Resolution No. 8699
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RESOLUTION NO. 8699
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A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON DIRECTING THE CITY ACCOUNTANT TO REVISE THE
CITY'S FINANCIAL POLICIES, PROCEDURES AND RELATED
INTERNAL CONTROL SYSTEMS AND APPROVING AND ADOPTING
A REVISED INTERNAL CONTROL POLICY
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WHEREAS, the City of Vernon (the "City") is a municipal
8 corporation and a chartered city of the State of California organized
9 and existing under its Charter and the Constitution of the State of
10 California; and
11 WHEREAS, on November 5, 1958, the City Council of the City of
12 Vernon adopted Resolution No. 2224 establishing rules and regulations
13 for the purchasing department; and
14 WHEREAS, Resolution No. 2224 was amended by Resolution No.
15 2292 on August 18, 1959 and Resolution No. 2308 on December 1, 1959;
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17 WHEREAS, with the adoption of the City's Charter on April 12,
18 1988, some or all of these resolutions may have been repealed; and
19 WHEREAS, the City desires to revise its financial policies,
20 procedures and related internal controls in conformance with all
21 applicable State statutes; and
22 WHEREAS, by letter dated March 31, 2005, Bruce V.
23 Malkenhorst, City Administrator/City Clerk, recommended that the City
24 memorialize the repeal or repeal as the case may be Resolution Nos.
25 2224, 2292 and 2308, that the City Accountant be appointed the Acting
26 Finance Director of the City and be directed to revise the City's
27 financial policies, procedures and related internal control systems,
28 and that a revised internal control policy be approved and adopted.
1 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
2 CITY OF VERNON AS FOLLOWS:
3 SECTION 1: The City Council of the City of Vernon hereby
4 finds and determines that the recitals contained hereinabove are true
5 and correct.
6 SECTION 2: The City Council of the City of Vernon hereby
7 appoints the City Accountant the Acting Finance Director of the City
8 and directs the City Accountant to revise the City's financial
9 policies, procedures and related internal controls and prepare a
10 revised internal control policy.
11 SECTION 3: The City Council of the City of Vernon hereby
12 approves and adopts a City of Vernon Financial Policies and Procedures,
13 in substantially the same form as the copy which is attached hereto as
14 Exhibit A and incorporated by reference, with such changes, insertions
15 and deletions as may be approved by the City Administrator.
16 SECTION 4: The City Council of the City of Vernon hereby
17 authorizes and directs the Acting Finance Director to take such actions
18 as may be necessary to implement the policy and all actions heretofore
19 taken by any committee of the City Council, or any officer,
20 representative or agent of the City in connection with the development
21 of the internal control policy and the other actions contemplated by
22 this Resolution, are hereby ratified, approved and confirmed.
23 SECTION 5: All resolutions, or parts of resolutions not
24 consistent with or in conflict with this resolution, specifically
25 Resolution Nos. 8473, 2224, 2292 and 2308, are hereby repealed.
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SECTION 6:
The City Clerk of the City of Vernon shall
2 certify to the passage of this resolution, and thereupon and thereafter
3 the same shall be in full force and effect.
4 APPROVED AND ADOPTED this 13th day of April, 2005.
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.. LEONIS C. LBURG, Mayor
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ATTEST:
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BRUCE V. MALKENHORST, City Clerk
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STATE OF CALIFORNIA
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COUNTY OF LOS ANGELES
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I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do
hereby certify that the foregoing Resolution, being Resolution No.
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8699, was duly adopted by the City Council of the City of Vernon at a
special meeting of the City Council duly held on Wednesday, April 13,
2005, and thereafter was duly signed by the Mayor of the City of
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Vernon.
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BRUCE V. MALKENHORST, City Clerk
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EXHIBIT
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City of Vernon
Financial Policies and Procedures
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City of Vernon
Financial Policies and Procedures
Table of Contents
I. About Financial Policies and Procedures.... ............ ...... ....... ..... ..... ........................................... 1
A.. Mission Statement of the City of Vernon .......................................................................... 1
B. What is Internal Control? ................................... ... .... ....... ............................................. ..... 1
C. . How Internal Control Relates to Our Organization ............................................................ 1
The Employee Role ......... ... .......... ......... ...... .................. ... ..... ........................................ ..... 1
The Department of Finance's Role ........... ......... ......... ....... ........... .......... ............ ........ ......... 2
D. . Organization of this Manual...................... .... ............... ..... ..... ............................................. 2
E. . Revisions and Updates to this Manual................................................................................ 2
II. Purchasing Policies and Procedures.... ..................... ..... ................... ......... ....... ............. ............ 3
A.. Introduction to Purchasing System .....................................................................................3
1. Authority for Establishing Policies and Procedures...................................................... 3
2. An Overview of Purchasing Process ............................ ....... .......... ............................ .... 3
B. How to Buy Goods and Services - Request Order (FLOWCHART 1) .............................. 3
1. Purpose of Request for Purchase Order (EXHIBIT A)................................................. 3
2. When Required..... ........ .......... ............ .......... .... .............. ............... .......... ........ ..... ..... .... 4 '
3. Bidding Requirements, Exceptions, and Procedures ....................................................4
(a) Requirements (to b documented on the bid sheet) .................................................. 4
(b) .Exceptions ............................................................................................................... 4
(c) Procedures............... ................................................................................................ 5
4. The Formal Bid Process Responsibilities ..................................................................... 5
(a) Notice Inviting Sealed Bids ....................................................................................6
(b) Suggested Bid Format or Request or Proposal.......................;............................... 7
(c) Staff Report for Presentation to City Council......................................................... 7
5. Selecting a Vendor and Review of Bids .......................................................................8
6. Approvals Required ..................... ................................................................................. 8
7. Internal Review ............................................................................................................. 9
C. Issuing Purchaser Orders............. .......... .......................... ...... ............ ....... ......................... 10
1. Preparation and Processing ......................................................................................... 10
2. Encumbering Funds, Liquidation of Encumbrance .................................................... 11
D. Blanket Purchase Orders. ............. .............. .......... ............... ............................. ....... .... 12
1. When to Use .... ....... .......................... ..... .............. ..... .... ...... ..... ............................. ....... 12
2. How to Process ......... .... ... ........................... ................................................................. 13
3. Placing Orders ................. ............................... ............................................................. 13
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City of Vernon
Financial Policies and Procedures
Table of Contents
4. Invoice Processing ................. ......................................................... ......... ................... 14
E. Receipt of Merchandise or Service .......................... ............ ...... ................ ..... ........................ 14
F. Special Purchasing Transactions ................................ ......... .... ....... .......... ............................... 15
1. Office Supplies....... ............. .............................................................................................. 15
2. Petty Cash Reimbursement .................................................... ............... ................ ............ 15
3. Travel Advances and Reimbursement .............................................................................. 16
a. General Policies ....................... ....................................... .... ............... ......................... 16
b. Per Diem and Actual Reimbursement.........................................................................16
c. Transportation.................................. ........................................ ................................... 17
d. Hotel accommodations ............................. ...................... ............. ................................ 17
e. Other Expenses..... ...... ......................... ........................ ..... ... .......... .............................. 18
f. Approval............................................................................................................... ....... 18
g. Travel Advances and Expense Reimbursement.......................................................... 18
4. Capital Expenditures.. ............... ..... ....................................... ............. ..... .......................... 19
Questions and Answers ............. ............... ....................... ....... .......... ..... .... ....... ... .......................... 21
Flowcharts ..... .................................................................................................................... ............ 23
Prepare Request for Purchase Order (FLOWCHART 1)........................................................24
Review Request for Purchase Order and Generate Purchase Order (FLOWCHART 2)........ 25
Exhibits ........................................... ................................................................................. ... .......... 26
Request for Purchase Order (EXHIBIT A) ............................................................................. 27
Purchase Order (EXHIBIT B) .................................... ........... .............. .... ..... .... .......... ............. 28
Mileage Reimbursement Claim (EXHIBIT C) ....................................................................... 29
