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CR 02-025 Policy 6-A Purchasing CITY OF ~ . February 19, 2002 HOPKINS Council Report 02-025 AMEND LEGISLATIVE POLICY #6-A PURCHASING POLICY DESCRIBING PURCHASING AND DISBURSEMENT PROCEDURES OF THE CITY Proposed Action Staff recommends that the Council approve the following motion: Move that the Hopkins City Council approve Resolution #02-010, amendinq Leqislative Policv #6-A. Adoption of this motion will change the current purchasing and disbursement procedures of the city. Overview The City of Hopkins is a Homerule Charter City. Minnesota Statute allows homerule cities to establish their own procedures for disbursing funds. Currently the council is in the process of changing its City Charter in regards to purchases and disbursements of city funds. At the same time the legislative policy regarding these issues and additional improvements need to be reviewed and amended. . Primary Issues to Consider . Update and improve on current purchasing procedures and policies to clarify the sometimes confusing requirements of state purchasing law, city charter requirements, department procedures and the finance department processes. Proposed Changes . Decentralize the distribution of purchase orders to assigned purchasers. . Eliminate the requirement of a yearly report on the use of recycled products. . Eliminate "Field Orders". . Increase department level approval to $10,000 with two informal quotes. . Require City Manager approval and two written quotes for anything above $10,000. . Require City Councilor HRA, City Manager and three written quotes for purchases above $25,000. . Require sealed bids and approval of City Councilor HRA and City Manager for purchases above $50,000. . Capital outlay is increased to $1,000 from $200. . . Supporting Information . Resolution #02-010 . Legislative Policy #6-A r-'--~ \ Lori K'Yager Finance Director . . . POLICY 6-A PURCHASING POLICY 1. POLICY 1.01 The purchasing policies of the City are established by the City Charter, the City Council, and state statute. Under state statute annual adoption of the operating budget shall constitute Council appropriations for purchases made throughout the year. No purchase is final until approved by the City Council. 1.02 The responsibility to adhere to a department budget shall be with the department head. Accordingly, the department head has full responsibility for the purchases which occur within his/her department. A department head may designate a subordinate to act for the department head. The role of the City Manager is to monitor the purchasing actions of the department head. The role of the Finance Director is to insure that proper purchasing and payment procedures are adhered to. and that tho distribution of purchase orders is controlled. 1.03 Large purchases for all departments of the City are to be made centrally, as nearly as possible, through the Purchasing Agent. . 1.04 All purchases shall be of a quality to suit the intended purpose at the lowest cost. 1.05 Wherever practical and appropriate, materials with recycled content will be used in the construction or remodeling of municipal facilities. 1) Specifications will promote, and not prohibit, the use of recycled products or materials. 2) Specifications shall require that employees of the City and of the contractors bidding, cooperate and promote the use of recycled products and materials. 3) i".. yearly report will be filed on the use of recycled products within the City. This report shall be kept on file with the City Clerk and a copy shall be sent to the Clerk of tho Hennepin County Board. 2. RELATIONS WITH SUPPLIERS' REPRESENTATIVES 2.01 Purchasing Relationships. The relationship between the purchaser and the seller should be one of mutual understanding. The departments should not be burdened with, nor encourage visits from, suppliers except in those cases where special equipment, chemicals, etc. are to be purchased or where it will be helpful to the Purchasing Agent; neither should they become involved in the routine of purchasing. . Legislative Policy Manual -- Chapter 6-A I . 2.02 The Finance Department City Clerks office shall maintain a file on possible suppliers, as well as catalogues, advertising, etc. 2.03 When necessary for City departments to correspond with suppliers on some technical matter, copies of the correspondence shall be forwarded to the Purchasing Agent. 2.04 AU employees of the City shall keep themselves free of obligation to any of the City's suppliers. 3. REQUIREMENTS FOR PURCHASING 3.01 Field Orders. For all commitments under $200.00 not cO'lered by purchase order or petty cash. Field orders are prenumbered and assigned to departments and must be signed by the department hend. This is a three part form. The original is signed by the employee and the vendor and is left with the ','endor. First copy (blue) is forwarded to Accounts Payable by the next vtOrking day with sales slip, invoice, or delivery ticket attached. Second copy (green) remains in the book for the department. For purchases less than $1,000, department head approval is necessary. Purchases greater than $25,000 that are part of a cooperative purchasing agreement and are within the adopted budget for that department do not need approval from the city council. Purchasing under $25,000 that are part of a cooperative agreement and are within the adopted budget for that department, quotations are not needed. . 