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4.8 SR 10-21-2024The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity Request for Action To City Council Item Number 4.8 Meeting Date October 21, 2024 Prepared By Cal Portner, City Administrator Item Description Update Finance Policy Reviewed by Lori Stich Joe Stremcha Tina Allard Action Requested Approve, by motion, the City of Elk River Financial Policies. Background/Discussion The city maintains and follows financial policies reflecting the best practices and recommendations from the Government Finance Officers Association (GFOA), the Governmental Accounting and Standards Board (GASB), and the League of Minnesota Cities. Last spring, the Minnesota Attorney General's Office issued a new opinion regarding public purpose expenditures. Following a review by the Elk River City Attorney, changes were made to the city's Public Purpose Expenditure Policy. City finance policies are reviewed periodically to ensure accuracy and to clarify language. Financial Impact N/A Mission/Policy/Goal Elk River Mission Statement Attachments 1. 2024 Update Financial Policies CLEAN 2. 2024 Update Financial Policies Redline Page 52 of 294 Financial Management Policies Page 53 of 294 Table of Contents Purpose .............................................................................................................................................1 Objectives .........................................................................................................................................1 Revenue and Expenditure ..................................................................................................................1 Utilities..............................................................................................................................................1 Cash Management .............................................................................................................................2 Investments.......................................................................................................................................2 Fund Balance .....................................................................................................................................6 Debt .................................................................................................................................................8 Capital Improvements......................................................................................................................11 Risk Management.............................................................................................................................13 Accounting, Auditing, and Financial Reporting .................................................................................13 Operating Budget ............................................................................................................................13 Purchasing/Credit Card Use ............................................................................................................14 Public Purchase Expenditures ............................................................................................................3 Expense and Travel Reimbursement/Elected Official .........................................................................6 OMB Uniform Grant Guidance .........................................................................................................9 Page 54 of 294 Financial Management Policies Purpose The City of Elk River is responsible to its citizens to manage its resources wisely and 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 helped maintain financial stability. These financial policies will be reviewed periodically to determine if changes are necessary. Throughout this policy, every reference to “city” explicitly defines the City of Elk River, Minnesota. Objectives ▪Providing sound principles to guide the decisions of the City Council and management. ▪Providing short- and long-term financial stability by ensuring adequate funding to provide for and protect infrastructure needed by the community today and for the future. ▪Protecting and enhancing the city’s credit rating and prevent default on any municipal obligations. ▪Protecting the City Council’s policy-making ability by ensuring that important policy decisions are not constrained by financial problems or emergencies. Revenue and Expenditure The city will: ▪Provide long-term financial stability through sound short- and long-term financial planning. ▪Estimate annual revenues and expenditures in a conservative manner to reduce exposure to unforeseen circumstances. ▪Project revenues and expenditures for the next five years and will update these projections for each budget process. ▪Establish user charges and fees at a level related to the cost of providing the service (operating, direct, indirect, and capital) when determined to be appropriate and the direct benefits are identifiable. Fees will be reviewed annually. ▪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 and garbage collection. The Utilities Commission sets fees and charges for the water and electric utilities. The city will encourage the Utilities Commission to adopt financial management policies similar to the policies stated in this section. ▪The city will strive to set municipal utility users fees at a financially sustainable level. ▪The fee structure for municipal 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. ▪All municipal utility funds will maintain adequate cash reserves. 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. ▪All utility rates should be reviewed annally to minimize the impacts of rate changes and to insure Page 55 of 294 Financial Management Policies Page 15 adequate long-term funding. ▪Elk River Municipal Utilities 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 Council will determine the fund allocation for the proceeds. ▪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. ▪Any operating transfer not included in the budget must be approved by the City Council. Cash Management The city shall pool cash balances from all funds to maximize investment earnings. Exceptions include legal and specific practical requirements that demand segregation of funds. ▪Funds received are to be deposited into an interest-bearing account with the city’s currently designated official depository by the next business day. ▪Cash on hand is to be kept to the minimum required to meet daily operational needs. Investments The city shall invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the entity while conforming to 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 city’s Annual Comprehensive Financial Report and include all city funds except for the water and electric funds which fall under the investment policy adopted by the Elk River Utilities Commission. Investments shall be made with judgment and care under circumstances then prevailing 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. The standard of prudence to be used by investment officials shall be the “prudent person” standard, as defined 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 diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. All investments shall be limited to those permitted by Minnesota Statute §118A. The primary objectives, in priority order, of the City of Elk River’s investment activities shall be: 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. Page 56 of 294 Financial Management Policies Page 15 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 consider the constraints on risk and cash flow characteristics of the investment portfolio. 4. Maintaining the Public’s Trust - All officials and employees who are part of the investment process shall act responsibly as custodians of the public trust. Investment officials shall avoid any transaction that might impair public confidence in the municipality’s ability to govern effectively. Authority to manage the investment program is derived from Minnesota Statutes §118A. Management responsibility for the investment program is hereby delegated to the Finance Manager. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Finance Manager. The Finance Manager 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 Manager 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 of Elk River’s portfolio. The Finance Manager will maintain a list of financial institutions authorized to provide investment services and a list of approved security brokers/dealers selected by credit worthiness, who maintain an office in the State of Minnesota. These may include “primary dealers” or regional dealers 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 Division in accordance with Minnesota Statute §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: A. Repurchase Agreements Repurchase agreements consisting of collateral allowable in Section 118A.04. B. United States Securities 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. High risk mortgage-backed securities are as follows: 1. interest-only or principal-only mortgage-backed securities; or, 2. any mortgage derivative security that: a. has an expected average life greater than 10 years; b. has an expected average life that: i. will 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 ii. will 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 iii. will 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. Page 57 of 294 Financial Management Policies Page 15 C. 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 under the Federal Securities Act of 1933, as long as the investment company’s fund receives the highest 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. D. State and Local Securities State and local government obligations as follows: 1. any security which is a general obligation of any state or local government with taxing powers which is rated “A” or better by a national bond rating service; and 2. any security which is a revenue obligation of any state or local government with taxing powers which is rated “AA” or better by a national bond rating service; and, 3. a general obligation of the Minnesota Housing Finance Agency which is a moral obligation of the State of Minnesota and is rated “A” or better by a national bond rating service. E. 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. F.Time Deposits Time deposits that are fully insured by the Federal Deposit Insurance Corporation. Bankers acceptances of United States banks. G. Money Market Accounts Money market funds may be held with next day withdrawal capacity to provide for daily liquidity requirements. The 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 five 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 will 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 percent more than the amount on deposit plus accrued interest at the close of the business day. To the extent that funds deposited are more than 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 of Elk River. 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 Page 58 of 294 Financial Management Policies Page 15 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 United States 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; provided that the government entity’s ownership of all securities is evidenced by written acknowledgments identifying the securities by the names of the issuers, maturity dates, interest rates, CUSIP number, or other distinguishing marks. 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 shall be transferred to the city’s custodian. The city will diversify its investments by security type and institution. In establishing specific diversification strategies, the following general policies and constraints shall apply: A. 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. B. The Finance Manager 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. C. The investment portfolio will be designed to obtain a market average rate of return during budgetary and economic cycles, taking into account the City of Elk River’s investment risk constraints and cash flow needs. D. The Finance Manager shall prepare an investment report directed to the City Council on a quarterly basis including: 1. Listing of individual securities held at the end of the reporting period. 2. Listing of investments by maturity date. 3. Percentage of the total portfolio which each type of investment represents. 4. Market to market analysis. 5. 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 giving the city sufficient funds to meet contingency and cash-flow timing needs. In establishing an appropriate fund balance, the city needs to consider the demands of cash flow, need for emergency reserves, ability to manage fluctuations of major revenue sources, credit rating and long-term fiscal health. A. Classification of Fund Balance/Procedures 1.Nonspendable Amounts that are not in a spendable form or are required to be maintained intact. Examples are inventory or prepaid items. Page 59 of 294 Financial Management Policies Page 15 2.Restricted Amounts subject to externally enforceable legal restrictions. Examples include grants, tax increment and bond proceeds. 