Received of Petty Cash (EXHIBIT D) .........................................:... ............................... ........ 30
Request for Travel Advance (EXHIBIT E).............................................................................31
Travel Expense Report (EXHIBIT F) .....................................................................................32
III. Budget Transfers (Request for Budget Appropriation Revision) ...........................................33
A. When to Use. ........ .................................................................... ... ...................................... 33
B. Processing a Request for Budget Appropriation Revision (EXHIBIT G) ........................ 33
1. Completion of Form and Approvals ...........................................................................33
2. Special Situations.................................................................... ................... .... ............. 34
Questions and Answers................. ...................................................................................... .......... 35
Exhibits.................................. ............................. .......................................................................... 36
Request for Budget Appropriation Revision (EXHIBIT G) ............................................. 37
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City of Vernon
Financial Policies and Procedures
Table of Contents
IV. Payment ofInvoices - Accounts Payable (FLOWCHARTS 3 and 4) .................................... 38
A. Invoice Processing ............................................................................................................ 38
1. Receipt of Invoices.... ...... ............. ...................................... ......................................... 38
2. Department Responsibilities .... ......................................... ..... ........ ............................. 38
3. Department of Finance's Accounts Payable Responsibi.lities ..................................... 39
B. Check Writing Schedule...... ............ ... ....................................................... .......... ............. 40
C. Manual Checks...................................................................................... ............................ 40
Questions and Answers .......... ........... ............... .......................... ........ .... .................. ..................... 41
Flowcharts ......................................................................................................................... ..... ....... 42
Prepare Check Request .............................................................................. ......... .............. 43
Check Writing Procedure.................................................................................................. 44
Exhibits......................................................................................................................................... 45
Check Request Form (EXHIBIT H) ............................................................................................. 46
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Financial Policies and Procedures
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I. AboutFinancial Policies and Procedures
A. Mission Statement of the City of Vernon
To answer the question of "why do we have policies and procedures" and "why do they
need to be documented so extensively," we look to why our organization, the government
of the City of Vernon, exists. The Mission Statement of the government of the City of
Vernon explains our goals:
The government of the City of Vernon exists to enhance the well-being of
all elements of the community while balancing conflicting interests. Elected
officials and City employees aspire to (1) promote a high quality physical
and social environment that fosters a sense of wholeness, vitality and
balance in a highly diversified urban residential and business community,
(2) provide a full range of municipal services, with a commitment to
affordable housing and leadership in the delivery of social services, and (3)
support a people-oriented environment sensitive to the human rights of all
people that is attractive to residents, visitors, artists and business.
B. What is Internal Control?
A definition of internal control: Internal control is a process, used by all of us, that allows
us to meet our goals, achieve our mission, and minimize surprises along the way. Internal
controls:
· promote efficiency,
· reduce risk of waste and loss,
· help ensure the reliability of financial information,
· provide assurance that everyone is complying with applicable laws and
regulations.
Policies and procedures are an important component of the entire system of internal
control. They are, to a great extent, the formal communication tool. A Policies and
Procedures Manual communicates approval levels, authorizations, verifications,
reconciliation methods, and procedures for reviewing operating performance.. It explains
how we attempt to protect our assets and how we divide our duties among us so that the
process cannot be circumvented.
C. How Internal Control Relates to Our Organization
1. The Employee's Role
Every employee of the City is responsible for implementing and adhering to the policies
and procedures established by the City. By taking personal responsibility, we assure that
our day to day operations run effectively and efficiently, that we achieve our performance
and financial objectives, and that we safeguard our resources.
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As employees, defined policies and procedures let us know what is expected of us
and help us to define our job and understand our responsibilities. This, hopefully,
makes work more rewarding and satisfying.
To expedite the process of answering questions and solving problems, we recommend
that each department appoint an administrative staff assistant to act as the primary
liaison to the Department of Finance.
2. The Department of Finance's Role
The Department of Finance is charged with establishing, communicating, and
enforcing the policies and procedures necessary to implement an effective system of
internal control. The internal control system is intertwined with our day to day
operating activities, and management personnel know that it is ultimately their
responsibility to achieve the goals and objectives established by and for their
departments and divisions. The Department of Finance is here to assist in that
process, and has, therefore, established a "Help Desk" to answer questions and assist
in resolving problems that may arise.
D. Organization ofthis Manual
This manual is being prepared in stages. The initial sections are dated December 1995. As
new sections are added, the same general outline, described below, will be followed.
The manual is presented in an outline format which keys off of specific forms used in
processing transactions. Aflowchart is included which highlights the main points to consider
when preparing a form or initiating a transaction. Finally, a question and answer section
further explains how to handle unusual or especially complicated situations.
E. Revisions and Updates to this Manual
Circumstances change; we discover more effective and efficient ways to accomplish tasks and
achieve our objectives. Establishing and documenting policies and procedures is a dynamic
process that requires ongoing communication. It is the Department of Finance's responsibility
to communicate changes in policies and procedures to all personnel.
To that end, when there is a change in policy and procedure or when the need to clarify such
policies and procedures becomes evident, the Department of Finance will communicate this
information to all management personnel by memorandum. Periodically the Department of
Finance will incorporate those changes and clarifications into this manual.
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II. Purchasing Policies and Procedures
A. Introduction to Purchasing System (FLOWCHART 1)
1. Authority for Establishing Policies and Procedures
Sections 1400 and 2700 of the Municipal Ordinance set forth in both general and specific
terms the policies and procedures of the City regarding purchasing. Those policies and
procedures are incorporated into this section of this manual by this reference and provide
the authority and basis on which it has been prepared.
2. An Overview of the Purchasing Process (SEE FLOWCHART 1)
· The purchasing process is decentralized; the person requesting the merchandise or
service ("Initiator") seeks out potential vendors, obtains the bids, and interacts with
the vendor.
· The process begins with the preparation of the Request for Purchase Order (EXHIBIT
A) form. Bid requirements and approval levels are documented in this manual and on
the form. The Initiator is responsible for assuring that adequate budgeted funds are
available. .
· The Request for Purchase Order form is sent to the Administrative Assistant -
Purchasing after completion.
· After review for proper completion of the form, a Purchase Order (EXHIBIT B) is
prepared. This process causes the funds to be encumbered.
· The Purchase Order is sent to the Initiator who transmits a copy to the vendor and
retains a file copy.
· The merchandise or service is received; the invoice is received and checked by the
Initiator.
· The Check Request Form (EXHIBITS Hand H-l) is prepared, appropriate approvals
are obtained, and it, along with the supporting documents, is sent to Accounts Payable
for payment
· The check is prepared and signed, authorized by City Council, and sent to the vendor.
The encumbrance is liquidated.
B. How to Buy Goods and Services - Request for Purchase Order (FLOWCHART 1)
1. Purpose of Request for Purchase Order (EXHIBIT A)
The Request for Purchase Order is:
· aform,
. designed to document bid information,
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· approvals, and
· budget compliance.
A complete and accurate Request for Purchase Order
necessary to allow a Purchase Order to be generated.
contains all the information
2. When Required
Simply stated, a Request for Purchase Order is required when someone wants to buy
goods or services that cost more than $1,000. There are some exceptions to this basic
rule, however, each of which is discussed in greater detail in the following sections:
. If a blanket or open purchase order was issued and is in effect, a new Request for
Purchase Order is not required each time an order is placed.
. If formal bidding is required, the Request for Purchase Order is prepared after a
contract has been executed.
. If, due to the nature of the service, no bidding is required, the Request for
Purchase Order is prepared after the contract has been executed.
3. Bidding Requirements, Exceptions, and Procedures
Contract Services, Equipment and Supplies: Contract services, equipment and supply
purchases have the same bidding requirements and levels of approval. Contract
services include those activities that do not require a high degree of professional
certification (see exception discussed below), such as gardeners, painters, printers,
and general construction providers. Contract services include all public work
contracts. When bidding for contract services, equipment and supplies, the contract is
awarded to the lowest bidder. When purchasing technology equipment or supplies,
such as computer equipment (hardware and software), it is required that you contact
the Information Systems Division for assistance.
a. Requirements (to be documented on the bid sheet)
. $1,000 or less: No bid required (and no Request for Purchase Order).
