City policy book will be reviewed as deemed necessary by staff and City Council. Any amendments to the policies must be approved by a majority of the City Council. The City Council delegates the authority to carry out the adopted policy book to the Administrator. Staff and elected officials will be held accountable for any abuse and misuse of the adopted policies. The City Policy Book was adopted by majority vote of the City Council on day of in the year 2009 and supersedes previously related adopted policies. Alan Rassier, Mayor Judy Weyrens, Administrator z5 College Avenue North PO Box 668 Saint ~oseph, Minnesota 56374 Phone 3zo.363.7zoi Fax 3zo.363.o34z CITY OF ST. JOSEPH FINANCIAL POLICIES Updated March 2009 DEFINITIONS 1-3 PURCHASING Purpose 5 Purchasing Process 5-6 Contract Purchasing 6 Electronic Signatures 6 Payment Process 6.7 Electronic Fund Transfers 7 Wire Payment Transfers (ACH Transfers) 7 Imprest Funds 7_g Prepayment of Goods or Services g Reporting Requirements g PURCHASING POLICY PROCEDURES Receiving Invoices g Payment Process 10 Payment Request Received after Processing Date 10 Electronic Funds Transfers 10 Wire Payment Transfers (ACH Transfers) 10 Imprest Funds 10-11 Filing and Record Keeping 11 CREDIT CARD POLICY Purpose 13 Provisions 13-14 Procedures 14 CAPITAL ASSETS Purpose 15 Provisions 15 Capital Assets to be Inventoried 15-16 Value of the Capital Assets to be Inventoried 16-17 Inventory Records Requirements 17 Physical Inventory 17 :Depreciation Method 17 Use Lives of Capital Assets 18 Reporting Requirements 18 Other Considerations 18 CAPITAL ASSETS TRACKING PROCEDURES Purpose 19 Capital Asset Tracking 1g Physical Inventory Additions to Capital Assets Disposal of Capital Assets Changes to Capital Assets FUND BALANCE Purpose Background Reserved Fund Balance Unreserved Fund Balance Enterprise Fund Equity Other Policy Considerations Reporting Requirements BUDGET POLICY Purpose General Budgetary Timeline Level of Budgetary Control Budgetary Basis .Reporting Requirements INVESTMENT POLICY Purpose Scope Objectives Safety of Principal Maintenance of Adequate Liquidity Maximization of Return on Investment (Yield) Local Consideration Standards of Care Prudence Ethics and Conflict of Interest Delegation of Authority Financial Institutions and Safekeeping Authorized Brokers/Dealers and Financial Institutions Broker Representations Authorized and Suitable Investments Investment Types Safekeeping Investment Parameters Diversification Maximum Maturities Competitive Bids Collateralization Repurchase Agreements Investment Reporting Purpose Performance Standards 19-20 20 20-21 21 23 23 23 23-25 25 25-26 27 29 29 29-30 31 31 33 33 33 33-35 35 35 35 36 36 36 36-37 37 37 37 38 38-39 39 40 40 40 40 40-41 Marketing to Market 41 Policy Considerations 41 Amendments 41 Approval of the Investment Policy 41 Statute Authority 41 Conclusion 41 TRAVEL Purpose 43 Overview 43 Travel Provisions Work Time 44-45 Meals and Lodging Reimbursement 45 Mileage Reimbursement 45-46 Personal Use of City Owned Vehicles 46 Commercial Airlines/Rail Service 47 Commercial Rental Vehicles 4~ Miscellaneous Ground Transportation 47 Cancellation Fees 48 Other Expenses 48 Conference Fees 48 Council Per Diem 48 Out of State Travel 48 Procedures Expense Reimbursement Forms 48-49 KEY ACCESS CONTROL Purpose 51 Applicability 51 Responsibilities 51-52 Other Procedural Considerations 52 Replacing Access Control Devices 52 Policy Consideration 52 DEFINITIONS Access control devices -includes, mechanical and electronic keys, locking and bio-metric devices or other activators that permit the control of doors, barriers, gates, entrances and exits to secure areas and vehicles. Accountable property is city property that contains a serial number and is valued over $350. Ad Valorem property taxes are general property taxes levied on an assessed valuation of real and personal property. Appointed official is any officer appointed by the Mayor and City Council to serve on committees or boards legally established by the City Council. Generally, appointed officials are paid a meeting stipend for the services they provide. The policy book will refer to appointed officials as officers of the City. Appropriations are the amounts of authorized spending. The remaining amount of appropriations includes actual expenditures and encumbrances. Capita! asset is defined as a financial resource that is tangible or intangible in nature, complete in itself, and is not a component of another. The asset has a useful life of at least three (3) years, is not a repair part or supply item, and has a value greater than the capitalization threshold of $1,000 or is considered to be an asset for which control is desirable. Capital lease is a lease that may be capitalized as a City capital asset that meets certain criteria. Capital outlay is expenditures incurred for acquiring capital assets as determined by the City's Capital Asset Policy. Cash basis of accounting is the basis of accounting that recognizes transactions or events when related cash amounts are received or disbursed. j Claim is a bill to the City. When a City owes money to a particular person or business, that person or business is said to have a claim against the City depository. Claimant is the individual or business that is owed money from the City. Convenience checks are electronic checks set up with vendors for automatic or electronic purchases and payments. Daily per diem is a set payment made to elected officials, appointed officials and volunteer fire fighters for their time conducting official city business. Designated fund balance is a portion of the unreserved fund balance designated by management's intended use of resources. Drop box - a device or chute allowing a security key ring to be put in an area placing it out of reach of the general public. Drop boxes may be provided in areas where access keys are rented out to groups. or individuals for the renters to return the keys to the City. ~,r_ Elected official is the Mayor or City Council elected by the residents of St. Joseph, or appointed to fill a vacant seat of the Mayor or City Council. The policy book will refer to elected officials as officers of the City. Employee is any person hired by the City and paid for hours worked at regular intervals by the City's personnel policy. Encumbrances are commitments related to open purchase orders or unfulfilled contracts not yet spent. Enterprise funds are funds that are financed and operated in a manner similar to private business enterprises where the intent of the costs, including depreciation, are covered by user fees. The City operates four enterprise funds including Water, Wastewater; Refuse and Storm Water funds.. Governmental funds are the funds that account for the City's governmental type activities. There-are four fund-types that make up the governmental funds. including the General fund; Special Revenue. funds, Debt Service funds, Capital Project funds. Highly pilferable property is any city property that is easily converted to personal use such as cameras, tools, laptops, cell phones and iPods. Homestead market value credit is a Minnesota aid to agricultural, mobile home and residential taxpayers which reduces the amount of ad valorem property taxes owed to the City by the taxpayer. Stearns County determines the level of homestead market value credit applied to each property owner based on the available resources of the State. The City's levy revenue will be reduced by the amount of homestead market value credit the City receives through the Minnesota Department of Revenue. Imprest funds are funds held as petty cash for making changes and small purchases. Inexhaustible land improvement is defined as an improvement that does not require maintenance or replacement, expenditures to bring land into a condition to commence assembly of structures (but note part of the structure), and expenditures for land improvements that do not deteriorate with use or passage of time. The additions are part of the cost. of the land and are generally not exhaustible; thus, not depreciable. Key control officer- is the official designated by the Council to maintain access control to City facilities. Mileage reimbursement rate is the rate paid per mile for official travel in a POV (not mileage incurred in the commute to and from work) that is set annually, or more often if needed,.by GSA and IRS. Modified accrual is the. basis of accounting according to which (a) revenues are recognized in .the accounting period in which they become available and measurable, and (b) expenditures are. recognized in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest on general long-term debt and certain similar accrued obligations, which should be recognized when due. -- - t=~ Out-of--state travel is defined as any travel by air, ground or sea that extends beyond the borders of the State of Minnesota. Travel outside of the continental United States is not allowed. Per diem is the maximum allowed reimbursement for meals and lodging rates by State and region within the State as set annually on October 15t by GSA. Actual costs will be considered for reimbursement up to the maximum per diem rate. The City will follow the federal per diem rate schedule for travel. See the GSA website for specific rates at http://www.~sa.~ov. (Daily per diem is not included in this definition). Privately owned vehicle (POV) is a vehicle owned by an officer or employee. Public purpose is defined as an activity that benefits the community as a whole and is directly related to the functions of the City. Specific guidelines for public purpose expenditures can be found on League of Minnesota Cities Website at www.lmnc.ore. Reserved fund balance is a portion of the fund balance that is not appropriable for expenditure or is legally segregated for specific future uses. Unreserved fund balance is a portion of fund balance not identified as reserved fund balance. Water salesman - an access card provided to general contractors to purchase water from the City at the Water Filtration Plant. ~,~ This page !eft blank intentionally ~,~ PURCHASING Purpose To carry on the day to day functions of the City it is necessary to set up short-term credit accounts with suppliers or vendors for goods or services purchased. These short-term debts are known as Accounts Payable and generally purchases are paid within a 35-day time period. Statue Authority The City will follow specific purchasing provisions under Minnesota Statutes included in chapters 471, 412.271, 375.18 (or as superseded}. Purchasing Process Minnesota law provides that no order shall be issued for claims arising from the purchase of goods and services until the City Council has reviewed and approved the claim. Either the person claiming payment or the person's representative must prepare a written, itemized list of goods and services provided to the City. The claimant must also sign a declaration stating his/her claim is just and correct and that no part of it has been previously paid. The written claim is then brought to the Council for their approval. The Council may approve the claim, approve only part of the claim, or choose not to approve the claim at all. The Administrator endorses the claim as either "allowed in the sum of $ " or "disallowed" depending on the Council's action. If the claim is approved only in part, the Council must specifically indicate which items have been rejected. An order is then drawn by the Mayor and'Adminstrator and upon both signatures it becomes a check upon the City depository. On behalf of the City of St. Joseph, the City has authorized the use of a credit card issued through the First State Bank of St. Joseph. The City Council has adopted a credit card policy for further guidance in use of'credit card purchases. In addition, the City utilizes in-store charges for fuel atthe local gas stations. The in-store charge is utilized so that the gas station completes the federal excise taxforms. At no time will personal purchases be allowed using the City's charge accounts. Purchasing will be limited to the following: • Department Heads are authorized to approve purchases from approved vendors not exceeding $1,000 for a single purchase and will be responsible for purchasing within the department budget guidelines. • Purchases exceeding $1,000 up to $5,000 require a Purchase Requisition form to be completed by Department Heads and submitted for approval to the Administrator. Upori signed approval the Finance Department will issue a Purchase Order to the Department Supervisor. • Purchases greater than $5,000 must be submitted to the City Council. Upon approval the Administrator will notify the Finance Department to issue a Purchase Order directly to the vendor and the Department Supervisor. • City Park Board has the authority to attain purchases up to $3,000 after the Park Boards Capital Improvement Plan has been adopted by the City Council. -- - -~ _ ~- • Purchases greater than $1,000 for the Fire Department must be approved through the St. Joseph Fire Board and then through the St. Joseph city Council. Contract Purchasing The City will follow the Minnesota statutes under contracting bid laws. Electronic Signatures The use of electronic signatures is authorized by the City. The public officer using such device for their signature authorizes the financial institutions to honor following instruments bearing an electronic signature of his/her name: • Checks. Drafts. • .Warrants. Vouchers.. • Check-orders on public funds. The public officer will not be personally liable for any loss that results from the use of his/her electronic signature if all of the following circumstances are met: • .The City, Council adopts the Purchasing Policy approving the public officer's use of an electronic signature. .The loss is not due to a wrongful act of the public officer. The City of St. Joseph uses an electronic signature for the Mayor. Payment Process. Department Heads are responsible-for invoices presented to them when received and are responsible for reviewing and. approving all accounts payable paperwork, verifying pricing and terms of Purchase Orders. Department Heads are responsible to return approved invoices and all applicable documentation to the Finance Department for timely payment. The City is required to pay claims within 35 days of the receipt of the invoice (earlier for payroll withholdings): If the City is late making payment of a claim, the City must pay interest charges in accordance with Minnesota law. Interest may not apply if the City disputes the claim in good faith. Under municipal contracts the prime contractor must pay any subcontractors within 10 days. of receipt of payment from the municipality or incur late penalties. Delegation of authority has been given to the Administrator and Finance Director to approve certain vendor payments prior to the Council meeting. Vendor. invoices with a due date prior to the next Council meeting received after the Accounts Payable listing has been prepared for the Council packet will be processed by the Finance Department if deemed to be in the normal course of business and payment is properly approved. The City will also consider early payments on invoices to receive discounts. In