4.9. SR 06-17-2019
Request for Action
To Item Number
Mayor and City Council 4.9
Agenda Section Meeting Date Prepared by
Consent June 17, 2019 Lori Ziemer, Finance Director
Item Description Reviewed by
Financial Management Policies Update Cal Portner, City Administrator
Reviewed by
Action Requested
Approve, by motion, the updated financial management policies.
Background/Discussion
Annually staff reviews the financial management policies and provides recommendations to Council for
updates.
The current updates are highlighted in red in the attached financial management policies and consist of
the following changes:
Purchasing – Pages 13-15:
Purchasing authority language updated.
Purchasing thresholds updated increasing the purchase order requirement from $5,000 to $25,000
based on purchasing best practices.
Competitive bidding threshold updated from $100,000 to $175,000 based on law passed in 2018.
Public Purpose Expenditures – Page 20:
City logo clothing allowance up to $75 per year for councilmembers added.
Expense and Travel Reimbursement – Page 23:
Clarification of the per diem meal reimbursement on the first and last days of travel.
Financial Impact
N/A
Attachments
Updated financial management policies
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
Financial Management Policies
Table of Contents
Purpose ....................................................................................................................................................................... 1
Objectives ................................................................................................................................................................... 1
Revenue and Expenditure ....................................................................................................................................... 1
Utilities ........................................................................................................................................................................ 1
Cash Management .................................................................................................................................................... 2
Investments ................................................................................................................................................................ 2
Fund Balance .............................................................................................................................................................. 5
Debt ............................................................................................................................................................................. 7
Capital Improvements ........................................................................................................................................... 10
Risk Management .................................................................................................................................................... 12
Accounting, Auditing, and Financial Reporting ................................................................................................ 12
Operating Budget ................................................................................................................................................... 12
Purchasing/Credit Card Use ................................................................................................................................ 13
Public Purchase Expenditures .............................................................................................................................. 17
Expense and Travel Reimbursement/Elected Official .................................................................................... 21
OMB Uniform Grant Guidance ........................................................................................................................... 24
Financial Management Policies
Purpose
The City of Elk River has the fiduciary duty to manage its resources wisely. Adopting financial policies is an
important step to ensure that resources are managed responsibly. The policies provide the framework for the
overall fiscal management of the city and guide the decision-making process.
Most of the policies represent long-standing principles, traditions and practices which have guided the city and
have maintained financial stability. These policies will be reviewed periodically to determine changes as
necessary.
Objectives
1. Provide sound principles to guide the decisions of the City Council and management.
2. To provide both short-term and long-term financial stability to city government by ensuring adequate
funding for providing and protecting infrastructure needed by the community today and tomorrow.
3. Protect and enhance the city
4. -making ability by ensuring that important policy decisions are not
constrained by financial problems or emergencies.
Revenue and Expenditure
The city will:
1. Provide long-term financial stability through sound short- and long-term financial planning.
2. Estimate annual revenues and expenditures in a conservative manner so as to reduce exposure to
unforeseen circumstances.
3. Project revenues and expenditures over five years and will update these projections each budget process.
4. Establish user charges and fees at a level related to the cost of the service (operating, direct, indirect, and
capital), when user charges and fees are determined to be appropriate and the direct benefits are
identifiable. Fees will be reviewed annually.
5. To the extent feasible, apply one-time revenues toward one-time expenditures or place them into
reserves. One-time revenues will not be used to finance ongoing programs.
Utilities
The City Council sets fees and user charges for municipal sanitary sewer utility, stormwater utility, and garbage
collection. The Utilities Commission sets fees and charges for the water and electric utilities. The city will
encourage the Commission to adopt financial management policies similar to the policies stated in this section.
1. The city will strive to set user fees for utilities at a level that creates financially-sustaining enterprises.
2. The fee structure for utilities should produce a net annual surplus of revenues over expenditures after
accounting for all operating costs, depreciation of capital assets and payment of debt service.
3. All municipal utility funds will maintain adequate cash reserves. The reserve needs vary for each
municipal utility. The assessment of cash reserves should take into account future capital investments,
diversity, and stability of revenues and potential for unanticipated changes in revenues and expenditures.
4. All utility rates shall be reviewed annually to minimize the impact of rate changes and to ensure adequate
long-term funding.
5. Elk River Municipal Utilities (ERMU) will make an annual contribution to the city. The cash
contribution will be based on 4% of gross electric sales within the corporate limits of the city. The City
Financial Management Policies Page 1
Council will determine the portion of this contribution to be allocated to the General Fund, Library and
the Equipment Replacement funds.
6. The City Council will determine the chargeback to the Sewer, Stormwater, and Garbage funds for
administration of the sanitary sewer system, storm water, and garbage collection.
7. Any operating transfer not included in the budget must be approved by the City Council.
Cash Management
1. Cash balances shall be pooled from all funds to maximize investment earnings with the exception of
legal and specific practical requirements that demand segregation of funds.
2. Funds received are to be deposited into an interest-bearing account with the cdesignated official
depository by the next business day.
3. Cash on hand is to be kept to the minimum required to meet daily operational needs.
Investments
Public funds shall be invested in a manner which will provide the highest investment return with the maximum
security while meeting the daily cash flow demands in conformance with all state and local statutes governing the
investment of public funds. The investment policy applies to all financial assets of the municipality. These funds
are accounted for in the cComprehensive Annual Financial Report (CAFR) and include all city funds with
the exception of the Water and Electric funds which fall under the investment policy adopted by the ERMU
Commission.
Investments shall be made with judgment and care under prevailing circumstances which persons of prudence,
discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for
investment, considering the probable safety of their capital as well as the probable income to be derived.
by Minnesota Statute §356A.04, Subd. 2, and shall be applied in the context of managing an overall portfolio.
Investment officers acting in accordance with written procedures and the investment policy and exercising due
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.
All investments shall be limited to those permitted by Minnesota Statute §118A. The primary objectives, in
1. Safety - Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in
the overall portfolio. To attain this objective, diversification is required in order that losses on individual
securities do not exceed the income generated from the remainder of the portfolio.
2. Liquidity - The investment portfolio will remain sufficiently liquid to enable the city to meet all operating
requirements which might be reasonably anticipated.
3. Return on Investment - The investment portfolio shall be designed with the objective of attaining a
market rate of return throughout budgetary and economic cycles. The investment strategy will take into
account the constraints on risk and cash flow characteristics of the investment portfolio.
4. Maintain - All officials and employees who are part of the investment process shall
seek to act responsibly as custodians of the public trust. Investment officials shall avoid any transaction
that might impair public confidence in the ability to govern effectively.
Authority to manage the cityManagement
responsibility for the investment program is hereby delegated to the finance director. No person may engage in
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an investment transaction except as provided under the terms of this policy and the procedures established by
the finance director. The finance director shall be responsible for all transactions undertaken and shall establish a
system of controls to regulate the activities of subordinate officials.
Officers and employees involved in the investment process shall refrain from personal business activity that
could conflict with the investment program or which could reasonably cause others to question or doubt their
ability to make impartial investment decisions. Employees and investment officials shall disclose to the finance
director any material financial interests in financial institutions that conduct business within this jurisdiction, and
they shall further disclose any large personal financial/investment positions that could be related to the
performance of the city
The finance director will maintain a list of financial institutions authorized to provide investment services. In
addition, a list will be maintained of approved security broker/dealers selected by credit worthiness, who
maintain an office in the State of Minnesota. that qualify
under Securities & Exchange Commission Rule 15c3-1 (uniform net capital rule). All brokers doing business
with the city shall have a Broker Certification form on file with the finance director in accordance with
Minnesota Statutes §118A.04, Subd 9. All investments must be placed with brokers whose office is in the State
of Minnesota. No investments may be made with out of state brokers.