3.Unrestricted The total of committed fund balance, assigned fund balance, and unassigned fund balance: ▪Committed fund balance – amounts that can be used only for the specific purposes determined by a formal action of the government’s highest level of decision-making authority. Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally. ▪Assigned fund balance – amounts a government intends to use for a specific purpose; intent can be expressed by the government body or by an official or body to which the governing body delegates the authority. ▪Unassigned fund balance – residual amounts that are 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. B. General Fund ▪The city will maintain an unassigned General Fund balance of not less than 40-45% of budgeted operating expenditures; however, this need could fluctuate with each year’s budget objectives. ▪Annual proposed 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. ▪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. ▪The City Council may consider appropriating (for authorized purposes) year-end fund balance more than the policy level or increasing the minimum fund balance. An example of preferred use of excess fund balance would be for one-time expenditures, such as: 1. An expenditure of significant long-term benefit or legacy to the community. 2. A one-time (non-recurring) expenditure or grant match opportunity. 3. Catch-up funding or long-term obligations not previously recognized. 4. A one-time unplanned revenue shortfall. 5. An unplanned expenditure due to an emergency or disaster. 6. Retirement of existing debt. 7. To fund policy shifts by other governmental entities having a negative impact on the city. 8. To moderate property taxes. ▪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. ▪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. ▪The City Council authorizes the finance manager or city administrator to assign fund balance that reflects the city’s intended use of those funds. ▪When both restricted and unrestricted resources are available for use, it is the city’s policy to Page 60 of 294 Financial Management Policies Page 15 first 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 city’s policy to use resources in the following order: 1) committed 2) assigned and 3) unassigned. C. Enterprise Funds The city will 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 quantified in a written plan for the fund which shall be included in the city’s annual Capital Improvement Plan (CIP). The city will maintain a reserve balance at a level which takes into consideration the following: ▪Cash Flow o Six months of projected operation expenditures (Sewer, Storm Water and Garbage). o One year of projected operation expenditures (Liquor). o Debt service obligations – 100% of next year’s principal and interest. ▪Contingency o Potentially volatile revenue sources. o Unforeseen natural or man-made disasters and emergencies. ▪Savings o Planned one-time expenditures and grant matching opportunities. o Impact of significant capital projects identified in a long-term plan. ▪Other Factors o Impact on city’s bond rating. o Requirements by external funding source. D. Special Revenue Funds The city will maintain reserves in the Special Revenue Funds at levels sufficient to provide working capital for current expenditure needs plus an amount that is estimated to be needed 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 city’s annual CIP. E. Debt Service Funds The city will maintain reserves in the Debt Service Funds at levels sufficient to provide working capital for current expenditure needs plus an amount that is estimated to be needed to meet legal restrictions and requirements by external funding sources. F. Capital Project Funds The city will maintain reserves in the Capital Project Funds at levels sufficient to provide working capital for current expenditure needs plus an amount that is estimated to be needed 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 city’s annual CIP. G. Monitoring and Reporting The Finance Manager shall annually review with the City Council the status of the fund balances with this policy and present it to the City Council in conjunction with the development of the annual budget and/or other long-term financial planning documents such as the CIP. The city will annually review the adequacy of the reserve balances. Page 61 of 294 Financial Management Policies Page 15 The city will periodically review updates to rating agency methodologies and medians to make sure that the reserve policy is consistent to ensure maintaining its existing rating or that it positions itself for an upgrade. Debt The city has chosen, by policy, to guide its issuance of debt by following the guidelines listed below. These practices were identified through examination of materials from state statutes, bond rating agencies, and the Government Finance Officers Association (GFOA). This policy can be amended in the future by the City Council but is consistent with general municipal practices at the time of its adoption. In accordance with the authorities cited in the background section, the city will use the following policies in determining when and how to use debt for financing capital and equipment needs. A. Debt Limits 1. Legal Limits a. Minnesota Statutes, Section 475 prescribes the statutory debt limit that outstanding principal of debt cannot exceed 3% of taxable market value. This limitation applies only to debt that is wholly tax-supported. The type of debt included is either general obligation debt of any size bond issue (G.O.) or Lease Revenue Bond Issues that were over $1,000,000 at the time of issuance. However, several debt types do not count against the limit. G.O. Tax Increment, G.O. Abatement G.O. Special Assessment, G.O. Utility Revenue, and most HRA or EDA-issued debt is considered to have a separate revenue source other than taxes and so are excluded from the legal debt limit calculation. HRA and EDA Public Project Revenue Bonds or Lease Revenue Bonds with Financing Lease Agreement with a city or county do count against the statutory debt limit. b. Local ordinances do not limit the city’s ability to issue debt. 2. Policy Limits a. Debt will only be used for capital costs. The city will not utilize debt for cash flow borrowing, even though it is allowed by state statutes. b. CIP and Financial Planning: The city’s Capital Improvement Plan shall contain debt assumptions which match this policy and requires a commitment to long-range financial planning which looks at multiple years of capital and debt needs. c. Tax Increment Bonds: The city shall use G.O. Tax Increment Bonds only when the development merits special consideration. 3. Financial Limits a. Bond issues may require a special debt levy. The city shall limit the amount of the city’s property tax levy dedicated to debt service (principal and interest plus 5% for G.O. Bonds) to less than 20% of the total tax levy. Unlike rating agencies, the city’s definition of tax levy does not include special assessments, tax abatements, or tax increments. b. Pure revenue bond debt for the city 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 city’s rating agencies. B. Use of Variable Rate Debt and Derivatives 1. Variable Rate Debt. The city shall use variable rate debt only if total principal and interest of the debt constitutes less than 20% of the city’s total debt payments and only 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). Page 62 of 294 Financial Management Policies Page 15 2. Derivatives. The city will not use derivative based debt. C. Debt Structuring Practices 1. Term: State law limits general obligation debt to 30 years in most circumstances and the city shall not exceed 25 years in term of debt. 2. Term for Equipment: The city has a goal of paying for all capital equipment with a useful life of five years or less from cash reserves or annual operating budgets. State allows cities to issue 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 would prefer, 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. 3. The city’s collective debt goal shall be to amortize at least 50% of its principal within 10 years. 4. The city shall usually issue debt with level principal and interest payments; or to align with a specific revenue stream. 5. 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. D. Debt Issuance Practices 1. Rating Agencies: The city utilizes a rating agency for all debt issuance of more than $1M or longer than three years in term. 2. Method of Sale: The city shall use competitive bidding for all debt unless the debt is so specialized in its nature that it will not attract more than two bids. 3. Refunding: a. Advance refunding bonds shall not be utilized unless present value savings of 4% to 5% of refunded principal is achieved and unless the call date is within four years. The state law minimum is 3% of refunded principal. Bonds shall not be advance refunded if there is a reasonable chance that revenues will be sufficient to pre-pay the debt at the call date. b. 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. c. Special Assessment or Revenue debt will not be refunded unless the finance manager determines that special assessments or other sufficient revenues will not be collected soon enough to pay off the debt fully at that call date. 4. Professional Services. The city shall use an outside bond attorney and an independent financial advisor to structure the sale. E. Debt Management Practices 1. Investment of bond proceeds. The city shall invest bond proceeds in a capital project fund. 2. Disclosure: The city shall comply 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 city’s annual financial report. 3. Arbitrage Rebate: The city shall complete an arbitrage rebate report for each issue no less than every five years after its date of issuance. 4. Communication: The city will maintain 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. F. Post issuance debt compliance policy The city shall ensure that all obligations are in compliance with all applicable state and federal regulations. This policy may be amended, as necessary, in the future. Page 63 of 294 Financial Management Policies Page 15 Background The Internal Revenue Service (IRS) is responsible for enforcing compliance with the Internal Revenue Code (the “Code”) and related regulations governing certain obligations (for example: 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. Post-Issuance Debt Compliance Policy Objective The city desires to monitor these obligations to ensure compliance with the IRS Code and related regulations governing such obligations. To help ensure compliance, the city has developed a “Post- Issuance Debt Compliance Policy.” This 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 manager is designated as the city’s agent responsible for post-issuance compliance of these obligations. However, to the extent obligations are issued for municipal utility purposes, the ERMU finance manager assumes the duties of post-issuance debt compliance as described in this policy. The finance manager shall assemble all relevant documentation, records and activities required to ensure post-issuance debt compliance as further detailed in corresponding procedures. At a minimum, the Post-Issuance Debt Compliance Procedures for each qualifying obligation will address the following: 1. General post-issuance compliance; 2. Proper and timely use of bond proceeds and bond-financed property; 3. Arbitrage yield restriction and rebate; 4. Timely filings and other general requirements; 5. Additional undertakings or activities that support points 1 through 4 above; 6. Other requirements that become necessary in the future. The finance manager shall apply the Post-Issuance Debt Compliance Procedures to each qualifying obligation and maintain a record of the results. Further, the finance manager will ensure that the Post-Issuance Debt Compliance Policy and Procedures are updated on a regular and as needed basis. The finance manager or any other individuals responsible for assisting the finance manager in maintaining records needed to ensure post-issuance debt compliance, are authorized to expend funds as needed to attend training or secure use of other educational resources for ensuring 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. On the other hand, if an issue of taxable governmental bonds 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 of taxable governmental bonds may be refunded, in whole or in Page 64 of 294 Financial Management Policies Page 15 part, with the proceeds of an issue of tax-exempt governmental bonds then, for purposes of this policy, the finance manager shall treat the issue of taxable governmental 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 with respect to such taxable governmental bonds. The finance manager 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 to be owned by the city but which may be used, in whole or in substantial part, by a nongovernmental organization that is exempt from federal income taxation under Section 501(a) of the Code as a result of the application of Section 501(c)(3) of the Code (the “501(c)(3) Organization”), the city may elect to issue the bonds as “qualified 501(c)(3) bonds” the interest on which is 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 manager, for purposes of this policy, the finance manager 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 with respect to such qualified 501(c)(3) bonds. Alternatively, in cases where compliance activities are reasonably within the control of the relevant 501(c)(3) Organization, the finance manager 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 “Conduit Bonds”). 