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HomeMy WebLinkAboutItem 5City of Lakeville Finance Department Memorandum To: Mayor and Council Justin Miller, City Administrator From: Jerilyn Erickson, Finance Director Date: May 22, 2017 Subject: Delegation of Authority to Pay Claims The purpose of this agenda item is to address the issue of internal controls that was raised at the April 24, 2017, council workshop when considering the delegation of authority to pay claims. Staff has updated the internal accounting policies and procedures that would be in place for invoice and payment processing. See attached policies. Specifically, verbiage was added to include the following: 1) review of due dates to ensure that payments will be processed to meet deadlines (not too early and not too late); 2) review of the check register by the Finance Director or Assistant Finance Director prior to the release of any payment; 3) claims list will be regularly submitted to the City Council for their review of the expenditures paid. A draft resolution which has been reviewed by the City Attorney is attached to this memo. A copy of the April 24, 2017 council workshop memo is attached for your reference, also. Council Direction Staff is seeking direction regarding the delegation of authority to pay claims to the Finance Director. Attachments: 1) Policy 8-1 Invoice Processing 2) Policy 8-4 Payment Processing and Distribution 3) Draft Resolution 4) April 24, 2017 Council Workshop Memo CITY OF LAKEVILLE Accounting Policies & Procedures Manual POLICY NUMBER: 8-1 POLICY TITLE: Invoice Processing 8-1 Invoice Processing PURPOSE: The City maintains a system of internal control procedures to process invoices for purchases that were authorized under the City’s purchasing policy. This policy establishes the criteria and procedures for processing invoices. RESPONSIBILITY: The Accounts Payable Technician is responsible for invoice processing. Purchasing and budgetary control for each department are the responsibility of the individual department heads and as specified in the City’s purchasing policy. POLICY: By following a system of internal purchasing control for goods and services, using purchasing approval requirements and proper authorizations, we can regulate department budget control and maintain a system of accurate and proper disbursements of public funds. PROCEDURES: Invoices, check requests, Engineering project payment requests and reimbursement requests are submitted to the Accounts Payable Technician by the appropriate deadlines to insure timely processing for payment. State law requires invoices be paid within 35 days of receipt of the invoice. To make this deadline, the invoice and the proper paperwork should be submitted to the Finance Department within 7 days of receipt of the invoice. There may be two exceptions to the 35-day timeline: • The invoice is incorrect or has some other issue. In this case, document the problem and wait for a corrected invoice. The 35 days will start when the new invoice is received. • The invoice is received before delivery of the merchandise. In this case, the 35 days begins on receipt of the merchandise. Be sure to note on the invoice the date of receipt of the merchandise. For each claim that is paid the following criteria must be met before issuing payment: • The claim must be in writing (which includes an electronic transaction record). • A purchase order must be assigned when required by the City’s purchasing policy and referenced on the corresponding invoice(s). • Each claim paid must have the appropriate authorized signature and appropriate account codes should be present as required by the City’s purchasing policy. • Each claim must have the appropriate documentation attached which will become a part of the file. • Purchasing guideline limits should be reviewed on each claim. • Reimbursement requests, per diems and mileage rates should be consistent with the current travel policy and mileage rate to ensure correct reimbursements. CITY OF LAKEVILLE Accounting Policies & Procedures Manual POLICY NUMBER: 8-1 POLICY TITLE: Invoice Processing 8-1 Invoice Processing • Refund of escrow payments should be reviewed and signed by either the Engineering Department for development-related escrows or the Inspections Department for landscape-related escrows. • Engineering project payments will be reviewed by the City/Project Engineer and signed by the Engineering Department and Finance Director. • Review of tax charges on each invoice is required to comply with current tax laws. If tax is not charged on an invoice when it should be, Use Tax will be paid. If tax is being charged when it should not be, then a Certificate of Exemption form should be filled out and mailed with payment. Once the invoices have been approved for processing, each invoice will be entered in the City’s financial software (JDEdwards) for payment. Invoices will