Investment instruments authorized and permitted by this policy are as follows:
1. Repurchase Agreements consisting of collateral allowable in Section 118A.04.
2. United States Securities
a. Governmental bonds, notes, bills, mortgages (excluding high-risk mortgage-backed securities),
and other securities, which are direct obligations or are guaranteed or insured issues of the
United States, its agencies, its instrumentalities, or organizations created by an Act of Congress.
b. High risk mortgage-backed securities are as follows:
i. interest-only or principal-only mortgage-backed securities; or,
ii. any mortgage derivative security that:
has an expected average life greater than 10 years;
has an expected average life that will:
o extend by more than four years as the result of an immediate and sustained
parallel shift in the yield curve of plus 300 basis points; or
o shorten by more than six years as the result of an immediate and sustained
parallel shift in the yield curve of minus 300 basis points; or
o have an estimated change in price of more than 17% as the result of an
immediate and sustained parallel shift in the yield curve of plus or minus 300 basis
points.
3. Minnesota Joint Powers Investment Trust
Agreements or contracts for shares of a Minnesota joint powers investment trust whose investments are
restricted to securities authorized for investment by the government entity and shares of an investment
company registered under the Federal Investment Company Act of 1940, whose shares are registered
credit rating and is rated in one of the two highest risk rating categories by at least one nationally
recognized statistical rating organization and is invested in financial instruments with a final maturity of
no longer than 13 months.
4. State and Local Securities, as follows
a. any security which is a general obligation of any state or local government with taxing powers
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b. any security which is a revenue obligation of any state or local government with taxing powers
d,
c. a general obligation of the Minnesota Housing Finance Agency which is a moral obligation of the
5. Commercial Paper
Commercial paper issued by United States corporations or their Canadian subsidiaries that is rated in the
highest quality category (e.g., A-1, P-1, F-1 or D-1 or higher) by at least two nationally recognized rating
agencies and matures in 270 days or less.
6. Time Deposits
a. Time deposits that are fully insured by the Federal Deposit Insurance Corporation.
b. Bankers acceptances of United States banks.
7. Money Market Accounts
Money market funds may be held with next day withdrawal capacity to provide for daily liquidity
requirements. These money market funds must be rated one of the two highest rating categories by at
least one nationally recognized statistical rating organization.
The city shall not purchase investments that, at the time of purchase, cannot be held to maturity. All
investments shall be purchased with the intent to hold until maturity. The maximum maturity will be 10 years
with a total weighted average maturity of total investments not to exceed 5 years. This section shall not be
construed to restrict the sale of investments prior to maturity which may be in the best interest of the city.
The city shall not invest in GICs or Reverse Repurchase Agreements.
The city shall follow Minnesota statutes regarding the use of collateral requirements. To anticipate market
changes and provide a level of security for all funds, the collateralization level will be at least 10% more than the
amount on deposit plus accrued interest at the close of the business day. To the extent that funds deposited are
in excess of available federal deposit insurance, the city shall require the financial institution to furnish collateral
security. All collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in an
account at a trust department of a commercial bank or other financial institution that is not owned or controlled
by the financial institution furnishing the collateral. The selection shall be approved by the city.
Any collateral pledged shall be accompanied by a written assignment to the city from the financial institution.
The written assignment shall recite that, upon default, the financial institution shall release to the city on
demand, free of exchange or any other charges, the collateral pledged. Interest earned on assigned collateral will
be remitted to the financial institution so long as it is not in default. The city may sell the collateral to recover the
amount due. Any surplus from the sale of collateral shall be payable to the financial institution, its assigns, or
both.
Investments may be held in safekeeping with:
1. Any Federal Reserve Bank;
2. Any bank authorized under the laws of the United States or any state to exercise corporate trust powers,
including, but not limited to, the bank from which the investment is purchased;
3. A primary reporting dealer in US government securities to the Federal Reserve Bank of New York; or
4. A securities broker/dealer having its principal executive office in Minnesota, licensed and registered
pursuant to chapter 80A, or an affiliate of it, regulated by the Securities and Exchange Commission;
videnced by written
acknowledgments identifying the securities by the names of the issuers, maturity dates, interest rates,
CUSIP number, or other distinguishing marks.
Financial Management Policies Page 4
The city will minimize 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
The city will diversify its investments by security type and institution. In establishing specific diversification
strategies, the following general policies and constraints shall apply:
1. Portfolio maturities shall be staggered to avoid undue concentration of assets at a specific maturity
sector, with one broker-dealer or financial institution, or any one type of instrument. The maturities
selected shall provide for stability of income and reasonable liquidity.
2. The finance director shall establish an annual process of independent review by an external auditor. This
review will provide internal control by assuring compliance with policies and procedures.
3. The investment portfolio will be designed to obtain a market average rate of return during budgetary and
economic cycles, taking into account the investment risk constraints and cash flow needs.
4. The finance director shall provide an investment report to the City Council quarterly to include:
a. Listing of individual securities held at the end of the reporting period
b. Listing of investments by maturity date
c. Percentage of the total portfolio which each type of investment represents
b. Market to market analysis
c. Rate of return for the quarter
Fund Balance
Fund balance reserves are an important component in ensuring the overall financial health of a community by
providing sufficient funds to meet contingency and cash-flow timing needs. In establishing an appropriate fund
balance, the city considers the demands of cash flow, need for emergency reserves, ability to manage fluctuations
of major revenue sources, credit rating and long-term fiscal health.
1. Classification of Fund Balance/Procedures
a. Non-spendable - Amounts not in a spendable form or are required to be maintained intact such
as inventory or prepaid items.
b. Restricted - Amounts subject to externally-enforceable legal restrictions such as grants, tax
increment and bond proceeds.
c. Unrestricted - The total of committed fund balance, assigned fund balance, and unassigned fund
balance:
i. Committed Fund Balance amounts that can be used only for the specific purposes
determined by a formal action of the cityhighest level of decision-making authority.
Commitments may be changed or lifted only by the city taking the same formal action
that imposed the constraint originally.
ii. Assigned Fund Balance amounts intended for a specific purpose; intent can be
expressed by the city or by an official or body to which the city delegates the authority.
iii. Unassigned Fund Balance residual amounts available for any purpose in the General
Fund. The General Fund should be the only fund that reports a positive unassigned fund
balance amount. This classification is also used to account for deficit fund balances in
other governmental funds.
2. General Fund
Unassigned General Fund balance shall not be less than 40-45% of budgeted operating expenditures;
however, this may fluctuate
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a. Proposed annual General Fund budgets shall include this benchmark policy. Council shall review
the amounts in fund balance in conjunction with the annual budget approval and adjust as
necessary to meet expected cash-flow needs.
b. In the event the unassigned General Fund balance will be calculated to be less than the minimum
requirement at the completion of any fiscal year, the city shall plan to adjust budget resources in
the subsequent fiscal years to bring the fund balance into compliance with this policy.
c. The Council may consider appropriating (for authorized purposes) year-end fund balance in
excess of the policy level or increasing the minimum fund balance. A preferred use of excess
fund balance would be for one-time expenditures, such as:
i. an expenditure of significant long-term benefit or legacy to the community
ii. a one-time (non-recurring) expenditure or grant match opportunity
iii. to provide catch-up funding or long-term obligations not previously recognized
iv. a one-time unplanned revenue shortfall
v. an unplanned expenditure due to an emergency or disaster
vi. to retire existing debt
vii. to fund policy shifts by other governmental entities having a negative impact on the city
viii. to moderate property taxes
d. Appropriation from the minimum fund balance shall require the approval of the City Council
and shall be used only for non-recurring expenditures, unforeseen emergencies or immediate
capital needs that cannot be accommodated through current year savings. Replenishment
recommendations will accompany the decision to utilize fund balance.
e. At the discretion of the City Council, fund balance may be committed for specific purposes by
resolution designating the specific use of fund balance and the amount. The resolution would
need to be approved no later than the close of the reporting period and will remain binding
unless removed in the same manner.
f. The City Council authorizes the finance director and/or city administrator to assign fund balance
that reflects the c
g. When both restricted and unrestricted resources are available for use, it is the c
use restricted resources, and then use unrestricted resources as they are needed. When
committed, assigned or unassigned resources are available for use, it is the c
resources in the following order; 1) committed 2) assigned and 3) unassigned.