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 will 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 manager will annually prepare and submit to the City Council a Capital Improvements Plan (CIP) for the next 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. 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 will 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 in order 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 Page 65 of 294 Financial Management Policies Page 15 intervals, city staff shall evaluate the amount of all capital charges and recommend necessary changes to the City Council and the Utilities Commission. The city will maintain an equipment acquisition and replacement program and 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 incur debt for equipment acquisition. The city will 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 will 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 will prepare an on-going 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 costs and capitalize if over $100,000 when completed Other assets $10,000 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 The city will maintain a Risk Management Program to minimize the impact of legal liabilities, natural disasters or other emergencies through the following activies: ▪Loss Prevention. Prevent negative occurrences. ▪Loss Control. Reduce or mitigate expenses of a negative occurrence. ▪Loss Financing. Provide a means to finance losses. ▪Loss Information Management. Collect and analyze relevant data to make prudent loss prevention, Page 66 of 294 Financial Management Policies Page 15 loss control and loss financing decisions. The city will maintain an active Safety Committee comprised of city employees. The committee will periodically conduct educational safety and risk avoidance programs for all employees. The city will maintain the highest deductible amount, considering the relationship between cost and the city’s ability to sustain the loss. Accounting, Auditing, and Financial Reporting The city will establish and maintain the highest standard of accounting practices, in conformity with Generally Accepted Accounting Principles (GAAP) including the following: ▪Attempt to maintain the GFOA Certificate of Excelleance in Financial Reporting. ▪Arrange for an annual audit of all funds and account groups by and independent certified public accountants or by the Office of the State Auditor. ▪Provide monthly summary reports of financial activity by major type of funds as compared to budget. ▪Department Directors shall review departmental budgets monthly to ensure budgetary compliance and report all deficiencies immediately to the city administrator. Operating Budget ▪The city administrator shall annually propose a balanced budget to the City Council in which appropriations do not exceed the total of the estimated General Fund revenue and the fund balance available after applying the General Fund Reserve Policy. ▪In the event there is an unanticipated shortfall of revenues in a current year budget, the finance manager may recommend the use General Fund unreserved fund balance. ▪The budget will provide for adequate maintenance of buildings and equipment, and for their orderly replacement. ▪The finance manager will prepare monthly reports comparing actual revenues and expenditures to the budget. Significant variances will be summarized in writing to the city administrator and City Council. ▪The operating budget will describe the major goals to be achieved and the services and programs to be delivered for the level of funding provided. ▪Before adding a new program or service, the city will use a cost-benefit analysis of contractors versus in-house services. ▪Assests will not be sold or one-time accounting principle changes used to balance the budget for any fund. ▪Public input will be encouraged and public hearings held for budget setting deliberations each year. ▪Department directors are responsible for administration of their departmental operating budget. Budget adjustments must be submitted and approved before cost overruns occur. ▪Department directors may propose administrative budget amendments throughout the year to adjust line item budgets within their department as long as the total departmental budget does not change. Line item budget changes shall exclude personal service and capital outlay categories. Admendments must be requested in writing and approved by the city administrator and finance manger. Purchasing The goal of the Purchasing Policy is to ensure all purchases are consistent with Minnesota statutes, to establish internal controls, to ensure appropriate documentation, and the best value for the public money. Purchasing Authority Purchasing and budgetary control is the responsibility of each department/division manager. The department/division manager 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 Division. Final Page 67 of 294 Financial Management Policies Page 15 approval of all purchases must be evidenced by the department/division manager’s signature on the invoice and/or receipt. Purchasing Thresholds All expenditures up to $50,000 must be within the limits established by the department budget. The threshold 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: Notes: If a cooperative purchasing agreement approved, quotations are not needed. EDA/HRA staff will follow the purchasing policies but seek approval from their respective boards. Exceptions to Competitive Bidding The following are some of the more common exceptions to the competitive bidding requirements: ▪Contracts less than $175,000 ▪Cooperative purchasing ▪Intergovernmental contracts ▪Real estate contracts ▪Emergency Purchases ▪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 Contractor’s Bond The city is required to obtain a Payment and Performance Bond equal to the contract price for all public work contracts over $175,000. The bond protects the city, subcontractors, and those providing labor and materials. 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 contractor’s bond. Page 68 of 294 Financial Management Policies Page 15 Consideration may be given for the percentage of the contract that is complete in relation to the contractor’s bond and the increase in the contract price. Professional Services Contracts for professional services such as those provided by engineers, attorneys, architects, accountants, and other services requiring technical, scientific, or professional training are exempt from competitive bidding requirements. However, the goals to secure professional services remain the same: 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. The following chart identifies the required procedures for professional services contracts. Pur chas e Le ve l Pur chas e Pr oce s s Re quir e d Appr oving Author ity Note s $0 - $24,999 Qu otes De partm e nt Dire ctor ● At l e ast tw o w ritten qu otes sh all b e obtained w he re the re is mo re than o n e feasib l e so u rce. ● In cases w her e the c i ty has establ ishe d a poo l of qu al i fied c onsu ltants, the con su ltant m ay be selected from the e xi sti ng poo l . $25,000 and Abo ve Cou nci l App roval City Cou nc i l ● Wh e n there i s m ore than on e feasib l e so u rce, the city shal l re qu e st w ri tte n pri ce qu otatio ns i n the f orm o f a Requ est f or Pro posal fr om at l east tw o so u rces. ● Th e qu otes sh all b e su b m itted i n w ri tten format. ● Th e standard c ontract shal l be aw arded to th e ser vi ce p rovi d e r w ith the b e st qu al if i c ati ons an d propo sal fo r th e specif i c project. Total c ost sh all not b e the on l y c onsi d er atio n, bu t m u st be in c l u ded i n the an alysi s o f the proposal s. Note: EDA/HRA staff will follow the purchasing policy but seek approval from their respective boards. Emergency Purchases Under Minnesota’s Emergency Management Act, the 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 defined as: a situation that creates an actual or imminent serious threat to the health and safety of persons, or a situation that has resulted or is likely to result in catastrophic loss to property or the environment, and for which traditional sources of relief and assistance within the affected 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. This policy establishes criteria for who may be issued a credit card and the specific use of the credit card. Page 69 of 294 Financial Management Policies Page 15 Authority for Credit Card Holder City staff 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 manager 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. 3. Any other information necessary to complete the credit card process. The department director is responsible for notifying the finance manager when any changes occur to the cardholder’s status. Types of Purchases Allowed by Credit Card A purchase by credit card must comply with all statutes, rules, and city policies applicable to city purchases. Specifically: 1. All purchases must be made by the authorized card holder. 2. Credit card purchases must comply with the city’s Purchasing Policy guidelines 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 (i.e., while attending conferences/workshops) 4. Uniform purchases. If a city employee makes a purchase by credit card that is inconsistent with this policy and/or is not approved by the Council, the employee is personally liable for 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 Elk River City 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 City 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 City Council authorizes the city administrator or designee to establish administrative Page 70 of 294 Financial Management Policies Page 15 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. Public Purpose Guidelines The following are hereby approved and recognized to serve a public purpose: 1. Training and development programs for Elk River employees when said programs are directly related to the performance of the employees’ job-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 those expenses are necessarily incurred by in connection with 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 of Elk River, 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 those 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 of such is an integral part of an official function, and is deemed 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 its 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. The following items are deemed to meet the Council’s definition of public purpose expenditures in regard to food/meals/refreshments. Page 71 of 294 Financial Management Policies Page 15 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. Allowed when they are 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, 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 are allowed for city employees’ monthly safety meetings 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 is provided by the city for employees and guests at city buildings. 11. Light refreshments for employees who leave employment after 10 or more years of service. Alcoholic Beverages The city shall not purchase or reimburse any employee, councilmember, volunteer, or agent for the purchase of alcoholic beverages. Preventative Health and Employee Recognition Program The City Council recognizes the effort and service performed by employees through a formal Preventative Health and Employee Recognition Program. The Council believes the benefits of attracting, retaining and motivating employees through such program supports a healthy and productive work place. The goal is to provide excellent public 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: a. Annual Employee Recognition. Annually, the City Council will recognize employees for their service in accordance with the Employee Recognition Program Policy. b. 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. Page 72 of 294 Financial Management Policies Page 15 Other Events The city supports other events that are planned and paid for by employees. Examples of such events include holiday gatherings and birthday recognition. 