be entered using the invoice number that appears on the invoice to prevent duplicate payments for goods and/or services. When an invoice number is not available, a numbering protocol will be used. CITY OF LAKEVILLE Accounting Policies & Procedures Manual POLICY NUMBER: 8-4 POLICY TITLE: Payment Processing and Distribution 8-4 Payment Processing and Distribution PURPOSE: The City maintains a system of internal control procedures to process and distribute payments in a secure and accurate manner and to prevent duplicate payment. This policy establishes the criteria and procedures for issuing and distributing payments. RESPONSIBILITY: The Accounts Payable Technician is responsible for payment processing and distribution. POLICY: By following a system of internal controls and orderly payment of claims, the City can insure accurate and secure payment of public funds. PROCEDURES: All invoices are submitted to the Accounts Payable Technician in accordance with the purchasing procedures and deadlines. The invoices are entered into the City’s financial software (JDEdwards) by the Accounts Payable Technician. All invoices will be reviewed for due dates to ensure that payments will be processed to meet those deadlines. All payments will be made subject to applicable State and Federal laws, the City Code and all appropriate City policies. The Accounts Payable Technician will generate a check register which will be reviewed by the Finance Director or Assistant Finance Director prior to the release of any payment. City check stock includes a declaration of payment. The declaration is sufficient if in the following form: The check by which the claim is paid may have printed on its reverse side, above the space for endorsement thereof, the following statement: “The undersigned payee, in endorsing this check declares that the same is received in payment of a just and correct claim and that no part of it has heretofore been paid.” When endorsed by the payee named in the check, such statement shall operate and shall be deemed sufficient as the required declaration of the claim. The remittance advice for ACH payments also includes the declaration and is emailed once the payment has been released. Each vendor who receives ACH payments signs up via Wells Fargo PDP service. See ACH enrollment instructions for specific information. A Positive Pay file is submitted to the bank by the Accounts Payable Technician after check payments have been processed. The bank verifies the check number, payee and amount of payment when checks are presented for payment. CITY OF LAKEVILLE Accounting Policies & Procedures Manual POLICY NUMBER: 8-4 POLICY TITLE: Payment Processing and Distribution 8-4 Payment Processing and Distribution After checks have been processed, the Accounts Payable Technician matches the checks to the appropriate invoice and includes any documentation as checks are put into envelopes. Copies of the checks are attached to invoice and scanned into Laserfiche by the Accounts Payable Technician. There are times when a check would need to be voided in the financial system. See policy 8-5 and the City’s financial software (JDEdwards) instruction manual for specific void check and check reissuance procedures. Payments are issued in accordance with the Accounts Payable pay schedule. Any special check runs and reissuance of checks must be authorized by the Finance Director or the Assistant Finance Director. A claims list will be regularly submitted to the City Council for their review of the expenditures paid. CITY OF LAKEVILLE RESOLUTION No______ RESOLUTION DELEGATING AUTHORITY TO PAY CLAIMS WHEREAS, Minnesota State Statute Section 412.271, Subd. 8 states that a city council may delegate its authority for paying certain claims against the city to a city administrative official subject to certain criteria; and WHEREAS, the prerequisite criteria for delegating this authority have all been met by the city through the following: (i) city’s internal accounting and administrative procedures, (ii) regular review of expenditure list by City Council at each meeting, and (iii) preparation of an annual audited financial statement attested by an independent certified public accountant, public accountant or state auditor; and WHEREAS, procurement of goods and services are made under the authority granted in the purchasing policy, council-approved resolutions and/or applicable state statutes; and WHEREAS, Minnesota State Statute Section 471.425, Subd. 2 states that cities that have at least one regularly scheduled meeting per month must pay their bills within 35 days of receipt and this delegation of authority is conducive to this end while assuring appropriate city council oversight. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lakeville: 1. The recitals set forth above are incorporated herein. 