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HomeMy WebLinkAbout2.d. Public Purpose Expenditure Policy• CITY OF ROSEMOUNT EXECUTIVE SUMMARY FOR ACTION COMMITTEE OF THE WHOLE MEETING DATE: MARCH 13, 2003 AGENDA ITEM: PUBLIC PURPOSE EXPENDITURE POLICY AGENDA NO. PREPARED BY: PAULA A. GRAFF, HUMAN RESOURCES COORDINATOR 17E i, ` 2 ATTACHMENTS: DRAFT POLICY, OSA GUIDELINE APPROVED BY: Attached is a draft policy for Public Purpose Expenditures The policy addresses expenditures made by the City regarding employees, groups and elected officials and attempts to clarify which expenditures the City Council considers to be appropriate. The biggest issue surrounding this policy seems to be employee recognition. In the past, employees have been recognized at an annual luncheon. There employees receive a complimentary meal and monetary awards for years of employment with the City. In the past, this event was deducted from the City Council's budget. The other issue seems to be the City's "Sunshine Committee" and their practice of using pop and candy machine revenue to purchase flowers, cards etc. for hospitalization, death, birth etc. of employees and their immediate family. Also attached is the Office of the State Auditor's guideline on the subject. RECOMMENDED ACTION/ NOTES: DISCUSSION ONLY. CITY OF ROSEMOUNT PUBLIC PURPOSE EXPENDITURE POLICY POLICY Pursuant to the statutes and laws of the State of Minnesota which permit and require the expenditure of public funds for public purposes, the Rosemount City Council believes it necessary and appropriate to provide assistance and guidance to the officials, employees and representatives of Rosemount to aid in the determination of when public funds may be spent for a public purpose. To provide that assistance and guidance, the Rosemount 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, elected officials and appointed department heads to establish administrative policies and procedures that are consistent with these guidelines and the adopted City policies which implement these guidelines. Definition A public purpose expenditure is one which relates to the purpose for which the City of Rosemount exists and the duties and responsibilities of Rosemount, its elected and appointed ofcials, employees and other representatives. PUBLIC PURPOSE GUIDELINES 1. Training and development programs for Rosemount employees and its official representatives serve a public purpose when those training and development programs are directly related to the performance of the employees' and the . officials 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 Rosemount employees and its official representatives 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 Rosemount has responsibility. 3. Appropriate safety and health programs for Rosemount 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 Rosemount, including various costs associated with workers compensation and disability benefit claims, insurance premiums, and lost time from employee absences. 4. Public expenditures for appropriate Rosemount employee and volunteer recognition programs serve a public purpose because formally recognizing employees and volunteers who make significant contributions and demonstrate their commitment during the performance of their duties result in higher morale and productivity among all Rosemount employees and volunteers, and therefore help the City to fulfill its responsibilities efficiently and more cost effectively. 5. Public expenditures for food and refreshments associated with official Rosemount functions serve a public purpose when the provision of food or refreshments is an integral part of an official Rosemount function and the provision of food or refreshment is necessary to ensure meaningful participation by the participants. 6. Public expenditures for appropriate community and customer outreach and similar activities serve a public purpose when those expenditures are necessary for Rosemount 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 Rosemount expenditure must be valid based upon the public purpose for which it is purchased. The following items are deemed to meet the Council definition of public purpose expenditures. EMPLOYEE RECOGNITION PROGRAM The City of Rosemount City Council recognizes the hard work and service performed by the employees of the City of Rosemount through a formal Employee Recognition Program. The City Council believes the benefits of attracting, retaining and motivating employees through an Employee Recognition Program support employee job satisfaction, which in turn impacts cooperation and productivity. The result is to provide excellent public and customer service to better serve the interests of the citizens of the community. The Employee Recognition Program is considered "additional compensation" for work performed by employees but is entirely dependent on receiving funding from year -to -year. No provisions of this policy, or its administration, shall be subject to review under the grievance or arbitration provisions of any collective bargaining agreement. The Program will include: 1. Annually the City will sponsor an Employee Recognition Luncheon for City employees. The City may also sponsor an annual employee picnic or a Holiday Party. 