order for the prepaid written claim to be endorsed, a majority of the Council must approve the claim at the next regular Council meeting. The City Council will annually review the delegation of authority to pay claims. The following expenditures may be made without prior Council approval: • Judgments _ ~ s r_- - • Principal or interest on obligations where the exact amounts have been previously fixed by contract. • Rent • Other fixed charges determined under a contract that the Council has previously approved. • Wages that have been previously set by the Council or Minnesota law. The St. Joseph City Council will receive a complete listing of vendor payments that have been approved for payment by the Administrator or Finance Director prior to the regular City Council meeting and a listing of unpaid vendor payments for authorization by the City Council at their next regular Council meeting. Unpaid checks will be mailed following City Council approval unless otherwise authorized. The Finance Department will: • Process timely payments to vendors. • Monitor vendor statements; investigate invoicing or payment errors, and consider earlier payments to receive discounts. • Request and process credit memos. • Resolve issues and provide assistance and direction to departments in service disputes with vendors arising from payment deductions. • Provide follow-up service on outstanding invoices to ensure payment is made in a timely fashion. • Assist Department Heads with account coding and monitoring their budget. • Apply refund checks to proper accounts. Research returned checks that may :need to be cancelled, voided or reissued. • Issue IRS form 1099 to applicable vendors in January of the following year. • Reconcile the bank accounts and provide financial statements to the Council and department heads on a monthly basis. Electronic Fund Transfers An Electronic Fund Transfer (EFT) is a formal process initiated by the City through a vendor's website for payment of a liability due. An Electronic Fund Transfer allows vendors to transfer funds from a designated City bank account to the vendor's bank account. To keep the City's exposure to a minimum the City will only allow EFT payments to Federal, State Organizations or vendors designated by the City that have a specific purpose for an EFT payment, such as a payment for a payroll liability. Wire Payment Transfers (ACH Transfers) Wire Payment Transfers or Automatic Clearing House (ACH) Transfers is a service provided through the banking system.. An ACH Transfer will be required for all individual payroll transactions. The City will use Wire Payment Transfers or an ACH Transfer for the purpose of transferring funds between Investment Brokers and City bank accounts. ACH transfer for Vendor payments must be approved by Council and the vendor will pay for any costs of setting up ACH account and applicable monthly fees charged due to Vendor ACH transfers. Imprest Funds The City Council authorizes the City to operate Imprest funds in the administration offices and the police department. Administration is allowed to make cash payments from the Imprest funds in situations where the traditional payment method is impractical for purchases under $25. The cash payments may _~,r include postage and small office supplies. Imprest funds may not be used to pay claims based on salary or personal expenses of a City officer or employee. Purchases $25 and greater must be made by order- check or EFT. Purchases must be recorded in the City's accounting system as a transaction of the City. The police department is not allowed to make cash payments from their petty cash fund; the fund is to be used for making change only. The custodian of the imprest funds may make a request to replenish funds via the normal claim request to the Council by providing a written claim that itemizes all. disbursements from the fund. If the Council denies any part of the claim the custodian becomes personally liable for the difference. Imprest funds will be kept in a locked, secured location to prevent unauthorized uses of the funds. Personal checks may not be cashed through the petty cash funds. Prepayment of Goods or Services The City ofSt. Joseph does not prepay for goods or services or utilize prepaid devices such as gift cards. If a vendor requires prepayment for goods or services authorization must be obtained from the majority of the City Council. Other Considerations • Public purpose guidelines will be adhered to. • All claims will require two (2) or more authorized signatures. • Electronic, wire transfers or ACH transfers will require two (2) or more authorized signatures. • Salary and wages paid are not covered by the purchasing policy but withholding liabilities will follow the purchasing procedures. • Board member stipends will be paid in accordance to-the approved fee schedule. • Travel reimbursements are addressed in the Travel Policy. Reporting Requirements The Finance Director will • Reconcile City bank accounts monthly. • Provide monthly budget to actual expenditure summaries to the Administrator, Department Heads and City Council • Quarterly Financial report to the City Council. • Monitor cash flow and investments for purchases. The City auditors will present the annual audited financial statements to the Council and report any deficiencies they find before June 30th following the year-end. _~ar Purchasing Policy Procedures The City of St, Joseph .has authorized the use of a credit. card issued through the First State Bank of St. Joseph. Credit cards have been issued to the Administrator, Chief of Police, Director of Public Works, and City Maintenance personnel. The credit card is to minimize the City's exposure to the loss of multiple credit cards. The credit card should be used only for purchases from vendors that do not have a purchasing system. to invoice the City. Local gas stations offer an in-store charge for City gas purchases. So much as possible, the City will alternate the stations the City uses each month. Charges will be made by vehicle and authorized purchasers only. The employee must sign the in-store log (as applicable) and turn in the receipt for purchases following in the same manner as the credit card policy. The leased police vehicles will follow the terms of the lease through Minnesota Travel Management. At no time will personal. purchases be allowed using the City's charge. accounts. The Public Works Director will monitor alternative options for fuelpurchases to allow for the-most economical price of fuel to the City. Purchasing will be limited to the following: • Department Heads are authorized to approve purchases not exceeding $1,000 for a single purchase of operating supplies or materials. • Purchases exceeding $1,000 but less than $5,000 require a Purchase. Requisition form to be completed by Department Heads and submitted for approval to the Administrator. Upon signed approval the Finance Department will issue a Purchase Order to the Department Supervisor. • Purchases greater than $5,000 must be submitted to the City Council Upon approval the Administrator will notify the Finance. Department to issue a Purchase Order directly to the vendor and the Department Supervisor. • St. Joseph's Park Board is authorized to purchase up to $3,000 after Council approves annually the-St. Joseph Park Board Budget. • .Purchases greater than $1,000 for the Fire Department must be approved through the St. Joseph Fire Board and then through the St. Joseph city Council Receiving Invoices Invoices will be accepted via mail, email, fax or at the. time the original transaction occurs: Invoices received via mail, email or fax by City Office Staff will be placed in the Department .Head's mailbox located at the. City Office. Invoices that are not charged on the credit card or in store gas purchase will be stamped by the. Department Supervisor. The Department Supervisor will complete the following information. Date Account Code Approved Initials Credit card/ln-store purchases: Department Heads and Maintenance Staff wil) receive a copy of the credit card/gas station statement. The original statement. will remain with the Finance Department. Each card. holder will. be required to attach all original charge receipts and to complete a Credit Card Expense Report with the following information: Date Description Amount Account Code Employee Signature Department Supervisor Signature 9 Payment Process Department Heads will provide all applicable documentation, invoices and statements to the Finance Technician by Wednesday preceding the City Council meeting date. All invoices will be clearly marked either "approved" or "denied" and include the appropriate account code for accounting purposes. Processing of all invoices will be completed the Thursday prior to the City Council meeting by the Finance Technician. After invoice posting has been completed the Finance Director will receive a complete listing of the Accounts Payables prior to check printing. Checks will be printed after approval from the Finance Director and held until after the City Council has met and approved payments. The Administrator or Finance Director may approve payment before Council approval. All paid and unpaid claims will be presented to the City Council at the next regular Council meeting. Once claims are approved the authorized signers wilt sign the checks for payment. Generally, checks will be signed by the Mayor and the Administrator. The Mayor's signature will be printed electronically through the check printing process. Only the Finance Technician and the Finance Director wilt have the password for the Mayor's electronic signature. Payment Requests Received After Processing Date Invoices received after the accounts payable processing date will be held and processed for the following City Council meeting unless the due date or discount to be applied would warrant payment before the next Council meeting and the claim is approved. by Administrator or• Finance Director. Electronic Fund Transfers An Electronic Fund Transfer (EfT} is a formal process initiated by the City through a vendor's website for payment of a liability due. Payments for Federal, State withholding, Public Employee Retirement and Deferred Compensation will be completed within a day of the payroll date. State sales and use tax will be filed' prior to the 20th day of the following month. Any other EFT will be determined by the Administrator or Finance Director. After the electronic payment is complete, a confirmation report will be printed and filed in the same manner as a check. (See Filing and Record Keeping). Only authorized signers are allowed to process EFTS: Wire Payment Transfers (ACH Transfers) Wire Payment Transfers or Automatic Clearing House (ACH) Transfers is a service provided through the banking system. An ACH Transfer will be required for all individual payroll transactions. The City will use Wire PaymentTra sfers or an ACH Transfer for the purpose of transferring funds between Investment Brokers and' City bankaccounts. ACH transfers for Vendor payments must be approved by Council and vendor will pay for any costs of setting up ACH account and individual processing fees. Only authorized signers are allowed to process ACH transfers. Imprest Funds The City Council authorizes the City to operate imprest funds in the administration offices and the police department: Administration is allowed to make cash payments from the imprest funds in situations where the traditional payment method is impractical for purchases under $25: The cash payments may include postage and small office supplies. All purchases made through the imprest funds must contain a receipt for the item purchased and a reimbursement slip completed stating the use of the funds, employee or City official signature, amount used, department and date. -- f~~~ The custodian of the imprest funds may make a request to replenish funds via the normal claim request to the Council by providing a written claim that itemizes all disbursements from the fund. If the Council denies any part of the claim the custodian becomes personally liable for the difference. Imprest funds will be kept in a locked, secured location to prevent unauthorized uses of the funds. The funds will be reconciled daily and reviewed by someone other than the custody holder of the funds. Personal checks may not be cashed through the petty cash funds. Filing and Record Keeping Laserfiche is an electronic scanning process used by City to file and keep records. The tree for electronic filing will be f:\\\\vendor\year\check date (month, date, year ie. 06-04-2008). Checks will include invoice and other documentation. Electronic fund transfers and ACH Transfers will include confirmation and information of.the assigned Banyon electronic number. The Finance Technician will scan all claims into Laserfiche within one week of Council approval for the claims. This page left blank intentionally _-~ ~= F - - CREDIT CARD POLICY Purpose The City has the authority to make purchases using credit cards under Minnesota Statute §471.382. This policy is implemented to follow the statutory requirements and good management practices with internal controls. Provisions Credit card use by city employees is restricted to purchases for the city. By statute, the credit cards should only be used by those employees and officers otherwise authorized to make purchases. The Administrator shall authorize certain individuals within the City to hold city credit cards for city purchases. The authorized credit card users must sign an agreement form to use city credit cards prior to their use. No personal use of the credit card is permitted. If the city council does not authorize the credit card purchase, the officer or employee who made the purchase. becomes personally liable for the amount of the purchase. Purchases made with the credit card must be consistent with other state laws. For example, Minnesota Statute §471.38, subd. 1 states claims presented for payment must be in writing and itemized. Bills received from a credit card company lack sufficient detail to comply with these statutory requirements. As a result, entities using credit cards must have the receipts needed to support the items charged in the bill from the credit card company. Credit card charge receipts are not sufficient receipts for payment because the charge slip lacks the details of what was purchased. Similarly, listing only the credit card company on a claims list would merely identify the method of payment. It would not identify the vendors providing the goods and services. The authority to use credit cards does not authorize the creation of a new form of debt for the public entity. The statutes governing the issuance of debt by a public entity have a number of restrictions attached to the issuance of any obligation. Instead, the credit card statutes simply authorize another payment option. Therefore, the City will pay off the credit card charges on a monthly basis. Cardholders are not allowed to set up convenience checks with any vendor using their City credit card. The Finance department is the only department allowed to make electronic payments after approved by the Administrator or Finance Director. Specific purchases that