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HomeMy WebLinkAbout18-034 Establishing Finance and Budget Policy Guidlines and Repealing Resolution 16-042Resolution I8-034 Page 1 of 2 RESOLUTION NO. 18-034 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PORT TOWNSEND, WASHINGTON, ESTABLISHING FINANCE AND BUDGET POLICY GUIDELINES AND REPEALING RESOLUTION 16-042 WHEREAS, the City Council adopted a set of Financial Policies and Budget Guidelines relating to Revenues, Expenditures, Reserves and general Budget goals and guidelines in Resolution 99-051; and WHEREAS, the City Council adopted an updated set of Financial Policies and Budget Guidelines relating to Revenues, Expenditures, Reserves and general Budget goals and guidelines in Resolution 14-042; and WHEREAS, the City Council adopted an updated set of Financial Policies and Budget Guidelines relating to Revenues, Expenditures, Reserves and general Budget goals and guidelines in Resolution 16-042; and WHEREAS, the State Auditor's Office and the Government Finance Officers Association recommends the adoption of Financial Policies and the periodic updates of these policies; and WHEREAS, the City's Finance and Budget Committee has reviewed the Comprehensive Financial Policies at its April 24, 2018 meeting; and WHEREAS, the City's Finance and Budget Committee recommend moving these updated policies forward to Council for review and adoption; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Port Townsend, Washington, as follows: Section 1. Resolution 16-042 is repealed and replaced by the attached Comprehensive Financial Policy Guidelines (Exhibit A to this Resolution); Section 2. The annual budget ordinance and supplemental ordinances shall be considered as a part of and implementing document for the City's Finance and Budget Policy Guidelines. Resolution 18-034 Page 2 of ADOPTED by the City Council of Port Townsend, WA at a regular meeting thereof, held this 16th day of July 2018. Attest., Joanna Sanders, OMC City Clerk - - --------------- --------- - Deborah S. StU011 Mayor Approved as to form: "wood I Gree cc wood City Attorney Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 1 of 23 Policy uJr"Uldelilles Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 2 of 23 Comprehensive Financial Management Policies Index I. FINANCIAL POLICY GUIDELINES ................................................ ............. ............. .....3 II. ORGANIZATION................................................................................................................3 III. ACCOUNTING, AUDITING AND FINANCIAL REPORTING......................................4 IV. FUND STRUCUTURE & FUND RESERVE GUIDELINES............................................6 V. REVENUE POLICIES ................................. ................ ......... ......... ...........................9 VI. OVERHEAD COST RECOVERY (COST ALLOCATION)...........................................11 VII. GENERAL BUDGET POLICIES -.... ........ ................... ........ -- ... ,...............,,.....,.12 VIII. FINANCIAL PLANNING POLICIES...........................................................................14 IX. ENTERPRISE FUNDS.....................................................................................................14 X. CAPITAL INVESTMENT PROGRAM PLAN POLICIES..............................................15 XI. DEBT MANAGEMENT POLICY ..................................... ........... ,,.......... ..,,.........,..,...... 15 XII. PURCHASING POLICY.................................................................................................17 XIII. GRANTS MANAGEMENT POLICY ... ................ ................ ............ ....... --- ....... ....... 17 Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 3 of 23 I. FINANCIAL POLICY GUIDELINES The financial policies outlined in this document have been developed in accordance with the Government Finance Officers Association's "Best Practices". These policy guidelines are intended to aid the City Council and City management in financial decision making. These policy guidelines also provide a means to test short term financial and budget decisions to help ensure the City is able to meet its immediate and long term financial service objectives and obligations. The City of Port Townsend is accountable to its citizens for the use of public funds. Municipal resources must be wisely used to ensure adequate funding for services, public facilities and infrastructure needed to meet the community's present and future needs. These policies are designed to help safeguard the fiscal stability required to achieve the City's goals and objectives. The City's Comprehensive Financial Policies have the following objectives: • To guide the City Council and management policy decisions that have significant financial impact. • To set forth operating principles which minimize the cost of government and financial risk to the City. • To employ balanced, consistent and fair revenue policies that provide adequate funding for desired programs. • To promote sound financial management by providing accurate and timely information on the City's financial condition. • To protect the City's credit rating and provide for adequate resources to meet the provision of the City's debt obligations for all municipal debt. • To ensure the legal use of financial resources through an effective system of internal