Loading...
HomeMy WebLinkAbout6.f. Purchasing Policy Update EXECUTIVE SUMMARY City Council Regular Meeting: March 15, 2022 AGENDA SECTION: AGENDA ITEM: Purchasing Policy Update Consent PREPARED BY: Teah Malecha, Finance Director AGENDA NO. 6.f. ATTACHMENTS: Draft Purchasing Policy APPROVED BY: LJM RECOMMENDED ACTION: Motion to approve the amended Purchasing Policy. BACKGROUND The City’s current Purchasing Policy includes internal controls that outline the thresholds for approval of various purchases. 1. For amounts over $50,000, approval is required by the City Administrator and the City Council before the purchases are made, except as listed in item 2. 2. For amounts over $50,000 that fall into any of the following categories; the payment of judgments, salaries and wages previously fixed by the council or by statute, principal and interest on obligations, rent and other fixed charges, the exact amount of which has been previously determined by contract authorized by the council, approval is required by the City Administrator. 3. For amounts from $15,000 – 50,000, approval by the Department Head and City Administrator is required. 4. For amounts under $15,000, approval by the Department Head is required. Since January 1, 2022, the City has processed 906 purchase orders. Nearly 600 of those were in the Police Department, Parks & Recreation, and Public Works. This creates a vast amount of additional work for the department head to review and approve each purchase order. Currently, the two public works supervisors approve each purchase order along with the department head. They are involved in the day-to-day tasks and aware of each purchase. Of the roughly 600 purchase orders, only 55 were above $5,000. It is recommended to add an additional threshold to allow supervisor approval up to $5,000 and update department head approval to be from $5,000 - $15,000. That has been updated in the attached draft Purchasing Policy. RECOMMENDATION Staff recommends approval of the amended Purchasing Policy. CITY OF ROSEMOUNT POLICY TITLE: PURCHASING POLICY EFFECTIVE DATE: JUNE 21, 1994 PROPOSED BY: ADMINISTRATION DATE APPROVED BY COUNCIL: JUNE 21, 1994 (AMENDED JULY 15, 2008 ) (AMENDED JANUARY 16, 2018) (AMENDED AUGUST 2, 2021) (AMENDED MARCH 7, 2022) PURPOSE The purpose of this policy is to establish specific guidelines for the purchase of goods and services by employees of the City of Rosemount. The use of public funds requires diligent scrutiny and careful regulation. The controls necessary are in two areas. First, the statutory law, which clearly details procedures for the purchase of goods and services by City employees. Second, the controls not required by statute, but that are important to a good system of internal control and a sound management program. This policy will outline the laws governing contracts and bids and describe the basis for a good internal control system. Following the law and the City's purchase system should help City officials obtain maximum benefit from each dollar of public funds. CONTRACTING & PURCHASING A City entering into an agreement for the sale or purchase of supplies, materials, equipment or the rental thereof, or the construction, alteration, repair or maintenance of real or personal property must abide by the statutes relating to contracting and bidding. Minnesota Statute §471.345 was established to provide dollar limits for all cities upon contracts which shall or may be entered into on the basis of competitive bids, quotations or purchase or sale in the open market. This statute puts the following basic requirements on cities (based on the estimated contract amount): 1. For amounts over $175,000 - sealed bids shall be solicited by public notice in the manner and subject to the particular requirements of the City. The sealed bids shall be solicited by public notice 2. For amounts from $25,000 to $175,000 - sealed bids or by direct negotiation, by obtaining two or more quotations for the purchase or sale when possible, and without advertising for bids or otherwise complying with the requirements of competitive bidding. 3. For amounts under $25,000 – the contract may be made upon quotation or at the open market, in the discretion of the City. If the contract is made upon quotation it shall be based, so far as practical, on at least two quotations On all purchases that require obtaining bids or quotes, the “State Bids” obtained through the state’s cooperative purchasing program and the prices obtained through the U.S. General Services Administration (GSA) are considered to have met this requirement. All bids, quotations, RFP’s, specifications, contracts, and supporting documents shall be retained in accordance to the City’s Data Retention Policy. Currently, the retention periods are as follows; ADM 01400 Bids, Quotations & RFP’s – Accepted 10 years after completion of project ADM 01500 Bids, Specifications, RFP’s, & Supporting Papers – Not Accepted 6 years CON 00100 Bids & Specifications for Capital Improvement – Accepted Permanent CON 00200 Bids & Specifications for Services & Supplies – Accepted 10 years after paid/audit When sealed bids are not required or used, and whenever it is reasonably practical and cost efficient, purchases will be made from Rosemount businesses. Professional service contracts, such as those provided by engineers, lawyers, architects, accountants and other services requiring technical, scientific or other professional training do not require competitive bidding. The provisions noted in this policy are not