. $1,001 through $5,000: Three (3) verbal quotations.
. $5,001 through $10,000: Three (3) written quotations.
. More than $10,000: Formal bid process (see below).
b. Exceptions
You do not need to obtain bids if one of the following conditions is met (however,
formal approval is needed ifin excess of$1O,OOO):
. The merchandise or service is unique because of its quality, durability,
availability, or fitness for a particular use.
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· The merchandise or service is available from only one source.
· The City Manager determines that critical circumstances reqUIre the
immediate purchase of the merchandise or service.
· The merchandise or service is provided by an independent contractor who
has a contract with the City to provide labor and materials for other than a
Public Works project, i.e., a .office supply contract that is in place for one
year and purchases of supplies are made periodically based on the
contract.
· The service is to be performed by aprofessional (discussed below).
Professional Services: Professional services are those activities performed by a
consultant who posses a high degree of expertise in a particular profession, such as an
Attorney, Certified Public Accountant, Engineer and Architect. There is no bidding
requirement for this type of service, since the agent is being hired based on their
qualifications, not lowest bid. Any professional service agreement submitted to the
Council for approval must provide sufficient background analysis to support the
recommendation. Purchase orders are not required for professional service agreements,
however they are recommended. Each agreement needs to be properly executed and held
on file with the City Clerk.
Requirements:
· $5,000 or less: City Manager approval.
· In excess of $5,000: City Council approval.
c. Procedures
Verbal quotations, usually obtained by telephone call, are to be described on the Request
for Purchase Order. It is important that the specifications are accurate and
comprehensive. Thus it may be beneficial to transmit the specifications by fax or mail
even when the quotation is received verbally. Written quotations, usually obtained by fax
or mail, are attached to the Request for Purchase Order. Again, it is important that the
specifications are accurate and comprehensive. The Formal Bid Process is discussed in
the next section.
4. The Formal Bid Process
a. Responsibilities
The responsibilities for completion of the formal bid process are shared by the City Clerk
and the person who wishes to purchase merchandise or services ("Initiator").
Initiator:
· Prepares a notice inviting sealed bids. (See requirements below.)
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· Prepares a bid form including detail specifications for the item to be purchased.
If the item is a service, prepares the Request for Proposal. (See suggested
format below.)
· Sends the notice to all applicable vendors.
· Sends the notice to the City Clerk for publication.
· Sends the notice to "F.W. Dodge Construction News" and "Daily Construction" if the
bid request is a public works project.
· Reviews qualifications and references of the low bidder(s).
· Negotiates contract with vendor selected.
Prepares the Staff Report (see requirements below) for presentation to City
· Council.
· If approved by City Council, obtains certificates of insurance and performance bonds
from the vendor.
· Sends these documents and two original contracts, signed by the vendor, to the
City Clerk.
· After the City Clerk has completed execution ofthe contract, prepares and processes
the Request for Purchase Order to record the encumbrance.
· Deals with the vendor on a day to day basis for completion of the contract and
processing of payments.
City Clerk:
· Publishes or posts the notice in three places at least ten (lO) days before the scheduled
bid opening date.
· Handles the bid opening.
· Notifies vendors whose bids were not accepted and returns bid bonds.
· Maintains copies of the losing bids for at least two (2) years after the bid opening.
· After the Staff Report has been presented to the City Council and approved, the
contract has been signed by the vendor and returned to the City, the City Manager or
Mayor signs the contract with an attest by the City Clerk.
· Sends a copy of the contract to the Initiator, sends an original to the vendor, and
retains one original contract in file.
· Monitors certificates of insurance and follows up on expirations.
· Monitors contract expirations and follows up with Initiator as appropriate.
b. Notice Inviting Sealed Bids
This should include the following:
· general description of the item to be purchased,
· statement indicating where bid forms and specifications can be obtained,
· statement specifying the time and place for the opening of the bids,
· statement describing the bid security required; i.e., a bid bond equal to 10% of the amount
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of the bid,
· statement describing performance bond requirements if the vendor is selected.
c. Suggested Bid Format or Request or Proposal
I. BACKGROUND Provide as much detail as necessary to give the bidder an
understanding of the environment in which the job will be performed and to which
the job relates.
II. SCOPE OF WORK Describe in detail the requirements for the job and detail
specifications.
III. DESIRED PROJECT SCHEDULE
Be as specific as possible.
IV. MINIMUM AND DESIRABLE QUALIFICATIONS
Be as specific as possible.
V. SUBMISSION OF BIDS (OR PROPOSALS)
Include date, time, and location. Include a detail list of the information the bid or
proposal should contain.
VI. QUESTIONS List the name, address and telephone number ofthe person to be
contacted concerning question regarding the project.
(d) Staff Report for Presentation to City Council
This is the format for the Staff Report:
ST A'fEMENT ON THE SUBJECT
Statement regarding the need, benefit to be received, and any other pertinent background
information.
RECOMMENDATION
"1. Enter into a (professional services, consulting, etc.) agreement with (name of
vendor) in the amount of (or in an amount not to exceed) (a dol/ar amount) for
(explain the project or service; i.e., CIP Project 95-06 or construction of
parking structure, etc.) with a term ending (include a termination date if
applicable).
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2. Authorize the City Manager to execute the agreement.
3. Approve the allocation of funds in the amount of (a dollar amount) from account
number (enter an account number) to account number (enter an account
number)." This part of recommendation is only necessary if there are any
reallocation of funds from unobligated general fund or between departments,
etc.
BACKGROUND ANALYSIS
Include more detailed background information and explain in detail the scope of services
of the proposed contract and identify other bids received.
FISCAL IMPACT
"Funds for the recommended action have been included in the (identify the department
or division) for fiscal year (identify the year)"
or"
Allocate funds in the amount of (a dollar amount) from account number (enter an
account number) to account number (enter an account number)."
5. Selecting a Vendor and Review of Bids
The City's policy is to .obtain goods and services of the highest quality for the lowest cost.
Consider these things when seeking the "highest quality" vendor:
· Ability, capacity, and skill.
· Ability to meet time requirements.
· Character, integrity, and reputation.
· Previous experience with the vendor.
· Sufficiency of financial resources needed to perform. (Note security and bid bond
requirements when formal bids are received.)
· Ability to provide future maintenance and service, if necessary.
Local Preference: The Municipal Code specifically provides for a 4% preference to local
bidders and vendors. This is accomplished by reducing their bids by 4% (but not more than
$5,000) when comparing such bids to those of other bidders.
6. Approvals Required
The Request for Purchase Order (EXHIBIT A) requires these approvals:
· All require Division Manager approval.
· If the amount is more than $5,000, Department Director approval is also required.
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· If the amount is more than $5,000 and the Request for Purchase Order is for
professional services, City Clerk approval is required, confirming that the contract
has been properly executed.
· If the amount is more than $10,000, City Clerk approval is required, confirming that
the contract has been properly executed.
· If the amount is more than $10,000, City Manager approval is also required.
When the amount is more than $5,000 for professional services and more than $10,000 for
all other items, a Staff Report must be prepared (even though the formal bids may not be
required) and the proposal presented to the City Council for approval. After such a contract
has been approved and executed, the Request for Purchase Order does not require any
additional approvals.
Note that grant expenditures may be subject to different and stricter rules. Grant
documents are to be reviewed for such rules prior to preparing a Request for Purchase
Order.
7. Internal Review
Department of Finance Review
The Department of Finance is responsible for administering the internal finance policies
and procedures of the City and provides a supportive role in assuring budget
accountability. In addition, the Department of Finance has an obligation to look for
"loose ends" and make sure that all the pieces of a transaction come together and make
sense; this might be called a "reasonableness review." The Department of Finance,
therefore, does the following:
· Reviews the Request for Purchase Order for completeness.