controls. II. ORGANIZATION The City provides municipal services for its citizens, including protection of life and property, public health and welfare, and improved quality of life. The City Council deems it a high priority to deliver municipal services in the manner consistent for all citizens, and with maximum efficiency and financial prudence. The Council, as the legislative and governing body, sets the City's Financial and Budget Policy Guidelines, and through its Finance and Budget Committee, monitors and reviews the City's overall financial performance. The City Manager, as the City's Chief Executive Officer and Chief Budget Officer, is responsible to the Council for managing City operations and program services, and preparation of the City's Annual Budget consistent with established Financial and Budget Policy Guidelines. Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 4 of 23 The Director of Finance and Administrative Services, as the City's Chief Financial Officer and Chief Auditing Officer, is responsible to the City Manager for the preparation of accurate and timely financial and budget reporting. Additional responsibilities include human resource and information technology administration, general accounting, business license/tax administration and utility billing operations, =rant federal & state fundiri compliance, purchasin drain stratiot , as well as policy advice to the City Manager and Council. The Department Heads are responsible to the City Manager for dDepartment 29perations && budggto�bsL:r al1gg., an4-cCapital pp-roject management, pu� ,and grants administration. Department Heads monitor related revenue performance and expenditure control with the assistance of the Finance Department. The City must prioritize its services and, should revenues become constrained, the following services are considered priorities in the following general order: 1. Public Life, Health and Safety: Police, fire, emergency medical services; building inspections; and traffic control; water, sewer, and storm drainage service and streets infrastructure maintenance. 2. Legal Mandates: Accounting/auditing/financial reporting; land -use planning; required staff certifications and training. 3. City Facilities and Property: maintenance of parks, buildings, public rights of way, and City equipment (including information technology equipment); 4. Council and community goals, both annual and long-range, including strategic plan goals. III. ACCOUNTING, AUDITING AND FINANCIAL REPORTING The City will maintain a system of financial monitoring, control and reporting for all operations and funds in-efle-r--to provide effective means of ensuring that overall City goals and objectives are met. Accounting Records and Reporting — The City will maintain its accounting records in accordance with state and federal regulations. Budgeting, accounting and reporting activities will conform to the Budgeting, Accounting and Reporting System (BARS) for Governments as prescribed by the Washington State Auditor. The City maintains its accounting and btid >et� i egg records on a cash basis and adheres to the cash basis BARS manual. Ca lital Assets As a cash basis entity, the City records and reports only inflows and outflows of cash. When a capital asset is purchased the entire expenditure is recorded when the cash is expended and depreciation is not recorded. The City considers capital assets to be real and intangible assets above $5,000 in value that have an anticipated life of one year or more. Capital assets are tracked by the Finance Department as a fixed asset inventory list. Items that are no longer needed or no longer functional will be disposed according to the City surplus policy and state law. Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 5 of 23 Capital assets that are purchased with grant funds may be subject to additional compliance requirements. The department obtaining the grant is responsible for understanding any compliance requirements related to acquiring, inventorying, tracking and disposing of assets obtained through these types of funds. Small and .attractive Assets _ The City identifies small and attractive assets as items with a cost greater than $300 but less than $5,000. These items have a life expectancy of more than one year AND are not likely to be immediately missed upon disappearance. These items are generally mobile in nature and may be easily transported from the workplace. Some exceptions to the $300 minimum include tablets, phones agrsgnLll computers and other lower cost items that have ongoing maintenance or service costs associated with them. Department Heads are accountable for the security of these items and are responsible for following the Small and Attractive Assets Policy and Procedures that have been adopted by Council. The Finance and Administrative Services Director has oversight responsibility for this policy and the associated inventory of these items. Auditing — The State Auditor will perform the City's financial, federal single audit and accountability/compliance audits in accordance with state and federal laws. Results of the audit will be provided to the Council in a timely manner. Cash Mana ement — The Finance & Administrative Services Director will ensure that cash management systems are developed to ensure accurate and timely accounting for all cash and security of all cash assets. Careful financial control of