3. Enterprise Funds
The city shall maintain reserves in enterprise funds at levels sufficient to provide adequate working
capital for current expenditure needs, for the replacement of capital assets within the fund over their
estimated useful life and to pay for future capital projects. Future capital projects must be identified and
Improvement Plan (CIP).
The city will maintain a reserve balance at a level considering the following:
a. Cash Flow
i. Six months of projected operation expenditures (Sewer, Storm Water and Garbage)
ii. One year of projected operation expenditures (Liquor Operations)
iii. Debt service obligations
b. Contingency
i. Potentially volatile revenue sources
ii. Unforeseen natural or man-made disasters and emergencies
c. Savings
i. Planned one-time expenditures and grant matching opportunities
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ii. Impact of significant capital projects identified in a long-term plan
d. Other Factors
i.
ii. Requirements by external funding source
4. Special Revenue Funds
Reserves will be maintained at levels sufficient to provide working capital for current expenditure needs
plus an amount estimated to meet legal restrictions, requirements by external funding sources and/or
pay for future capital projects. Future capital projects must be identified and quantified in a written plan
for the fund, which shall be included in the annual CIP.
5. Debt Service Funds
Reserves will be maintained at levels sufficient to provide working capital for current expenditure needs
plus an amount estimated to meet legal restrictions and requirements by external funding sources.
6. Capital Project Funds
Reserves will be maintained at levels sufficient to provide working capital for current expenditure needs
plus an amount estimated to meet legal restrictions, requirements by external funding sources and/or
pay for future capital projects. Future capital projects must be identified and quantified in a written
finance plan for the fund, which shall be included in the annual CIP.
7. Monitoring and Reporting
The finance director shall annually review with the City Council the status of the fund balances with this
policy and present it to the Council in conjunction with the development of the annual budget and/or
other long-term financial planning documents such as the CIP.
Reserve balances will be annually reviewed for adequacy.
Rating agency methodologies and medians will be periodically reviewed for updates to ensure the reserve
policy is consistent for maintaining the existing rating or positioned for an upgrade.
Debt
Debt issuance shall follow guidelines identified through examination of materials from state statutes, bond rating
agencies, and the Government Finance Officers Association (GFOA). This policy can be amended by the City
Council to maintain consistency with general municipal practices.
The following policies shall determine when and how to use debt for financing capital and equipment needs.
1. Debt Limits
a. Legal Limits:
i. Minnesota Statute, § 475 prescribes a debt limit that shall not exceed 3% of taxable
market value. This limitation applies only to debt wholly tax-supported for either General
Obligation (GO) debt of any size bond issue or Lease Revenue Bond issues were over
$1,000,000 at the time of issuance. Several other types of debt do not count against the
limit including GO Tax Increment, GO Abatement, GO Special Assessment, GO Utility
Revenue, and HRA or EDA-issued debt considered to have a separate revenue source
other than taxes. HRA and EDA Public Project Revenue Bonds or Lease Revenue
Bonds with a financing lease agreement with a city or county do count against the limit.
ii.
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b. Policy Limits:
i. Debt will be used only for capital costs and will not utilize debt for cash flow borrowing,
even though this is allowed by state statutes.
ii. The CIP shall contain debt assumptions matching this policy and requiring a
commitment to long-range financial planning of capital and debt needs.
iii. The city shall use GO Tax Increment bonds only when the development merits special
consideration.
c. Financial Limits:
i. The city limits the amount of the property tax levy dedicated to debt service (principal
and interest plus 5% for GO bonds) to less than 20% of the total tax levy. Unlike rating
abatements, or tax increments.
ii. Pure revenue bond debt shall be used primarily as Lease Revenue Bonds supported by
taxes. The city may use Revenue Bonds for enterprise, electric and water utility
operations, but only if debt service coverage achieves investment grade rating from the
2. Use of Variable Rate Debt and Derivatives
a. The city shall use variable rate debt only if total principal and interest constitute less than 20% of
total debt payments, if circumstances dictate the need for a short call date, and will only be used
for debt repaid from non-property tax sources (specific revenues).
b. The city shall not use derivative based debt.
3. Debt Structuring Practices
a. State law limits GO debt to 30 years in most circumstances. The city shall not exceed 25 years in
term of debt.
b. The city goal is to pay for all capital equipment with a useful life of five years or less from cash
reserves or annual operating budgets. State law allows for the issuance of debt equipment
certificates or capital notes with a term of 10 years or the useful life of the equipment if it is at
least 10 years. The city prefers, within the bounds of levy limits, to fund capital equipment on a
pay-as-you-go basis. Capital equipment with a useful life greater than five years may be financed
with debt, but the bond term should not exceed 10 years.
c.
d. The city shall usually issue debt with level principal and interest payments; or to align with a
specific revenue stream.
e. The city shall have a call date (pre-payment date) of no longer than 10 years on longer-term debt
and 6 to 8 years on shorter-term debt.
4. Debt Issuance Practices
a. The city utilizes a rating agency for all debt issuance of more than $1 million or longer than three
(3) years in term.
b. The city shall use competitive bidding for all of its debt unless the debt is so specialized in its
nature that it will not attract more than two (2) bids.
c. Refunding:
i. Advance refunding shall not be utilized unless a present value savings of 4-5% of
refunded principal is achieved and the call date is within 4 years (state minimum is 3%).
Bonds shall not be advance refunded with a reasonable chance revenues will be sufficient
to pre-pay the debt at the call date.
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ii. Current refunding bonds shall be utilized when present value savings of 3% of refunded
principal is achieved or in concert with other bond issues to save costs of issuance.
iii. Special assessment or revenue debt will not be refunded unless the finance director
determines special assessments or other sufficient revenues will not be collected soon
enough to pay off the debt fully at that call date.
d. The city shall use an outside bond attorney and an independent financial advisor to structure the
sale.
5. Debt Management Practices
a. Investment of bond proceeds shall be in a capital project fund.
b. Disclosure shall be in compliance with SEC rule 15(c)2(12) on primary and continuing
disclosure. Continuing disclosure reports shall be filed no later than 180 days after receipt of the
annual financial report.
c. Arbitrage Rebate Reports shall be completed for each issue no less than every five years after its
date of issuance.
d. Communication will include frequent and regular communications with bond rating agencies
about its financial condition and will follow a policy of full disclosure in every financial report
and bond prospectus. The city will comply with Securities Exchange Commission (SEC)
reporting requirements.