· Assigns the vendor number if it is not already on the form.
· Determines that the required bids have been obtained.
· Determines that.the appropriate approvals are included.
· Determines that the account number charged is appropriate for the item being
acquired.
· Reviews for availability of funds or determines that the Request for Budget
· Appropriation Revision (EXHIBIT G) has been completed.
· Prints the Purchase Order which causes the encumbrance to be recorded in the
General Ledger.
Ifthe Request for Purchase Order has missing, or what appears to be incorrect,
information, the Department of Finance personnel use their judgment in handling
the problem in accordance with these guidelines:
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· If there is a minor problem, such as an incomplete or misspelled name,
address, telephone number, etc., they communicate by telephone or E-mail to
get the problem resolved.
· If the required bids or approvals have not been obtained, the Request for
Purchase Order is returned to the Initiator with an explanation of the problem
and suggested corrective action.
· If the account number appears to be incorrect, the Department of Finance will,
depending on the amount of the purchase, either correct the account number
and notify the Initiator or return the Request for Purchase Order to the
Initiator with a request for clarification. Note that the accounts used for
allocated expenses should not be used for any purchases initiated by the
operating divisions.
· If budgeted funds are not available and the Request for Budget Appropriation
· Revision has not been completed, they communicate by telephone or E-mail
to
· get the problem resolved. If the amount involved is small, they may process
the
· Request for Purchase Order before the Request for Budget Appropriation
· Revision is received, but are under no obligation to do so.
Department Director and Division Manager Review
Budget accountability rests primarily with the operating departments of the City. In
accomplishing the programs and objectives for which the budget was authorized,
department directors are responsible for ensuring that their respective budgets stay
within the prescribed funding levels. Unavailability
They use these tools to determine the current status of their encumbrances, expenditures
and budget:
· The Monthly Report provided to each Director and Manager by the
Department of Finance includes a statement of total current budget,
expenditures and encumbrances and un-obligated budget and Encumbered
Purchase Order report.
· Online access to the General Ledger and financial reports is available.
Anyone wishing to learn how to access this information should contact the
Department of Finance.
C. Issuing Purchase Orders (FLOWCHART 2)
1. Preparation and Processing
After the review of the Request for Purchase Order for completeness and accuracy, the
Purchase Order is generated by the Department of Finance based on this schedule:
· Complete and accurate Requests for Purchase Orders are submitted by the close
business on the Monday.
, .
City ofVemof1
Financial Policies and Procedures
4/5/05
Page 11
· Purchase Orders are generated and ready for pick up by noon on Wednesday in
the Administrative Assistant - Purchasing's office.
· Any Purchase Orders not picked up by the close of business on Wednesday are
distributed through intra-office mail.
The Purchase Order form is a/our-part document distributed as follows:
· Original (white): Returned to the Initiator who transmits it to the vendor.
· Blue: To Administrative Assistant - Purchasing. The blue copy is
attached to Request for Purchase Order and filed.
· Yellow: To Account Clerk - Accounts Payable. The yellow copy is
initially filed and matched to the invoice when it arrives
for payment.
· Pink: To the Initiator for filing. The pink copy may be used to
document the receipt of merchandise and may
accompany the invoice to accounts payable.
The Initiator reviews the Purchase Order for accuracy and completeness. Any problems
are reported immediately to the Administrative Assistant - Purchasing for correction.
If the Purchase Order (EXHIBIT B) is to a first time vendor, a Taxpayer Identification
. Number Sheet will accompany the Purchase Order. It is generally preferable to send the
Taxpayer Identification Number Sheet to the attention of the Accounting Department since
that Department usually processes such requests. Note that checks will not be mailed to a
new vendor until the form is returned.
2. Encumbering Funds, Liquidation of Encumbrance
Encumbering: When the Purchase Order is printed, the funds are encumbered. Note that
the Department of Finance issues the Purchase Order under certain circumstances even if
there are not sufficient budgeted funds available. See "Internal Review" under "Request for
Purchase Order" for the conditions under which this will occur.
Liquidation: Note that if the invoice presented for payment is equal to the amount of the
Purchase Order, the encumbrance will automatically be liquidated upon payment of the
invoice. However, if the invoice is less than the Purchase Order, it is the Initiator's
responsibility to instruct the Account Clerk - Accounts Payable to liquidate the encumbrance
when final payment has been made.
, .
City ofVemon
Financial Policies and Procedures
4/5/05
Page 12
YEAR END PROCESS FOR ENCUMBRANCES/PURCHASE ORDERS
Definition of an Encumbrance. An encumbrance is an outstanding purchase order for
goods or services; a portion of the budget appropriation is reserved in the amount of the
purchase order. Encumbrances help to ensure administrative and budgetary compliance.
Purchase orders issued in the General Fund, Special Revenue Funds, Debt Service Funds,
and Capital Improvement Project Funds may be carried forward to the future fiscal year
or years in the case of capital improvement projects). Note: Except for capital
improvement projects, carry forward purchase orders will be liquidated at the end of the
fiscal year, i.e., Fiscal Year 95/96 purchase orders will be liquidated at June 30, 1997.
Requests for Purchase Orders will be accepted by Finance no later than May 31. This is
because of the large volume of requests presented at year end. At May 31, all accounts
must have available balance greater than or equal to the amount of the purchase order
requested. In needed, please process a Budget Transfer Request prior to submitting the
Request for Purchase Order.
D. Blanket Purchase Orders (sometimes referred to as "Open" Purchase Orders)
(FLOWCHART 2)
1. When to Use
· When very similar goods or services are purchased frequently during the year.
Generally, any individual purchase is small in relation to the total amount authorized
by the blanket purchase order or in relation to the total amount budgeted for the goods
or servIces.
· When there are a limited number of vendors who supply a particular good or service.
Vendors may be unwilling to repeatedly bid on small jobs especially when they have
not been awarded the job in the past. However, the prospect of a large annual contract
may induce them to prepare a complete and more competitive bid.
Example: Graffiti abatement requires many small painting and clean up jobs
during the year, although no one job may be large in relation to the total budget.
Rather than obtaining separate bids each time, a blanket purchase order is placed
with one vendor up to a stated maximum amount. Note that a blanket purchase
order may be allocated to different accounts. Such an allocation should be clearly stated on
the Request for Purchase Order.
A blanket purchase order is a special situation that should be reviewed and approved by
. .
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City ofVemon
Financial Policies and Procedures
4/5/05
Page 13
the Department of Finance when the circumstances indicate that the issuance of a blanket
purchase order is appropriate.
2. How to Process
· Identify and document the need to have a blanket purchase order through the examination
of past purchasing records and the current budget.
· Solicit bids and obtain approvals using the same criteria as for a single item purchase
order; i.e., if the total amount is more than $10,000, the formal bidding process must be
followed and City Council approval obtained.
· Prepare a Request for Purchase Order (EXHIBIT A) to generate a Purchase Order to be
sent to the vendor, or if a contract has been executed, to encumber the funds on the
General Ledger. In either case, the Purchase Order or the contract must include wording
that clearly identifies the arrangement, such as:
Furnish goods or services as requested by City of Vernon employees (or state
specifically who is authorized to place orders) when above purchase order
number is referenced up to a total maximum amount of $(state an amount).
Issue invoices for each individual order placed. This purchase order expires on
(date).
3. Placing Orders
Since a Purchase Order has been issued, and the funds encumbered, it is not necessary to
prepare a Request for Purchase Order (EXHIBIT A) each time an order is placed under a
Blanket Purchase Order. To accurately communicate an order and avoid misunderstandings,
however, written documentation supporting each order is prepared.
This is done by one of the following methods:
· Use the vendor's order form to place an order referencing the Blanket Purchase Order
number.
· Use a blank Purchase Order form obtained from the Department of Finance. The
form should clearly reference the previously issued Blanket Purchase Order.