intended to be an exhaustive list of Minnesota bid laws. In the event that this policy is not consistent with Minnesota law, such law will govern. For purchases made under Federal or State grant funded programs, additional restrictions are identified within the uniform grant guidance regulations (2 CFR 200.318). INTERNAL CONTROLS The primary basis for the City's system of internal control is the City's annual budget. The budget, as adopted by the City Council, serves as the basis for the City's spending for that year. The appropriate level of responsible official must approve any expenditure over budget. Also, any expenditure that would utilize money budgeted from one area of a department budget for another purpose must be communicated by that department head to the City Administrator for his/her verbal approval. In addition, all purchase orders and invoices presented for payment must be approved by the appropriate department head or supervisor and reviewed for reasonableness and proper account coding by such department head in a timely manner. The Finance Department must be notified immediately for any reason that may result in withholding payment. In order to expedite payments to vendors in a timely fashion, Minnesota Statute §412.271 allows the City Council to delegate its authority to pay certain claims made against the City to a City Administrative official. A list of all claims paid under the procedures established by the City Council shall be presented to the council for informational purposes only at the next regularly scheduled meeting after payment of the claim. The City Council, by resolution ( Resolution 2018-02), has delegated this authority to the City Administrator or the Finance Director. The following approvals shall be required depending on the amount of the purchase; 1. For amounts over $50,000, approval is required by the City Administrator and the City Council before the purchases are made, except as listed in item 2. 2. For amounts over $50,000 that fall into any of the following categories; the payment of judgments, salaries and wages previously fixed by the council or by statute, principal and interest on obligations, rent and other fixed charges, the exact amount of which has been previously determined by contract authorized by the council, approval is required by the City Administrator. 3. For amounts from $15,000 – 50,000, approval by the Department Head and City Administrator is required. 4. For amounts under from $5,000 - 15,000, approval by the Department Head is required. 4.5. For amounts under $5,000 approval by a supervisor is required. For situations where immediate approval is required and cannot be delayed until the subsequent City Council meeting, the City Administrator has the authority to approve the expenditure. The City Administrator will contact the City Council as soon as feasibly possible regarding the expenditure and approval. PROHIBITED INTEREST IN CONTRACTS Minnesota Statutes §471.87 and §417.88 prohibit entering into any contract for goods or services in which an employee, officer or agent or their immediate family members, has an indirect or direct personal financial interest or will personally benefit from the contract or purchase. In exceptional cases and if permitted by applicable law or regulation, this policy may be waived by the City Administrator for good cause after consulting with the city attorney. Employees shall not make any purchases for personal use utilizing City funds. Employees shall not be allowed to take advantage of special pricing offered to the City by vendors to make personal purchases. Employees may not take advantage of government discounts for non-business related purchases. The general rule to be applied is if a discount is not available to a member of the public, the employee should not take advantage of it. ACCEPTANCE OF GIFTS Minnesota Statute §471.895 prohibits local officials from requesting, soliciting, or accepting a gift from any person or representative of a person or association that has a direct financial interest in a decision that the employee is authorized to make. Local official includes elected and appointed positions within the City. PROCEDURE The City Administrator is the chief purchasing officer of the City and has delegated purchasing and budgetary control to each department. The department head may designate other staff within their department to purchase goods and services in compliance with the annual budget. The City Council has delegated authority to staff to make purchases as approved in the annual budget in compliance with all bidding requirements and the City’s purchasing policy. The use of credit cards is an authorized payment method. These purchases must follow the purchasing policy and are a more efficient method of paying vendors than the check payment process. In certain cases, where professional services were specifically identified in the budget and it is an ongoing contract, the City Council does not need to approve each year’s contract. The City purchases yearly memberships at various wholesale warehouses, i.e. Sam’s Club, for purchases of supplies, food, equipment, etc. Due to the manner in which these businesses issue memberships, employees with City issued membership cards are granted access and purchasing rights by these wholesale businesses for both business and personal uses. However, given membership cards are purchased with the City’s public funds, employees are not entitled to purchase items with these purchased membership cards.