6. Post-Issuance Debt Compliance Policy
The city shall ensure all obligations are in compliance with all applicable state and federal regulations
and shall amend as necessary.
a. Background - The Internal Revenue Service (IRS) is responsible for enforcing compliance
with the Internal Revenue Code and related regulations governing certain obligations (ex:
tax-exempt obligations, Build America Bonds, Recovery Zone Development Bonds and
various tax credit bonds). The IRS expects issuers and beneficiaries of these obligations to
adopt and implement a post-issuance debt compliance policy and procedures to safeguard
against post-issuance violations.
b. Policy Objective - The city desires to monitor these obligations to ensure compliance with
the IRS Code and related regulations governing such obligations. To ensure compliance,
the Post-Issuance Debt Compliance Policy shall apply to the obligations mentioned above,
including bonds, notes, loans, lease purchase contracts, lines of credit, commercial paper or
any other form of debt that is subject to compliance.
The finance director is the designated agent responsible for post-issuance compliance. However, to the
extent obligations are issued for municipal utility purposes, the finance director/office manager of
ERMU assumes the duties of post-issuance debt compliance as described in this policy instead of the
finance director.
The finance director shall assemble all relevant documentation, records and activities required to
ensure compliance as further detailed. At a minimum, the Post-Issuance Debt Compliance Procedures
for each qualifying obligation will address the following:
i. General post-issuance compliance;
ii. Proper and timely use of bond proceeds and bond-financed property;
iii. Arbitrage yield restriction and rebate;
iv. Timely filings and other general requirements;
v. Additional undertakings or activities that support points 1 through 4 above;
vi. Other requirements as necessary in the future.
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The finance director shall apply the Post-Issuance Debt Compliance Procedures to each qualifying
obligation and maintain a record of the results. Further, the finance director will ensure that the policy
and procedures are updated on a regular and as needed basis.
The finance director or anyone who assists with maintaining records needed to ensure compliance are
authorized to expend funds as needed to attend training or secure use of other educational resources
to ensure compliance such as consulting, publications, and compliance assistance.
Most of the provisions of this policy are not applicable to governmental bonds, the interest on which
is includable in gross income for federal income tax purposes. However, if an issue is later refunded
with the proceeds of an issue of tax-exempt governmental refunding bonds, then the uses of the
proceeds of the taxable governmental bonds and the uses of the facilities financed with the proceeds
of the taxable governmental bonds will be relevant to the tax-exempt status of the governmental
refunding bonds. Therefore, if there is any reasonable possibility that an issue may be refunded, in
whole or in part, with the proceeds of an issue then, for purposes of this policy, the finance director
shall treat the issue as if such issue were an issue of tax-exempt governmental bonds and shall carry out
and comply with the requirements of this policy with respect to such taxable governmental bonds.
The finance director shall seek the advice of bond counsel and its financial advisor as to whether there
is any reasonable possibility of issuing tax-exempt governmental bonds to refund an issue of taxable
governmental bonds.
If the city issues bonds to finance a facility owned by the city but used in whole or in substantial part
by a nongovernmental organization exempt from federal income taxation under Section 501(a) of the
Code, the ci
exempt from federal income taxation under Sections 103 and 145 of the Code and applicable Treasury
Regulations. Although such qualified 501(c)(3) bonds are not governmental bonds, at the election of
the finance director, for purposes of this policy, the finance director shall treat such issue of qualified
501(c)(3) bonds as if such issue were an issue of tax-exempt governmental bonds and shall carry out
and comply with the requirements of this policy. Alternatively, in cases where compliance activities are
reasonably within the control of the relevant 501(c)(3) organization, the finance director may
determine that all or some portion of compliance responsibilities described in this policy shall be
assigned to the relevant organization.
The city may also issue tax-exempt bonds, the proceeds of which are loaned to certain private entities,
including qualified 501(c)(3) organizations (referred to as The city will require, as
part of approval of any conduit bonds that the borrower assumes the duties of post-issuance debt
compliance as described in this policy, including provisions for reporting to the city.
Capital Improvements
The city shall maintain buildings, infrastructure, utilities, parks, facilities, and other assets in a manner that
protects the investment and minimizes future maintenance and replacement costs. The finance director shall
annually prepare and submit a CIP to the Council covering the following five fiscal years.
At a minimum, the CIP will include a description of the proposed improvement, the estimated cost, timing and
potential sources of funding. If applicable, the CIP will identify implications for the operating budget created by
the proposed improvement.
Financial Management Policies Page 10
In most cases, private developers will be responsible for the construction of streets, sanitary sewer, watermain,
and storm water collection systems needed to serve new development. The city may install infrastructure and
assess property owners when this approach provides the best alternative. The city will finance street and utility
oversizing and trunk utility systems.
The city shall maintain a system of capital charges for sanitary sewer, storm water, and water services. The
charges will be collected when undeveloped land is platted and when new users connect to the system. Revenues
from the capital charges will be accumulated and used to pay for the capital investment related to the
maintenance and expansion of the utility system.
The city will strive to maximize the revenues collected from capital charges to protect existing utility users from
bearing the costs associated with growth. The City Council will work with the Utilities Commission to set capital
charges for the water system at appropriate levels. In not less than three-year intervals, city staff shall evaluate
the amount of all capital charges and recommend necessary changes to the Council and the Commission.
The city will maintain an equipment acquisition and replacement program. The city will annually update the plan
to provide funding for all equipment purchases over $25,000 to be made in the next five fiscal years. The city
shall attempt to fund the program without the use of debt. It is recognized that state-imposed levy limits may
create the need to incur debt for equipment acquisition.
The city shall establish and maintain a program for the construction and maintenance of the municipal storm
water management system. Financial projections for the storm water management system shall be updated
annually.
The city shall establish and maintain a program for the maintenance of the municipal street system. The initial
sealcoating in new subdivisions will be financed with monies collected for this purpose at the time of original
development. Other sealcoating will be financed through the Pavement Management Fund and other
maintenance activities will be financed through the General Fund.
The city shall prepare an ongoing plan for the reconstruction of all city streets and will provide a sustainable
source of funding for the street reconstruction program. The city will annually prepare cash flow projections for
street reconstruction projects to ensure adequate and ongoing funding.
Capital Assets and Capitalization Thresholds
A capital asset is a tangible asset that has a life expectancy of more than one year. For financial statement
reporting purposes, the city reports capital assets in the following categories and has established a capitalization
threshold for each category:
Capitalization
Category Threshold__
Land $10,000
Buildings $25,000
Other Improvements $25,000
Machinery and equipment $10,000
Vehicles $10,000
Infrastructure $100,000
Construction in progress Accumulate all costs and capitalize
if over $100,000 when completed
Other assets $10,000
Financial Management Policies Page 11
Another criterion for recording capital assets is capital-related debt. Capital assets purchased with debt proceeds
should be capitalized and depreciated over their estimated useful life.
The amount to record for a capital asset is any cost incurred to put the asset into its usable condition. Donated
capital assets should be reported at fair value at the time of acquisition.
Risk Management
1. The city shall maintain a Risk Management Program to minimize the impact of legal liabilities, natural
disasters or other emergencies through the following acitivies:
a. Loss Prevention - Prevent negative occurrences.
b. Loss Control - Reduce or mitigate expenses of a negative occurrence.
c. Loss Financing - Provide a means to finance losses.
d. Loss Information Management - Collect and analyze relevant data to make prudent loss
prevention, loss control and loss financing decisions.
2. The city shall maintain an active Safety Committee comprised of city employees.
3. The city will periodically conduct educational safety and risk avoidance programs, through its Safety
Committee and with the participation of its insurers, within its various departments.
4. The city will maintain the highest deductible amount, considering the relationship between cost and the
c
Accounting, Auditing, and Financial Reporting
1. The city will establish and maintain the highest standard of accounting practices, in conformity with
Generally Accepted Accounting Principles (GAAP).