the City's daily operations is an important part of the City's overall fiscal management practices. Achieving adequate cash management and investment control requires sound financial planning to ensure that sufficient revenues are available to meet the current expenditures of any operating period. The City's cash management and investment guidelines are as follows: 1lae.'rtr mill m.pl_ctnntgmetlrtg'_i%wVah �t1r._._i�aleat�a.1 ontrcal pr tcc� s for c ol,l' ct� atr.tai c a t .t � t� �c,.cl sbttrs c�l_t l fiiz and _ _ prudcrat investment of its,available cash. «� The Finance & Administrative Services Director Finance Director serves as the investment officer of the City of bort 'T"ownsend. The Finance Director is authorizedto oversee the investment program and to develo o tin m°ocedures to administer the prograni, The Finance Director may delegate the authority to conduct investment transactions and manage the operation of the investnient_portfolio to one or raaor-e subordinates as outlined in the investment program p i p participants i1pocess ro gram o.,eratrra � tocctlrric� 111 �rr•tit,r grants ara the t.,ic� s rnvcstnrrcnt shall act responsibly as custodians of the public trust. p ...I T� 1 '°l 1 11 -lad l P1 C"Dl ml l l l �-1 'l A =lt Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 6 of 23 AM222 U 213 a • As permitted by law and City ordinances and to maximize the effective investment of assets, all funds needed for general obligations may be pooled into one account for investment purposes. The income derived from this account will be distributed to the various funds based on their average fund balances on a periodic basis. NY, iy 1� � to ml--�r,.a�B,,,,.tla ha + t O�intem -ear=ned sum a�tnwi�l�l� l�u�"Dint-cl�ll�"- 'ntaaa�- . �nn�t 5,'ee_1 Fendi A l`c,)r Full Investment Policy. w �w no eh i,"#[A f'Gv'SH Yv'% n h p� w SrxTi�G:i-P'7LF-N.T1F»��'G'��R"C7�M�.Y., ��r-l"�k�9�1{l—"l IV. FUND STRUCUTURE & FUND RESERVE GUIDELINES The City's accounting and budgeting systems are organized and operated on a fund basis. Funds are accounting entities used to record revenues and expenditures. By definition, balanced funds mean that total revenues equal total expenditures. The budgeted funds are Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 7 of 23 grouped into categories: General, Special Revenue, Debt Service, Capital Projects, Enterprise, and Internal Service. The following provides a brief description of the fund types and reserve guidelines for each fund. The numbers in parentheses represent the BARS manual fund series numbering scheme. GENERAI, FUN1 010 -- This is the primary operating fund or current expense fund of the City. To maintain the City's credit rating and meet seasonal cash flow, the budget shall provide for an anticipated undesignated fund balance between 8% and 15% of estimated annual revenues for general government fund types. The fund balance shall be exclusive of all reserves not anticipated to be readily available for use in emergencies and contingencies. Should the fund balance fall below 8% of revenues, a plan for expenditure reductions and/or revenue increases shall be submitted by the City Manager to the Council. If, at the end of a fiscal year, the fund balance falls below 8%, then the City shall rebuild the balance within a period not to exceed three fiscal years. GENERAL FUND COUNCIL RESERVE Included in the General Fun — In addition to the Fund balance and the Contingency Fund, the budget for the General Fund shall provide for a "Council Reserve" equivalent to approximately I% of estimated operating revenues in the General Fund (010). Only the General Fund shall maintain a "Council Reserve." The Council Reserve is established to provide for non-recurring community requests or unanticipated needs deemed necessary by Council. The Council Reserve shall be suspended during times of significant economic downturn, especially during years when the General Fund ending fund balance falls below 5%. The Council Reserve is a budgeted appropriation expected to be specifically allocated at the Council's discretion. SPECIAL REVENUE 'FUNDS 101-199 -- These funds account for revenues derived from special taxes, grants or other restricted sources designed to finance particular activities. Apart from any unrestricted General Fund contributions to a Special Revenue Fund, the unexpended ending fund balances carry over year to year and should retain enough revenue to cover operating cash flow and anticipated major project or program obligations of the fund. Of these funds, the Street, Library, and Community Services funds are of an operations nature. The Street and Community Services Funds reserve balance will be equivalent to 2-3% of fund expenditures. The Library Fund reserve is set at 5-8% of Library property tax revenue. Other Special Revenue Funds are more cyclical or project related and only need retained ending fund balances or transfers in to cover anticipated obligations: Drug Enforcement, Lodging Tax, Fire/EMS, Affordable Housing, and CDBG Grants. CONTI NG ENC° 102 — While classified as a Special Revenue Fund, the City's Contingency Fund is more of a strategic reserve to meet emergency conditions or to help Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 8 of 23 maintain essential services during periods of economic downturn. Each fund should retain enough in its own Ending Fund Balance Reserves to offset minor non-recurring