2. An employee will receive an award for service at the Employee Recognition Luncheon. New employees receive a City Pin and employees completing 5, 10, 15, 20, 25, 30, and 35 years of service receive a gift certificate for a designated amount. 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EMPLOYEE SAFETY PROGRAMS The City Council recognizes the importance of employee health and safety as it relates to the overall work and life satisfaction of the employee and the overall impact on the City's health insurance program. The Employee Safety Program is funded by the departmental budgets. The City supports programs created by the Safety Committee to promote and retain and safe work environment. MEETING FOODIMEALS 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 work force. The following items are deemed to meet the Council definition of public purpose expenditures in regards to food and meals. 1. Meals and refreshments are allowed at City meetings and events that have a purpose of discussing City issues. These meetings would normally have a pre- planned agenda. 2. Meals and refreshments are allowed at employee meetings and events that have a purpose of discussing City issues or are a part of an employee training. These meetings would also normally have a pre - planned agenda. These meetings could include new employee receptions to introduce new employees to existing employees, provide an orientation to the City, and promote teamwork and cooperation. This does not include routine staff meetings. 3. Meals and refreshments are allowed when they are part of a breakfast/lunch /dinner meeting for official city business when it is the only practical time to meet. Usually these meals involve meeting with City Council members, Committee /Commission members, or local business /fraternal organizations. Payment for fees relating to a special event, such as a Chamber of Commerce event may also be allowed where 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 official meetings of the City Council, council committees, advisory boards /commissions, and taskforces. 5. Travel expenses for employees are outlined in the Rosemount Personnel Policy. 6. Meals and refreshments are allowed where employees or volunteers are participating in a City - sponsored special event, participating in an outside event as an official representative of the City, or working additional hours and where the department heads deems appropriate as recognition of efforts above those normally required. Because emergency personnel are often called to perform for extended periods of time and duties where refreshments are important to duty performance, emergency response personnel may be provided refreshments or food when it is deemed appropriate by the City Administrator or Department Head to assure the delivery of quality emergency response service. 4 7. No purchase of alcoholic beverages is allowed. The cost of these meals or fees is included in the departments' travel /conferences Line -item in the Rosemount Operational Budget. 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. MEMBERSHIP, DUES, AND DONATIONS The City Council has determined that the City will fund memberships and dues (individual or organization) in professional organizations and City social and community organizations when the purpose is to promote, advertise, improve or develop the City's resources and advantages and not personal interest or gain. The cost of memberships /dues is included in the departments' dues and subscriptions line -item in the Rosemount Operational Budget. 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. All donations must be approved by the City Council during the annual budget process and /or by City resolution. Donations provided by the City must be for programs that serve our citizens and are deemed to meet the public purpose guidelines. EDUCATION REIMBURSEMENT The City of Rosemount Personnel Policy contains guidelines for an education reimbursement program. glob related advanced education meets the public purpose guidelines of this policy. The amount available for this program shall be considered annually. The cost of this program is contained in the Rosemount City Council budget. CLOTHING AND OTHER SUNDRY ITEMS Employees may receive T- shirts, and other sundry items of nominal value ($5.00) when these items are made available to the general public or if these items are determined by the City. Administrator to be important to the successful involvement of employees in special city- sponsored or city- supported events (i.e. National Night Out, Safety Camp, etc.). Employees may be supplied with uniforms, clothing, boots and other gear necessary for the performance of their job. CONCLUSION The Rosemount City Council has determined that the above expenditures are valid expenditures and serve a public purpose. 