can be made with the credit card include office supplies, operating supplies and services, repair and maintenance, motor fuel, training and instruction, hotel and meals, small equipment and tools, only necessary purchases for the city. The city's purchasing and travel policies are required to be followed with credit card purchases. AI{ accountable and highly pilferable items purchased must be preapproved by the appropriate approving authority following the purchasing policy. Cardholders purchasing accountable items must also submit a Capital Asset Addition Form with the purchase receipt to properly track the asset in accordance with the capital asset policy. The Administrator approves the credit card limits for each officer and employee based on their needs. All credit card holders will adhere to purchasing limit as established in the purchasing policy. In the case of an emergency, the officer or employee is allowed to purchase items over the purchasing policy limit, but only up to the limit of the credit card for credit card purchases. ~ ., r-_ If the credit card issued to an officer or employee is lost or misplaced, it is the officer's or employee's responsibility to report the loss to the Finance Director or Administrator immediately. The officer or employee is required to call to deactivate the credit card as soon as the loss is realized. The City will consider applying purchases to a rewards program based on the following provisions: The rewards program is at no cost to the City, Rewards are paid back to the City directly, and The Citymaintains control over the reward program, not the individual cardholder. Procedures All credit card receipts must be signed by the purchaser with a description if what was purchased if unclear. The signed credit card receipts will be turned into the Finance department to match the invoice from the credit card company, Department heads and the Administrator may use the Credit Card Expense Report to submit their receipts.. All other card holders must use the form with signed approval from their department head. Any missing receipts will become the responsibility of the officer or employee who made the credit card purchase. The council cannot approve payment for an invoice without .proper back up for the credit card purchase under Minnesota Laws. 14 CAPITAL ASSETS Purpose The capital asset policy is to provide guidance to management for recording, depreciating and tracking the capital assets of the City. Provisions A capital asset is defined as a financial resource that intangible or intangible in nature, complete in and of itself, and is not a component of another. The asset has a useful life of not less than three (3) years, is not a repair part or supply item and has a value greater than the capitalization threshold of $1,000 or is considered to be an asset for which control is desirable. An inexhaustible land improvement is defined as an improvement that does not require maintenance or replacement, expenditures to bring land into a condition to commence assembly of structures (but not part of the structure), and expenditures for land improvements that do not deteriorate with use or passage of time. The additions are part of the cost of the land and are generally not exhaustible; thus, not depreciable. A capital lease is a lease that may be capitalized as a City capital asset if any one of the following criteria applies: • Ownership of the property transfers to the lessee by the end of the lease term, • The lease contains a bargain purchase option, • The lease term is equal to 75% of the estimated useful life of the asset, or • The present value of the minimum lease payments exceeds 90% of the fair value of the asset at :the beginning of the lease, Capital Assets to be inventoried The following capital assets are considered inventory items and must be carried on the property records of the City: All land and land improvements (inexhaustible) regardless: of value, Capitalized capital assets with a unit cost (including sales tax and ancillary costs) of $1,000 or greater. These assets would include the following: o Land improvements (exhaustible): ^ Fencing and gates ^ Landscaping ^ Parking lots/driveways/parking barriers ^ Outside sprinkler systems ^ Recreation areas and athletic fields (including bleachers) ^ Disc golf course ^ Paths and trails. ^ Stadiums ^ Swimming pools/tennis courts/basketball courts ^ Fountains ^ Retaining walls o Buildings and building improvements, o Infrastructure and infrastructure improvements, 15 o Plant and lines, o Furniture, vehicles, equipment, machinery, o Leasehold improvements, and o Construction in progress ^ The City recognizes that construction in progress is on-going and that when deemed complete by Administration and City Engineering staff, construction in progress will be listed as an acquired asset and normal depreciation procedures will be followed. Accountable assets and highly pilferable property with a unit cost (including sales tax and ancillary costs) less than $1,000 but greater than $350 identified as small and attractive will not be capitalized, but will remain inventoried. These assets are as follows: o Communications equipment, o Audio equipment, o Video equipment, o Cameras and photographic projection equipment, o Microcomputer systems, laptops and notebook computers, pda's, o Other IT accessorial equipment and components (i.e. scanners, data displays, etc.), and o Radios, television sets, tape recorders, video cassette recorders, digital video devices, and video cameras. Value of the Capital Assets to be inventoried: The capital asset is valued at its historical value or the estimated historical value if the actual value is not known at the time of purchase. The cost of a capital asset should include capitalized interest and ancillary charges necessary to place the asset into its intended location and condition of use. Donated assets will be reported at their estimated fair value at the time of donation, plus ancillary charges if any. Ancillary costs to be included in the value of the capital asset include the following items: o Freight and handling charges (including shipping insurance), o Cost of construction, o Allocation of fringe benefits and overhead expenses, o Insurance premiums during construction, o Installation and inspection costs, o Appraisal and negotiation fees, o Title, legal, commission, closing and survey fees incurred in connection with the acquisition of land, o External architectural, engineering, and design costs, o Land preparation and demolition costs of existing buildings or other structures with the intent of using the cleared land, and o Other charges incurred to place the asset into use: Costs to be excluded from the cost of a capital asset include the following items: o Other charges incurred to place the asset into use. o Demolition, removal and disposition of existing equipment in preparation for a new project, EXCEPT for the cost to remove and demolish a building or other structure existing at the time of acquisition of land, o Relocation and rearrangement of existing equipment, o Start-up, including the costs of correcting flaws, o Licensing and registration fees for vehicles and operational equipment, o Extraordinary costs incidental to the construction of capital assets, such as those due to lightening, flood, fire, or other causes, o For asset exchanges, monies paid or received as part of the exchange, o Costs to maintain and repair assets (including street seal-coating), o Costs of abandoned construction, o Administrative and executive salaries, even though a portion of the salary may be related to the acquisition of the capital asset, and o Interest related to the construction period. Inventory Records Requirements The main control of asset inventory records will be the responsibility of Finance department. The Finance department will update inventory records when applicable or at the fiscal year end. Department heads will be responsible for tagging capital assets within their department, maintaining necessary control, and maintenance of the asset. Department heads will be responsible to notify the Finance department of changes to any assets acquired, such as but not limited to, additions, disposal of assets due to damage, there is no longer any usefulness of life, additions or repairs that may increase the usefulness of life. The City shall use Banyon software to track capital assets and Laser fiche for bar coding assets. Physical Inventory The City will conduct a physical inventory at least once every other fiscal year for aii inventoriable capital assets. Each Department head is responsible for all capital assets within their department. However, in order to ensure objective reporting of inventory items, physical inventories should be performed by personnel having no direct responsibility (custody and receipt/issue. authority) for assets subject to the inventory count. If it is not feasible to use such personnel for' any part of the inventory, then those portions are, at least, to be tested and verified by a person with neither direct responsibility for that portion of the inventory nor supervised by the person directly responsible. The Department head is responsible for scheduling the inventory count at the minimum annual basis. The Finance department will also. conduct periodic spot checks of the capital assets at least two times per year. The spot check will not be a full inventory count, but a random sampling selection of inventorial assets. The Finance department is responsible for writing procedures for inventorying capital assets and what to do if changes to the records ar-e required. Depreciation Method The City will use the straight-line method with the full-month convention to depreciate all of its exhaustible capital assets. Property placed in service at any time during a given month will be treated as if it had been placed in service on the first day of that month.. If property is disposed of prior to the end of the estimated useful life, no depreciation is allowed for the month of disposition. Land, inexhaustible land improvements and construction in progress will not be depreciated. ~ ., }- Useful Lives of Capital Assets The following table is a guideline to use when determining the life of a capital asset. A capital asset should normally be within the range given; however, there are exceptions to the rule. To be considered a capital asset, the item must have a useful life of three or more years. Land Improvements: Landscaping 5-15 years Paving projects 15-20 years Fencing, signs, and other 10-20 years Buildings,. Non-Park 40 years Buildings, Park 30 years Building Improvements 15 years Infrastructure and Infrastructure Improvements: Street Construction/Reconstruction 15 years Street Overlays 10 years Water Systems 50 years Sanitary Sewer Systems 50 years Storm Sewer Systems 50 years Furniture & Fixtures 5-10 years Vehicles.: Light general purpose 5 years Heavy general purpose 5-7 years Fire Trucks 20 years Equipment: Computer and Peripherals (Hardware) 3-S years Computer (Software) 3 years Office. 3-7 years , Playground 5-7 years Fire/Police 5-7 years.. Street/Sewer/Water/Other 5-7 years Machinery,,... 5-7 years Reporting Requirements: The Finance Director will provide a written report to the Administrator and City Council after each inventory is completed. Any significant deficiencies in capital asset tracking will be reported to the Administrator and City Council as soon as they are discovered with corrective action plan suggestions. The City's Auditors will present an annual. overview of the City's financial position, including capital assets, to the City Council. Other Considerations Specific procedures for maintaining the capital asset records will be provided and updated by the Finance department. The Finance department's ,capital asset tracking procedures are attached to this document, but are not approved by City Council as part of the Capita! Asset Policy. ~„~ CAPITAL ASSET TRACKING PROCEDURES Purpose The capital asset procedures are a detailed account for maintaining records and are intended to be a guideline for staff and to give insight to the policy makers to the internal controls taken to maintain creditability of the assets held by the City. Capital Asset Tracking The main inventory control of capital assets will be held within the Finance department of the City. The Finance Director and staff will maintain all records of acquired, disposed, or changes that may reduce the useful life or increase the useful life of an asset within the inventory of capital assets. Assets will be inventoried and categorized following the'Capital Asset Policy set forth by the City Council. The physical inventory record shall include but is not limited to the following data elements: •Locaton and department of asset • Acquisition date •Purchase price including any ancillary costs • Description of asset •Useful life • Local tag number •Manufacturer • Serial and/or model number •Quantity • Parcel number (Land use only) Physical Inventory A full physical inventory will be conducted at least once every other fiscal year by City staff not directly responsible or supervised for the inventoried department assets. If it is not feasible to use such personnel for any part of the physical inventory, then at least portions will be tested and verified by staff not directly responsible or supervised for the department assets. A final bi-annual written report will be submitted by the Finance Director to the Administrator and City Council A physical inventory by department will be conducted annually to include all insurable and capital assets. The annual department inventory shall be conducted by each department and conclude with a statement of the completed inventory. The statement should read the inventory was completed on the exact number of items inventoried, who conducted the inventory, any findings and corrective action plans, and the department head's approving signature. The inventory results will be turned into the Finance Director. The Finance .Director will report the inventory results to the Administrator and City Council A physical spot check inventory will be conducted at least two (2) times per year by the Finance department to test for existence and completeness. The Finance department will randomly select ten (10) inventoried items from the capital asset tracking system (Banyon) to the locations the asset is assigned to. The Finance department will randomly select ten (10) assets around the City to verify the assets are on the capital asset tracking system. Further, the assets' barcode information will be verified in Laser fiche. Inventoried Capital Assets Missina • When capital assets from the master inventory control list are missing, it will be necessary to notify the department head that is responsible for the asset. • The Department head will need to determine if the asset has been transferred to different department, placed in storage, scrapped or converted to another asset and complete the ~ .s ~_ necessary Capital Asset Acquisition/Disposal/Change Form describing the events surrounding the loss of asset. If there are a significant number of assets missing or the value of the missing asset exceeds $1,000 the department head must determine why there is a problem and submit a plan of action to correct the situation to the Administrator, and copy the Finance department. Capital Assets Located but not Inventoried • When capital assets have been located but are not on the master inventory control list, a search of the complete inventory list should be completed. • The Capita! Asset Acquisition/Disposal/Change Form will need to be completed by the department head and the Finance department. • If there are a significant number of assets located, the department head must determine why there is a problem and submit a plan of action to correct the situation to the Administrator, and copy the Finance department. Upon completion of the physical inventory personnel will sign certifying all findings and actions that have been taken to correct the inventory. These reports will then be given to the Finance Director for review and for final approval by the Administrator and City Council for the corrective action to the master inventory control list. Additions to Capital Assets The department head is ultimately responsible for ensuring Capital Asset Acquisition/Disposa!