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 City 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 City Council supports the Health Rewards Program, which has been designed to educate employees on fitness/health issues. Also, 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 has determined the city will fund memberships and dues for the city, councilmembers and its employees in organizations of a civic, educational, or governmental nature when the organization’s primary purpose is for the betterment and improvement of municipal government operations. Memberships shall be approved by the department director and city administrator. The Council has determined that it serves a public purpose for the city to donate to the Annual Memorial Day Parade and to purchase candy for distribution at the 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 they are made available to the general public or if they 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 or reimbursed for city logo clothing up to $75 per year. Trinkets or Marketing Items The City Council has determined that it serves a public purpose for the City of Elk River to distribute items of a nominal nature for the purpose of educating or promoting city provided programs. Page 73 of 294 Financial Management Policies Page 15 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. Prohibited Expenditures Unless otherwise contemplated in or by the city’s Employee Recognition Program, the following are examples of some, but not all specifically prohibited expenditures. Alcoholic Beverages Decorations for office space Donations/Contributions Dues to Social Clubs Employee Parties (incl. holiday parties)* Entertainment Flowers Greeting/Sympathy Cards Gifts of any kind Holiday Decorations Lobbying Personal Purchases Pictures, Artwork Décor Prizes/giveaways for public contests Refreshments for Routine Meetings** * This item does not prohibit employee recognition and wells programming **This item does not prohibit refreshments otherwise allowed under the ”Meetings: Food/Meals/refreshments” Section of this policy. Conclusion The Council reserves the right to not fund any expenditure described in this policy. No provision of this policy, or its administration, shall be construed as being a benefit or condition of employment by or for any employee, nor is any provision of this policy to be considered a provision of the City’s Personnel 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. This policy applies to all employees and city officials including temporary, regular full and part-time employees, the mayor, council members, and members of city commissions or committees. Authorization Unless otherwise required by law, the following conditions must be met to qualify for reimbursement: ▪The expenditure must qualify as a public purpose expenditure as determined by state law and the Elk River City Council for which the city may use tax money. ▪Employees must receive supervisor or city administrator approval for reimbursement of expenses. Elected Official Out-of-State Travel The city recognizes that its elected officials may at times 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 by the city: 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: ▪Whether the elected official will be receiving training on issues relevant to the city or to his or her role as the mayor or as a councilmember. ▪Whether the elected official 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. Page 74 of 294 Financial Management Policies Page 15 ▪Whether the elected official will be viewing a city facility or function that is similar in nature to one that is currently operating at, 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. ▪Whether the elected official has been 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. ▪Whether the city has sufficient funding available in the budget to pay the cost of the trip. 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 Council Member 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 for processing. 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. 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 when receipts are not submitted as required. 6. Upon approval, supervisors shall submit the form to Finance for payment. Travel 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. 1. Reimbursement shall be at the standard IRS mileage rate. 2. When an employee travels directly to a conference or seminar site, mileage will be computed from the employee’s home or normal place of work, whichever is less. 3. Travel to and from the worksite (commuting) is not eligible for reimbursement, including evening and weekends. 4. 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. Page 75 of 294 Financial Management Policies Page 15 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. iv. Travel time above that required for air travel, will be on the employee’s personal 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 U.S. General Services Administration (GSA) per diem rates which may be found at www.gsa.gov. c. 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. d. When a trip includes meals that are already paid for by the city (such as through a registration fee for a conference), those meals would be deducted from the per diem daily meal reimbursement amount. e. Reimbursement for alcoholic beverages is prohibited. 3. Meals for Others: Elected officials, the city administrator, department directors, or other designated city employees Page 76 of 294 Financial Management Policies Page 15 serving as representatives of the city 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: ▪The name and official capacity of each person attending must be listed. ▪The public benefit of the meeting must be described. ▪Reimbursement for alcoholic beverages is prohibited. ▪Original itemized receipts must be provided. ▪Must comply with the City’s Public Purpose Expenditure Policy. ▪The amount reimbursed per person will follow the amounts listed in accordance with U.S. General Services Administration (GSA) standard per diem rates (www.gsa.gov) 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. ▪A signed Reimbursement Request with receipts must be submitted within thirty (30) days of travel. ▪The city shall determine the estimated travel expense amount to be advanced. ▪Additional reimbursement due to the employee shall be paid based on the receipts submitted. ▪Any refund due from the employee shall be paid to the city within ten (10) days of submission of the Reimbursement Request. The refund due from the employee shall be based on the actual receipts. ▪All other provisions of this travel policy apply to determine the expenses eligible for reimbursement. Other ▪All reimbursements will be subject to tax as required by IRS regulations. ▪Only actual expenses for the employee shall be submitted and reimbursed. Employees are responsible for all lodging, meal, travel, and other expenses of anyone accompanying the employee. ▪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 provisions of this policy and other applicable laws. OMB Uniform Grant Guidance Internal Controls All grants must comply with the city’s internal controls and policies, in addition to any 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 charged against the grant must be on an actual cost basis or per diem for overnight travel and follow the city’s Expense and Travel Reimbursement Policy. Financial Management and Accounting Records The city’s general ledger will identify all federal awards by CFDA# and title, Federal Award ID and year, name of federal awarding agency, and pass-through entity’s name. The general ledger will be supplemented by the City of Elk River Federal Grant Information Checklist. All disbursements will follow the city’s internal control policies and procedures. In addition, the city’s purchasing policy will be followed to ensure competitively priced purchases are obtained when applicable. Page 77 of 294 Financial Management Policies Page 15 Allowability of 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. 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 city’s authorizing official will sign a certification on the annual and final fiscal reports or vouchers 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 Revised June 17, 2019 Page 78 of 294 Financial Management Policies Page 79 of 294 Table of Contents Purpose .............................................................................................................................................1 Objectives .........................................................................................................................................1 Revenue and Expenditure ..................................................................................................................1 Utilities..............................................................................................................................................1 Cash Management .........................................................................................................................223 Investments ...................................................................................................................................223 Fund Balance .................................................................................................................................657 Debt ............................................................................................................................................8810 Capital Improvements ...............................................................................................................111114 Risk Management ......................................................................................................................131215 Accounting, Auditing, and Financial Reporting...........................................................................131316 Operating Budget......................................................................................................................131316 Purchasing/Credit Card Use .....................................................................................................141317 Public Purchase Expenditures.......................................................................................................3321 Expense and Travel Reimbursement/Elected Official ...................................................................6726 OMB Uniform Grant Guidance ..................................................................................................91029 Page 80 of 294 Financial Management Policies Purpose The City of Elk River is responsible to its citizens to manage its resources wisely and 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 standinglong-standing principles, traditions and practices which have guided the city in the past and have helped maintain financial stability over the past years. These financial policies will be reviewed periodically to determine if changes are necessary. Throughout this policy, every reference to “city” explicitly defines the City of Elk River, Minnesota. Objectives ▪Providing sound principles to guide the decisions of the City Council and management. ▪PTo providinge both short-term and long-term financial stability to city government by ensuring adequate funding for to provide foring and protecting infrastructure needed by the community today and for years to comethe future. ▪Protecting and enhancing the city’s credit rating and prevent default on any municipal obligations. ▪To pProtecting the City Council’s policy-making ability by ensuring that important policy decisions are not constrained by financial problems or emergencies. Revenue and Expenditure The city will: ▪The city will pProvide long-term financial stability through sound short and long termshort- and long- term financial planning. ▪The city will eEstimate its annual revenues and expenditures in a conservative manner so as toto reduce exposure to unforeseen circumstances. ▪The city will pProject revenues and expenditures for the next five years and will update these projectionsprojections for each budget process. ▪Establish user charges and fees at a level related to the cost of providing the service (operating, direct, indirect, and capital) Wwhenever user charges and fees are determined to be appropriate and the direct benefits are identifiable,. the city will establish user charges and fees at a level related to the cost of providing the service (operating, direct, indirect, and capital). Fees will be reviewed annually. ▪To the extent feasible, one-time revenues will be applyied one-time revenues toward one-time expenditures or place themd 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 and garbage collection. The Utilities Commission sets fees and charges for the water and electric utilities. The city will encourage the Utilities Commission to adopt financial management policies similar to the policies stated in this section. ▪The city will strive to set municipal utility users fees for municipal utilities at a financially sustainable level that creates financially sustaining enterprises. Page 81 of 294 Financial Management Policies Page 15 2 ▪The fee structure for municipal 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. ▪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. ▪All utility rates should be reviewed every yearannally to minimize the impacts of rate changes and to insure adequate long-term funding. ▪Elk River Municipal Utilities 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 Council will determine the fund allocation for the proceedsportion of this contribution to be allocated to the General fund, Library and the Equipment Replacement fund. ▪The City Council will determine the chargeback to the Sewer, Storm water, and Garbage Ffunds for administration of the sanitary sewer system, storm water, and garbage collection. ▪Any operating transfer not included in the budget must be approved by the City Council. Page 82 of 294 Financial Management Policies Page 15 3 Cash Management T It is the policy of the city to shall pool cash balances from all funds to maximize investment earnings. Exceptions include legal and specific practical requirements that demand segregation of funds. ▪Funds received are to be deposited into an interest bearinginterest-bearing account with the city’s currently designated official depository by the next business day. ▪Cash on hand is to be kept to the minimum required to meet daily operational needs. Investments It is the policy of tThe Ccity of Elk River to shall invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the entity while conforming to 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 city’s Annual Comprehensive Financial Report and include all city funds with the exception ofexcept for the wWater and Eelectric ffunds which fall under the investment policy adopted by the Elk River Utilities Commission. Investments shall be made with judgment and care under circumstances then prevailing 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. The standard of prudence to be used by investment officials shall be the “prudent person” standard, as defined 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 diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. All investments shall be limited to those permitted by Minnesota Statute §118A. The primary objectives, in priority order, of the City of Elk River’s investment activities shall be: 1.Safety - 2.1.