· Prepare a memorandum clearly identifying the goods or services ordered and
referencing the Blanket Purchase Order.
It is the Initiator's responsibility to:
· Keep a record of the orders placed.
· Not exceed the authorized amount.
· Liquidate any remaining balance on the Purchase Order when the Purchase Order has
expired or no additional purchases will be made.
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City of Vemon
Financial Policies and Procedures
4/5/05
Page 14
4. Invoice Processing
When invoices are presented for payment, a copy of the Blanket Purchase Order and the
individual order document prepared should accompany the invoice.
E. Receipt of Merchandise or Service (FLOWCHART 2)
The initiating division or department is responsible for receiving incoming goods, inspecting
them as to quality and condition, and confirming the quantities received by counting,
measuring, or weighing. The pirik copy of the Purchase Order may be used to document the
receipt of the merchandise.
The pirik copy of the Purchase Order (if used as a receiving document) or other similar
documentation noting receipt and inspection of the merchandise accompanies the invoice
when it is sent to the Department of Finance for payment.
If there is a partial delivery, its receipt is documented on the pirik copy of the Purchase
Order and a copy is made to accompany the invoice for payment. The originator keeps the
original pink copy to document later receipts of merchandise. All dates of receipt are noted
on the pink copy to avoid confusion.
If merchandise is not acceptable, the Initiator arranges for replacement or return for
credit of the defective items. Be sure to completely document the nature of the
deficiency including:
· The name of the supplier
· Purchase order number for item
· Date of receipt
· Quantity received and quantity returned
· Nature of the defect
· Action requested (return for credit, replacement, allowance)
Note that many vendors will not give credit for returned merchandise unless a return
authorization is obtained prior to returning the items. The vendor is contacted for their
specific requirements to expedite the return and credit or replacement.
When the Purchase Order has been issued for services, the Initiator approves the invoice for
payment denoting that the services were provided in a satisfactory manner.
"
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City of Vemon
Financial Policies and Procedures
4/5/05
Page 15
F. Special Purchasing Transactions (FLOWCHART 2)
1. Office Supplies
Copy paper, computer paper, toner cartridges, coffee, bottled water and medical
supplies are kept in a storeroom on the first floor near the Administrative Assistant -
Purchasing's office. The cost of these items is allocated by the Department of Finance
to the various divisions and departments. Division managers and department directors
do not have budget responsibility for these charges.
Other office supplies are ordered by submitting an "Office Depot" form to the
Administrative Assistant-Purchasing. All orders must be approved by either the Division
Manager or the Department Director. Approvals are checked and orders are placed each
Tuesday at 4:30 p.m. The order arrives on Wednesday. Each order is invoiced separately
and the Initiator is responsible for inspecting and counting the merchandise and
approving the invoice.
Business cards are ordered by taking a sample of the card and an indication of the
quantity needed to the Administrative Assistant-Purchasing. The Administrative
Assistant-Purchasing accumulates the requests until such time that better pricing can be
obtained by submitting a large order. The amount of time it may take to receive an
order can vary; therefore, an order should be placed well in advance of need to avoid
emergency and costly orders.
2. Petty Cash Reimbursement
The Petty Cash fund is used to reimburse purchases which were originally paid out-of-pocket
by a City official or employee. Mileage reimbursement for local travel is also paid from the
Petty Cash fund. Petty Cash reimbursements will either be paid in cash or with a petty cash
check, depending on the amount.
Amount: If the amount is $25.00 or less, the reimbursement will be paid in cash. If the
amount is more than $25.00 but not greater than $200.00, the reimbursement will be
paid by check.
Where: The petty cash fund is maintained by the Revenue Manager on the first floor of
City Hall.
Procedures:
· Obtain a Received of Petty Cash (EXHIBIT D) form from the Revenue Manager.
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City ofVemon
Financial Policies and Procedures
4/5/05
Page 16
· Complete the form, including the account number to be charged, description, date
requested, and amount.
· Attach a receiptor other supporting documentation. A Mileage Reimbursement Claim
(EXHIBIT C) form is attached if the request is for mileage reimbursement.
· Obtain division manager or department directorapproval.
· Submit the documentsfor reimbursement.
· Upon reimbursement,sign and return the Received of Petty Cash (EXHIBIT D) form.
3. Travel Advances and Reimbursement
a. General Policies
The City recognizes the constructive value of professional conferences, seminars and
meetings. To that end, the City provides travel funds for City officials, department
directors, division managers, and other employees.
Travel funds for out of state meetings will normally be provided only for City elected
officials, department directors and division heads. Other employees may be provided
with travel funds for conferences held within the State of California.
Any overnight travel must be requested in advance and approved by the City Manager
before incurring any cost on behalf of the City.
b. Per Diem and Actual Reimbursement
For any overnight trip, an employee may receive a per diem or be reimbursed for
actual expenses for each day or fraction thereof they are traveling. This is in addition
to transportation and hotel accommodation expenses.
The per diem rate is $50 per day.
If actual expenses are used,
reimbursement will be made up to $80 per day.
For trips of one day when overnight lodging was not required, receipts must be
submitted, and reimbursement will be for either the amount of the receipts or per
diem, whichever is less.
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City ofVemon
Financial Policies and Procedures
4/5/05
Page 17
Number of days reimbursed includes days actually spent on City business, for
programmed days at a conference or meeting, and for time spent in travel by air. (Per
diem for time spent in travel other than air, such as rail or automobile, must be
approved by the City Manager.)
Travel days not to exceed one day before and after the conference or meeting are
included in the num~er of days. The travel days are only allowed if time and travel
schedules do not allow for travel at reasonable hours on the beginning and ending days of
the conference or meeting.
c. Transportation
Air travel: Travel by one employee outside the six county SCAG regions and the City
of Santa Barbara is to be by air unless the City Manager approves another mode of
transportation. Reimbursement is based on:
· the shortest and most direct route,
· bookings being made at least a week in advance, when possible, such that the
lowest fares possible are received (except that night coach will not be required).
If two or more employees are traveling within a day's drive (no more than four
hours), they should usually travel together by car rather than air.
Private vehicles: If a personal vehicle is used for travel, reimbursement is based on the
cost of air travel and transportation from the airport to the destination and back, or the
current per mile rate allowed under the IRS rules (presently $0.325 per mile), whichever
is less.
Example:
Drive to Santa Barbara = 185 miles
Reimbursement at $0.325 per mile = $60.13
Air travel to Santa Barbara = $101.00
Taxi from the airport to conference and return = $ 15.00
Total air cost = $116.00
$60.13 is less so this amount is reimbursed.
City owned vehicles: There is no reimbursement for transportation when a City
owned vehicle is used, except for out-of-pocket expenses incurred.
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City of Vemon
Financial Policies and Procedures
4/5/05
Page 18
d. Hotel Accommodations
City officials and employees should choose reasonably priced, not extravagant,
accommodations based on the location of the business meeting or conference. The days
allowed correspond to the policy for per diem reimbursement discussed under that
section. Local telephone call and long distance calls related to City business are allowed
as a hotel accommodation expense.
e. Other Expenses
City officials and employees will be reimbursed for:
· conference registration fees,
· parking expenses,
· taxis or other local transportation, including rental cars, if reasonable under
. the circumstances,
f Approval
For Local Conferences (trips of one day), approvals are based on the estimatedtotal
cost of the trip, these approvals are necessary:
. $l,OOOorless:
. $1,000 or less:
· $1,001 through $5,000:
. More than $5,000:
Division Head
Department Director
City Manager
City Council
· Division Head and Department Director initial approval is generally verbal
followed by written approval for advances and reimbursement requests.
· When City Manager or City Council approval is required, the approval must be in
writing before any financial commitments are made.
For Conferences with Travel (overnight travel), approvals required are as follows:
· $5,000 or less: Division Head
· $5,000 or less: Department Director
· $5,000 or less: City Manager
· More than $5,000: City Council
· All overnight travel requires the Division Head, Department Director, and the City
Manager to approve the travel before any financial commitments are made.