2. The City Finance Director is authorized to pay all claims made against the City that meet the standards and procedures established by the City Council. ADOPTED this 5th day of June, 2017 by the City Council of the City of Lakeville. CITY OF LAKEVILLE By: ________________________________ Douglas P. Anderson ATTEST: ________________________________ Charlene Friedges, City Clerk City of Lakeville Finance Department Memorandum To: Mayor and Council Justin Miller, City Administrator From: Jerilyn Erickson, Finance Director Date: April 24, 2017 Subject: Delegation of Authority to Pay Certain Claims Minnesota State Statute Section 412.271, subdivision 8 states that a city council may delegate its authority for paying certain claims made against the city to a city administrative official. The City Council currently receives a claims list at each of its regularly scheduled meetings for purposes of reviewing the expenses and authorizing the payment of these expenses. Following this approval, the checks and electronic payments that have been issued for these invoices are then released. Other payments for expenses such as bond payments, property acquisitions, and insurance have been paid via wire transfers, electronic funds transfer or credit card. These payments are also included on the claims list. There are certain situations where disbursement of city funds is already preauthorized by state statute: • Payment of judgments, salaries and wages previously fixed by the council or by statute; • Principal and interest on obligations, rent and other fixed charges, the exact amount of which has been previously determined by contract authorized by the council. The delegation of authority is relevant especially as Staff is considering making some changes in how and when it processes payments: • Process accounts payable invoices on a more frequent basis (e.g. weekly or bi-weekly schedule) instead of only twice a month; • Expanding the use of electronic payments for vendor invoices. Staff is considering these changes for a number of reasons: 1) The City is statutorily obligated to pay invoices within 35 days. Processing invoices more frequently will help in complying with this legal requirement. 2) The expansion of electronic payments will reduce postage costs, bank transaction fees and staff time/costs for the reissuance of lost checks. 3) Staff is looking at ways to streamline and automate payment processes and improve efficiencies within all departments. Primary Issues to Consider City councils may choose to delegate authority for all claims or only for certain claims. Some issues to consider: • Some transactions have deadlines that don’t align with the current processing timelines; • Customers have overpaid for/cancelled a service/program; therefore, we are returning their money; • We are processing payments for another government entity; • The purchasing policy authorizes the use of the City’s credit card for purchases. A few examples of those types of transactions: • Gas/electric utilities; • Customer refunds (utilities, development escrows, recreation programs, etc.) • City credit card; • Dakota Communications Center expenses; • Police court bail; • LAAC performance contracts. Another approach may be to define which payments the Council specifically wants to review prior to their release. For example, the Council may want to approve final construction contract payments (retainage). Delegating authority to pay claims has been in place for quite a few years for some of our neighboring cities including Burnsville, Prior Lake, Eagan and Apple Valley. City councils may delegate their authority to review claims before payment if certain criteria are met. The following table shows the criteria and how each one has been or will be met: Requirement Criteria Accomplished 1 The Council must adopt a resolution specifying the types of claims to be paid and the specific administration official to whom this authority is granted; A resolution delegating payment authority to the Finance Director will be prepared based on the City Council’s feedback. 2 The Council must establish internal accounting and administrative control procedures that ensure the proper disbursement of public funds, including periodic review of the official’s actions by the council; Purchasing Policy adopted June 6, 2016, provides purchasing authority thresholds. Staff will update internal accounting procedures. 3 The list of expenditures must be submitted for review at the next council meeting; Council would receive the same claims list they are currently receiving. 4 The City must prepare an annual audited financial statement that has been attested to by an independent certified public accountant, public accountant or the state auditor. The independent public accounting firm of CliftonLarsonAllen LLP conducts the annual audit. Council Direction Staff is seeking feedback regarding the level of payment authority that the City Council is willing to delegate to the Finance Director.