3.02 Purchase Orders Requisitions. (1) $200 $1,000 $1,000 - $10,000 Requisition signed by Department Head. Attach two informal quotes. (2) $1,000 $5,000 $10,000 - $25,000 Requisition signed by Department Head and City Manager. Attach two informal written quotes. (3) $5,000 $25,000 $25,000 - $50,000 Requisition signed by Department Head and City Manager. Three informal written quotes or RFPs. Approval is required from City Council or HRA Board for purchase. (4) Above $25,000 $50,000 Advertise/sealed bids per M.S.S. 471.345. Approval is required from City Council or HRA Board for purchase. Signed contract replaces need for purchase order. 3.03 All non-budgeted purchase requests over $500.00 must be accompanied by a staffreport justifying the expenditure. Requisition must be signed by the City Manager. 3.04 DEFINITIONS Capital Outlay - the purchase of any item or equipment costing over $200.00 $1,000 and having a useful life of at least 3 years. Operating and Maintenance Supplies - non-capital outlay items, equipment, or services . necessary for normal operations and maintenance. 3.05 Multiple item purchases form a single vendor are to be placed on one purchase order. Legislative Policy Manual -- Chapter 6-A 2 . 3.06 A purchase order is prepared for each requisition when the vendor requires such a document and will be mailed or faxed to vendors upon request. 4. PURCHASE REQUISITION 4.01 The purchasing requisition serves to inform the Purchasing Agent of the needs of the requisitioning department, aHfl: to define exactly the material supply or service requested and to demonstrate to finance that proper purchasing procedures are being followed. 4.02 Requisitions shall be prepared far enough in advance to allow sufficient time for delivery to be made prior to the actual need of the requisitioned material or service. This applies to all purchases except emergency purchases (see Section 6) which should be kept to a minimum since they tend to disrupt normal purchasing procedure and lessen budgetary controL 4.03 All requisitions shall be signed by the head of the department or someone authorized to act for him/her. Such authorization shall be filed in writing with the PURCHASING AGENT. Requisitions for budgeted purchases of $5,000.00 $10,000 or more shall be signed by the City Manager. 4.04 A properly processed purchase requisition shall contain the following information: 1) Date - The date the requisition was prepared. . 2) Department and requisition number. 3) Delivery Point - Address where merchandise or service is to be delivered or furnished. 4) Terms - Indicate who pays shipping charges and if a discount is applicable. 5) Company Name and Address. 6) Quantity Requested. 7) Description - A complete and accurate description of the item requisitioned must be given so an understandable purchase order may be prepared. This includes size, color, type, grade, etc. If the purchase is of a teclmical nature, specifications should accompany the requisition. If the item carnot be described, except with a great amount of detail, a brief description may be given, followed by the trade name and model of an acceptahle item or "equal". All specifications shall be approved by the Purchasing Agent. 8) Cost - The cost shall be given. When definite costs figures are not available, a reasonable estimate shall be given. When an estimate is given it will be designated as such. 9) Appropriation - Designate the account number to which the purchase is to be charged. . 10) If the item has been bid or it is over $25,000, show the date of council approval. 11) The signature (or signatures) of the person authorized to sign the requisition is Legislative Policy Manual -- Chapter 6-A 3 e required. 12) Quotations required for the purchase must be attached to the requisition. 4.05 Two copies of the requisition should be prepared. The original is to be submitted directly to the Finance Department for budgetary authorization of such purchase and the duplicate or copy should be retained by the department initiating the purchase requisition. 4.06 If a requisition is incomplete or not properly prepared, it shall be returned to the department initiating such requisition for additional information. 4.07 The requisitioner shall not split orders to circumvent any provisions of the City Charter or any policy established by the City. 4.08 When several pages of a requisition are required for a purchase, pages shall be numbered consecutively. In such cases only the first page need be signed by the authorizing department. 5. ISSUANCE OF PURCHASE ORDERS 5.01 A purchase order authorizes the vendor to ship and invoice materials or services, or both, as specified. Purchase orders shall be typed. . 5.02 Purchase orders shall be issued only upon receipt of an acceptable requisition, except under emergency conditions as set forth in the "Emergency Purchases" section of this policy. 5.03 The authorized Purchasing Agent shall issue purchase order. All purchase orders shall be transmitted to the supplier by the Finance Department, except under emergency conditions as set forth in the "Emergency Purchases" Section 6 of this manuaL 5.04 A standard snapout purchase order form, containing an original and three copies, is needed to make all purchases and is routed as follows: 1) Original (white copy) is forwarded to the supplier. 2) First copy (yellow) is retained by the Purchasing Agent in a numerical file. 3) Second copy (pink) is used by Accounts Payable to maintain an open purchase order file. 4) Third copy (goldenrod) is attached to requesting department's requisition and sent to the requesting department as a receiving copy. This is returned to the Finance Department attached to the invoice as the using department's acknowledgment of dated receipt and approval for payment. 