2. The city will attempt to maintain the GFOA Certificate of Excellence in Financial Reporting.
3. The city will arrange for an annual audit of all funds and account groups by independent certified public
accountants or by the Office of the State Auditor.
4. Regular monthly reports present a summary of financial activity by major fund type as compared to
budget. Department directors will review monthly reports comparing actual revenues and expenditures
to the budgeted amounts. Any negative variance in any revenue or spending category (Personal Services,
Supplies, Other Charges and Services, Capital Outlay) for their department as a whole projected to exceed
$5,000 by year-end will be reported in writing to the finance director and the city administrator.
Operating Budget
1. The city administrator will submit annually a balanced budget in which appropriations will not exceed
the total of the estimated General Fund revenue and the fund balance available after applying the
General Fund Reserve Policy.
2. The city may annually budget a contingency appropriation in the General Fund budget, not to exceed
0.5% of the total budget, to provide for unanticipated expenditures of a non-recurring nature.
3. In the event of an unanticipated revenue shortfall, the finance director may recommend the use of a
portion of the General Fund balance not to exceed the amount of available cash or reserves for working
capital or already appropriated to the General Fund budget.
4. The budget will provide for adequate maintenance of buildings and equipment, and for their orderly
replacement.
5. The finance director will prepare monthly reports comparing actual revenues and expenditures to the
budgeted amount. All significant variances will be summarized in a written report to the city
administrator and Council.
6. The operating budget will include annual goals, services and programs to be delivered for the level of
funding provided.
Financial Management Policies Page 12
7. Before adding a new program or service, the city will consider the cost benefit analysis of using outside
contractors versus in-house provided services.
8. The city will attempt to maintain the GFOA Distinquished Budget Presentation Award.
9. The city will not sell assets or use one-time accounting principle changes to balance the budget for any
fund.
10. The city will provide ample time and opportunity for public input into its budget setting deliberations
each year, including any required public hearings.
11. Department heads will be responsible for administration of their departmental operating budget.
Requests for budget adjustments must be submitted and approved before any program incurs cost
overruns for the annual budget period.
12. Budget amendments are intended to recognize changes made by the council during the year, to reflect
major revenue and expenditure deviations from budgeted amounts, and to consider year-end budget
requests. Budget amendments are not intended to create a budget that matches budgeted revenues and
expenditures to actual revenue and expenditures.
13. Administrative budget amendments may be made throughout the year by department directors to adjust
line item budgets within their department as long as the total departmental budget does not change. Line
item budget changes exclude personal service and capital outlay categories. Administrative budget
admendments must be requested in writing and approved by the city administrator and finance director.
Purchasing
The goal of the Purchasing Policy is to ensure all purchases are consistent with Minnesota statutes, to establish
internal controls, to maintain the appropriate documentation, and to ensure the best value for the public money.
Purchasing Authority
Purchasing and budgetary control is the responsibility of each department director/division manager.The
department/division director for which the service, equipment, or supplies are ordered must recommend the
order be placed. The department/division leader may designate the authority to make certain purchases to
department staff in compliance with the annual budget. This designation must be communicated to the Finance
Department. Final approval of all purchases must be evidenced by the department/division signature on
the purchase order, invoice and/or receipt. Purchase orders must be completed prior to acquisition to insure
accountability, provide amount verification, and avoid a misunderstanding with respect to cost between the
vendor and the city.
Purchasing Thresholds
All expenditures up to $50,000 must be within the limits established by the department budget. The thresholds
of dollar amounts that have been established either by policy, city code, or statutory authority for the purpose of
purchasing city goods are identified as follows:
Financial Management Policies Page 13
Old Purchasing Threshold Chart:
PurchaseProcessApproving
Notes
Level Required Authority
recommended.
Department
Less than
Director or
$5,000purchasing the item.
Designee
department director
item, the city shall request written price quotations from at least two
$5,000 -Purchase Order/Department
sources and shall place the order at the lowest price quoted, provided
$24,999QuotesDirector
the items are of comparable quality.
item, the city shall request written price quotations from at least two
$25,000 -City
P.O./Quotessources and shall place the order at the lowest price quoted, provided
$49,999 Administrator
the items are of comparable quality.
program before obtaining quotes.
$50,000 -Council
City Council
$100,000Approvalitem, the city shall request written price quotations from at least two
sources and shall place the order at the lowest price quoted, provided
the items are of comparable quality.
Bids/Cooperative
Above $100,000City Councilrequirements for purchases above $100,000. (See "Purchases
Agreements
Exceeding $100,000" section below for more details.)
New Purchasing Threshold Chart:
PurchaseProcessApproving
Notes
Level Required Authority
Department
Less than
NoneDirector or
$5,000
Designee
Open Market
Purchase or
$5,000 -Department
Obtain two or
$24,999Director
more quotes if
practicable
Purchase Order
$25,000 -and Obtain two City
$49,999or more quotes if Administrator
practicable
Obtain two or
$50,000 -more written
City Council
$175,000quotes, bids, or
one year.
proposals
Above
Competitive BidsCity Council
$175,000
Notes: If a cooperative purchasing agreement is in place, quotations are not needed.
EDA/HRA staff will follow the purchasing policies but seek approval from their respective boards.
Financial Management Policies Page 14
Purchases Exceeding $100,000
There are three processes available that would satisfy statutory requirements for purchases that are above
$100,000:
1. Purchases through Cooperative Purchasing Organizations:
The city is a member of various cooperative purchasing organizations
2. Purchases Made Outside of the Cooperative Bidding Process:
If the amount of the contract is estimated to exceed $100,000, and funds are appropriated within the
current operating budget or capital improvement program, sealed bids shall be solicited by public notice
at least 10 calendar days before scheduled bid opening following preparation of bid specifications as
authorized by the City Council. The successful bid is to be awarded by the City Council to the lowest
responsible bidder.(Minnesota Statutes 471.345)
3. Non-Competitive Supplies or Equipment:
If the city is purchasing a product or service which is available from only one source, the acquisition will
be made in the same fashion as a purchase between $50,000 and $100,000 except that no other quotes
are required.
Exceptions to Competitive Bidding
The following are some of the more common exceptions to the competitive bidding requirements:
Contracts less than $100,000175,000
Cooperative purchasing organizationsprograms
Intergovernmental contracts
Noncompetitive supplies and equipment
Real estate purchasescontracts
Professional services including:
o Architectural
o Auditing
o Engineering
o Legal
o Group Insurance
o Banking Services
o Investment Services
o Financial Service Providers
o Construction Management
o Surveying
Emergency Purchases
Bond
The city is required to obtain both a payment and performance bond for all public work contracts over
$100,000175,000. Payment and performance bonds protect the city as well as subcontractors and persons
providing labor and materials. When the public work contract is let, the amount of the bond needs to be equal
to the contract price. If the contract price increases due to change orders, unforeseen conditions, cost overruns
or any other reason after the contract is signed, the city has the option of increasing the amount of the
Consideration may be given for the percentage of the contract that is complete in relation to
Professional Services
Contracts for professional services such as provided by engineers, attorneys, architects, accountants, and other
services requiring technical, scientific or professional training are exempt from the competitive bidding
requirements. However, the goals remain the same: to ensure all purchases are consistent with Minnesota
Financial Management Policies Page 15
statutes, to establish internal controls, to maintain the appropriate documentation, and to ensure the best value
for the public money.
The following chart identifies the required procedures for professional services contracts.
Purchase Process Approving
Notes
Level Required Authority
At least two written quotes shall be obtained where there is more than one feasible
$0 Department source.