2003 Minnesota City Attorneys Educational Conference February 7, 2003 OFFICE OF THE STATE AUDITOR CITY EXPENDITURES AND THE PUBLIC PURPOSE DOCTRINE Deputy State Auditor /General Counsel Carla Heyl 651- 297 -3673 or cheyl&.osa.state. n.us 525 Park Street, Suite 400 St. Paul, Minnesota 55103 L The Office of the State Auditor ( "OSA") A. The OSA is a constitutional office which serves as a watchdog for Minnesota taxpayers by helping to ensure financial integrity, accountability and cost - effectiveness of Minnesota's local governmental entities. B. The OSA has oversight responsibility for approximately 4,300 units of local government, including: 1,803 townships; 855 cities; 429 educational districts; 87 counties; 703 police and fire relief association funds; 145 housing and redevelopment authorities; 22 port authorities; 91 soil and water conservation districts; and approximately 150 special districts. C. The role of the Special Investigations Division is to assure integrity and accountability in local government by reviewing and investigating allegations of malfeasance, misfeasance, or nonfeasance. Since the Division is a fact- finding entity and has no prosecutorial powers, its role is to evaluate allegations brought to its attention, and when appropriate, provide specialized auditing techniques, initiate an independent investigation or refer the matter to appropriate oversight authorities. Office of the State Auditor City Expenditures and the Public Purpose Doctrine Page 2 D. Source of Complaints L Public officials and employees pursuant to Minn. Stat. § 609.456 (2002): "Whenever a public employee or public officer of a political subdivision or charter commission discovers evidence of theft, embezzlement, unlawful use of public funds or property, or misuse of public funds by a charter commission or any person authorized to expend public funds, the employee or officer shall promptly report to law enforcement and shall promptly report in writing to the state auditor a detailed description of the alleged incident or incidents. Notwithstanding chapter 13 or any other statute related to the classification of government data, the public employee or public officer shall provide data or information related to the alleged incident or incidents to the state auditor and law enforcement, including data classified as not public." Minn. Stat. § 609.456, subd. 1 (2002). 2. The OSA's audit staff 3. Citizen inquiries and complaints E. Public Reports for 1998 - 2002 are available at www.osa.state.mn.us F. For additional information, contact: David Kenney, Legal Counsel, at 651- 297 -2671 or dkenneyna,osa.state.mn.us Mark Kerr, Assistant Legal Counsel, at 651 - 2964717 or mkerr&osa.state.mn.us Nancy J. Bode, Attorney Special Investigations Division, at 651- 297 -5853 or nbodep_osa.state.mn.us IL Public Purpose Expenditures A. Public Purpose Doctrine 1. A public entity must have the authority (statutory or charter) to make an expenditure. a. Express powers are enumerated in statute or charter. b. Implied powers are those powers "implied as necessary in aid of those Office of the State Auditor City Expenditures and the Public Purpose Doctrine Page 3 powers which have been expressly conferred." Mangold Midwest Co. v. Village of Richfield, 274 Minn. 347, 357, 143 N.W. 2d 813, 820 (1966). 2. The expenditure must be made for a public purpose. 3. These requirements apply to "funds of governmentalentities derivednot only from taxation but from other sources as well." Op. Att'y Gen. 107 -A -3 (Jan. 22, 1980). See Minn. Const., art. X, § 1 ( "Taxes . . . shall be levied and collected for public purposes. "); Visina v. Freeman, 89 N.W.2d 635 (1958) (courts generally construe "public purpose" to mean "such an activity as will serve as a benefit to the community as a body and which, at the same time, is directly related to the functions of government"); Tousley v. Leach, 180 Minn. 293, 230 N.W. 788 (1930) (public funds may be used by public entity if the purpose is a public one for which tax money may be used, there is authority to make the expenditure, and the use is genuine); Op. Att'y Gen. 59a -22 (Dec. 4, 1934) (regardless of how desirable or commendable the purpose may be, public funds cannot be expended unless there is statutory or charter authority to do so). B. Gifts/Donations to Private Individuals (E.g., Consultants <or Nonprofit Organizations) Generally, no donations to people, non - profits, charities, etc., are permitted unless based upon specific statutory or charter authority. See, e.g., Ops. Att'y Gen. 59a -3 (Aug. 19, 1947)(no authority to donate to 4 -H Clubs), 442a -17 (Jan. 17, 1938)(Red Cross), 59- A -3 (May 21, 1948) and (Sept. 28, 1933)(Boy Scouts). The assumption is that a gift of public funds to an individual or private entity necessarily serves a private rather than a public purpose. See Ops. Att'y Gen. 107 -a -3 (Jan. 22, 1980), 270 -D (Aug. 12, 1977), and 59a -22 (Dec. 4, 1934). The Attorney Generalhas distinguishedbetween statutory authorization to appropriate and use money for a purpose, and authorization to contribute money to a body generally committed to advancing a purpose. Op. Att'y Gen. 59 -A -3 (Jan. 15, 1959) (can't give money to an organization to use as it sees fit, but may contract with the organization to perform on behalf of city activities authorized by statute). The following are specific statutorily authorized appropriations: Office of the State Auditor City Expenditures and the Public Purpose Doctrine Page 4 _ 1. Artistic Organizations. A county, city or town may appropriate money to support artistic organizations. Minn. Stat. § 471.941 (2002). 2. Historical. Cities "may appropriate money for the purpose of collecting, preserving, storing, housing, printing, publishing, distributing and exhibiting data and material pertaining to the history of the city, for the purpose of commemorating the anniversary of any important and outstanding event in such history, and to preserve such history data and material for future generations." Minn. Stat. § 471.93 (2002). See Op. Att'y Gen. 59a -3 (Jan. 18, 1968)(money may be given to a non - profit organization to sponsor city centennial observation). See also Minn. Stat. § 138.053 (2002) (city may annually appropriate specified amount to county historical society; a historical society receiving city funds must be affiliated with and approved by the Minnesota Historical Society). 3. Senior/Youth Centers. A county, city or town may appropriate money to support the facilities, programs, and services of a public or private, not - for -profit senior citizen center or youth center. Minn. Stat. § 471.935 (2002). 4. City Promotions. A city may appropriate not more than $50,000 annually out of the city's general revenue fund to be paid to any incorporated development society or organization of this state, such as a local chamber of commerce, for promoting, advertising, improving, or developing the economic and agricultural resources of the city. See Minn. Stat. § 469.191(2002); Letter of June 27, 1997 from Attorney General's Office to Staples City Attorney regarding Staples Chamber of Commerce membership (Chambers of Commerce are incorporated development societies or organizations for purposes of Minn. Stat. § 469.191). See also Minn. Stat. § 375.83 (2002) (counties). See also League of Minnesota Cities research memo "Public Purpose Expenditures" (215h2.1, October 2000) for a comprehensive list of authorized city expenditures. Comment: To make other donations, cities may wish to seek specific statutory or charter authority. Alternatively, cities may enter into contracts with other entities to perform on behalf of the city activities authorized by statute or charter. For example, cities may appropriate money to advertise the city and its resources and advantages. See Minn. Stat. § 469.189 (2002). Therefore, a city could contract with an entity to Office of the State Auditor City Expenditures and the Public Purpose Doctrine Page 5 advertise the city. C. Acceptance of Gifts /Donations Cities have authority to receive and accept gifts and donations. See, e.g., Minn. Stat. §§ 465.03 and 465.04 (2002). However, the OSA is unaware of any authority for a city to engage in fund- raising activities. Comment: Fund - raising activities are more appropriately conducted by independent organizations (e.g., fire relief associations, auxiliary organizations, etc.). D. Meals and Food Expenditures 1. Whether a meal is necessary depends upon the necessity for holding a particular meeting during meal time rather than at some other time, and upon the benefits derived from providing food during a meeting. Op. Att'y Gen. 63a -2 (May 6, 1965). 