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. 3.Liquidity - 4.2.The investment portfolio will remain sufficiently liquid to enable the city to meet all operating requirementsrequirements, which might be reasonably anticipated. 5.Return on Investment - 6.3.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 accountconsider the constraints on risk and cash flow characteristics of the investment portfolio. Page 83 of 294 Financial Management Policies Page 15 4 7.Maintaining the Public’s Trust 8.4.- 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 municipality’s ability to govern effectively. Authority to manage the City of Elk River’s investment program is derived from Minnesota Statutes §118A. Management responsibility for the investment program is hereby delegated to the Finance DirectorManager. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Finance DirectorManager. The Finance Director Manager 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 Manager 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 of Elk River’s portfolio. The Finance Director Manager will maintain a list of financial institutions authorized to provide investment services. In addition, and a list will be maintained of approved security brokerbrokers/dealers selected by credit worthiness, who maintain an office in the State of Minnesota. These may include “primary dealers” or regional dealers 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 fForm on file with the Finance Director Division 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: A. Repurchase Agreements Repurchase agreements consisting of collateral allowable in Section 118A.04. B. United States Securities 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. High risk mortgage-backed securities are as follows: 1. interest-only or principal-only mortgage-backed securities; or, 2. any mortgage derivative security that: a. has an expected average life greater than ten 10 years; b. has an expected average life that: i. will 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 ii. will 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 iii. will have an estimated change in price of more than 17 percent% as the result of Page 84 of 294 Financial Management Policies Page 15 5 an immediate and sustained parallel shift in the yield curve of plus or minus 300 basis points. C. Minnesota Joint Powers Investment Trust Agreements or contracts for shares of a Minnesota Jjoint pPowers iInvestment tTrust 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 under the Federal Securities Act of 1933, as long as the investment company’s fund receives the highest 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. D. State and Local Securities State and local government obligations as follows: 1. any security which is a general obligation of any state or local government with taxing powers which is rated “A” or better by a national bond rating service; and 2. any security which is a revenue obligation of any state or local government with taxing powers which is rated “AA” or better by a national bond rating service; and, 3. a general obligation of the Minnesota Housing Finance Agency which is a moral obligation of the State of Minnesota and is rated “A” or better by a national bond rating service. E. 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. F.Time Deposits Time deposits that are fully insured by the Federal Deposit Insurance Corporation. Bankers acceptances of United States banks. G. 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 5five 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 Ccity of Elk River will follow Minnesota statutes regarding the use of collateral requirements. In order toTo anticipate market changes and provide a level of security for all funds, the collateralization level will be at least ten 10 percent 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 ofmore than available federal deposit insurance, the government entity city shall require the financial institution to furnish collateral security. Page 85 of 294 Financial Management Policies Page 15 6 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 of Elk River. Any collateral pledged shall be accompanied by a written assignment to the government entitycity from the financial institution. The written assignment shall recite that, upon default, the financial institution shall release to the government entity 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 government entity 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 United States 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; provided that the government entity’s ownership of all securities is evidenced by written acknowledgments identifying the securities by the names of the issuers, maturity dates, interest rates, CUSIP number, or other distinguishing marks. 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 shall be transferred to the city’s custodian. The Ccity of Elk River will diversify its investments by security type and institution. In establishing specific diversification strategies, the following general policies and constraints shall apply: A. 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. B. The Finance Director Manager 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. C. The investment portfolio will be designed to obtain a market average rate of return during budgetary and economic cycles, taking into account the City of Elk River’s investment risk constraints and cash flow needs. D. The Finance Director Manager shall prepare an investment report directed to the City Council on a quarterly basis including: 1. Listing of individual securities held at the end of the reporting period. Page 86 of 294 Financial Management Policies Page 15 7 2. Listing of investments by maturity date. 3. Percentage of the total portfolio which each type of investment represents. 4. Market to market analysis. 5. 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 giving the city sufficient funds to meet contingency and cash-flow timing needs. In establishing an appropriate fund balance, the city needs to consider the demands of cash flow, need for emergency reserves, ability to manage fluctuations of major revenue sources, credit rating and long-term fiscal health. A. Classification of Fund Balance/Procedures 1.Nonspendable Amounts that are not in a spendable form or are required to be maintained intact. Examples are inventory or prepaid items. 2.Restricted Amounts subject to externally enforceable legal restrictions. Examples include grants, tax increment and bond proceeds. 3.Unrestricted The total of committed fund balance, assigned fund balance, and unassigned fund balance: ▪Committed fund balance – amounts that can be used only for the specific purposes determined by a formal action of the government’s highest level of decision-making authority. Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally. ▪Assigned fund balance – amounts a government intends to use for a specific purpose; intent can be expressed by the government body or by an official or body to which the governing body delegates the authority. ▪Unassigned fund balance – residual amounts that are available for any purpose in the general fund. The General Ffund 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. B. General Fund ▪The city will maintain an unassigned General Ffund balance of not less than 40-45% of budgeted operating expenditures; however, this need could fluctuate with each year’s budget objectives. ▪Annual proposed General Ffund budgets shall include this benchmark policy. Council shall review the amounts in fund balance in conjunction with the annual budget approval, andapproval and make adjustmentsadjust as necessary to meet expected cash-flow needs. ▪In the event the unassigned General Ffund 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. ▪The City Council may consider appropriating (for authorized purposes) year-end fund balance in excess ofmore than the policy level or increasing the minimum fund balance. An example of preferred use of excess fund balance would be for one-time expenditures, such as: Page 87 of 294 Financial Management Policies Page 15 8 1.to fund aAn expenditure of significant long-term benefit or legacy to the community. 2.to fund aA one-time (non-recurring) expenditure or grant match opportunity. 3.to provide cCatch-up funding or long-term obligations not previously recognized. 4.to fund aA one-time unplanned revenue shortfall. 5.to fund aAn unplanned expenditure due to an emergency or disaster. 6.to rRetirement of existing debt. 7.tTo fund policy shifts by other governmental entities having a negative impact on the city. 8.tTo moderate property taxes. ▪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. ▪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. ▪The City Council authorizes the finance manager or Finance Director and/or Ccity Aadministrator to assign fund balance that reflects the city’s intended use of those funds. ▪When both restricted and unrestricted resources are available for use, it is the city’s policy to first 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 city’s policy to use resources in the following order;order: 1) committed 2) assigned and 3) unassigned. C. Enterprise Funds The city will maintain reserves in Enterprise fFunds 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 quantified in a written plan for the fund which shall be included in the city’s annual Capital Improvement Plan (CIP). The city will maintain a reserve balance at a level which takes into consideration the following: ▪Cash Flow o Six months of projected operation expenditures (Sewer, Storm Water and Garbage). o One year of projected operation expenditures (Liquor). o Debt service obligations – 100% of next year’s principal and interest. ▪Contingency o Potentially volatile revenue sources. o Unforeseen natural or man-made disasters and emergencies. ▪Savings o Planned one-time expenditures and grant matching opportunitiesopportunities. o Impact of significant capital projects identified in a long-term planplan. ▪Other Factors o Impact on city’s bond rating. o Requirements by external funding source. D. Special Revenue Funds Page 88 of 294 Financial Management Policies Page 15 9 The city will maintain reserves in the Special Revenue Ffunds at levels sufficient to provide working capital for current expenditure needs plus an amount that is estimated to be needed 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 city’s annual CIP. E. Debt Service Funds The city will maintain reserves in the Debt Service fFunds at levels sufficient to provide working capital for current expenditure needs plus an amount that is estimated to be needed to meet legal restrictions and requirements by external funding sources. F. Capital Project Funds The city will maintain reserves in the Capital Project fFunds at levels sufficient to provide working capital for current expenditure needs plus an amount that is estimated to be needed 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 city’s annual CIP. G. Monitoring and Reporting The Finance Director Manager shall annually review with the City Council the status of the fund balances with this policy and present it to the City Council in conjunction with the development of the annual budget and/or other long-term financial planning documents such as the CIP. The city will annually review the adequacy of the reserve balances. The city will periodically review updates to rating agency methodologies and medians to make sure that the reserve policy is consistent to ensure maintaining its existing rating or that it positions itself for an upgrade. Debt The Ccity of Elk River has chosen, by policy, to guide its issuance of debt by following the guidelines listed below. These practices were identified through examination of materials from state statutes, bond rating agencies, and the Government Finance Officers Association (GFOA). This policy can be amended in the future by the City Council, butCouncil but is consistent with general municipal practices at the time of its adoption. In accordance with the authorities cited in the background section, the Ccity of Elk River will use the following policies in determining when and how to use debt for financing capital and equipment needs. A. Debt Limits 1. Legal Limits: a. Minnesota Statutes, Section 475 prescribes the statutory debt limit that outstanding principal of debt cannot exceed 3% of taxable market value. This limitation applies only to debt that is wholly tax-supported. The type of debt included is either general obligation debt of any size bond issue (G.O.) or lLease rRevenue bBond iIssues that were over $1,000,000 at the time of issuance. However, there are also several other debt types of debt that do not count Page 89 of 294 Financial Management Policies Page 15 10 against the limit. G.O. tTax Iincrement, G.O. aAbatement G.O. sSpecial aAssessment, G.O. uUtility rRevenue, and most HRA or EDA-issued debt is considered to have a separate revenue source other than just taxes and so are excluded from the legal debt limit calculation. HRA and EDA pPublic pProject rRevenue bBonds or lLease rRevenue bBonds with fFinancing lLease aAgreement with a city or county do count against the statutory debt limit. b. Local ordinances do not limit the city’s ability to issue debt. 2. Policy Limits: a.Uses of Debt: Debt will only be used only for capital costs. The city will not utilize debt for cash flow borrowing, even though this it is allowed by state statutes. b. CIP and Financial Planning: The city’s cCapital iImprovement pPlan shall contain debt assumptions which match this policy and requires a commitment to long- range financial planning which looks at multiple years of capital and debt needs. c. Tax Increment Bonds: The city shall use G.O. tTax iIncrement bBonds only when the development merits special consideration. 