Quotes
$24,999 Director
In cases where the city has established a pool of qualified consultants, the
consultant may be selected from the existing pool.
Where there is more than one feasible source, the city shall request written price
quotations in the form of a Request For Proposal from at least two sources.
$25,000- Council City
The quotes shall be submitted in written format.
And above Approval Council
The standard contract shall be awarded to the service provider with the best
qualifications and proposal for the specific project. Total cost shall not be the only
consideration, but must be included in the analysis of the proposal.
Note: EDA/HRA staff will follow the purchasing policy but seek approval from their respective boards.
Emergency Purchases
city has the authority to enter into contracts during an
emergency without following many normally required procedures. An emergency is defined as an unforeseen
combination of circumstances that calls for immediate action to prevent a disaster from developing or occurring. A disaster is a
situation that creates an actual or imminent serious threat to the health and safety of persons, or a situation that has resulted or is
likely to result in catastrophic loss to property or the environment, and for which traditional sources of relief and assistance within the
affected area are unable to repair or prevent the injury or loss.
During an emergency or disaster, the City Council may waive compliance with the time-consuming procedures
or formalities concerning:
1. The performance of public work
2. Contracting
3. Incurring obligations
4. Renting equipment
5. Purchasing supplies and materials
Emergency purchases will only be allowed when the mayor issues a proclamation declaring an emergency, and
the steps listed in Minn. Stat. §12.29 are completed.
Credit Card Use
According to Minn. Stat. §471.382, the City Council may authorize the use of a credit card by any city officer or
employee otherwise authorized to make a purchase on behalf of the city. The purpose of this policy is to
establish criteria for who may be issued a credit card and the specific use of the credit card.
Authority for Credit Card Holder
Employees having authority to make certain purchases will be eligible credit cardholders. A department director
may request a credit card for city-authorized purchasers when there is a demonstrated efficiency to be gained.
The finance director must review and approve each request before the card is issued. Such requests must include
the following information:
1. The name of the specific user
2. The general reason and types of purchases they will be making
Financial Management Policies Page 16
3. Any other information necessary to complete the credit card process
The department director is responsible for notifying the finance director when any changes occur to the
status.
Types of Purchases Allowed by Credit Card
A purchase must comply with all statutes, rules, and city policies applicable to city purchases. Specifically:
1. Must be made by the authorized card holder.
2. Must comply with the cpolicy for quotes and bids.
3. All expenditures must be within the limits established by the department budget.
Types of Purchases Prohibited
Use of a city credit card is prohibited for the following purchases:
1. Personal purchases of any kind.
2. Alcoholic beverages of any kind.
3. Employee meal purchases (ie, while attending conferences/workshops)
4. Uniform purchases.
An employee making a purchase inconsistent with this policy and/or is not approved by the Council, s/he is
personally liable for the amount of the purchase.
Procedures and Documentation
Finance will receive the monthly bill and the cardholder will receive a copy of the monthly statement of their
charges. The cardholder will code and attach invoices and receipts for all charges on the statement and submit all
of the documentation to the department director or designee by the due date. Payment will be made if the billing
matches all completed credit card statements and receipts.
Violations
Failure to comply with any portion of this policy may result in disciplinary action (up to and including
termination), cancellation of the credit card, and legal and financial consequences.
Public Purchase Expenditures
Pursuant to the statutes and laws of the State of Minnesota which regulate the expenditure of public funds for
public purposes, the Council believes it is necessary and appropriate to provide assistance and guidance to the
officials, employees, and representatives of Elk River to aid in the determination of when public funds may be
spent for a public purpose.
To provide that assistance and guidance, the Council adopted these public purpose guidelines for the
establishment of operating policies and procedures and the appropriate expenditures of public funds. Based on
these guidelines, the Council authorizes the city administrator, elected officials and appointed department
directors to establish administrative policies and procedures that are consistent with these guidelines and the
adopted city policies which implement these guidelines.
Definition: A public purpose expenditure is one which relates to the purpose for which the City of Elk River exists and the duties
and responsibilities of Elk River, its elected and appointed officials, employees, and other representatives.
Financial Management Policies Page 17
Public Purpose Expenditure Guidelines
The following are hereby approved and recognized to serve a public purpose:
1. Training and development programs for employees when said programs are directly related to the
-related duties and are directly related to the programs/services for
which the city is responsible.
2. Payment of employee work-related expenses including travel, lodging, and meal expenses when said
expenses are necessarily incurred by employees in connection with their actual work assignments or
official duties and those expenses are directly related to the performance of the governmental functions
for which the city has responsibility.
3. Appropriate safety and health programs for employees because they result in healthier and more
productive employees and reduce certain costs to the city and the taxpayers including various costs
associated with workers compensation and disability benefit claims, insurance premiums, and lost time
from employee absences.
4. Employee and volunteer recognition programs because formally recognizing employees and volunteers
who make significant contributions and demonstrate their commitment during the performance of their
duties results in higher morale and productivity among all city employees and volunteers and therefore
helps the city to fulfill its responsibilities efficiently and more cost effectively.
5. Food and refreshments associated with official city functions when the provision is an integral part of an
official city function and is necessary to ensure meaningful participation by the participants.
6. For appropriate community and customer outreach and similar activities when those expenditures are
necessary to ensure the efficient operation of programs/services, promote the availability and use of city
resources, and promote coordinated, cooperative planning activities among and between the public and
the private sectors.
Specific Programs and Expenditures
City expenditures shall be valid based upon the public purpose for which it is expended. These line-items are
approved annually by the City Council as a part of the overall budget approval process which includes a public
hearing on the proposed budget.
The following items are deemed to meet the Council definition of public purpose expenditures.
Meetings: Food/Meals/Refreshments
The City Council recognizes that situations in which city business needs to be discussed can and do occur during
meal hours (i.e. luncheon meetings). In addition, there are public and employee meetings and events in which
reasonable refreshments may add to the success of the meeting and/or event and create a more productive
workforce. Meals are allowed at training or meetings only when they are part of a meeting or training involving
official city business and when it is the only practical time to meet.
to
food/meals/refreshments and shall be allowed.
1. City meetings and events for the purpose of discussing city issues. These meetings would normally have
a pre-planned agenda and would involve predominately non-city employees.
2. As part of the structured agenda for an offsite conference, workshop, seminar, training session, or
meeting in which the city administrator or a department director has authorized the employee to attend
for training and development purposes. This does not include routine staff meetings.
3. When part of a breakfast/lunch/dinner meeting for official city business when it is the only practical
time to meet and when it involves non-city employee participants (i.e. business developers or business
representatives). Payment for fees relating to a special event, such as a Chamber of Commerce event,
Financial Management Policies Page 18
may also be allowed when approved by the city administrator and when attendance is deemed to meet
the public purpose guidelines for community or customer outreach and marketing of the city.
4. During non-routine, official meetings of the City Council, Council Committees, advisory
boards/commissions, and taskforces.
5. Where employees or volunteers are participating in a City Council-sponsored or authorized special event
or in an outside event as an official representative of the city.
6. At department-sponsored meetings, conferences or workshops where the majority of invited participants
are not city employees.
7. Cookies and coffee allowed for cngs sponsored by the Safety
Committee.
8. Annual safety training lunch where lunch is provided at a minimal cost while safety training is being held.
9. Dinner meals for staff during performance of election-related duties on Election Day.
10. Coffee for employees and guests at city buildings.
11. Light refreshments for employees who separate from employment after 10 years of service.
Alcoholic Beverages
The city will not purchase or reimburse any employee, councilmember, volunteer, or agent for the purchase of
alcoholic beverages.