or unanticipated expenses during the budget year. The City's Contingency Fund is intended for major events and should be maintained at no less than 2% of the General Fund annual operating revenues. If the contingency falls below 2% of operating revenue, the City will initiate a plan that will restore the balance to the required level over a three-year period. DEBTSERVICES FUN I) 20II" — These funds are used to pay general government debt. The City shall retain or transfer in funds sufficient to cover the annual debt service obligations, and retain such "coverage" amounts to comply with bond covenants or other loan restrictions. CAPI'T'AL PROJECTS FUNDS 300 — These funds are established for the acquisition or construction of general government (non-utility) capital improvements. Ending Fund Balance Reserves should be maintained at levels sufficient to cover anticipated annual expenditures with transfers in from supporting funds (General, REET, etc.) to cover project needs. ENTERPRISE FUNDS 400 — These funds are the proprietary or "business -like" funds for operations providing services to the general public supported primarily through user's fees (Water, Sewer, Stormwater, and Utility Revenue Bond). The Ending Fund Balances of these funds should be equal to or greater than 60 days of operating expenditures and any additional amounts needed to build towards future project cash or debt payment needs. To the extent that the reserved Fund Balance and operating cash flow are not adequate to fund needed utility system improvements, additional rate increases or surcharges may be adopted by Council. Included in the Enterprise funds are Debt Service Reserve Funds, Utility Capital Project Funds and System Development Fund. Revenue bonds may be issued by the Enterprise Funds. Investors may require additional lending requirements or covenants. The ending fund balance of the Enterprise Funds should include a reserve to cover any additional covenant requirements INTERNAL SERVICE FtJNDS '500 — These funds are also internal "business -like" funds for operations providing services to other City departments (funds) on a direct cost - reimbursement basis (e.g. Equipment Rental including Information Technology services and equipment, Public Works AAdministaratioi and internal Engineering Services). Fund balances should break even, after set aside of funds for future capital equipment replacements. FIDUCIARY FUNDS 600 — These funds account for assets held by the City as a trustee or as an agent on behalf of others. Ending Fund Balances and any transfers in should be maintained consistent with fund restrictions. ENDING FUND BALANCE, RESERVES, CONTINGENCY SUMMARY Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 9 of 23 The following is a summary of the reserves guidelines. Guidelines will be reviewed annually as a part of the Budget process: • General Fund ........................................... 8-15% of operating revenue • Library ..................................................... 5-8% of property tax • Street ....................................................... 2-3% of expenditures • Community Services ............................... 2-3% of expenditures • Other Special Revenue Funds ................. Sufficient to meet obligations • Contingency ............................................ No less than 2% of operating revenue • Debt Service ............................................ Sufficient to meet obligations • General Capital ........................................ Sufficient to meet obligations • Enterprise Funds ...................................... 60 days of operating expenditures • System Development Charges Fund (Enterprise) .... Sufficient to meet obligations • Internal Service .......................................fir w, „a :.,,. vL-flue-Sufficient to me t 0 i - atg i ons • Fiduciary Funds ....................................... Sufficient to meet obligations The undesignated General Fund Balance (the balance not tied to a known project) will be maintained at a level that provides the City with sufficient working capital and a comfortable margin of safety to address emergencies and unexpected declines in revenue without borrowing. The City should not use the undesignated General Fund Balance to finance recurring operating expenditures. Annual General Fund revenues should be equal to or greater than annual regular operating expenditures. Reserves above the target can be used for new, expenditures, with emphasis placed on one time uses that achieve future gRgLgting cost reductions. _JOtl at oii mi slit bpi y'Ie ie ., . General Fund revenues will be used for general government, street and community service programs only. General Fund revenue for other purposes will require approval by the City Council. General Fund revenues will not be used to subsidize utility or enterprise operations, which will be self-supporting through user rates. V. REVENUE POLICIES General Revenue Policies - The City will strive to maintain a diversified and stable revenue system to shelter the government from short -run fluctuations in any one revenue source and ensure its ability to provide ongoing service. Restricted revenue shall only be used for the purposes legally permissible and in a fiscally responsible manner. Programs and services funded by restricted revenue will be clearly designated as such. Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 10 of 23 One-time revenues shall support one-time expenditures. County, state or federal funding will be used to finance only those capital improvements that are consistent with the capital improvement plan and local government priorities, and whose operation and maintenance costs have been included in operating budget forecasts. Enter rise Fund Revenue Policies - Enterprise funds will be operated in a manner that maintains a minimum ending fund balance that is not less than t)O days q,f QPg_ t_ i ex pepditures-5-41/1r,*l4-ot l opefatt"venues. Utilities will be self-supporting through user rates and charges. Utility user charges for each of the City utilities will be based on cost of service (i.e., set to full support the total direct, indirect, and capital costs) and established so that the operating revenues of each utility are at least equal to its operating expenditures and annual debt service obligations. The user rates of a utility shall be designated so that a portion covers replacement of the utility's facilities. '1"ire LJ,ti lity will condLtct a study orits user rates no less than every -yc rs s� side+ ' -1-dy-* imwov eat�ito ensure rates are adequate to fund egr ations and meet future needs,. -and. -Io -Am 1 - Fund balances may be used to temporarily offset rate increases, after sufficient funds have been accumulated for identified capital improvement needs or alternative fuinding for moiects has been secured. Fees and Charges Non-Utifi - All fees for licenses, permit, fines, and other miscellaneous charges shall be set to recover the City's expense in providing the attendant service. Average cost or actual cost methodology may be used. These fees will be reviewed periodically and will be incorporated into the budget process for possible action by Council. rtli�1#�:k+t wrii� "ns nee- -ley, NOF -oor-iiieastir+�-a,s-de, min y wi,474o , Ffees and charges for services will generally be set to recover the actual cost of service delivery.Fees that erre set lower then tthe cost of service deliver v will be reviewed at least every other year to determine if those fees are still appropriate based_on. City finances and the community needs. Exhibit i Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page •:eal whi � h induded King, Gown Where direct beneficiaries of a city program or services can be identified, fees will be established to recover the costs of that program or service. Fees will also be set in a manner that protects tax payers from subsidizing special service users. A fee shall be charged for any service that benefits limited interests within the community, except for human needs type services to persons with limited ability to pay. Rental fees will be established to recover full cost of use of the property or facility. Fees related to the rental of City properties may be waived only throu h a roval of the City Manager, The waiver of fees will only^ be provided if the air ose of the rental or it associated event will benelt the community at lame. Some services provide greater benefit to the community. When a greater community benefit is identified, the Council may choose to subsidize, either whole or in part, such services. Park and Pool Fees – The Pool division will strive to recover 50% of Pool costs by generating revenues through special programs, fees, charges, donations and/or designated use of City -operated facilities. l. _arl-ht nt1�1w ye�gY� Through a volunteer recruitment program, the Parks will seek to minimize the subsidy required for partial and minimum fee support programs. Solicitation of funds through donations, fund raising events, non-traditional sources, and various other modes will be encouraged by the City through its park and pool user groups. Funds collected for any special purpose shall be earmarked for that purpose. VI. OVERHEAD COST RECOVERY (COST ALLOCATION) As provided in the State Auditor's Office guidelines, "Cost allocation is a method to determine and assign the cost of central services to the internal -government users of those services. Cost allocation thereby enables local governments to more accurately account for the complete cost of the services it provides to the public—and to better assess the fees it should charge them." Included in cost allocation are direct costs (not otherwise charged to budget units) and indirect costs. Direct Costs are those costs that can be specifically identified with a particular service or unit if not already charged directly (e.g. facilities, janitorial, etc.) Indirect Costs are costs incurred for common or joint purposes, Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 12 of 23 benefiting more than one unit, not readily assignable to a specific unit (e.g. legal, human resources, administration, clerk, etc.). The term "allocation" implies that there is no overly precise method available for direct charging a cost to a unit, so the City is using the most appropriate method available for doing so. However, a cost allocation plan should be designed and used to provide a reasonable, consistent and equitable means to allocate costs. Inequitable charges result in questionable charges to grant, utilities and restricted funds. For grant purposes, costs that benefit the public at large cannot be included and should follow the OMB A-87 and/or 2CFR Part 200 guidelines. The Council adopted a Cost Allocation Plan in Resolution 14-035 on June 25, 2014. In addition