/Change Forms .are provided to the Finance department. The Finance department will monitor City invoices for possible capital asset additions. If the Finance department receives an invoice for an item that should be added to the capital asset. tracking system, the Finance department will contact the department head to complete the proper forms. Specific procedures for capital asset additions are as follows: • ,Upon receipt and acceptance of an inventorial capital asset the department head is responsible for supervising the addition of the asset to the inventory. system. • Capital Asset Acquisition/Disposal/Change Forms shall be initiated. by the gaining department recognizing that an inventory item has been delivered and. property. ownership has been transferred to the City. To be complete the information on this form will have to be completed between the Finance department and the department head. If an appraisal is completed to value the asset, the appraisal report must be submitted to the Finance department to properly value the capita) asset. The Finance department will issue the local tag number to the department head, based on the department and the sequential number of the inventory system. The department heads are responsible for making sure the capital asset receives a bar coded tag. Besides the procedures listed here, the department head must follow Minnesota Statutes and the City's Purchasing Policy relating to acquiring of capital assets. Disposal of Capital Assets The department head is responsible for notifying the Finance department for capital assets that are disposed. The Finance department will review cash receipts for assets sold also. - {,o} Specific procedures for capital asset disposals are as follows: • Department heads will first notify the Finance Director of the potential disposal of a capital asset. • The Finance Director will determine the proper procedure to dispose of the asset. If the item has no value or is cost prohibitive to sell, the department head will be notified to make the asset available to other cities, schools, counties, or the State of Minnesota before making it available to the general public. • The Finance Director will notify the Administrator of the asset to be disposed and the matter will be placed on the next City Council agenda for the Council to declare the property surplus. Once the Council has declared the property surplus the appropriate disposal method will be followed. • Department heads are responsible to complete the Capital Asset Acquisition/Disposal/Change Form indicating if the asset was sold or junked. Sold assets will be accompanied with any .appraisal information, bill of sale, receipt showing value of sale, and who acquired the asset. • After completing the Capital Asset Acquisition/Disposal/Change Form, the form will be returned to the Finance department for recording of disposed asset to the capital asset tracking system. • The Finance department will enter any receipts for the sale of a capita{ asset through Banyon's Point of Sale software. The receipt will be coded to the proper fund and recorded as an "other finance source" for the sale of a capital asset. • The department head is responsible for removing the local tag number and any other identifying marks that would indicate the asset belonged to the City. The tag should be turned into the Finance department with the disposal form if salvageable. In addition the guidelines listed above, all disposals must follow Minnesota Statutes relating to disposal of equipment (assets). Changes to Capital Assets There are various times that a capital asset may require a change. A few examples are: • The asset transferred to another department, • The asset is damaged causing the book value to be in excess of the actual, • The asset's life is extended or decreased from the original estimated life, or • An appraisal had been completed and found that the fair market value of the asset should be changed. o Whenever there is a question as to change in value, the department head and Finance Director should determine if a change in value should occur and the Capital Asset Acquisition/Disposal/Change Form completed and signed by the department head. ~ _, ~- This page intentionally left blank - --~ °= 1- FUND BALANCE Purpose The purpose of this policy is to establish the specific guidelines for the level of unreserved and reserved fund balances in the governmental funds. The policy also specifies the types of future expenditures to be designated, how the amounts for such designations are arrived at, and when the designations will be set. Background In governmental funds, a City should identify fund balance separately between reserved and unreserved fund balance. The City may assign and report some or all of the unreserved fund balance as designated or undesignated. This policy is based on U.S. Generally Accepted. Accounting Principles (GAAP) as established by the Governmental Accounting Standards Board (GASB). Future changes to GAAP may require changes to this policy. Proprietary funds' equity will be managed as a separate business-like enterprise as allowed by GAAP. The funds will monitored through operations and their rate structures. Examples of Proprietary funds include water, sewer, refuse and storm water. Reserved Fund Balance The function of reserved fund balance is to separate the portion of fund balance that is not appropriable for expenditure or is legally segregated for specific future uses, so that the unreserved fund balance can serve as a measure of current available financial resources. In accordance with GAAP, the City will classify a portion of fund balance as reserved that meets the following criteria: ~ Resources not available for spending. Some of the assets reported in governmental funds are not available for spending in the subsequent year's budget. • .Legal restrictions on spending. ,Fund .balance also is reserved to indicate situations where a portion of,the fund balance is not available for new spendingbecause of legal restrictions involving parties outside the financial reporting entity. One common example is amounts reserved for encumbrances, which represent contracts for goods or services with outside parties still outstanding at the end of the year (like construction contracts). Reservations also are commonly used to report legal restrictions arising from state statutes or grant requirements placed on the use of specific resources. The City. Council will set the Reserved Fund Balance amount to a level necessary to meet GASB or legal requirements.: No set level will be established. in this policy because the requirements will fluctuate depending on the needs of the City each year.. The City's independent auditor shall annually provide the Council with the audited reserve balance after the audit is completed. The auditor shall offer an opinion on the adequacy of the reserve balance. Unreserved Fund Balance The part of fund balance not identified as reserved is the unreserved fund balance. The unreserved fund balance may, in turn, be subdivided into designated and undesignated. _~,,; Designated Fund Balance. Whereas 6AAP dictates the criteria for reserved fund balance, fund balance designations represent management's intended use of resources. Fund balance designations may be established to indicate management's tentative plans for financial resource utilization in a future period, such as for general contingencies or for equipment replacement, Such designations reflect tentative managerial plans or intent and should be clearly distinguished from that which is reserved. Designations should be supported by actual plans approved by the City Council. Such plans or intent are subject to change and may never be legally authorized or result in expenditures. The designations are the City's self-imposed limitations on the use of available current financial resources. o When an unreserved fund balance is designated for the City's intended use of current available financial resources, the designations are reported on the face of the balance sheet only in connection .with governmental funds. Designations are reported as part of the unreserved -designated fund balance on the balance sheet in the fund financial statements and disclosed in the notes to the financial statements by specific purpose. The designations will not appear on the face of the government-wide financial statements. o No set level of unreserved -designated fund balances will be established in this policy because the requirements will fluctuate depending on the Council's intentions and current planning. o The Finance Director will annually recommend approval from the City Council on the unreserved -designated fund balance levels following year-end. Unreserved, Undesignated Fund Balance. The unreserved, undesignated fund balance consists of current resources available for which there are no City self-imposed limitations or set spending plan. Although there is generally no set spending plan for the undesignated-portion, there is a need to maintain a certain funding level. In the case of'some of the revenue sources in the governmental funds, the revenues can'only be used for a specified purpose as dictated by Minnesota Statutes. No designation of the funds will be established even though the revenues are restricted for their specified purpose. Examples of restricted revenues include park dedication fees, tax increment revenue, fire contracts, sales tax revenue and specified grant funds. If a fund balance exceeds the'required designation leve(set by City Council, these funds are not available for the general operations of the City. o The City will maintain an undesignated fund balance of 35-50% of the budgeted expenditures in the general fund (called working capital). The fund balance range is to provide cash flow between Minnesota state aid payments and collection of ad valorem property taxes (the significant revenue sources of the general fund). o The City will maintain an additional 5% of the expenditure budget for unanticipated emergencies. If an emergency costs more than 5% of the expenditure budget, the City will consider other revenue sources to pay for the emergency such as insurance reimbursements, bonding, grants orstate/federal appropriations. ~_<~ o The City is not allowed to expend more than the revenues received in the special revenue funds. Specific designated Boards will maintain undesignated fund balances of 25% of the current year expenditures. Enterprise Fund Equity Enterprise funds are used to account for operations financed and operated in a manner similar to private business enterprises, where the City intends the cost of providing goods or services to the public be financed or recovered primarily through user charges. The City's enterprise funds include the Refuse, Water, Sewer and Storm Water funds.. It is the City's intent to cover all operating, including depreciation, and non-operating expenses through user charges to eliminate the impact on taxpayers.. User charges will be reviewed annually to ensure adequate rates are charged for the services provided. A detailed rate analysis will be conducted bi- annually. Enterprise funds' equity will be classified in one of the following categories: • Investment in Capital Assets, Net of Related Debt. The component of net assets which is the difference between assets and liabilities of proprietary funds that consists of capital assets less both accumulated depreciation and the outstanding balance of debt that is directly attributable to the acquisition, construction or improvement of the capital assets. • .Restricted. The component of net assets which is the difference in assets and liabilities. of proprietary funds that consist of assets with constraints placed on their use by either external parties (i.e. creditors or grantors) or through constitutional provisions or enabling legislation. • Unrestricted. The difference between the assets and liabilities of proprietary funds.. that is not. reported as Investment in Capital Assets, Net. of Related Debtor Restricted net assets. The City Council will not establish a minimum. required level for equity in proprietary funds other than the funds should cover their own operating and non-operating costs.. Other Policy Considerations The City will use all budgetary and financial accounting options available to maintain the minimum level of fund balance available for appropriation in the General and Special Revenue Funds. Some options available include the following items: 1. A specific budgeted revenue increase (i.e. ad valorem property tax increase). 2. Increase fees for services. 3. Reduction of expenditures in the budget. 4. Transfers from other available funds. 5. Sale of capital assets. It is the intent of the City to minimize significant fluctuations in ad valorem property tax rates. The City is strongly dependent upon Minnesota state. aids to subsidize the City's expenditure budget. State legislature may approve appropriation changes that would cause the City to adjust the property tax level by a large amount to maintain an appropriate level of fund balance and to provide the. services needed by the community. The Administrator and Finance Director will monitor state legislation to be aware of possible cuts or increases in State appropriations. The Administrator will report significant changes to the City Council once realized. -- ~ __ ~ - The City Council requires positive fund balances for all governmental, proprietary and fiduciary funds, with a few exceptions. The Council will allow a negative fund balance in the following instances: 1. A project may be in a developmental phase in which all appropriations have not yet been received. It is anticipated the appropriations will be received within the fiscal year or early the following fiscal year. The Finance Director will present anticipated revenue sources to the Council when a deficit occurs for this reason. 2. An emergency occurred and all appropriations to pay for the emergency have not been received yet. The Administrator will keep a current listing of anticipated revenue sources to pay for the emergency. 