· When City Council approval is required, the approval must be in writing before
"
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City ofVemon
Financial Policies and Procedures
4/5/05
Page 19
any financial commitments are made.
g, Travel Advances and Expense Reimbursement
Travel and conference expenses can be paid in several ways:
· By invoice or registration form such as a conference registration form.
· By obtaining an advance of funds.
· By submitting an expense report after completion of the trip.
Invoices or registration forms are processed like any other invoice as discussed in the
Accounts Payable section.
An advance offunds is obtained (required for all overnight travel) by:
· completing the Travel Advance form detailing the estimated expenses,
· obtaining approvals in accordance with the above requirements, and
· sending two copies, along with a Check Request, to the Department of Finance for
payment.
No later than thirty (7) working days after returning from a trip, the traveler
completes a Travel Expense form to submit to the Department of Finance.
· If monies are due to the traveler, an approved Check Request Form
accompanies the Travel Expense form.
· If the form indicates that the advance exceeded the actual expenses, the
traveler's personal check accompanies the Travel Expense form
submitted to the Department of Finance.
In any case, all expenses incurred by the traveler are documented with receipts except
those covered by per diem.
If the advance is not properly accounted for
the advance is income to the recipient
or can be deducted from their regular pay.
Travel expenses are submitted on a Travel Expense form along with a Check Request. All
expenses incurred by the traveler are documented with receipts except those covered by per
diem.
Grant reimbursement: Special arrangements must be made with Director of Finance to
assure appropriate compensation.
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City of Vemon
Financial Policies and Procedures
4/5/05
Page 20
4. Capital Expenditures
Criteria for classification: Capital expenditures include land, buildings, major
improvements to buildings, equipment, and furniture. Generally, the item has a
useful life of at leasttwo years and costs at least$500.
· Cost includes the actual cost of the item itself, plus freight, installation costs, and
any other expenses incurred that are necessary to get the item delivered, installed,
and in working order.
· The unit price of an item rather than the total cost of the purchase is the value
to be used as the guide.
Non capital costs:
· Items of small value which may have a relatively long life such as shovels, tool
boxes, scissors, etc., but are of small individual value, should be classified as
supplies.
· Replacement or repair parts and labor for such replacement or repair for capital
items should be charged to a maintenance or supplies account.
Approval requirements:Capital items are subject to the same approval requirements as any other
purchase except purchases of technology related equipment may require Division Manager,
Information Services approval.
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City of Vernon
Financial Policies and Procedures
4/5/05
Page 21
QuesnonsandAn~en
Why do we need to create a purchase order if the vendor I select does not require one?
There are several reasons but two main ones. First, purchases should be pre-approved. After a
vendor has supplied a service or merchandise, it would be inappropriate to not pay them. If a
purchase order is generated, then we know that the prescribed procedures were followed and
the purchase is authorized by management. Second, when a purchase order is created, an
encumbrance is recorded on the general ledger. Thus, a manager can know what they have
committed to spend so they are able to better manage their budget even though the monies may
not yet have been released.
Why don't we require purchase orders, and in fact discourage the use of them, for amounts
less than $1,000?
Weare attempting to balance the cost of a procedure with the benefit obtained. It costs us time
and supplies to produce and process purchase orders. We believe that the potential loss we might
suffer from not requiring purchase orders for smaller purchases is less than the cost we would
incur in producing and processing purchase orders for every item or service we buy.
The policy states that a purchase order is not required if the amount involved is less than
$1,000. Maya purchase order be issued for less than this amount?
If the vendor prefers that a purchase order be used or if some other unusual situation exists that
makes it preferable to issue a purchase order, prepare the Request for Purchase Order including a
the reason for the special request and a purchase order can be generated.
What consntutes a bid? Sometimes it's difficult to find more than one or two vendors who
supply an item or service. If I call a potential vendor and they can't provide the item, does
that count as a bid?
To be considered a bid, the vendor must be able to supply the item or service and give a price for
it. If an item or service is truly unique or only one vendor supplies it, then multiple bids are not
required. This is a rare situation and should be thoroughly explained on the Request for Purchase
Order.
Is it okay to get more than the required numbered of bids?
If you believe that the bids you have received are out of line, it is certainly okay to get more.
Remember, that your time costs money, too, so only continue to seek more bids if you have good
reason to think that you can get a significantly better price or service.
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City of Vemon
Financial Policies and Procedures
4/5/05
Page 22
What is the Taxpayer Identification Number Sheet and what am I supposed to do with it?
The Internal Revenue Service requires us to get this information from all individuals and
companies with which we do business. From the information they provide us on this form, we
can make a determination of whether or not we need to send the vendor a 1099 at year end. The
sheet is to be sent to the vendor's Accounting Department for completion and returned to us.
Remember, we cannot issue a check to a new vendor until we receive this information.
What do you mean by a "contract"? Do I have to have legal counsel create such a document
if I need to make a large dollar purchase?
A letter can be a contract. What we want is a written document that contains a good description
of the services or merchandise we expect to receive, what we expect to pay, and the time frame
in which we expect completion. If in doubt, see the City Clerk for assistance.
.... . .
. .
.
. .
Flowcharts
.~
. .
Bid ~
. .
PREPARE REQUEST FOR PURCHASE ORDER
&Jdget Review
<Is _<DUn1 IesS>- G
. lhan or equal to YIIS No bid reqUired.
$l.ooo?
y
No
^
.---- ~. '.....-'>111 b~1
<$1.000 and ~ tl1an >-ves .red
or eq;ual to $5..000? "'llW .
Y
No
A
Is amount lI",ater 13
<tIlan $5.,000 but less)-ves Three wrille<l bids
lhan or equal to are required.
S H)JiOO?
Y
No
~
<Is me amount >-v r=:l
~ 5L=J
ReqUl!St for I'urehase
0nIer
<Is amOlll'll leSS>
.hn "". eq<lai to . Yes
$1,0001
y
No
^
is af'i'WlUffl morE- man:
< S"Uj()(l and less hn>- Yes
or equal 10 $5.0001
Y
No
A
!s !he amoun'
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less !hanor equal to
1O.ilOO?
Y
No
~
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~
"-
<Are b"u.gs!ed > Yes
funds 2-tafOO'tE"
~
No
Prepare- R€queM
fur Budget
ApprOf....~natkm
He vision-
FLOWCHART 1
DiWsioo M~
spprov.>i required.
Depa.'1menl
Director "W""'..I
l"IHluirl!d.
Ci"ty Manager Of
AssiSlafll City
Man;sger a~
''''lund.
CityCoon;:il
approval r~d.
No f^$J1sr aciion
Of."C€5s:ary.
.'
. .
Request for
Purchase
Order
Yes
. .
REVIEW REQUEST FOR
PURCHASE ORDER AND
GENERATE PURCHASE ORDER
FINANCE DEPARTMENT
Yes
~
<~~:'i:m>No""
oo!>lined?
V
Yes
/~
<" Ase OO<lQel... !e<l .fun<!ll.)-
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Yes
. Subject to certain parameters; see lext
@
1
Blue
I'un:M8e ORIel"
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'-..../
FLOWCHART
2
.'
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EXHIBIT B
CITY OF VERNON
4305 Santa Fe Avenue
Vernon, CA 90058
Page
Purchase Order Number
This Number Must Appear On All
Packages
VENDOR
SHIP
TO
QUANTITY
UNIT OF MEASURE COMMODITY CODE
f
ORGANlZAllON 1'~!\cc0UN1
I
. PROJECT
PROJECT ACGOUNT I
AMOUNT
BY
PURCHASING AGENT
APPROVED FOR ISSUE
THIS INSTRUMENT HAS BEEN PREAUDITED IN THE
MANNER REQUIRED BY THE lOCAL GOVERNMENT
BUDGET AND FISCAL CONTROL ACT.
.'
..
.. .
CITY OF VERNON
MILEAGE REIMBURSEMENT CLAIM
Name: Extension:
Extension
Division:
$ 0.31
Requested by:
Approved by:
.'