2. When an event is hosted by an organization other than the city, when attendance at the event is necessarily beneficial to the city, and when such benefits cannot be derived other than at the event itself, the Attorney General has determined that "the propriety of such expenditures may become a factual determination vesting within the discretion of the city council in the exercise of its sound and honest judgment." Op. Att'y Gen. 63a -2 (May 6, 1965). However, the Attorney General also noted that entertainment expenses are not properly payable for public employees. Id. 3. Staff -on -Staff Meals /Food a. "Entertainment expenses are not properly payable ... and to the same degree, officials holding luncheon meetings among themselves are not compensable since neither are necessary expenditures." Op. Att'y Gen. 63a -2 (May 6, 1965) (questioning rationale which would compel a meeting to be held at noon rather than some other time, and the necessary benefit derived from eating while meeting, or meeting while eating, as distinguished from just meeting). b. Meals prior to City meetings may be purchased with city funds only if Office of the State Auditor City Expenditures and the Public Purpose Doctrine Page 6 necessary. See Op. Att'y Gen. 285a (Aug. 7 1969)(Attomey General deferred to library board's determination that meal was necessary so invited guests could attend). 4. The OSA maintains that the purchase of alcohol at public expense does not serve a public purpose. In addition, the expenditure of public funds for the expenses of a spouse of a public employee or officer does not serve a public purpose. E. Employee Social Events Unless specific authority provides otherwise, employee social functions_ should not be paid for with public funds. See Ops. Att'y Gen. 59A -22 (Jan. 8, 1957) (municipal corporation may not imply authority to appropriate public revenue for celebrations, entertainments, etc., quoting 15 McQuillin, Municipal Corporations, 3` ed., Sec. 39.22), and 59a -22 (Nov. 23, 1966) (city Christmas party). Comment: Many public entities fund employee social events through employee clubs. Such clubs collect money from the employees, and have no involvement with the public entity regarding the funds collected from the employees. Sometimes vending machine proceeds are used by the employee clubs. A public entity appears to have at least three options for the operation of vending machines in public spaces: 1. The public entity could be responsible for the vending machine. All disbursements of vending machine proceeds would then need to comply with the public purpose doctrine. 2. The public entity could contract with a private entity, which results in the public entity receiving a commission from the vending machine sales. All commissions collected by the public entity would need to comply with the public purpose doctrine. 3. An employee club could operate the vending machines. In such cases, the OSA would expect to see a written arm's - length contract between the public entity and the employee club that would compensate the public entity for the licensed space used by the vending machines, and set forth the liabilities of the parties with regard to the machines and insurance. Proceeds of the vending machines would not be considered public funds in such cases. Note: Vending machines operated by employees in non -public places, such as in employee lunch rooms, would not necessarily be public funds in the OSA's opinion. Office of the ,State Auditor City Expenditures and the Public Purpose Doctrine Page 7 F. Employee Compensation and Recognition Events 1. Bonuses. Public entities cannot pay year -end bonuses to employees for performance of past services. See Ops. Att'y Gen. 107 -a -3 (Jan. 22, 1980) and 270 -D (Aug. 12, 1977) (prohibiting retroactive pay increases or bonuses to public employees). Comment: There are several exceptions to this rule in collective bargaining settings. 2. In -kind Benefits. In -kind benefits need specific statutory authority in order to be provided to public employees. See Ops. Att'y Gen. 359b (Oct. 24, 1989) and 161b -12 (Jan. 24, 1989). Comment: Bonus or incentive programs need to be set up in advance, based upon objective criteria. 3. Employee Appreciation Dinners and Awards. The Attorney General's Office is unaware of any authority for the expenditure of public funds for annual employee appreciation dinners. See Letter of February 6, 1998 from Attorney General's Office to Champlin City Attorney regarding employee recognition program. Addressing whether a city, pursuant to its employment policy which was understood to be part of its employment agreement, can hold an annual employee appreciation dinner at public expense for all employees, or award recognition gifts for those employees with 25+ years of service, the Attorney General's Office concluded: "Thus, while an agreed upon monetary bonus might be provided as part of a. salary plan to employees who meet performance or longevity standards, we are at a loss to locate authority for expenditures of funds for in kind awards or social occasions of the type described." Id. The Attorney General's Office also questioned a city's authority to expend any public funds for award recognition gifts for employees based on years of service. Id. Comment Counties