to using the overhead cost recovery model to assess the appropriate amount of overhead to utilize for establishing user fees, the model will be used to apply charges to Departments/Funds for City-wide overhead indirect cost recovery where allowed (Council, City Manager, City Clerk, City Attorney and Finance). The Council may authorize waiver of the overhead cost -recovery in all or part if Council determines doing so will provide a general benefit to the citizens, taxpayers or utility rate payer. If a portion of the overhead cost -recovery is waived, the General Fund must absorb these costs; waived costs may not be absorbed by or reallocated to a Special Revenue or Enterprise Fund. A llIe-Re _ t 1-WE- t and ry'—�- °e to disetisS a �s� ,i s VII. GENERAL BUDGET POLICIES Annual Budget – 441"nmjal opefalking and Co nei4--a+rd the - it -y. mThe Ci 's annual budget will be developed in accordance with the dies and 2r i.tie5_s tJorth in the com preliensive plan the City Council's strate is plan, City Council sol gnd__12Ap i .ies the reeds oftkae coininunit , and federal and state laws. In general, budgeted revenues must meet or exceed budgeted appropriations each year. Current year operating expenses, maintenance costs and direct and indirect costs of services provided will be covered by current year revenues. One-time expenditures may be appropriated if one-time revenues or excess fund balance (in excess of reserve requirements) are available. The City budget appropriations are adopted at the fund level. Department heads are responsible for preparing a budget that reflects realistic expense projections and that adhere to guidelines within this policy document. Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 13 of 23 Expense (Appropriation) riationPolicies — Operating expenditures will be pm -o L�cib iAed at a level that will be supported by ongoing annual operating revenues. Staffing g Bud et Salary and benefit costs are the City's most significant operating expense. The City will strive to provide a total compensation package that is comparable to other cities and similar type positions within the same labor market or other cities of a similar size with comparable type and quality services in order to recruit and retain high quality staff. The City Manager's proposed budget will identify staffing levels and provide justification for any increases or decreases in overall City staffing. Union Contract negotiations may impact budget expenditures annually. However, if a collective bargaining agreement is, or will be, under negotiation, a specific amount will not be included in the budget from potential wage adjustments resulting from the negotiation, other than a base COLA adjustment. This is to protect the City from any claims of not "bargaining in good faith". Funding for unknown contract terms must be considered in balancing ongoing revenues with ongoing expenses. E ui meat Replacement & Maintenance - Equipment replacement and maintenance projections will be updated each year. Replacement of items with a cost of in $5,000 or more will be reviewed to time such expenditures at stable intervals to preserve cash flow, when possible. Deferment of regular repair and maintenance will not be used to balance the budget. Trainin and Travel — City employees or others on official City business or training may be required to travel outside the City to conduct their business or training for the City. City employees and officials will be reimbursed for reasonable and customary expenses incurred in the conduct of their business for the City, including food, lodging and travel expenses while away, excluding any expenses for personal entertainment or alcoholic beverages, as provided in the City's Personnel Policies Manual for business or training travel. Such training or travel shall be as provided either specifically or generally in the annual budget. Training is seen as an investment in maintaining the certifications and skills of the City's employees. At least 1% of the department's budgeted salary expense will be allocated for certifications and skills training. The City will also include a targeted amount of 1% of City-wide salaries for organizational development and process improvement. Investments that Forestall Adding Permanent Staff- Since personnel -related expenditures represent the largest portion of the City's budget, funding of technology or process improvements that increase efficiency and effectiveness of the delivery of City services should receive priority funding. Budget Monitoring- Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 14 of 23 The Finance & Administrative Services Director will maintain a system for monitoring the City's budget performance. This system will provide timely information to Department Heads and the City Manager in order to ensure accuracy of financial data and compliance with budget appropriations. The Council will receive (at a minimum) quarterly reports regarding fund level revenues and expenditure performance compared to budget. Significant financial issues that need to be addressed between regular monitoring reports will be provided to Council as warranted. The Finance Director will monitor unanticipated needs or emergency expenditures and prepare budget amendments in compliance with State Law. VIII. FINANCIAL PLANNING POLICIES FINANCIAL FORECAST — The City will develop a 5 -year Financial Plan and Forecast