Employee Recognition Program
The City Council recognizes the effort and service performed by city employees through a formal Employee
Recognition Program. The Council believes the benefits of attracting, retaining and motivating employees
through this program supports job satisfaction, which in turn impacts cooperation and productivity. The result is
to provide excellent public and customer service to better serve the interests of the community.
No provisions of this policy, or its administration, shall be subject to review under the grievance or arbitration
provisions of any collective bargaining agreement.
The Program will include:
1. Annual Employee Recognition Celebration. Annually, the city will sponsor an Employee Recognition
Celebration for city employees according to the Employee Recognition Program Policy.
2. Recognition Plaques. The city supports recognition plaques in recognition of retirement. The employee
shall receive a plaque thanking them for their dedicated years of service to the community.
Volunteer Recognition Program/Events
The City Council recognizes the hard work and service performed by volunteers through a formal Volunteer
Recognition Program. This program promotes teamwork and coordination amongst the Council, staff,
board/commission members, police reserves, and parks and recreation volunteers. The Program will include:
1. Volunteer Recognition Program for Board/Commission Members. Annually, the city will sponsor a
dinner (which may also include minimal entertainment) for invited participants and their guests. This
dinner and a token gift for the volunteers will serve as de minimus compensation for the service provided
by the volunteers and employees serving in a volunteer capacity or purpose. Employees working directly
or indirectly with the volunteer groups being recognized shall be invited along with their guest to the
event and have the cost of their meals paid for by the city.
2. Police Reserves/Parks and Recreation Volunteers. Annually, the city will sponsor an event or picnic for
invited participants and their guests.
Other Events
The city supports other events that are planned and paid for by employees. Examples of such events include
holiday gatherings and monthly birthday recognition.
Financial Management Policies Page 19
Refreshments and Food for Emergency Response Staff
Because emergency personnel are often called to perform for extended periods of time where refreshments are
important to duty performance, firefighters, police officers, and other emergency response personnel may be
provided refreshments or food when it is deemed appropriate by the city administrator or department director
to assure the delivery of quality emergency response service.
Employee Training
The Council supports employee training and allows for reasonable reimbursement of registration, tuition and
travel expense for conferences, seminars, workshops, and approved city employment-related course work in
accordance with the City of Elk River Personnel Policy.
The Personnel Policy also contains guidelines for an education reimbursement program. Job-related advanced
education meets the public purpose guidelines of this policy.
Employee Wellness and Safety Programs
The City Council recognizes the importance of employee fitness and health as it relates to the overall work and
life satisfaction of the employee and the impact on the city's health insurance program. As such, the Council
supports the Health Rewards Program, which has been designed to educate employees on fitness/health issues.
Also, in an effort to promote wellness, the city maintains a fitness room equipped with exercise equipment that
is available to all staff 24/7.
The city also supports programs that provide discounts to employees when participating in parks and recreation
wellness-related activities.
The Employee Safety Program and programs created by the Safety Committee to promote and retain a safe
work environment are supported by the City of Elk River. Refer to Meetings: Food/Meals/Refreshments.
Membership, Dues, and Donations
The Council determined the city will fund memberships and dues for the city, Councilmembers and its
employees in professional organizations and city social and community organizations when the primary purpose
is to promote, advertise, improve or develop the city's resources and advantages and not personal interest or
gain. Said memberships shall be approved by the department director and city administrator.
The Council determined it serves a public purpose for the Economic Development Authority (EDA) to
maintain membership in the Elk River Chamber of Commerce as a means of promoting, advertising, improving,
and developing the economic resources and advantages of the city.
The Council determined it serves a public purpose for the City of Elk River to donate to the Annual
Independence Day Celebration wherein the event promotes the resources and advantages of the city.
The City Council determined it serves a public purpose for the city to purchase candy for distribution during the
local high school homecoming and county fair parades.
Clothing and Other Sundry Items
Employees may receive T-shirts, and other sundry items of nominal value ($5.00) when these items are made
available to the general public or if these items are determined by the city administrator to be important to the
successful involvement of employees in special city-sponsored or supported events (i.e. Night To Unite, etc.).
For purposes of city identification to the public, city councilmembers may be provided with city logo clothing
up to $75 per year.
Financial Management Policies Page 20
Trinkets or Marketing Items
The Council determined it serves a public purpose for the city to distribute items of a nominal nature for the
purpose of educating or promoting city provided programs.
Sympathy Gifts
The cost of flowers or other similar items as a sign of sympathy shall not be paid for by public funds; except
sympathy cards for regular full-time and regular part-time employees upon the death of the following: Husband,
wife, mother, father, son, daughter, brother, sister, stepmother, stepfather, stepson, stepdaughter, stepbrother,
and stepsister.
Gifts for Employees, Consultants and Others
The city shall not pay for gifts to employees, consultants, or similar persons working with or for the city.
Conclusion
The Council reserves the right to not fund any item of expenditure described in this policy. No provision of this
policy, or its administration, shall be construed as a benefit or condition of employment by or for any employee
of the city, nor is any provision of this policy
Expense and Travel Reimbursement
This policy establishes guidelines and procedures for the payment and reimbursement of travel and other
expenses incurred by employees and city officials in the conduct of approved official city business. Employees
and city officials include temporary, regular full- and part-time employees, mayor, council members, and
members of city commissions or committees.
Authorization
Unless otherwise required by law, the following conditions must be met in order to qualify for reimbursement:
1. The expenditure must qualify as a public purpose expenditure as determined by state law and the City
Council for which the city may use tax money.
2. Employees must receive supervisor or city administrator approval for expense reimbursement.
Elected Official Out-of-State Travel
The city recognizes that elected officials may receive value from traveling out of the state for workshops,
conferences, events and other assignments. This policy sets forth the conditions under which out-of-state travel
will be reimbursed:
1. The event, workshop, conference or assignment must be approved in advance by the City Council at an
open meeting and must include an estimate of the cost of the travel. In evaluating the out-of-state travel
request, the Council will consider the following:
a. Whether they will be receiving training on issues relevant to the city or to his or her role as the
mayor or council member.
b. Whether they will be meeting and networking with other elected officials from around the
country to exchange ideas on topics of relevance to the city or on the official roles of local
elected officials.
c. Whether they will be viewing a city facility or function that is similar in nature to one that is
currently operating, or under consideration, by the city where the purpose for the trip is to study
the facility or functions to bring back ideas for the consideration of the full Council.
d. Whether s/he was specifically assigned by the Council to testify on behalf of the city at the
United States Congress or to otherwise meet with federal officials on behalf of the city.
e. Whether the city has sufficient funding available in the budget to pay the cost of the trip.
Financial Management Policies Page 21
2. No reimbursements will be made for attendance at events sponsored by or affiliated with political
parties.
3. Limitations may be imposed on paying for expenses for a Councilmember who has announced his/her
intention to resign, not to seek reelection, or who has been defeated in an election.
4. The Council may request an oral or written report from the elected official on the results of the trip.
5. The city will reimburse for travel, lodging, meals, and registration using the same procedures, limitations
and guidelines outlined in this expense and travel reimbursement policy.
6. The City Council may make exceptions to the policy depending upon circumstances unique to the trip
and/or elected official.
Expense Reimbursement Procedure
Reimbursement shall be made in accordance with the rules stated in this policy. No reimbursement shall be
made unless the reimbursement request meets the following criteria and the proper documentation is included
with the reimbursement request.
1. All reimbursement requests shall be submitted to finance within 60 days of the date incurred.
2. The city administrator may, under unique circumstances, approve reimbursement for items submitted
after the 60-day limit.
3. Expense reimbursements $25.00 or less may be submitted to petty cash for payment with a detailed
vendor receipt.