3. Pledges for a project are expected to be received over a period of time. In this case, a long-term receivable may be recorded if the pledges are assured to be received. If the receipt of the pledges is not guaranteed, the receivable cannot be recorded. The project (fund in some cases) will carry a negative balance until all pledges are received. 4. An inter-fund loan is not appropriate or not available to cover the fund deficit. 5. The quarterly report provided by the Finance Director is on the cash basis of accounting. The cash basis of accounting does not account for receivables or payables in its presentation,-even though the accruals exist. The Finance Director will report shortfalls or surpluses in the projected fund balance levels to the City Council with the quarterly financial report, or as soon as found to be a significant impact, which ever is sooner. If a fund deficit occurs, a written plan by the appropriate designated Board (i.e. Fire Board) is required. If a designated Board does not exist for the fund; the Finance Directorwill write a plan to move the fund out of the deficit and review the plan with the Administrator. The City Council is responsible for reviewing and approving the financial plan. The Administrator will monitor the plan's effectiveness on a monthly basis. The Finance Director will report the plan's effectiveness to the Administrator and City Council on a quarterly basis. A fund surplus above the required undesignated' fund balance threshold may also occur. In this case, the Administrator will notify the City Council to discuss the circumstances'oftke surplus and determine whether or not the established threshold is effective. Some appropriate plans for using fund surpluses include the following items (but is not limited to): 1. Move budgeted expenditure into a future year due to unforeseen circumstances. 2. Fund cone-timeproject or project planning that would not normally be budgeted in the on-going operations of the City. 3. Return unused dollars to donors. 4. Transfer excess funds to another City fund to finance a project or cover a shortfall. The City's credit rating for debt financing and investing will also be considered in the level of required General fund balance. The City Council may further restrict the required fund balance level to meet a higher credit rating need if possible. The City's credit rating is reviewed annually by the Administrator, Finance Director, and bond counsel when necessary. The City Administrator shall be responsible for conducing rating reviews. ~ =s ~._ Reporting Requirements Periodic required fund balance reports to elected officials provide necessary written communication regarding the City's financial position. The Finance Director shall provide the City Council quarterly fund balance reports on the cash basis of accounting. The City's audit firm shall provide a Council presentation of the previous year's financial condition in the modified and full accrual basis of accounting after the audit is completed. Any deficiencies presented by the auditor's will be followed up by the Finance Director with a written plan to comply with this policy. The audit presentation will occur before June 30th following the previous year's end. - - -{ ~, ~ This page intentionally left blank _{z,~__ BUDGET POLICY Purpose The purpose of this policy is to establish the specific guidelines for determi-Wing the level of budgetary control, how the budgets are adopted and which basis of accounting the budget will be prepared in. General Budgetary Timeline The City established a budgetary timeline to meet the requirements of Minnesota Statutes. The following timeline is a general timeline for staff to follow to allow Council and the community sufficient time to review the proposed budget. May June August August -September September September 15 October-November November November-December December 28 February Stearns County conducts open book meeting with the residents to discuss market valuation. Department Heads prepare budget and present preliminary budget at a staff level meeting. The Administrator shall convey to all department heads the goal for budget preparation. Budget workshops are scheduled with the staff and City Council. Public Hearing -Fee Schedule for next budget cycle. Preliminary budget certified to Stearns County. Budget workshops with staff and City Council after Stearns County provides the estimated tax capacity to the City. Approve fee schedule. Truth-in-Taxation hearing Final budget certified#o Stearns County. Homestead market value credit determined by Stearns County. The specific dates listed are the due dates are for the preliminary and final levies. The Council may certify the levies prior to these dates at their regularly scheduled meeting or at a special meeting. Level of Budgetary Control The City Council will monitor the budget and approve any changes at the department level. The City Council will review the budget to actual expenditures and revenue on a quarterly basis. Department level expenditures may not exceed budgeted appropriations. The Finance Director shall be responsible to report to the Administrator when a budget is reaching deficit spending. If a department's expenditures exceed the budgeted appropriations, the Finance. Director will notify the Administrator. and Department Head immediately. The Department Head shall prepare a written plan to the Administrator which will then be presented to the City Council for approval. The City Council may consider transferring budgeted amounts between departments. Department heads will monitor their budgets by department. The department heads have the authority to move budgeted amounts within a department between object codes. In order to make line item adjustments, a written request must be submitted to the Finance Director to make the changes. The Finance Director will ensure the proper level of budgetary control is followed and will provide reports at the proper level to the appropriate authority. Capital Improvement Plan - As part of the budget process, the City Council annually approves the updated five (5) year capital improvement plan (CIP). The City's comprehensive capital improvement ~=s~_ plan is a long-range plan that identifies capital projects and equipment purchases needed by the City. The CIP is presented by department head requesting capital outlay expenditures required to provide the services requested by the taxpayers. The City Engineer will also. present a 5-year plan for significant capital projects. Only capital outlay expenditures exceeding the City's capital asset threshold of $1,000 will be included in the CIP. The Council will hold special workshopsto discuss the CIP during the budget process before the final levy is certified. The workshops will allow public input on the CIP. The CIP is formally adopted by motion of the City Council The comprehensive CIP will include the following information: • A listing of capital projects or equipment to be purchased. • The projects ranked in order of preference. • The plan for financing the projects. • A timetable for the construction or completion of the project. • The justification for the project. The CIP provides many benefits including the following items: • Allows for a systematic evaluation. of aU potential projects at the same time. • Provides the ability to stabilize debt and consolidate projects to reduce borrowing costs. • Ensures the efficient use of publicfunds. • Serves as a public relations and economic development tool: • Focuses on preserving the City's infrastructure.. • Fosters cooperation among departments. • Provides an ability to inform other governmental units of the City's priorities. Budget Adoption byFund -The City Councit will adopt a budget for the General fund and aU Special Revenue funds as required by GAAP. The City Council wilt review the Enterprise funds through operational studies. Annual appropriated budgets are not adopted for the Debt Service-funds because effective budgetary control is alternatively achieved through bond indenture provisions. Although not formally adopted annually, the City Council will add the required levy. and other revenue streams required to meetthe annual debt payments as required through the bond agreements to the budget. The budgetary control.. for Capital Project funds is accomplished. through the use of project controls. Formal annual appropriated budgets are not adopted for Capital Project funds: Budget Transfers/Amendments.-The City Council can modify the adopted budgets through budget transfers or amendments. Although the City'sJevy cannot be changed once certified in December of the preceding year, the Council may change the budget amounts based on other factors such as receiving a grantor: a large surplus in fee revenues. The Council may consider the amendments to maintain #und balance levels as determined by the Fund Balance Policy: Budget line item transfers within a department can be modified by approval of the department head; however, no inter-department amendments can be made without Council approval. Remaining Budgets/Encumbrances -Any remaining budget expenditure appropriations lapse at year- end. Encumbrances outstanding at year-end will expire and outstanding purchase orders are canceled and not reported. in the financial statements. __ - ~ ,~ ~ Budgetary Basis The City Council will adopt budgets for the General and Special Revenue funds based on the cash basis of accounting. The annual audited financial statements will present the adopted and final budgets in comparison to actual revenues/expenditures on the modified accrual statements and schedules for the General fund and major Special Revenue funds. Reporting Requirements Periodic required budget to actual reports to elected officials provide necessary written communication regarding the City's financial position. The Finance Director will provide monthly department budget to actual reports to department heads. Department heads are responsible for monitoring their budgets and reporting any overages to the City Council. Further, department heads will assign account codes to purchase orders and invoices as a means of tracking their amount of remaining budget byline before submitting the request for payment. The Finance Director shall provide the City Council quarterly budget to actual reports on the cash basis of accounting. If any significant expenditure overages occur or are projected to occur, the Administrator will report the facts to the City Council once known. The City's audit firm shall provide a Council presentation of the previous year's financial condition in the modified and full accrual basis of accounting after the audit is completed. Any deficiencies presented by the auditors will be followed up by the Finance Director with a written plan to comply with this policy. The written policy will be submitted to the Administrator for review and comment. The audit presentation will occur before June 30th following the previous year's end. -~ ,. ~-_. This page intentionally left blank. ~~,} INVESTMENT Purpose The purpose of this policy is to establish the specific guidelines for the investment of all public funds of the City of St.loseph, Minnesota. This policy is designed to ensure the prudent management of public funds, the availability of operating the capital funds when needed, and an investment return commensurate with the City's investment risk constraints and cash. flow characteristics of the portfolio. It will be the responsibility of the City Council to appoint an Investment Committee to direct the Administrator and Finance Director to invest City funds in order to attain a market rate of return while preserving and protecting the capital of the overall portfolio. The Investment Committee shall serve as the Policy Committee to provide overall guidelines for investments, and the Administrator and Finance Director are responsible for the day to day activities. Investments will be made based on statutory constraints in safe, low risk instruments. Scope This policy applies to all financial assets of the City of St. Joseph, Minnesota. While separate investment funds are created to accommodate reporting on certain bonded indebtedness, individual investments are purchased using a pooled approach for efficiency and maximum investment opportunity. The Administrator and Finance Director under the direction of the Investment Committee are responsible for the investing of all funds in the custody of the City within the guidelines established by the Investment Committee. The City's-funds are defined in the City's Audited Financial Statements and include the following funds: • General fund • Special Revenue funds • Debt Service funds • Capital Project funds • Enterprise funds • Any new funds created by the City, unless specifically exempted by the City Council through resolution Except for cash in certain restricted and special funds, the City will consolidate cash balances from all funds to maximize investment earnings, which shall be referred to as pooling of funds. Investment income will be allocated to the various funds based on their perspective participation and in accordance with U.S. generally accepted accounting principles (GAAP). Objectives The objective of this policy is to establish standards for governing the investment of the funds of the City. These funds will be invested in accordance with this policy and Minnesota Statute §118A. The City has determined that its funds shall be invested based on the following three objectives: Safety of Principal Safety of principal is the foremost objective of the City. Each investment transaction shall seek first to insure that capital losses are minimized. The objective will be to mitigate the following risks: Credit Risk The risk of loss due to the failure of the security issuer or backer, by: • Limiting investments to the types of securities listed under this policy. 