6. EMERGENCY PURCHASES . 6.01 Emergency purchases are those made by departments only when normal operation of the department would be hampered by the delay resulting from adherence to the Legislative Policy Manual -- Chapter 6-A 4 . requisition/purchase order system. 6.02 In cases of emergency, an employee, with the approval of the Purchasing Agent, may purchase directly any materials, supplies, or services necessary to the immediate continuation of the work of the department. Such purchases and the emergency causing them shall be reported in writing to the Purchasing Agent no later than the work day following such purchase. 6.03 If an emergency occurs during regular working hours, the employee, upon securing purchase approval, must then request a confirming purchase order from the Purchasing Agent or Department Head. This number is given to the supplier for inclusion on his invoice and should also be placed on the departmental requisition. 6.04 When the purchase is made, an invoice or sales ticket shall be obtained by the purchaser. 6.05 At the first opportunity, the purchase order, with the invoice or sales ticket attached, shall be submitted to the Purchasing Agent. Terms of the transaction indicating price and any discount allowed shall be shown. 6.06 In cases wher~ the purchase exceeds $500.00 is for a non-budgeted item, written justification of the purchase shall be submitted to the City Manager. 7. PAYMENT PROCEDURES . 7.01 The City will make payments only on original invoices. If a vendor cannot issue an invoice separate from statements the vendor must note on the statement they do not issue invoices and that their statement is the only form of billing that will be rendered. If the original invoice is lost, the vendor must submit a copy of the invoice and state thereon that payment has not been received with current date of such notation. 7.02 Requesting payment for a purchase will require the following file: . Original invoice; . Goldemod copy of purchase order with original or requisition; . Copies of formal or informal quotes (if applicable); . Signature, date, and proper account code. If remittance advice or other items are to be returned with the check they must be paper clipped to the back of the file. 7.03 If the requester has a valid reason to receive the check for mailing, paper clip a note to the front of the file. Normal procedure is for the check signer to mail out checks. . Legislative Policy Manual -- Chapter 6-A 5 . 7.04 For certain limited uses a "Request for Check" form can be submitted to have a check prepared (e.g. travel advance, certain repetitive agreement payments if no invoice is available, etc.) 7.05 All costs incurred by an employee for travel, seminars, meetings, parking, etc. are to be submitted on a "Travel Expense Voucher". 7.06 Please forward all requests to Accounts Payable as they are completed daily. fu order to be included on n council prelist an item must be in ,^~ccounts Payable by noon on the Tuesday preceding a council meeting. 7.07 When a payment will exceed $50,000 $100,000 you must notify Finance two weeks in advance. Also, if there is some uncertainty about when a check needs to be released, notify Finance if you hold a check exceeding $10,000 $50,000 for more than three days. 7.08 Partial payments on a purchase order shall not be made except in extreme situations. If necessary, a copy of the purchase order should be forwarded with the partial payment and the goldenrod copy forwarded with the final payment on the purchase order. 7.09 Interim Manual checks will only be issued to coyer payroll, take discounts or avoid late pa)ment penalties with approval from Finance Director, (City Manager if Finance Director is absent.). . 8. PETTY CASH Two petty cash funds are maintained: 8.01 1. City Hall Receptionist 2. Public Works Administration 8.02 Petty cash purchases shall be kept to a minimum. A sales slip or petty cash voucher must include explanation of what was purchased, account code and signature or person receiving the cash. The petty cash funds will be maintained on an imprest system. Established 8/18/87 Revised 6/26/92 City of Hopkins . Legislative Policy Manual -- Chapter 6-A 6 . . CITY OF HOPKINS Hennepin County, Minnesota RESOLUTION NO. 02-010 A RESOLUTION AMENDING LEGISLATIVE POLICY MANUAL, CHAPTER 6-A PURCHASING POLICY WHEREAS, The City Council has determined that changing the purchasing and disbursing procedures would benefit the city as a whole; and WHEREAS, changes to the City Charter will take affect changing the purchasing and disbursing practices of the City; and WHEREAS, the Hopkins City Council adopted a Legislative Policy in 1987 establishing policies and procedures for purchasing and disbursements; and . WHEREAS, the existing policy needs to be amended to reflect changes in the City Charter; NOW THEREFORE BE IT RESOLVED, that the City Council of the City of Hopkins hereby amends the Legislative Policy #6-A, Purchasing Policy, by amending the purchasing requirements and the payment procedures to coincide with the changes in the City Charter. NOW THEREFORE BE IT RESOLVED, that these amendments will go into affect on March I, 2002. Adopted by the City Council of the City of Hopkins this 19th day of February, 2002. By Eugene Maxwell, Mayor ATTEST: Terry Obermaier, City Clerk .