4. Expense reimbursements in excess of $25.00 will be paid by vendor check or direct deposit.
5. Employees shall submit a completed expense reimbursement request form to their supervisor for written
approval with detailed documentation (i.e. original itemized receipts, mileage form, etc.). Reimbursement
shall not be made without receipts.
6. Upon approval, supervisors shall submit the form to finance for payment.
Travel
1. Supervisors shall only approve mileage reimbursement to conduct official city business when a city
vehicle is not available, a staff vehicle does not meet the intended work objective, or when a specific
employment agreement prevails. Carpooling should be used whenever feasible.
2. Reimbursement shall be at the standard IRS mileage rate.
3. When an employee travels directly to a conference or seminar site, mileage will be computed from the
whichever is less.
4. Travel to and from the worksite (commuting) is not eligible for reimbursement, including evening and
weekends.
5. If out of state travel is required, costs shall generally be based on a comparison between the cost and
convenience of the lowest available air fare and travel by personally owned vehicle or city vehicle with
associated meals, lodging, and loss of work time costs.
a. Employees should select the most economical airfare that fits the conference or meeting
schedule.
b. An employee may elect to drive for personal reasons instead of utilizing air transportation with
the following provisions:
i. Prior written approval must be received from the department director and city
administrator.
ii. On the date permission is received to drive, the employee must get a written quote
for airfare based on the lowest round trip rate available that fits the conference or
meeting schedule. The quote must include the departure and arrival times and be
attached to the reimbursement request.
iii. Reimbursement will be made based on a comparison between the cost and
convenience of the lowest available airfare and travel by personal vehicle, with
associated lodging and meals, whichever is less.
Financial Management Policies Page 22
iv. Travel time above that required for air travel, will be on the employ
time.
Lodging
1. The city will pay for reasonable hotel accommodations appropriate to the purpose of the trip.
2. Rates for accommodations shall be comparable to those of other facilities in the area. The hotel hosting
a convention shall be deemed an appropriate accommodation.
3. The city will pay the single rate if the employee or official is accompanied by a guest or family member.
Meals
Meal expenses incurred must be paid directly by the employee. City credit cards cannot be used to purchase
employee meals. Each employee must submit their own receipt for reimbursement.
1. No overnight stay required:
a. Meal expenses shall be reimbursed for city-required attendance at day-long training/workshops
with morning and afternoon sessions when no meal is provided between the two sessions. Meals
before or after the event are not reimbursable.
b. Expenses for meals, including maximum gratuity of 18%, will be reimbursed with an original
itemized receipt (credit card receipts are not acceptable) up to the Minnesota Standard per diem
rate in accordance with the U.S. General Services Administration (GSA) Standard per diem rates
(www.gsa.gov).
c. Reimbursement for alcoholic beverages is prohibited.
d. Reimbursement shall not be made for meals included in the conference or meeting fee.
2. Overnight stay required:
a. No meals are to be charged to the hotel/motel room.
b. Expenses for meals, including gratuity, will be reimbursed in accordance with the GSA per diem
rates which may be found at www.gsa.gov.
c. First and last days of travel will be reimbursed at 75% of the per diem. If a meal is provided on
the first or last day of travel, the per diem should be reduced by the meal provided then
multiplied by 75%.
cd. Per Diem meal expenses at the applicable daily rate does not require receipts, but the employee
must provide adequate substantiation verifying the date, time and location of the event or
meeting and the business purpose of the trip.
de. Meals that are already paid for by the city (such as through a conference registration fee or hotel
costs), those meals will be deducted from the per diem daily meal reimbursement amount.
ef. Reimbursement for alcoholic beverages is prohibited.
3. Meals for Others:
Elected officials, the city administrator, department directors, or other designated city employees serving
as city representatives may occasionally provide a meal for other persons who have official business with
the city. The cost of providing such meals, including tax and a reasonable gratuity, will be reimbursed
provided the following conditions are met:
List the name and official capacity of each person attending
Describe the public benefit of the meeting
Reimbursement for alcoholic beverages is prohibited
Provide original, itemized receipts
Be in compliance with the c
The amount reimbursed per person will follow the amounts listed in accordance with the GSA
standard per diem rates (www.gsa.gov)
Financial Management Policies Page 23
Advance Expense Check
If requested, an advance expense check may be issued for estimated travel expenses. The advance shall be
issued pursuant to Minnesota Statute 471.97.
1. A signed Reimbursement Request with receipts must be submitted within 30 days of travel.
2. The city shall determine the estimated travel expense amount to be advanced.
3. Any additional reimbursement due to the employee shall be paid based on the receipts submitted.
4. Employees shall refund the city within 10 days of submission of the reimbursement request. The refund
due from the employee shall be based on the actual receipts submitted.
5. All other provisions of this travel policy apply to determine the expenses eligible for reimbursement.
Other
1. All reimbursements will be subject to tax as required by IRS regulations.
2. Only actual expenses for the employee shall be submitted and reimbursed. The employee is responsible
for all lodging, meal, travel, and other expenses of anyone accompanying the employee.
3. By signing the Reimbursement Request, the employee acknowledges and agrees that all items included in
the Reimbursement Request are legally eligible for reimbursement and meet all of the provisions of this
travel policy and other applicable laws.
OMB Uniform Grant Guidance
Internal Controls
All grants must comply with the cany state and federal
guidelines. A copy of the grant agreement should be readily available for review and compliance. The City of Elk
River Federal Grant Information Checklist should be filled out and filed with the finance department.
Travel
All travel costs to be charged against the grant must follow the c
and must be on an actual cost basis or per diem for overnight travel in accordance with the travel
reimbursement policy.
Financial Management and Accounting Records
The c
of federal awarding agency, and pass-The general ledger will be supplemented by the City
of Elk River Federal Grant Information Checklist.
policy will be followed to ensure competitively priced purchases are obtained when applicable.
Allowable costs will be determined by grant agreements and the department director will be responsible to
ensure costs are approved according to grant agreements.
The city, upon any advance of payments, will ensure disbursements or transfer of funds happens within a
reasonable time upon proper disbursement approvals.
Personnel Compensation Documentation
Actual timesheets and payroll records will be maintained to support personnel compensation. These costs will
reflect actual activities and costs related to the grant award/program. If multiple grants are awarded, the city will
allocate time according to timesheets or activities related to the grant/program.
Financial Management Policies Page 24
Procurement
The city Purchasing Policy will be used for all purchases unless additional requirements (state and federal) are
required with the grant agreement. A contractor must provide certification regarding debarment, suspension,
ineligibility, and voluntary exclusion.
A contract will only be with responsible contractors that can perform successfully meeting the requirements and
terms and conditions of the contract award based on:
Contractor integrity
Compliance with public policy
Record of past performance
Financial and technical resources
All contractors who are awarded projects must provide a list of all entities with which it has relationships that
create, or appear to create, a conflict of interest with the work that is contemplated in the grant award. The list
should indicate the name of the entity, the relationship, and a discussion of the conflict.
Report Certification
The c
requesting payments that states:
By signing this report, I certify to the best of my knowledge and belief that the report is true, complete, and accurate, and the
expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the
Federal award. I am aware that any false, fictitious, or fraudulent information, or the omission of any material fact, may
subject me to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise. (U.S. Code
Title 18, Section 1001 and Title 31, Sections 3729-32730 and 3801-3812).
Policy History
Adopted April 15, 2013 (many existing financial policies were combined into this newly created and
updated policy)
Revised April 7, 2014
Revised April 6, 2015
Revised April 18, 2016
Financial Management Policies Page 25