.'
. .
Exhibit D
Petty Cash Form
"
..
.. .,
Date: 2005
CITY OF VERNON
TRAVEL EXPENSE REPORT
Name:
Division:
Reason for Travel:
Location:
Dates of Travel:
(Ani val/Departure)
Hotel:
Air
Personal Car: Miles:
Other (s ecify):
No. of nights:
Hotel tax No. of nights:
Per diem: No of nights:
* $
per day
per day
$ per day
Registration:
Other (Describe)
Requested by:
Approved by:
City Manager (More than $5,000)
Approved by:
Approved by:
Division Head
City Council (more than $10,000)
Approved by:
Department Director
.'
.'
'--' .
CITY OF VERNON
TRAVEL EXPENSE REPORT
I Date: 2005
Name:
Division:
Reason for Travel:
Location:
Dates of Travel:
Hotel:
Air
Personal Car: Miles:
Other (specify):
No. of nights:
Hotel tax No. of nights:
No of nights:
* $
0.31 per mile (IRS
@
per day
per day
$ per day
Per diem
Registration:
Parking
Shuttles, Taxis
Other (Describe)
Account No.
Amount
Total
Advance Received (-)
Amount to Em 10 ee
Amount to City
Total
Receipts for all expenses except the per diem must accompany this report. If amount is due to the
City, a check must accompany this report.
Requested by:
Approved by:
City Manager (More than $5,000)
Approved by:
Approved by:
Division Head
City Council (more than $10,000)
Approved by:
Department Director
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City oj Vernon
Financial Policies and Procedures
4/5/05
Page 33
III. Budget Transfers (Request for Budget Appropriation Revision) (FLOWCHART 1)
A. When to Use
Budget transfers can be made within divisions and departments subject to the approval
requirements discussed below. The Request for Budget Appropriation Revision
(EXHIBIT G) form is prepared to document and accomplish the transfer. So that the
Request for Purchase Orders and invoice payments can be processed without delay,
budget transfers are made when:
· The amount of a Request for Purchase Order being prepared or the amount of an
invoice presented for payment will cause the annual budget to be exceeded and
budgeted funds are available in other accounts within the division or department.
The Request for Budget Appropriation Revision form accompanies the Request for
Purchase Order or the invoice.
· A Purchase Order is processed even though budgeted funds are not available (see
Internal Review, Department of Finance section above). The Initiator of the
transaction should take action to cover the shortfall immediately. This keeps the
general ledger up to date and lets the individual manager, as well as upper
management, know where they, their division or department, and the City as a
whole stand in relation to the annual budget.
· The Monthly Report received by each manager (see Internal Review, Department
Director and Division Manager section above) shows a budget shortfall. Each
manager is responsible for reviewing the report for accuracy and taking corrective
action as necessary. Budget shortages in individual categories within a division or
department can be covered by using the Request for Budget Appropriation
Revision form to transfer from other categories.
B. Processing a Request for Budget Appropriation Revision (EXHIBIT G)
1. Completion of Form and Approvals
· The form must include all the information requested including both account
number and description.
· Transfers of grant funds or matching funds must be accompanied by
authorization from the funding source.
· Approval requirements depend on what type of accounts are affected, who
initiates the request, and the amount of the request.
For transfers between operating expense accounts within the same fund, the
required approvals are:
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. "
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City of Vernon
Financial Policies and Procedures
4/5/05
Page 34
· Division Manager initiates a transfer within their division:
Only the Department Director must approve.
· Department Director initiates a transfer between divisions:
Only the Department Director must approve.
· Transfers between departments initiated by two Department
Directors:
· City Council approval is required. The Finance Director reviews and approves
all transfers after the above approvals are obtained.
For transfers between departments, betweenfunds, orfrom the unreservedfund
balance, City Council approval is required.
2. Special Situations
There are special situations that always requires consultation with the Finance Director
before the request is initiated:
· Transfers from allocated expense accounts since these are not under the control of
the division managers and department directors.
· Transfers from salaries and related benefit accounts because of the complexity of
calculating these budget categories.
· Transfers from program or program-specific funding sources.
"
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City of Vernon
Financial Policies and Procedures
4/5/05
Page 35
Questions and Answers
If] have budgeted funds available in one account and not in another, why can't] just charge
my purchase to the account where] have funds available rather than go through preparing a
Request for Budget Appropriation?
First, that would give a false perception to management and to the community about how we
spend our money. Second, knowing how we spent our money in the past helps us plan for future
spending as well as helping us to determine areas where we should reduce costs.
Can I use a Request for Budget Appropriation to transfer funds from one account to another
even if] am not ready to spend those funds j1!st yet?
You can process a Request for Budget Appropriation at any time. If you are processing one with
a Request for Purchase Order and know additional amounts will need to be transferred later one,
go ahead and do the entire amount at once. This saves time and supplies for both you and the
Department of Finance.
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City of Vernon
Financial Policies and Procedures
4/5/05
Page 38
IV. Payment ofInvoices - Accounts Payable (FLOWCHARTS 3 and 4)
A. Invoice Processing
1. Receipt of Invoices
Invoices are received by either the Accounts Payable Department or the
department that initiated the transaction. If the invoice is received by the
Accounts Payable Department, the Account Clerk-Accounts Payable checks for a
vendor number; if none, one is assigned. The invoice is then sent to the initiating
department.
Note that payments are made only from original invoices. In the case of a lost
invoice not previously paid, the vendor must mark the copy stating to process it as
an original.
Statements are listings of outstanding invoices and are never used to process
payments. Statements are a tool to determine if there are discrepancies between
our records and the vendor's records.
2. Department Responsibilities
Each department is responsible for verification of invoices for payment, including
the following:
· Comparison of quantities billed on the invoice with quantities listed on the
purchase order and shown on receiving documents.
· Comparison of prices, discounts, and terms with those specified on the
purchase order.
· Proof of clerical accuracy of the invoice with respect to extensions,
footings, and deduction of discounts.
The Check Request Form is required for all payments and is used to clearly
document the invoices to be paid. The initiating department completes the form,
including the following information:
· vendor's name and address,
· special handling instructions
. invoice number,
· purchase order number,
· account number to be charged,
· description of the purchase,
· amount,
· instructions regarding the liquidation of any remaining encumbrance that
was generated by the purchase order
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City of Vernon
Financial Policies and Procedures
4/5/05
Page 39
It is essential that the information be complete and accurate since this is the basis
on which checks are prepared and encumbrances are released.
The initiating department is responsible for obtaining the required approvals:
· All require Division Manager approval.
· If the amount is more than $5,000, Department Director approval IS
required.
· If the amount is more than $10,000, City Manager approval is required;
however, that approval will be obtained by the Department of Finance.
Note that these approval requirements are based on the total amount
of the Check Request, not the individual invoices.
The invoice and any receiving documents are attached to the Check Request (the
"Package") and forwarded to the Accounts Payable Department for payment.
3. Department of Finance's Accounts Payable Responsibilities
The Department of Finance has the same responsibilities for administering the
internal finance policies and procedures as described in the Purchasing, Request
for Purchase Order, Internal Review section. The Department of Finance,
therefore, does the following:
· Reviews the Package for completeness.
· Checks or assigns the vendor number as appropriate.
· Determines that the required approvals have been obtained; obtains City
· Manager approval if the amount is $10,000 or more.
· If the funds have not been previously encumbered by a purchase order,
reviews for availability of funds or determines that the Request for Budget
Appropriation Revision has been completed.
If the Package has missing, or what appears to be incorrect, information, the
Department of Finance personnel use their judgment in handling the problem in
accordance with these guidelines:
· If there is a minor problem, such as an incomplete or misspelled name and
address, invoice number, purchase order number or account number
discrepancy, they communicate by telephone or E-mail to get the problem
resolved.
· If the required approvals have not been obtained, the Package is returned
to the Initiator with an explanation of the problem and proposed corrective
action.