3. Financial Limits: a. Bond issues may require a special debt levy. The city hereby adopts a policy to shall limit the amount of the city’s property tax levy dedicated to debt service (principal and interest plus 5% for G.O. bBonds ) to less than 20% of the total tax levy. Unlike rating agencies, the city’s definition of tax levy does not include special assessments, tax abatements, or tax increments. b. Pure revenue bond debt for the city 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 city’s rating agencies. B. Use of Variable Rate Debt and Derivatives 1. Variable Rate Debt. The city shall use variable rate debt only if total principal and interest of the debt constitutes less than 20% of the city’s total debt payments and only 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). 2. Derivatives. The city will not use derivative based debt. C. Debt Structuring Practices 1. Term: State law limits general obligation debt to 30 years in most circumstances and . Tthe city shall not exceed 25 years in term of debt. 2. Term for Equipment: The city has a goal of paying for all capital equipment with a useful life of five years or less from cash reserves or annual operating budgets. State law does allows cities to issue debt (known as eEquipment cCertificates or cCapital nNotes) with a term of ten 10 years or the useful life of the equipment if it is at least 10 years. The city would prefer, 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 ten 10 years. 3. The city’s collective debt goal shall be to amortize at least 50% of its principal within 10 years. Page 90 of 294 Financial Management Policies Page 15 11 4. The city shall usually issue debt with level principal and interest payments; or to align with a specific revenue stream. 5. 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. D. Debt Issuance Practices 1. Rating Agencies: The city utilizes a rating agency for all of its debt issuance of more than $1M or longer than three3 years in term. 2. Method of Sale: 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 2two bids. 3. Refunding: a. Advance refunding bonds shall not be utilized unless present value savings of 4% to 5% of refunded principal is achieved and unless the call date is within four4 years. The sThe state law minimum is 3% of refunded principal. Bonds shall not be advance refunded if there is a reasonable chance that revenues will be sufficient to pre-pay the debt at the call date. b. 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. c. Special Aassessment or rRevenue debt will not be refunded unless the Ffinance Director manager determines that special assessments or other sufficient revenues will not be collected soon enough to pay off the debt fully at that call date. 4. Professional Services. The city shall use an outside bond attorney and an independent financial advisor to structure the sale. E. Debt Management Practices 1. Investment of bond proceeds. The city shall invest bond proceeds in a capital project fund. 2. Disclosure: The city shall comply 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 city’s annual financial report. 3. Arbitrage Rebate: The city shall complete an arbitrage rebate report for each issue no less than every five years after its date of issuance. 4. Communication: The city will maintain 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. F. Post issuance debt compliance policy The City Council (the “Council”) of the City of Elk River, Minnesota (the “City”) has chosen, by policy, to take steps to help city shall ensure that all obligations will be are in compliance with all applicable state and federal regulations. This policy may be amended, as necessary, in the future. Background The Internal Revenue Service (IRS) is responsible for enforcing compliance with the Internal Revenue Code (the “Code”) and related regulations governing certain obligations (for example: 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. Page 91 of 294 Financial Management Policies Page 15 12 Post-Issuance Debt Compliance Policy Objective The Ccity desires to monitor these obligations to ensure compliance with the IRS Code and related regulations governing such obligations. To help ensure compliance, the Ccity has developed the a following policy (the “Post-Issuance Debt Compliance Policy.”). Thise Post-Issuance Debt Compliance poPolicy 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 Ffinance Dmirector anager of the City is designated as the Ccity’s agent who is responsible for post-issuance compliance of these obligations. However, to the extent obligations are issued for municipal utility purposes, the Finance Director/ERMU Ofinance ffice Mmanager of Elk River Municipal Utilities assumes the duties of post-issuance debt compliance as described in this Post- Issuance Debt Compliance Ppolicy instead of the Finance Director. The fFinance Director manager shall assemble all relevant documentation, records and activities required to ensure post-issuance debt compliance as further detailed in corresponding procedures (the “Post-Issuance Debt Compliance Procedures”). At a minimum, the Post-Issuance Debt Compliance Procedures for each qualifying obligation will address the following: 1. General post-issuance compliance; 2. Proper and timely use of bond proceeds and bond-financed property; 3. Arbitrage yield restriction and rebate; 4. Timely filings and other general requirements; 5. Additional undertakings or activities that support points 1 through 4 above; 6. Other requirements that become necessary in the future. The Ffinance Director manager shall apply the Post-Issuance Debt Compliance Procedures to each qualifying obligation and maintain a record of the results. F Further, the Ffinance Director manager will ensure that the Post-Issuance Debt Compliance Policy and Procedures are updated on a regular and as needed basis. The fFinance Dmanagerirector or any other individuals responsible for assisting the Ffinance Director manager in maintaining records needed to ensure post-issuance debt compliance, are authorized to expend funds as needed to attend training or secure use of other educational resources for ensuring compliance such as consulting, publications, and compliance assistance. Most of the provisions of this Post-Issuance Debt Compliance Ppolicy are not applicable to governmental bonds, the interest on which is includable in gross income for federal income tax purposes. On the other hand, if an issue of taxable governmental bonds 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 of taxable governmental bonds may be refunded, in whole or in part, with the proceeds of an issue of tax-exempt governmental bonds then, for purposes of this Post-Issuance Debt Compliance Ppolicy, the Ffinance Director manager shall treat the issue of taxable governmental bonds as if such issue were an issue of tax- exempt governmental bonds and shall carry out and comply with the requirements of this Post- Issuance Debt Compliance Ppolicy with respect to such taxable governmental bonds. The Ffinance Page 92 of 294 Financial Management Policies Page 15 13 Directormanager 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 cCity issues bonds to finance a facility to be owned by the Ccity but which may be used, in whole or in substantial part, by a nongovernmental organization that is exempt from federal income taxation under Section 501(a) of the Code as a result of the application of Section 501(c)(3) of the Code (the “501(c)(3) Organization”), the Ccity may elect to issue the bonds as “qualified 501(c)(3) bonds” the interest on which is 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 Ffinance Directormanager, for purposes of this Post- Issuance Debt Compliance Ppolicy, the Ffinance Director manager 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 Post-Issuance Debt Compliance Ppolicy with respect to such qualified 501(c)(3) bonds. Alternatively, in cases where compliance activities are reasonably within the control of the relevant 501(c)(3) Organization, the Ffinance Directormanager may determine that all or some portion of compliance responsibilities described in this Post-Issuance Debt Compliance Ppolicy shall be assigned to the relevant organization. The Ccity 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 “cConduit bBonds”). The Ccity 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 Post-Issuance Debt Compliance Ppolicy, including provisions for reporting to the Ccity. Capital Improvements The city will maintain buildings, infrastructure, utilities, parks, facilities, and other assets in a manner that protects the investment and minimizes future maintenance and replacement costs. The Ffinance Director manager will annually prepare and submit to the City Council a Capital Improvements Plan (CIP) for the next 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. 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 will 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 in order 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 Page 93 of 294 Financial Management Policies Page 15 14 intervals, the city staff shall evaluate the amount of all capital charges and recommend necessary changes to the City Council and the Utilities Commission. The city will maintain an equipment acquisition and replacement program. The city and 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 Sstate -imposed levy limits may create the need incur debt for equipment acquisition. The city will 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 will 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 pPavement mManagement fFund and other maintenance activities will be financed through the General fFund. The city will prepare an on-going plan for the reconstruction of all city streets and . The city 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 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 The city will maintain a Risk Management Program that will to minimize the impact of legal liabilities, natural disasters or other emergencies through the following acitivies: ▪Loss Prevention. Prevent negative occurrences. Page 94 of 294 Financial Management Policies Page 15 15 ▪Loss Control. Reduce or mitigate expenses of a negative occurrence. ▪Loss Financing. Provide a means to finance losses. ▪Loss Information Management. Collect and analyze relevant data to make prudent loss prevention, loss control and loss financing decisions. The city will maintain an active Safety Committee comprised of city employees. The city committee will periodically conduct educational safety and risk avoidance programs, through its Safety Committee and with the participation of its insurers, within its various departments for all employees. The city will maintain the highest deductible amount, considering the relationship between cost and the city’s ability to sustain the loss. Accounting, Auditing, and Financial Reporting The city will establish and maintain the highest standard of accounting practices, in conformity with Generally Accepted Accounting Principles (GAAP) including the following:. ▪The city will Aattempt to maintain the GFOA Certificate of Excelleance in Financial Reporting. ▪The city will Aarrange for an annual audit of all funds and account groups by and independent certified public accountants or by the Office of the State Auditor’s