are expressly authorized to establish and expend funds for preventive health and employee'recognition services. Minn. Stat. § 15.46 (2002). Cities may wish to seek similar legislative authorization to clarify this matter. Prior to the February 6, 1998 Attorney General's Office letter, employee recognition awards and events would not result in an audit comment if: Office of the State Auditor City Expenditures and the Public Purpose Doctrine Page 8 • The recognition awards were of nominal value, distributed pursuant to a written policy setting forth, in advance, the objective criteria for receiving the recognition awards; and • The public entity did not pay for spouses or third parties to attend the recognition event, and no alcohol was provided at the event. 4. Employee Gifts. Public funds cannot be given away to public employees or officials as gifts. See Ops. Att'y Gen. 59 -A -3 (May 21, 1948), 59a -22 (Dec. 4, 1934). 5. Volunteer Recognition Events. The OSA understands that some cities provide volunteers with recognitions. The OSA is unaware of any Attorney General Opinion prohibiting such recognitions. G. City .Celebrations and Events 1. There is no general authority for city celebrations or events. However, authority for some specific events is contained in the statutes. 2. A city may appropriate not more than $300 annually for each 75,000 of population for Memorial Day observances. Minn. Stat. § 465.50 (2002). 3. Statutory cities may spend money to provide free musical entertainment. Minn. Stat. § 412.221, subd. 15 (2002). Specific statutes also authorize certain cities and towns to levy a tax for specified forms of musical entertainment. See Minn. Stat. §§ 449.06 (cities of the fourth class), 449.08 (cities of the third class), 449.09 (cities of the second, third or fourth class, statutory cities, and towns). 4. Statutory cities may spend money to establish, improve, ornament, maintain and manage parks, parkways and recreational facilities. Minn. Stat. § 412.491 (2002). All cities, towns, counties and school districts may expend funds to operate programs of public recreation, recreational facilities, and playgrounds. See Minn. Stat. §§ 471.15 - 471.1911 (2002). Such programs may be conducted independently or with any nonprofit organization. See Minn. Stat. § 471.16, subd. 1 (2002). 5. Authority for firework displays appears to be implied. See Minn. Stat. § 624.22, Office of the State Auditor City Expenditures and the Public Purpose Doctrine Page 9 subd. 1 (a)(2) (2002). 6. Cities have no authority to purchase refreshments for celebrations for events such as Halloween or the Fourth of July. Op. Att'y Gen. 59A -22 (Jan. 8, 1957). 7. "To further an authorized purpose, an [EDA] may ... (2) have a reception of officials who may contribute to advancing the city and its economic development, and (3) carry out other public relations activities to promote the city and its economic development. Activities under this subdivision have a public purpose." Minn. Stat. § 469.101, subd. 16 (2002). Comment: In many cities, city events and celebrations are sponsored by independent organizations, with the city providing city services such as police and public works. H. Memberships and Dues L There is no general authorization for local units of government to join "private" organizations absent specific statutory or charter authority. 2. All cities, counties, and towns may appropriate money for membership in county, regional, state, and national associations of a civic, educational, or governmental nature. Minn. Stat. § 471.96 (2002). The associations must have as their purpose the betterment and improvement of municipal governmental operations. Id. This authorization also allows these public entities to participate in the meetings and activities of these associations. Id. 3. All cities and urban towns in Minnesota may appropriate money to pay dues to become members of the League of Minnesota Cities. Minn. Stat. § 465.58 (2002). 4. While a city may appropriate up to $50,000 to an incorporated development society or organization for promotional types of activities under Minn. Stat. § 469.191 (see Section II.B.4 supra), the : Attorney General's Office has determined that local units of government may not pay dues to a local chamber of commerce. Letter of June 27, 1997 from Attorney General's Office to Staples City Attorney regarding Staples Chamber of Commerce membership. The OSA believes that a city may pay dues to such an organization only if the dues are used Office of the State Auditor City Expenditures and the Public Purpose Doctrine Page 10 solely for purposes authorized by the statute. 5. An EDA may join an official, industrial, commercial or trade association, or other organization concerned with an authorized purpose. Minn. Stat. § 469.101, subd. 16 (2002).