· If budgeted funds are not available and the Request for Budget
Appropriation Revision has not been completed, their actions are
determined by the amount involved in accordance with the policy
established in the Purchasing, Request for Purchase Order, Internal
Review section of this manual.
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City of Vernon
Financial Policies and Procedures
4/5/05
Page 40
Because of the time constraints involved in the check writing process,
Department of Finance personnel will attempt to get the problems corrected in
a timely manner so that the request is not delayed until the following payment
cycle.
After review and correction or clarification of any information, the data is
entered into the computer system for generation of the checks. Internal
reviews are performed and a resolution of the City Council is prepared for
approval of payment of the checks written. Checks are released on Tuesday
following the Monday night City Council meeting.
B. Check Writing Schedule
Checks are written two times per month. Because of the volume of checks
processed and because City Council approval is required before any checks are
released, the accounts payable submission date, subject to holiday variations, is
the Friday when City Council meeting agenda items are due, which is ten (10)
days prior to the Council meeting. Checks are released on Tuesday following
the City Council meeting. The exact dates are published annually and the
schedule can be obtained from the Account Clerk - Accounts Payable.
C. Manual Checks
In extremely rare situations a manual check may be written. To obtain a manual
check requires the approval of the Director of Finance and the City Manager.
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City of Vernon
Financial Policies and Procedures
4/5/05
Page 41
Questions and Answers
What exactly is the difference between a statement from a vendor and an invoice
and why can't I use a statement as backup for a check request?
A statement is a listing of invoices. An invoice lists the specific services or merchandise
being billed and the amount charged for each item. Statements are used to reconcile our
records with the vendors to assure that payments have been properly applies. Invoice
formats vary a great deal and sometimes vendors show a balance forward on an invoice,
too. Therefore, all invoices and statements need to be carefully reviewed before any
check requests are prepared. Also, all statements should be forwarded to the Account
Clerk - Accounts Payable for reconciliation of our records with the vendors.
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CITY COUNCIL JOHN KARNS
LEONIS C.MALBURG Karns&Karabian
Mayor General Counsel
THOMAS A.YBARRA KEVIN WILSON
Mayor Pro-Tem Director of Community Services&Water
WM. "BILL"DAVIS
Councilman STEVEN E.PARKER
H. "LARRY"GONZALES Fire Chief
Councilman
W.MICHAEL McCORMICK SOL BENUDIZ
Police Chief
Councilman
BRUCE V.MALKENHORST LEWIS J.POZZEBON
City Administrator/City Clerk Director of Environmental Health
Chief Executive Officer of CITY HALL
Light&Power RORY BURNETT
ERIC T.FRESCH 4305 SANTA FE AVENUE,VERNON,CALIFORNIA 90058 Gursey,Schneider&Co.LLP
City Attorney TELEPHONE(323)583-8811 City Accountant
March 31, 2005
City Council
City of Vernon
Honorable Members :
In accordance with the recent review of the City' s Code by the City
Attorney' s office, it is hereby recommended that a resolution be
adopted directing the City Accountant to revise the City' s financial
policies, procedures and related internal control systems, approving
and adopting a revised internal control policy, and repealing
Resolution Nos . 2224, 2292 and 2308 .
Very truly yours,
4z
Bruce V. Malkenhorst
City Administrator/City Clerk
BVM/ke
"Exclusively Industrial"
CITY COUNCIL JOHN KARNS
LEONIS C.MALBURG Karns&Karabian
Mayor General Counsel
THOMAS A.YBARRA KEVIN WILSON
Mayor Pro-Tern Director of Community Services&Water
WM. "BILL" DAVIS
Councilman STEVEN E.PARKER
H. "LARRY"GONZALES Fire Chief
Councilman
W.MICHAEL McCORMICK SOL BENUDIZ
Councilman Police Chief
BRUCE V.MALKENHORST LEWIS J.POZZEBON
City Administrator/City Clerk Director of Environmental Health
Chief Executive Officer of CITY HALL
Light&Power
RORYBURNETT
ERIC T.FRESCH 4305 SANTA FE AVENUE,VERNON,CALIFORNIA 90058 Gursey,Schneider&Co.LLP
City Attorney TELEPHONE(323)583-8811 City Accountant
March 31, 2005
City Council
City of Vernon
Honorable Members :
In accordance with the recent review of the City' s Code by the City
Attorney' s office, it is hereby recommended that a resolution be
adopted directing the City Accountant to revise the City' s financial
policies, procedures and related internal control systems, approving
and adopting a revised internal control policy, repealing Resolution
Nos . 2224 , 2292 and 2308, and appointing the City Accountant as the
Acting Finance Director of the City.
Very truly yours,
Bruce V. Malkenhorst
City Administrator/City Clerk
BVM/ke
"Exclusively Industrial"
1 RESOLUTION NO . 8699
2
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
3 VERNON DIRECTING THE CITY ACCOUNTANT TO REVISE THE
4 CITY' S FINANCIAL POLICIES, PROCEDURES AND RELATED
INTERNAL CONTROL SYSTEMS AND APPROVING AND ADOPTING
5 A REVISED INTERNAL CONTROL POLICY
6
7 WHEREAS, the City of Vernon (the "City" ) is a municipal
8 corporation and a chartered city of the State of California organized
9 and existing under its Charter and the Constitution of the State of
10 California; and
11 WHEREAS, on November 5, 1958, the City Council of the City of
12 Vernon adopted Resolution No. 2224 establishing rules and regulations
13 for the purchasing department; and
14 WHEREAS, Resolution No. 2224 was amended by Resolution No.
15 2292 on August 18, 1959 and Resolution No. 2308 on December 1, 1959;
16 and
17 WHEREAS, with the adoption of the City' s Charter on April 12 ,
18 1988 , some or all of these resolutions may have been repealed; and
19 WHEREAS, the City desires to revise its financial policies,
20 procedures and related internal controls in conformance with all
21 applicable Stat atut s--.and
22 ' WHE S, by letter dated March 31, 2005 uce V.
23 Malkenhorst, Ci Administrator/City Clerk, recommended that the City
24 memorialize he repeal or repeal as the case may be Resolution Nos .
25 2224, 2 2 and 2308, that fhe City Accounta-n fie appointed the Actin
26 Fina ce Director of the City nd be directed to revise the City' s
27 f ' ancial policies,,,s edures and related internal control systems,
28 nd that a revised internal control policy be approved and adopted.
,Y
CITY ATTORNEY'S OFFICE
INTER-DEPARTMENT MEMORANDUM
DATE: March 23, 2005
TO: Bruce V. Malkenhorst, City Administrator/City Clerk
FROM: Eric T. Fresch, City Attorney � ,� ^ ��
RE: Revising the Financial Policies, Proc/,eGdures and Related
Internal Control Systems of the City
Dear Bruce:
I recommend that the City do the following:
lr` Repeal Resolution Nos. 2224, 2292 and 2308 adopted on November 5,
1958, August 18, 1959 and December 1, 1959, respectively, and
codified in the Vernon City Code as Appendix II, Rules and
Regulations of Purchasing Department;
2 . Memorialize the repeal of Appendix II of the Vernon City Code;
3 Direct the City Accountant to revise the City' s financial
policies, procedures and related internal control systems; and
4 . , Approve and adopt a revised internal control policy.
Appendix II was not incorporated, as part of Ordinance No. 827 and its
inclusion in the Vernon City Code was made moot by the adoption of the
City Charter on April 12, 1988, which provides that all codes and
regulations not in force on the date the charter took effect are void.
The City' s financial policies, procedures and related internal control
systems are outdated and need revision in accordance with state
statutes and public accounting standards.
I further recommend the adoption of an ordinance memorializing the
repeal of Appendix II of the Vernon City Code and the adoption of a
resolution repealing the aforementioned resolutions, giving direction
to the City Accountant and approving the adoption of a revised internal
control policy.
I look forward to discussing this matter with you at your earliest
convenience.
EF:bvmjr