33 • Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisers with which the City will do business as designated by Council and are qualified as stated under this policy. • Diversifying the investment portfolio so that the impact of potential losses from any one type of security or from any one individual issuer will be minimized. The Investment Officers must disclose the credit quality ratings as of the date of the financial statements. If there is not credit rating, this fact must be disclosed in the audited financial statements. U.S. government obligations or obligations explicitly guaranteed by the U.S. government are exempt from this requirement. Custodial Credit Risk The City will not hold deposits or investments that are uninsured or uncollateralized,sre not registered in the name of the City and held either by the City's broker/financial institution or trust department but not in the City's name. The Finance Director will ensure proper insurance or collateral is maintained for all deposits and investments at all times. The Finance Director will obtain a broker acknowledgement form from all investment institutions in January of each year. • Deposits -The City of St. Joseph will minimize deposit Custodial Credit Risk, which is the risk of loss .due to a failure of the depository bank or credit union, by obtaining collateral or bond for all uninsured amounts on deposit, and by obtaining Necessary documentation to show compliance with state law and a perfected security interest under federal law. Investments -The City of St. Joseph will eliminate investment Custodial Credit Risk by permitting brokers that obtained investments for the City to hold them`only to the extent there is SIPC and excess SIPC coverage available. Securities purchased that exceed available SIPC coverage shall be transferred to the City or approved custodian of the City under Minnesota Statute §118A'.06. Further, a broker certification form must be signed by the broker annually prior to obtaining investments on behalf of the City. The following institutions may hold the securities of the City of St. Joseph in accordance with Minnesota Statute §118A.06: • The Federal Reserve Bank • Banks with corporate trust powers • .Primary Reporting Dealers, to the Federal Reserve Bank of New York • Broker-dealers with principal executive offices in Minnesota, licensed under Minnesota Statute §80A and regulated by the Securities and Exchange Commission Concentration of Credit Risk The City will keep the concentration of credit risk below 5% of the total investments when prudent to do so. If at anytime the concentration of credit risk exceeds 5%, this fact must be disclosed to the City Council with associated risk of loss of the public funds: This risk is the risk of loss attributed to the magnitude of the City's investments in a single issuer. _(„~_ __ Interest Rate Risk The City will minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in market interest rate. The City will use the weighted average maturity to evaluate interest rate risk. The following considerations are made by the City: Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools. Investing capital funds in longer-term securities if the market rate is favorable to capitalize on interest earnings on the funds. Foreign Currency Risk: The City will not hold deposits and investments in foreign financial institutions or brokers. This risk refers to the risk that changes in exchange rates will adversely affect the fair value of an investment or deposit. Maintenance of Adequate Liquidity The portfolio will remain sufficiently liquid to enable the City to meet all operating and capital requirements that might be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets. for all. available funds that do not have an anticipated demand (dynamic liquidity). Alternatively, a portion. of the portfolio may be placed in money market mutual funds or local government investment. pools, which offer same-day liquidity. Maximization of Return on Investment (Yeild) The investment portfolio shall be designed with the objective ofattaining amarket-average rate of return through budgetary and economic cycles, taking into account the constraints on risk and cash flow characteristics of the investment portfolio and prudent investment principles. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall generally be held until maturity with the following exceptions: • A security with declining credit may be sold early to minimize loss of principal. • A security swap would improve the quality, yield, or target duration in the portfolio. • Liquidity needs of the portfolio require that. the security be sold. Following the satisfaction of liquidity and maturity needs, the balance of the funds available for investment will be placed with institutions that offer the highest rate of return consistent with preservation of principal. Local Consideration Subject to requirements of the above objectives, it is the policy of the City of St. Joseph to offer financial institutions within the City of St. Joseph. the opportunity to bid on investments; however, the City of St. Joseph will seek competitive investment yields. ~ 35 r- STANDARDS OF CARE Prudence Investments shall be made with judgment and care, under circumstances then prevailing, with persons of prudence, discretion and intelligence. The standard of prudence to be used by investment officials shall be the "prudent person" and/or "prudent investor" standard and shall be applied in the context of managing an overall portfolio. Investment Officers acting in accordance with this policy and with Minnesota Statue §118A and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. Ethics and Conflict of Interest Any City official (elected or appointed) or employee involved in the investment process shall refrain from personal business activity that could conflict with proper execution and management of the City's investment program, or that could impair their ability to make impartial decisions. Investment officials shall disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with which business is conducted on behalf of the City. DELEGATION OF AUTHORITY The Administrator and Finance Director are designated by City Council under Minnesota Statutes as the Investment Officers of the City and are responsible for investment management activities. The responsibility for conducting investment transactions resides with the City Council of the City of St. Joseph. The Council shall appoint an Investment Committee to oversee the City's investment program. The Administrator and Finance Director shall develop and maintain written administrative procedures and internal controls for the operations of the investment program, monitoring diversification and risk as well as a system of controls to regulate the activities of subordinate officials. Procedures should include references to: safekeeping, investment accounting, 'repurchase agreements, wire trar-sfer agreements and collateral/depository agreements. No person may engage in an investment transaction except as provided under the terms of this policy and procedures established by the Investment Committee and City Council FINANCIAL INSTITUTIONS AND SAFEKEEPING Authorized Brokers/Dealers and Financial Institutions The Finance Director will maintain a list of financial institutions authorized to provide investment services. The Council shall authorize the Investment Committee to exercise the powers of the Council in designating a depository of the funds: In selecting depositories, the credit worthiness of the institutions under consideration shall be examined by the Administrator and Finance Director. All financial institutions selected as official depositories shall be in good standing with FDIC, NCUA, SIPC or collateralized at 110% for deposits not covered by FDIC, NCUA or SIPC. Only approved security broker/dealers selected by creditworthinessshsll be utilized (minimum capital requirement of $7,500,000 and at least seven years in operation). They must be authorized to provide investment services in the State of Minnesota. These may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule.) - ~ 36 ~- All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the Finance Director, upon request, with annual audited financial statements, proof of National Association of Security Dealers (NASD) certification (as applicable), proof of State of Minnesota registration, completed broker/dealer questionnaire for firms who are not major regional or national firms, and certification of having read the City's investment policy. The City will give preference to local financial institutions. Broker Representations Municipalities must obtain from their brokers certain representations regarding future investments. Minnesota Statutes §118..04, subd. 9 requires municipalities to provide each broker with information regarding the municipality's investment restrictions. Annual completion of Notification of Broker and Certification by Broker (pursuant to Minnesota Statute §118A.04) must be completed in January. Authorized and Suitable Investments From the governing body perspective, special care must be taken to ensure that the list of instruments includes only those allowed by law and those that local investment managers are trained and competent to handle. Minnesota Statute §118A lists all permissible. investments for municipalities. The City of St. Joseph is .authorized to invest in the instruments as permitted by Minnesota Statutes. Furthermore, no one type of instrument will exceed the maximum percentage. allowed for the investment portfolio as dictated in Minnesota Statutes. Investment Types Consistent with the GFOA Policy Statement on State and Local Laws Concerning Investment Practices, the following investments will be permitted by this policy and are those. defined by state and local law where applicable: • U.S. Treasury obligations which carry the full faith and credit guarantee of the United States government and are considered to be the most secure instruments available • U.S. government agency and instrumentality obligations that have a liquid market with a readily determinable. market value (excluding high-risk mortgage-backed securities) • Certificates of deposit and other evidences of deposit at financial institutions • CDARS • Bankers' acceptances • Commercial paper, rated in the highest tier by a nationally recognized rating agency • Investment-grade obligations of state, provincial and local governments and public authorities • Repurchase agreements whose underlying purchased securities consist of the aforementioned instruments • Money market mutual funds regulated by the Securities and Exchanges Commission-and whose portfolios consist only ofdollar-denominated securities • Local government investment pools either state-administered or developed through joint powers statutes and other intergovernmental agreement legislation Investment in derivatives of the above instruments shall require authorization by the Council. Investments in FDIC-guaranteed bank bonds are not "direct obligations" or "issues of" the United States or one if its subsidiary organizations; therefore, are not lawful investments for public entities. _~,>~_ Safekeeping Securities will be held by the City itself or an independent third-party custodian as evidenced by safekeeping receipts in the City's name. Securities purchased will be retained of the institution where the securities are purchased in the City's name. Securities will be held at the City or at the financial institution in the City's name. All securities should be a risk category one according to the Governmental Accounting Standard No. 3. When a Broker/Dealer holds investments purchased by the City of St. Joseph, Minnesota in safekeeping, the Broker/Dealer must provide asset protection through the Securities Investor Protector Corporation (SIPC). Deposits shall be insured through the Federal Depository Insurance Corporation (FDIC) or National Credit Union Share Insurance Fund (NCUSIF) and pledged collateral in an amount of 110% over the FDIC/NCUSIF/SIPC insurance. Internal Controls The Investment Officers are responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft or misuse. Details of the internal control system shall be documented in an investment procedures manual and shall be reviewed and updated annually. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely tobe derived, and (2) the valuation of cost and benefits requires estimates and judgments by management: Accordingly, the Investment Officers shall establish a process for an annual independent audit by an external auditor to assure compliance with policies and procedures. The internal controls shall address: • Contr-of of collusion • Separation of transaction authority from accounting and record-keeping • .Custodial safekeeping • .Avoidance of physical delivery securities • Clear delegation of authority to subordinate staff members • Written confirmation of transactions for investments and wire transfers • Development of a wire transfer agreement with the lead bank and third-party custodian • Dual authorizations of wire transfers INVESTMENT PARAMETERS Diversification It is the policy of the City to diversify its investment portfolios. To eliminate risk of loss resulting from the over-concentration of assets in a specific maturity, issuer, or class of securities, all deposits and investments in all City funds shall be diversified by maturity, issuer, and class of security. Diversification strategies shall be determined and revised periodically by the Investment Officers for all funds. In establishing specific diversification strategies, the following general policies and constraints shall apply: Portfolio maturities shall be staggered to avoid undue concentration of assets in a specific maturity sector. Maturities selected shall provide for stability of income and reasonable liquidity. For cash management funds: • Liquidity shall be assured through practices ensuring that the next disbursement date and payroll date are covered through maturing investments or deposits. ~ ,a ~ --- Positions in securities having potential default risk (e.g. commercial paper) shall be limited in size so that in case of default, the portfolio's annual investment income will not exceed a loss on a single issuer's securities. Risks of market price volatility shall be controlled through maturity diversification such that aggregate price losses on instruments with maturities exceeding one year shall not be greater than coupon interest and investment income received from the balance of the portfolio, The Investment Officers shall establish strategies and guidelines for the percentage of the total portfolio that may be invested in securities other than repurchase agreements, Treasury bills or collateralized certificates of deposit. The officer shall conduct a quarterly review of these guidelines and evaluate the probability of market and default risk in various investment sectors as part of its considerations. The following diversification limitations shall be imposed on the portfolio: • Maturity: No more than 20% of the portfolio may be invested beyond 60 months, and the weighted average maturity of the portfolio shall never exceed five years. • Default risk: No more than 10% of the overall portfolio may be invested in the securities of a single issuer, except for securities of the U.S. Treasury. No more than 25% of the portfolio may be invested in each of the following categories of securities: o Commercial paper o Negotiable certificates of deposit o Bankers' acceptances o Any other obligation that does not bear the full faith and credit of the United States government or which is not fully collateralized or insured o No more than 5% of the portfolio shall be invested in overnight instruments or in marketable securities which can be sold to raise cash in one day's notice. Maximum Maturities To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City will not directly invest in securities maturing more than 5 years from the date of purchase or in accordance with state and local statutes and ordinances. The City shall adopt weighted average maturity limitations consistent with the investment objectives. Extended maturities may be utilized to take advantage of higher yields• however, no more than 20% of the total cash and investments should extend beyond 5 years. Unless prior Council approval is received, no investment with a