Office. ▪Provide Regular monthly summary reports present a summary of financial activity by major type of funds as compared to budget. ▪ Department dDirectors will shall review departmental budgets 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 to ensure budgetary compliance and report all deficiencies immediately to the Ccity Aadministrator. Operating Budget ▪The cCity Aadministrator shall annually propose a balanced , when submitting the proposed budget to the City Council, will submit a balanced budget in which appropriations will do not exceed the total of the estimated General Ffund revenue and the fund balance available after applying the General Fund Reserve Policy. ▪The city will annually appropriate a contingency appropriation in the General fund budget, not to exceed .5% of the total budget, to provide for unanticipated expenditures of a non-recurring nature. ▪In the event there is an unanticipated shortfall of revenues in a current year budget, the fFinance Director manager may recommend the use of a portion of the General fFund unreserved fund balance, not to exceed the amount of available cash or reserved for working capital or already appropriated to the General fund current budget.. ▪The budget will provide for adequate maintenance of buildings and equipment, and for their orderly replacement. ▪The Ffinance Director manager will prepare regular monthly reports comparing actual revenues and expenditures to the budgeted amount. All sSignificant variances will be summarized in a written reporting to the Ccity Aadministrator and City Council. ▪The operating budget will describe the major goals to be achieved and the services and programs to be delivered for the level of funding provided. ▪Before adding a new program or service, the city will consider the use a cost- benefit analysis of using outside contractors versus in-house provided services. ▪The city will attempt to maintain the GFOA Distinquished Budget Presentation Award. ▪The city Assests will not sell be sold assets or use one-time accounting principle changes used to balance the budget for any fund. Page 95 of 294 Financial Management Policies Page 15 16 ▪The city Public input will be encouraged and public hearings will provide ample time and opportunity for public input held into its for budget setting deliberations each year, including any required public hearings. ▪Department heads directors are will be responsible for administration of their departmental operating budget. Requests for bBudget adjustments must be submitted and approved before any program incurs cost overruns occurfor the annual budget period. ▪Department directors may propose The budget shall be adjusted as needed to recognize significant deviations from original budget expectations. The council shall consider budget amendments each December. 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. ▪Aadministrative 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. These lLine item budget changes shall exclude personal service and capital outlay categories. Administrative budget admendments must be requested in writing and approved by the Ccity Aadministrator and fFinance Dmangerirector. Purchasing The goal of the Purchasing Policy is to ensure all purchases are consistent with Minnesota statutes, to establish internal controls, to ensure appropriate documentation, and to ensure the best value for the public money. Purchasing Authority Purchasing and budgetary control is the responsibility of each The department/division director manager. for which the service, equipment, or supplies are ordered must recommend the order be placed. The department/division director manager 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 DepartmentDivision. Final approval of all purchases must be evidenced by the department/division director’s manager’s 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, cCity Ccode, or statutory authority for the purpose of purchasing city goods are identified as follows: Page 96 of 294 Financial Management Policies Page 15 17 Pur chas e Le ve l Pur chas e Pr oce s s Re quir e d Appr oving Aut hor it y Note s Le ss th an $5,000 Departme n t Di recto r o r Design e e ● Wri tte n qu ote s ar e no t re qu ired, bu t ve rbal qu o te s are r e com me nde d. ● At the poi nt of sale , the rece ipt m u st be si gne d b y the i nd i vid u al p u rchasing the ite m . ● Th e re cei p t/i nvoic e m u st also be si gne d and c o de d b y th e d e p artm ent d i recto r $5,000 - $24,999 Pu rc h ase Ord er/ Qu ote s Departme n t Di rec to r ● Whe n there is m ore than on e fe asi b l e sou rce o f su ppl y for an i te m , th e c i ty sh al l r equ est w r i tten pric e qu otations f ro m at le ast tw o sou rce s an d shal l pl ac e th e ord er at the low est p ri ce qu o te d, provi d e d the i te m s are of co m p arable qu al i ty . ● Q u o te i n f ormati on sh o u l d b e attached to the p u rc h ase o r de r . $25,000 - $49,999 P.O ./Qu ote s City Ad m i ni strator ● Whe n there is m ore than on e fe asi b l e sou rce o f su ppl y for an i te m , th e c i ty sh al l r equ est w r i tten pric e qu otations f ro m at le ast tw o sou rce s an d shal l pl ac e th e ord er at the low est p ri ce qu o te d, provi d e d the i te m s are of co m p arable qu al i ty . ● Q u o te i n f ormati on sh o u l d b e attached to the p u rc h ase o r de r . $50,000 - $100,000 Co u nc i l Appro val Ci ty Co u nc i l ● Ch eck the avail ab i li ty o f an item th r ou gh a coop erative pu rchasing p rogram b e f o re ob taini ng qu ote s. ● Whe n there is m ore than on e fe asi b l e sou rce o f su ppl y for an i te m , th e c i ty sh al l r equ est w r i tten pric e qu otations f ro m at le ast tw o sou rce s an d shal l pl ac e th e ord er at the low est p ri ce qu o te d, provi d e d the i te m s are of co m p arable qu al i ty . Abo ve $100,000 Bi d s/Coop erati ve Agre eme nts Ci ty Co u nc i l ● Th ere are three pro cesses avai lable that w o u l d satisfy statu tory r e qu ire m ents for pu rchases abo ve $100,000. (See "Pu rc hases Exc eed ing $100,000" se c ti on be low f o r m ore de tail s.) Notes: If a cooperative purchasing agreement approved, quotations are not needed. EDA/HRA staff will follow the purchasing policies but seek approval from their respective boards. 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: Page 97 of 294 Financial Management Policies Page 15 18 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 $17500,000 ▪Cooperative purchasing organizations ▪Intergovernmental contracts ▪Noncompetitive supplies and equipment ▪Real estate purchasescontracts ▪Emergency Purchases ▪ ▪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 Contractor’s Bond The city is required to obtain both a Ppayment and pPerformance bBond equal to the contract price for all public work contracts over $17500,000. The bond. Payment and performance bonds protects the city, as well as subcontractors, and persons those 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 contractor’s bond. Consideration may be given for the percentage of the contract that is complete in relation to the contractor’s bond and the increase in the contract price. Professional Services Contracts for professional services such as those provided by engineers, attorneys, architects, accountants, and other services requiring technical, scientific, or professional training are exempt from competitive bidding requirements. However, the goals to secure professional services remain the same: 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. The following chart identifies the required procedures for professional services contracts. Page 98 of 294 Financial Management Policies Page 15 2 Pur chas e Le ve l Pur chas e Pr oce s s Re quir e d Appr oving Author ity Note s $0 - $24,999 Qu otes De partm e nt Dire ctor ● At l e ast tw o w ritten qu otes sh all b e obtained w he re the re is mo re than o n e feasib l e so u rce. ● In cases w her e the c i ty has establ ishe d a poo l of qu al i fied c onsu ltants, the con su ltant m ay be selected from the e xi sti ng poo l . $25,000 and Abo ve Cou nci l App roval City Cou nc i l ● Wh e n there i s m ore than on e feasib l e so u rce, the city shal l re qu e st w ri tte n pri ce qu otatio ns i n the f orm o f a Requ est f or Pro posal fr om at l east tw o so u rces. ● Th e qu otes sh all b e su b m itted i n w ri tten format. ● Th e standard c ontract shal l be aw arded to th e ser vi ce p rovi d e r w ith the b e st qu al if i c ati ons an d propo sal fo r th e specif i c project. Total c ost sh all not b e the on l y c onsi d er atio n, bu t m u st be in c l u ded i n the an alysi s o f the proposal s. Note: EDA/HRA staff will follow the purchasing policy but seek approval from their respective boards. Emergency Purchases Under Minnesota’s Emergency Management Act, the 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 defined as: 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. A purpose of tThis policy is to establishes criteria for who may be issued a credit card and the specific use of the credit card. Authority for Credit Card Holder City staff 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 Ffinance Director manager 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. 3. Any other information necessary to complete the credit card process. Page 99 of 294 Financial Management Policies Page 15 3 The department director is responsible for notifying the fFinance Director manager when any changes occur to the cardholder’s status. Types of Purchases Allowed by Credit Card A purchase by credit card must comply with all statutes, rules, and city policies applicable to city purchases. Specifically: 1. All purchases must be made by the authorized card holder. 2.All cCredit card purchases must comply with the city’s Purchasing Policy guidelines 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 (i.e., while attending conferences/workshops) 4. Uniform purchases. If a city employee makes a purchase by credit card that is inconsistent with this policy and/or is not approved by the Council, the employee is personally liable for the amount offor 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 Elk River City 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 Elk River City 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 City Council authorizes the Ccity Aadministrator or designee, elected officials and appointed department heads to establish administrative policies and procedures that are consistent with these guidelines and the adopted Ccity 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. Page 100 of 294 Financial Management Policies Page 15 4 Public Purpose Guidelines The following are hereby approved and recognized to serve a public purpose: 1. Training and development programs for Elk River employees serve a public purpose when those training and development said programs are directly related to the performance of the employees’ job-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, serves a public purpose when those expenses are necessarily incurred by Elk River 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 Elk River the city has responsibility. 3. Appropriate safety and health programs for Elk River employees serve a public purpose because they result in healthier and more productive employees and reduce certain costs to the city and the taxpayers of Elk River, including various costs associated with workers compensation and disability benefit claims, insurance premiums, and lost time from employee absences. 4.Public expenditures for appropriate Elk River eEmployee and volunteer recognition programs serve a public purpose because formally recognizing employees and volunteers those who make significant contributions and demonstrate their commitment during the performance of their duties results in higher morale and productivity among all Elk River city employees and volunteers, and therefore helps the city to fulfill its responsibilities efficiently and more cost effectively. 5.Public expenditures for fFood and refreshments associated with official Elk River city functions serve a public purpose when the provision of food or refreshments such is an integral part of an official Elk River functionfunction, and the provision of food or refreshment is deemed necessary to ensure meaningful participation by the participants. 6.Public expenditures fFor appropriate community and customer outreach and similar activities serve a public purpose when those expenditures are necessary for Elk River to ensure the efficient operation of its 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 Every City of Elk River expenditures must 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 Page 101 of 294 Financial Management Policies Page 15 5 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. The following items are deemed to meet the Council’s definition of public purpose expenditures in regards to food/meals/refreshments. 1.CAllowed at city meetings and events that have for the purpose of discussing city issues. These meetings would normally have a pre-planned agenda and would involve predominately non-city employees. 