4.4 ERMUSR 07-13-2021______________________________________________________________________________
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UTILITIES COMMISSION MEETING
TO:
ERMU Commission
FROM:
Michelle Canterbury – Executive Administrative Manager
MEETING DATE:
July 13, 2021
AGENDA ITEM NUMBER:
4.4
SUBJECT:
Purchase Order Policy
ACTION REQUESTED:
Approve the delegation of authority to management and move the Purchase Order Policy from
the Commission Policy Manual to the Management Policy Manual.
BACKGROUND:
In 2017, the Commission worked with staff and a consulting firm to develop governance
policies based on the Carver Model of governance. In 2019, an initiative was created to develop
a migration plan for relevant old policies to become part of the new Commission Policy Manual,
confirm delegation of authority to management for old policies that are not governance, and
eliminate or remove documents that are not policy. At the November 19, 2019, commission
meeting, the Commission addressed the administration section of the old policy manual and
approved moving six administration policies to the Commission Policy Manual, one of those
being the Purchase Order Policy.
DISCUSSION:
The final step of the policy manual initiative is the review of policies transferred over to the
Commission Policy Manual. The review process includes making any necessary updates,
formatting, and creating new policies that were identified. Any proposed changes or new
policies will be presented to the commission for consideration and approval.
After review of the G4i.5 Purchase Orders Policy that was transferred over to nest under G.4i
Financial Conditions and Transactions, we determined that the policy outlines our internal
procedures and when a purchase order is required. In addition, commission policy G.414
Procurement sets the expectation and states “the General Manager shall designate specific
delegated procurement authorities for selected ERMU managers and employees, by position title,
based on type of procurement, dollar value, or other appropriate criteria, and keep complete and
accurate records of all procurement contracts demonstrating compliance with applicable legal and
regulatory requirements, this commission policy, and established management policies,
procedures, and practices.” As the Purchase Order Policy is a downstream internal procedure
required by the governance procurement policy it should be classified as management policy.
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Based on our review, staff recommends moving the Purchase Order Policy from the Commission
Policy Manual to the Management Policy Book as it addresses implementation of commission
policy by management.
ATTACHMENTS:
• ERMU Policy – G.4i5 – Purchase Orders
• ERMU Policy – G.4i4 – Procurement – For reference only
• ERMU Policy – G.4i – Financial Conditions and Transactions – For reference only
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G.4i5 – Purchase Orders
1.0 Purchase Order Policy
In an effort to enhance documentation of purchasing materials and/or services, the following
procedures shall be implemented:
A. Any purchased item(s) or service(s) over $5,000.00 must have a pre-approved purchase
order number. The Supervisor of the department will initiate the purchasing process by
securing quotations or asking the Purchasing Specialist to secure quotations before the
actual item is purchased. The General Manager or his designee will sign all purchase
orders. A minimum of two quotations shall be required.
B. Items or services under $5,000.00 may be purchased upon authorization of the
Supervisor.
C. Routine items such as office supplies, hardware, and small automatic parts will not
require a purchase order at places of business where an account is established. The
Supervisor must authorize purchase and he/she or employee must sign receipt at the place
of business and submit such a receipt to the Purchasing Specialist.
Revised April 9, 2013
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COMMISSION POLICY
Section: Category:
Governance Delegation to Management Policies
Policy Reference: Policy Title:
G.4i4 Procurement
PURPOSE:
With this policy, the Commission sets forth its expectations for the General Manager concerning
procurement of supplies and services for ERMU.
POLICY:
The General Manager shall establish management policies, procedures, and practices for
procurement that are consistent with the requirements of the most current version of or successor to
Minnesota Statute 471.345 Uniform Municipal Contracting Law, and which implement and comply
with the following:
1. Contracts for procurement which are estimated to exceed $175,000 in value shall be presented to
the Commission for specific approval.
2. Contracts for procurement with a value of less than $175,000 do not require specific
Commission approval, but the General Manager shall report on the procurement to the
Commission at the next regular Commission meeting if the contract amount exceeds $25,000
and the item has not been previously approved by the Commission as part of the Business
Plan/Budget.
3. Contracts for procurement with a value of less than $25,000 may be entered into by the General
Manager or his/her designee without approval or reporting to the Commission, but shall be
reflected in ERMU’s financial records.
In addition, the General Manager shall:
1. Designate specific delegated procurement authorities for selected ERMU managers and
employees, by position title, based on type of procurement, dollar value, or other appropriate
criteria.
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ERMU Commission Policy – G.4i.4 Procurement Policy
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2. Keep complete and accurate records of all procurement contracts demonstrating compliance
with applicable legal and regulatory requirements, this Commission policy, and established
management policies, procedures and practices.
3. Inform the Commission, as soon as practical after discovery, of any material violations of this
policy, Minnesota law, or the conditions of a Commission contract approval.
POLICY HISTORY:
Adopted December 12, 2017
Revised July 9, 2019
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COMMISSION POLICY
Section: Category:
Governance Delegation to Management Policies
Policy Reference: Policy Title:
G.4i Financial Condition and Transactions
PURPOSE:
With this policy, the Commission sets forth its expectations for the General Manager
concerning ERMU’s financial condition and transactions.
POLICY:
The General Manager shall not intentionally cause or allow ERMU’s financial condition to
become precarious or to materially deviate from the Financial Plan or Business Plan/Budget.
The General Manager shall not allow financial transactions to occur outside of the boundaries
established by other applicable provisions of the Commission’s governance policies. The
General Manager shall not allow financial reporting that fails to comply with applicable
standards for governmental accounting.
Consistent with this general statement, the General Manager shall:
1. Provide monthly financial reports to the Commission which accurately and adequately
describe ERMU’s financial condition.
2. Provide quarterly financial report presentations which discuss any material changes (1% or
greater of annual revenues or expenditures for each utility enterprise) to the projections for
the balance of the fiscal year including any appropriate remedial actions.
3. Not allow the cumulative expenditure of funds during a fiscal year to exceed by more than
$1 million the amounts that have been allocated through the approved capital and
operating budgets without prior approval by the Commission in the form of a budget
amendment.
4. Advise the Commission of any individual project expenditure in excess of 10% above the
approved budgeted amount.
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ERMU Commission Policy – G.4i Financial Condition and Transactions
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5. Not reallocate an amount greater than $500,000 among line items in the approved capital
and operating budgets without prior approval by the Commission in the form of a budget
amendment.
6. Advise the Commission of any financial transaction or event deemed by the General
Manager to have a substantial impact on ERMU’s financial condition.
7. Not take any financial action that violates bond covenants or otherwise jeopardizes
ERMU’s ability to obtain favorable bond ratings.
8. Not allow working capital and other designated reserves to fall below the levels
established in the Financial Plan.
9. Make payroll and pay other financial obligations in a timely way.
10. Collect or otherwise resolve receivables.
11. Implement internal policies and procedures that comply and ensure timely accounting and
reporting of financial condition and transactions in accordance with legal or regulatory
requirements, and generally accepted industry practices.
12. Not acquire, encumber, or dispose of real property without approval of the Commission.
POLICY HISTORY:
Adopted August 8, 2017
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