maturity exceeding 5 years will be purchased. Reserve funds and other funds with longer-term investment horizons may be invested in securities exceeding 5 years if the maturities of such investments are made to coincide as nearly as practicable with the expected use of funds. The intent to invest in securities with longer maturities shall be disclosed in writing to the City Council Because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio should be continuously invested in readily available funds such as local government investment pools, money market funds, or overnight repurchase agreements to ensure that appropriate liquidity is maintained to meet ongoing obligations. --~3sr Competitive Bids The Investment Officers shall obtain competitive bids from at least two brokers or financial institutions on all purchases of investment instruments. Collateralization Where allowed by state law and in accordance with the GFOA Recommended Practices on the Collateralization of Public Deposits, full Collateralization and perfection will be required on all demand and time deposit accounts, including checking accounts and non-negotiable certificates of deposit. Further, the written assignment shall recite that, upon default, the financial institution shall release to the government entity on demand, free of exchange or any other charges, the collateral pledged. There are two types of federal securities that are allowed as collateral under Minnesota law: U.S. Government Treasury bills, Treasury notes, Treasury bonds; and Issues of U.S. government agencies and instrumentalities as quoted by a recognized industry quotation service available to the City. Repurchase Agreements Repurchase agreements shall be consistent with GFOA Recommended Practices on Repurchase Agreements. INVESTMENT REPORTING Purpose Periodic required investment reports to elected officials provide necessary written communication regarding investment performance, risk analysis, adherence to policy provisions, as well as other information. The Finance Director shall provide the City Council quarterly investment reports, which provide a clear picture of the status of the current investment portfolio. The management report should include a summary of securities held at the end of the reporting period by authorized investment category, percentage of portfolio represented by each investment category, percentage of portfolio represented by each financial institution, realized and unrealized gains/losses resulting from appreciation or depreciation by listing the cost and market value of securities, and overall portfolio values. Each quarterly report shall indicate any areas of policy concern and suggested or planned revision of investment strategies. Copies shall be available to the independent auditor. A monthly Treasurer's Report shall be given by the Finance Director to the City Council stating the overall financial health of the City. Within 40 days of the end of the calendar year, the Investment Officers shall present an annual report on the investment program and investment activity.- The annual report shall include 12-month and separate quarterly comparisons of return and shall suggest policies and improvements that might be made in the investment program. Alternatively, this report may be included within the City's annual audited financial statements. Performance Standards The investment portfolio will be managed in accordance with the parameters specified within this policy. The portfolio should obtain a market average rate of return during amarket/economic - _- c <~ ~- environment of stable interest rates. The City will use the current market condition as a benchmark in which the portfolio performance shall be compared on a regular basis. This benchmark shall be reflective of the actual securities being purchased and risks undertaken, and the benchmark shall have a similar weighted average maturity as the portfolio. Marking to Market The market value of the portfolio shall be calculated and posted at least monthly and a statement of the market value of the portfolio shall be issued at least monthly. The will ensure the review of the investment portfolio, in terms of value and price volatility, has been performed consistent with the GFOA Recommended Practice on "Mark-to-Market Practices for State and Local Government Investment Portfolios and Investment Pools." In defining market value, considerations should be given to the GASB Statement 31 pronouncement. Policy Considerations Any investment currently held that does not meet the guidelines of this policy shall be temporarily exempted from the requirements of this policy. Investments must come in conformance with the policy within twelve months of the policy's adoption or the governing :body must be presented with a plan through which investments will come into conformance. Amendments This policy shall be reviewed on an annual basis. Any changes must be approved by the Investment Committee and the City Council, as well as the individuals charged with maintaining internal controls. Approval of Investment Policy The City's investment policy and any amendments shall be adopted by motion by the City Council. Statute Authority Specific investment parameters for the investment of public funds by the City are found in Minnesota Statutes §118A. Conclusion The intent of this policy is to ensure the safety of all City funds. The main goal of the City will be to maintain the safety of its principal while earning the market rate of return. { ,. }- This page intentionally left blank - ~ __ ~--_ TRAVEL Purpose The City has the right to reimburse. employees, staff and elected officials for official City required travel through federal and state laws and policies. This policy is adopted to implement statutory requirements and provide good management practices with internal controls. Overview Officers and .employees acting on behalf of the City that incur personal expenses for travel to complete their assigned and approved duties shall be reimbursed for their travel expenses when the officer or employee properly requests reimbursement. The officer or employee must complete an Expense Reimbursement Form. within 60 days of returning from travel, provide proper documentation of expenses and obtain the proper approvals before reimbursement consideration will be given.. Cash advances for travel will not be allowed by this policy. Prior to incurring. travel expenses, the purpose of the. travel must be pre-approved by City Council, Administrator or department heads. Approvals may be given through the budget process, personnel contracts, within the purchasing policy, or City code and ordinances. Out-of-state travel must be approved by City Council and meet the needs of the City's public purpose prior to travel Travel expenses include the following expenses: • Mileage by Personal Owned Vehicle (POV) • Lodging costs and applicable taxes • Meals and incidentals • Air/train/bus or other public transportation fares. • Parking meter/garage fees • Conference fees • Official City long distance or focal phone calls Items not reimbursable under this policy include, but not limited to, are as follows: • Costs for travel of family members • Alcoholic beverages • Events sponsored by or affiliated with political parties.. • Expenses incurred for personal travel during official travel (i.e. mileage, additional time) • Meal tips greater than 20~o the cost of a meal • Hotel room service greater than the maximum daily allowance as set by GSA • Tips for travel assistance • Entertainment charges • ATM or cash advance fees • Lobbying events (unless in connection with a specific City project) • Campaigning costs • Personal phone calls • Meals when a meal is provided as part of a conference fee • Networking excursion events during official City travel • "Sister City" travel expenses _~ ., ~- TRAVEL PROVISIONS Work Time The City will follow FLSA for non-exempt employees. Work time will be given for time spent traveling for official City business. The following guidelines are provided to help determine when travel work time is reimbursed. Travel from home to work after hours: An employee who has gone home after completing their normal day's work is called out at night to travel to perform an emergency job. All time spent on such travel is working time. Employees will be paid a minimum of two (2) hours at time and a half for the additional time. If the emergency takes more than 2 hours, the time over 2 hours will go to the employee's compensatory (comp) time accrual at time and a half at the rate of pay at the time the comp time was earned.. This provision does not include volunteer fire fighters or exempt employees. • Special one day assignment in another City: An employee who regularly works at a fixed location in St. Joseph is given a special 1-day assignment in another City. Because such travel is performed for the City of St. Joseph's benefit and atthe City of St. Joseph's request, such travel time is considered work time and mileage will be reimbursed if a City vehicle is not used. Regular home to work travel time and meal periods will be deducted.. • Overnight travel away from home: Travel away from home is work time when it cuts across the employee's work day. The time to be considered is not only hours worked on regular working days during normal working hours, but also during the corresponding hours on non- working days. All overnight travel must be approved by the supervisor. Exam le: If an employee regularly works from 8:00 a.m. to 4:30 p.m., Monday through Friday, the travel time includes hours for Saturday, the employee shall be compensated for the normal working hours plus the additional time worked on Saturday. The employee shall not be compensated for hours outside of the typical work day. In this example compensation ends at 4:30 PM. Exceptions: Pubic Transportation - !fan employee is offered public transportation..but request permission to drive their POV instead, the employer may count the hours worked either: The time spent driving the car; or The time they would havehad to count as hours worked during working hours if the employee had used the public conveyance. Work While Traveling -Any work which an employee is required to perform while traveling must be counted as hours worked. An employee who drives a truck,. bus, automobile, boat, or airplane, or an employee who is required to ride therein assn assistant or helper, is working while .riding. Meal periods and sleep time in adequate facilities furnished by the City need not be counted as work time. • For example, travel on Sunday by POV from 3:00 p.m. to 7:00 p.m.-the employee receives paid travel time from 3:00 p.m. to 5:00 p.m. The employee then. stops for dinner for %: hour which is not paid time. The travel continues from 5:30 p.m. to 7:00 p.m. in which is paid work time. If there are any personal stops or detours along the way, the additional travel is not paid for. f^^~ Instead of travel by POV, the travel is by public transportation (bus). The only work time counted is from 3:00 p.m. to 4:30 p.m. (within the normal working hours). Please note the work time paid for travel is included in the overtime calculation for non-exempt employees only for the City's work week. Meals and Lodging Reimbursement Meals and lodging will be reimbursed at costs up to the maximum daily allowance as established by the IRS and GSA. Reimbursement for meals will only be considered when meals are not provided for through conference or training fees. The expenses must be listed on the City's expense reimbursement form and contain attached detailed receipts to be in compliance with Minnesota Statute §471.38 and §471.41. A credit/debit card receipt showing only the total paid is NOT an acceptable form of documentation. Lodging receipts must show a $0 balance due and detail of all charges, Charges for personal calls, alcohol, entertainment charges, room service (over daily maximum meal reimbursement allowed) or concierge services will not be reimbursed. Local lodging taxes and other applicable taxes will be reimbursed by the City as long as the total daily charge does not exceed the maximum daily lodging allowance. Meals will only be reimbursed up to the maximum daily allowance by meal as set by GSA or union contract. The union contract will .prevail before GSA. Reimbursement will include the meal, up to a 20% tip, local and state taxes. Alcohol will not be reimbursed, nor will purchases made on the behalf of another person. o Overnight travel meals are reimbursed at 75% of the maximum daily rate on the departure and return .days, 100% of the maximum daily rate for official travel days in between. o In determining which meals are reimbursable for 1 day travel events, breakfast may be reimbursed up to the maximum daily rate when the official travel begins before and up to 6:30 a.m. The evening meal may be reimbursed up to the maximum daily rate when the officialtravel continues at or past 6:00 p.m. Any exceptions to the amount reimbursed must be approved by the City Council or Administrator prior to reimbursement. The only exceptions approved must meet public purpose. Amounts reimbursed over the maximum daily allowable rate will be considered taxable income through payroll. Mileage Reimbursement The City will reimburse mileage for officers and employees who travel for City business and use their POV. The City will use the IRS mileage`reimbursement rate for each mile driven for official business only. If the travel includes personal miles, only the official City business miles will be reimbursed. Miles for normal commuting distance will not be reimbursed (unless one of the exemptions below is met). The Finance department will estimate the travel distance by MapQuest from city hall to the destination address. The actual distance must be recorded on the expense reimbursement form and should be close to the MapQuest mileage estimate. Large differences between the MapQuest mileage estimation _ _ ~,_~_ and the actual mileage recorded must be explained. The department head, Administrator or City Council must consider approval for significant differences before being reimbursed. • The City will not pay a monthly or periodic travel allowance to any officer or employee unless agreed to by the City Council. All miles will be reimbursed using the maximum IRS rate. • When travel may occur via plane or POV, the City encourages plane travel. Consideration for POV travel is possible if the travel expense is a lower cost. • Mileage in a POV to an airport, bus stop or train station is reimbursable within the guidelinesabove. • When more than one (1) officer or employee travels to the same destination for the same purpose, the group must travel together to cut down on City costs. For example, two (2) Councilors travel toSt. Paul for a conference. The Councilors are expected to travel together. Only one (1) Councilor will receive reimbursement for POV miles. Officials will adhere to Open Meeting laws. The City Council or Administrator can approve exceptions to this rule for extenuating circumstances.. Public purpose of the City of St. Joseph must be adhered to. Exceptions: Travel from home to work after hours: An employee who has gone home after