2. Allowed when they ares part of the structured agenda for an offsite conference, workshop, seminar, training session, or meeting in which the cCity Aadministrator or a department director has authorized the employee to attend for training and development purposes. This does not include routine staff meetings. 3. Allowed when they are 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, may also be allowed when approved by the Ccity Aadministrator and when attendance is deemed to meet the public purpose guidelines for community or customer outreach and marketing of the city. 4.Allowed dDuring non-routine, official meetings of the City Council, cCouncil cCommittees, advisory boards/commissions, and taskforces. 5.Allowed wWhere 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.Allowed for At department- sponsored meetings, conferences, or workshops where the majority of invited participants are not city employees. 7. Cookies and coffee are allowed for city employees’ monthly safety meetings 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.A dDinner meals to be allowed for staff during performance of election related duties on Election Day. 10. Coffee is provided by the city for employees and guests at city buildings. 11. Light refreshments may be provided for employees that who separate leave employment after 10 or more years of service. Alcoholic Beverages The Ccity of Elk River will shall not purchase or reimburse any employee, councilmember, volunteer, or agent for the purchase of alcoholic beverages. Preventative Health and Employee Recognition Program The City of Elk River City Council recognizes the hard work effort and service performed by the employees of the City of Elk River through a formal Preventative Health and Employee Recognition Program. The City Council believes the benefits of attracting, retaining and motivating employees through an Preventative Health and Employee Recognition Psuch program supports a healthy and Page 102 of 294 Financial Management Policies Page 15 6 productive work place.employee job satisfaction, which in turn impacts cooperation and productivity. The result goal is to provide excellent public and customer service to better serve the interests of the citizens 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: a. Annual Employee Recognition Celebration. Annually, the cCity Council will sponsor an Employee Recognition Celebration for recognize City employees according for their service in accordance with to the Employee Recognition Program Policy. b. 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 of Elk River City Council recognizes the hard work and service performed by the vvolunteers of the City of Elk River through a formal Volunteer Recognition Program. This Pprogram promotes teamwork and coordination amongst the City Council, staff, board/commission members, Ppolice Rreserves, and parks and recreation volunteers. The Program will include: a. 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. b. 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. 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 Ccity Aadministrator or department director to assure the delivery of quality emergency response service. Employee Training The City 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. Page 103 of 294 Financial Management Policies Page 15 7 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 City Council supports the Health Rewards Program, which has been designed to educate employees on fitness/health issues. Also, in an effort toto 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,p and Dues and Donations The City Council has determined that the city will fund memberships and dues for the city, cCouncilmembers and its employees in professional organizations of a civic, educational, or governmental nature and city social and community organizations when the organization’s primary purpose is to promote, advertise, improve or develop the city's resources and advantages and not personal interest or gainfor the betterment and improvement of municipal government operations. Said mMemberships shall be approved by the department director and Ccity Aadministrator. Membership in the Local Chamber of Commerce The City Council has determined that 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. Donations to Organizations The City Council has determined that it serves a public purpose for the ciCity of Elk River to donate to the Annual Independence Day Celebration wherein the event promotes the resources and advantages of the CitycityMemorial Day Parade and . The City Council has determined that it serves a public purpose for the City of Elk River to purchase candy for distribution during at 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 theyse items are made available to the general public or if theyse items are determined by the cCity Aadministrator to be important to the successful involvement of employees in special city sponsored or supported events (i.e. Nightte tTo Unite, etc.). For purposes of city identification to the public, city councilmembers may be provided with or reimbursed for city logo clothing up to $75 per year. Trinkets or Marketing Items The City Council has determined that it serves a public purpose for the City of Elk River 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 Page 104 of 294 Financial Management Policies Page 15 8 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. Prohibited Expenditures Unless otherwise contemplated in or by the city’s Employee Recognition Program, the following are examples of some, but not all specifically prohibited expenditures. Alcoholic Beverages Decorations for office space Donations/Contributions Dues to Social Clubs Employee Parties (incl. holiday parties)* Entertainment Flowers Greeting/Sympathy Cards Gifts of any kind Holiday Decorations Lobbying Personal Purchases Pictures, Artwork Décor Prizes/giveaways for public contests Refreshments for Routine Meetings** * This item does not prohibit employee recognition and wells programming **This item does not prohibit refreshments otherwise allowed under the ”Meetings: Food/Meals/refreshments” Section of this policy. Conclusion The City 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 being a benefit or condition of employment by or for any employee of the city, nor is any provision of this policy to be considered a provision of the City’s Personnel Policy. The Elk River City Council has determined that the above expenditures are valid expenditures and serve a public purpose. 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. This policy applies to all employees and city officials including temporary, regular full and part-time employees, the mayor, council members, and members of city commissions or committees. Authorization Unless otherwise required by law, the following conditions must be met in order toto qualify for reimbursement: ▪The expenditure must qualify as a public purpose expenditure as determined by state law and the Elk River City Council for which the city may use tax money. ▪Employees must receive supervisor or Ccity Aadministrator approval for reimbursement of expenses. Elected Official Out-of-State Travel Page 105 of 294 Financial Management Policies Page 15 9 The cCity of Elk River recognizes that its eElected Oofficials may at times receive value from traveling out of the state for workshops, conferences, eventsevents, and other assignments. This policy sets forth the conditions under which out-of-state travel will be reimbursed by the city: 1. The event, workshop, conferenceconference, 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: ▪Whether the eElected Oofficial will be receiving training on issues relevant to the city or to his or her role as the Mayormayor or as a cCouncil Mmember. ▪Whether the Eelected Oofficial 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. ▪Whether the Eelected Oofficial will be viewing a city facility or function that is similar in nature to one that is currently operating at, 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. ▪Whether the eElected Oofficial has been 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. ▪Whether the city has sufficient funding available in the budget to pay the cost of the trip. 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 Council Member 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 Eelected Oofficial 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 eElected Oofficial. 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 criteriacriteria, 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 for processing. 2. The cCity Aadministrator may, under unique circumstances, approve reimbursement for items submitted after the 60 day60-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. 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 when receipts are not submitted as required. 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 Page 106 of 294 Financial Management Policies Page 15 10 employment agreement prevails. Carpooling should be used whenever feasible. 1.2.Reimbursement shall be at the standard IRS mileage rate. 2.3.When an employee travels directly to a conference or seminar site, mileage will be computed from the employee’s home or normal place of work, whichever is less. 3.4.Travel to and from the worksite (commuting) is not eligible for reimbursement, including evening and weekends. 4.5.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 tripround-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. iv. Travel time above that required for air travel, will be on the employee’s personal time. Lodging 1. The cCity 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. Page 107 of 294 Financial Management Policies Page 15 11 b. Expenses for meals, including gratuity, will be reimbursed in accordance with the U.S. General Services Administration (GSA) per diem rates which may be found at www.gsa.gov. c. 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. d. When a trip includes meals that are already paid for by the city (such as through a registration fee for a conference), those meals would be deducted from the per diem daily meal reimbursement amount. e. Reimbursement for alcoholic beverages is prohibited. 3. Meals for Others: Elected officials, the city administrator, department directors, or other designated city employees serving as representatives of the city 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: ▪The name and official capacity of each person attending must be listed. ▪The public benefit of the meeting must be described. ▪Reimbursement for alcoholic beverages is prohibited. ▪Original itemized receipts must be provided. ▪Must comply with the City’s Public Purpose Expenditure Policy. ▪The amount reimbursed per person will follow the amounts listed in accordance with U.S. General Services Administration (GSA) standard per diem rates (www.gsa.gov) 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. ▪A signed Reimbursement Request with receipts must be submitted within thirty (30) days of travel. ▪The city shall determine the estimated travel expense amount to be advanced. ▪Any additional reimbursement due to the employee shall be paid by the city based on the receipts submitted. ▪Any refund due from the employee shall be paid to the city within ten (10) days of submission of the Reimbursement Request. The refund due from the employee shall be based on the actual receipts submitted. ▪All other provisions of this travel policy apply to determine the expenses eligible for reimbursement. Other ▪All reimbursements will be subject to tax as required by IRS regulations. ▪Only actual expenses for the employee shall be submitted and reimbursed. The eEmployees isare responsible for all lodging, meal, travel, and other expenses of anyone accompanying the employee. ▪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 Page 108 of 294 Financial Management Policies Page 15 12 All grants must comply with the cCity’s internal controls and policies, in addition to any 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 be on an actual cost basis or per diem for overnight travel must and follow the cCity’s eExpense and tTravel rReimbursement Ppolicy 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 Ccity’s general ledger will identify all federal awards by CFDA# and title, Federal Award ID and year, name of federal awarding agency, and pass-through entity’s name. The general ledger will be supplemented by the City of Elk River Federal Grant Information Checklist. All disbursements will follow the city’s internal control policies and procedures. In addition, the city’s purchasing policy will be followed to ensure competitively priced purchases are obtained when applicable. Allowability of costs will be determined by grant agreements and the department director will be responsible to ensure costs are approved according to grant agreements. The Ccity 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. Procurement The city Ppurchasing pPolicy 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 Page 109 of 294 Financial Management Policies Page 15 13 The cCity’s authorizing official will sign a certification on the annual and final fiscal reports or vouchers 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). Page 110 of 294 Financial Management Policies Page 15 14 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 Revised June 17, 2019 Page 111 of 294