completing their day's work, or an officer responding, is . called out at night to travel to perform an emergency job. All time spent on such travel is working time and mileage will be reimbursed. Volunteer fire fighters are not .included in this provision. Special one day assignment in another City: An employee who regularly works at a fixed location in St.loseph is given a special 1-day assignment in another City. Because such travel is performed for the City of St. Joseph's benefit and at the City of St. Joseph's. request, such travel time is considered work time and mileage will be reimbursed. Regular home,to work mileage will be deducted. Personal Use of City Owned Vehicles Per Minnesota Statute §471.666, the City cannot allow personal use of City owned. or leased vehicles by officers or employees. The only exceptions to this rule is when approved by the City Council within the guidelines of Minnesota Statute §471.666, subd. 3. The exceptions include the following instances: • In connection with work-related activities during hours when the employee is not working; • If the employee has been assigned the .use of a City vehicle for authorized City business on an extended basis, and the employee's primary place of work is not the at the City of St. Joseph; or • If the employee has been assigned the use of a City vehicle for authorized City business away from the City of St. Joseph, and the number of miles traveled, or the time needed to conduct the City business, will be minimized if the employee uses a City vehicle to travel to the employee's residence before or after traveling to the place of the: City business. • Minnesota Statute provides an exception to this law for public safety vehicles; however, the City does not allow personal use. of public. safety vehicles unless one of the exceptions above is met. -- ( °6 1 Commercial Airlines/Rail Service Allowable reimbursement for commercial travel shall include the actual expense or cost for the least expensive logical fare via the most direct route, or a reasonable alternative route if it results in a lower fare. First class or business class fares will not be reimbursed. • Travelers may not specify a particular airline to accumulate mileage or promotional plans, such as frequent flyer programs, if it results in a higher airfare. • Travelers .are expected to make advance bookings using the City's purchase card. Personal charges are not allowed on the City's purchase card. • If a change in the cost of airfare is incurred, the charge is reimbursable and allowable if the change in the charge was not under the control of the traveler. Increased or extra charges incurred due to the traveler's negligence will be considered a personal expense of the traveler and shall not be reimbursed. • Receipts for commercial travel must be turned into the Finance department with signatures of the approving officer and traveler. Commercial Rental Vehicles Commercial rental vehicles may be used when traveling on official City business. Advance reservations are encouraged when possible using the City's purchase card. Reimbursement or allowable expenses for commercial rental vehicles wil{ be made at actual cost for the daily rental fee for amid-size or smaller vehicle, .plus. mileage fees and fuel costs. For travel longer than a few days, the weekly rate will be considered as the lowest reasonable rate. • Reimbursement may be made for full-size vehicles if more than three (3) people are traveling together, for groups of five (5) people or more, a larger vehicle can be considered. • The City expects groups of up to three (3) people share a commercial rental vehicle. when traveling together with exception of City Council. City Council must adhere to .Open Meeting laws. The City expects (2) officials to share a commercial rental vehicle. • Collision damage insurance for commercial rental vehicles will not be reimbursed because the insurance coverage of the. City will cover collision damages.: • The travel policy does not allow for rentals of trucks, campers, off-road vehicles, trailers, motorized bikes,. motorcycles and motorized scooters, antique cars, high value vehicles, special interest and exotic vehicles, or vans that seat more than 15 occupants. • Receipts and/or other documentation are. required for reimbursement of car rental and mileage charges or fees. The receipts must show a zero balance due. Reimbursement may be made for actual fuel costs, not at the GSA mileage reimbursement rate. Receipts must be attached to the Expense Reimbursement Form. All documentation must be turned into. the Finance department with signatures of the approving officer and traveler. Miscellaneous Ground Transportation Travelers may be reimbursed for taxi, bus or other forms of public transportation to travel to and from the airport terminal or rail service. Receipts must be provided for reimbursement. Travelers are expected to use courtesy transportation when provided by lodging, airport, conference center, or other service facility. Cancellation Fees If a cancellation charge is incurred, the charge is reimbursable if the traveler is directed by their Supervisor to change their travel plans, or if other extenuating circumstances arise and are approved by their Supervisor. Charges incurred due to the failure of the traveler will be considered a personal expense to the traveler and shall become a cost to the officer or employee. Other Expenses Travelers may incur miscellaneous City-related expenses for which reimbursement may be made, if appropriate.. Such expenses and reimbursements may include, but are not limited to the following items: • Tolls, garage and parking fees, including gratuities up to 15%, communication expenses, such as local or long distance calls required for official City6usiness. Conference Fees Approved conferences or training events will be paid for by the City. The fees should be prepaid by the City using the City's charge card when possible. If not possible, a detailed receipt and Expense Reimbursement Form must be completed and approved. The expense will be reimbursed on the next payroll Council Per Diem Officers conducting over 2 %: hours of City business (including travel time) during a normal working day (pre-approved by the City Council) will be compensated a per diem rate set annually in the fee schedule in lieu of a stipend or hourly wage. The Council per diem is taxable and subject with income tax withholdings. The Council per diem will be paid at the next regularCouncil pay day. Examples of City business for purposes of receiving the Council per diem includes conferences, litigation, negotiations and Council workshops. Out of State Travel Officials and employees will not be allowed out of the Minnesota for official travel unless the travel has a direct benefit to the public of the City of St:loseph. The travel must be considered and approved by a majorityof the City Council prior to travel and the request must state the public purpose of the travel. PROCEDURES Expense Reimbursement Forms The request to be reimbursed for travel costs must be requested. on the City's Expense Reimbursement Form within 60 days after returning from travel. The forms are saved under the f://drive under City/Shared/Forms/Travel on the City's server. If an officer or employee does not have access to the City's server, the Finance department will provide the form to the officer or employee. Detailed receipts (as described above) must be attached to the expense reimbursement form. The claimant must sign. and date the form. When necessary and possible, the City will allow an employee. to file a copied, faxed or duplicate invoice if the original receipt is lost; however, the receipt must contain two signatures from the business issuing the copy and the employee's signature. The approving official is responsible for understanding the City's travel policy and requirements, and ensuring the official travel was allowable. Further, the approving official is responsible for ensuring adequate budget is available for the claim and must provide the ~•a1 __ account code for the claim. The following people are listed as the Approving Officials for signature approval of the reimbursement: o Non-exempt employees: Department Heads o Fire Fighters: Fire Chief o Department Heads/Fire Chief.• Administrator o Officers: Administrator o Administrator: Mayor • The Finance department will verify alt required documentation and approvals are received before paying the claim. Claims from employees will be reimbursed at the next regular payroll for the employee. Officers will be reimbursed at the next regular accounts payable period or payroll, which ever is applicable. City Council approves the payment at their next regularly scheduled meeting. Travel expenses greater than 60 days old will be considered for reimbursement following the guidelines above; however, the reimbursement must be processed through payroll and will be taxable with the appropriate withholdings deducted from the reimbursement. For more information on this issue, see IRS Publication 463, "Travel, Entertainment, Gift. and Car Expenses" 2006, page 29. This City must uphold the federal laws for travel reimbursement. Excess Reimbursement of Travel Expenses must be refunded back to the City within 120 days of the travel. If not refunded within 120 days, the excess reimbursement will be considered income, subject to income taxes at the end of the calendar year. For mare information on this issue, see IRS Publication 463, "Travel, Entertainment, Gift and Car Expenses" 2006, page 29. -f •s 1__. This page intentionally left blank 50 KEY ACCESS CONTROL Purpose The purpose of this policy is to assist with facility security and provide for the systematic control of keys and other access devices. Applicability All City facilities. Responsibilities The Administrator shall be designed by the City Council as the Key Control Officer and it shall be his/her responsibility to maintain the key control policy. The City Council remains overall responsible for facilities and personnel safety and implementing policies. The Key Control Officer will be responsible for the following processes: • Issuing access control devices. • Facility master keys must only be issued on a limited basis, as absolutely necessary and the facility must annually review its roster of master key holders for appropriateness. • Inventory of access control devices periodically (minimum of every 2 years). • Maintaining a Key Log for all access control devices. • Determine the necessity of an access control devices by employees, elected or• appointed officials, contractors, volunteers and interns. • Authorize the level of physical access needed by an individual to perform their assigned duties. • Designating one person as the primary person responsible for access control procedures. • Replacing lost or damaged access control devices. • Duplicating key control devices. • Recommending access control devices for facilities to Council. • Recording access control devices. • Storing access control devices, including: • Access control devices will be stored in assigned key cabinets and will be indexed. • Color and/or tactile coded emergency and restricted. access control devices will be stored in separate, secured locations. • Staff training or orientation. • Obtaining access control devices from key holders when the access control device is determined to be no longer necessary. • Ensuring temporary access control devices are returned to drop boxes then their use is not longer needed or allowed. • Supervising staff with access control responsibilities. • Changing access control devices periodically to maintain safety. The Department Heads will recommend the need for access control devices to the Key Control Officer and supervise those individuals with access control. The Department Heads will also assist the Key Control Officer uphold the established policy and procedures. All Access Control Holders will read and understand the Key Control Policy before receiving access control devices. The Holders are responsible to return the access control devices when they are no --~_~]-- longer deemed necessary. If the Holder loses an access control device, they must immediately report the loss to their Department Head and the Key Control Officer. Specific regulations for general access control include the following items: • Maintaining strict physical control of access control devices at all times. • Access control devices will be handled irr such a manner as to prevent them from being dropped. Access control devices should be passed hand-to-hand and should never be thrown from one staff to another, left on desks or in desk drawers, or left hanging in a lock. Staff may use key keepers to facilitate physical control of keys. • Access control devices will not be employed for any use other than their intended purpose. • Access control devices will not be altered or defaced in any way. • Access control devices will not be duplicated for any purpose except when authorized by the appropriate authority. • Access control devices will not leave the facility unless specifically authorized. In the event an employee accidentally leaves the facility with a device, it will be immediately returned. upon discovery or notification. • Any,access control devices that are not being used will be identified and reported to the Department Head and Key Control Officer for removal. • Employees will be alert for any lock that is jammed, tampered with, or in need of repair. If such a lock is found, it will be immediately reported to the Department Head and Key Control Officer. • No personal locks may be introduced into the facility without the approval of the Department Head or Key Control Officer. Other Procedural Considerations Locksmith tools and supplies, including but not limited to: blanks, tools, cutters, key cores, and file keys must be kept in a secure location inaccessible to all persons not directly involved in the access control process. These tools and supplies must be accounted for on a regular basis to ensure their security. Replacing access control devices • Access control devices that are lost or damaged will be immediately reported to the proper authorized authority with the required written documentation. • Replacement access control devices may be obtained through written request via a Key Request form. Anew device will be manufactured and issued on the approval'of the Key Control Officer. • Only authorized staff will add or remove devices (keys) from a key ring unless removal is specifically authorized. Key rings or other access control devices that are of special concern should be sleeved or otherwise secured to prevent tampering. For park or fire hall rentals, signed rental forms, rental fees and damage deposit must be received prior to key issuance. Staff will verify renter's identity with the signed rental agreement. Water Salesman general contractors must be approved by the Public Works Director and sign an agreement before issued an access control card. Policy Consideration: If the City Council or Key Control Officer determines a City facility is unsafe for lack of access control, consideration will be made to change the locksto the facility. --~,=r_ _