Model based on these financial policy guidelines and a best estimate of likely revenues and expenditures. The model will be used to test the policies against likely surrounding economic conditions. The model will be used for long-range financial planning and is not a replacement for budgeting. The City's financial planning will include the current year budget plus five additional years of projected data. The City may elect to extend its planning horizon further if conditions warrant. The long range financial plan operating revenues and expenses will include data for the General Fund, Contingency Fund, Library Fund and Community Services Fund. In addition to ongoing revenues and expenses, this forecast will utilize assumptions that forecast general obligation debt and general fund contributions to capital projects. The long range financial plan should present trends and projections in key financial indicators, such as: • Revenues and expenses per capita including nominal and inflation adjusted data. • Staffing levels per 1,000 population: total and by major department. • Projected annual growth rates of revenues and expenses including personnel costs. The long range financial plan may include comparisons to other cities and benchmarks, recognizing that the data for comparable cities may reflect differences in service delivery, financial structure and financial policies. Comparative information may include: • Comparative revenues and expenses by major type to include: o Total revenues and expenses per capita. o Taxes per capita by tax source. IX. ENTERPRISE FUNDS Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 15 of 23 The Water, Sewer and Stormwater utilities will be managed as self-supporting business enterprises. Each utility will be managed in a professional manner in accordance with applicable laws and standards. The long range financial plan model for each utility will analyze rate revenues, rate structure, operating costs, replacement capital costs, debt service and other utility considerations (special rate programs, paybacks, etc). The City may utilize specialized rate consultants to evaluate the rate and cost structure of the utilities. X. CAPITAL INVESTMENT PROGRAM PLAN POLICIES General Policy Considerations - The major resources for funding capital improvement and capital maintenance programs are revenues, grants and debt. Financing planned capital replacement costs are an ongoing challenge. Preparing for the challenges of infrastructure replacement or enhancements demands a long-term view of replacement needs. In order to plan for these needs the City will develop a six-year Capital Improvement Plan (CIP) for adoption by Council as required by the Washington's Growth Management Act. The CIP will be consistent with the Capital Facilities Element of the City's Comprehensive Plan. A c ital . ro ect over$15,000 with a minimuni of a five-year _anticiafe will be included in the CIP. -Nl . -1 99 p� r m` - " � ( r to 11I ter [4" " . . it r -1P XI. DEBT MANAGEMENT POLICY Long Term Debt - The City will manage its long-term debt in a manner designed to utilize its credit to optimize City services while balancing overall debt levels and annual debt service obligations. Long-term debt includes Bonds, Federal or State loans (e.g. PWTF, FHA), or private placement financing. The City shall only use long-term debt for capital projects that cannot be financed out of current revenues. Annual debt payments should not exceed 15% of the total of annual General Government operating revenues plus budgeted transfers from capital funding sources. General Government Funds include the General Fund, Contingency Fund and Special Revenue Funds. Debt financing will generally be limited to one-time capital improvement projects and only under the following circumstances: • When the project's useful life will exceed the term of the financing; • When project revenue or specific resources as identified will be sufficient to service the debt; • When projects cannot be cash funded. Debt financing will not be considered appropriate for: • Current operating and maintenance expenses (except for issuing short-term instruments such as revenue anticipation notes or tax anticipation notes); and any recurring purpose (except as indicated above). Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 16 of 23 Tax anticipation debt will be retired annually, and bond anticipation notes will be retired within six months of the completion of the project. Short-term debt outstanding at the end of the year will not exceed 5% of net operating revenue (including tax anticipation notes but excluding bond anticipation notes.) The City's Limited (non -voted) General Obligation (LTGO) Debt Capacity per State Law is 1.5% of total assessed value. The City should seek to retain 5-10% of its LTGO Debt Capacity for unforeseeable catastrophic emergencies. Options for Interim or `Bridge" financing may include: • Bond Anticipation Notes (BANS) • Tax Anticipation Notes (TANS) • Lines of Credit with major financial institutions • Interfund Loans Short Term. Debt — Transfers and Interfund Loans — General Fund transfers to other funds are intended as payments for the support of specific programs or services. Amounts not needed to support such specific program or service expenses will remain in the General Fund's fund balance. For example, the General Fund may make transfers to the Debt Fund to fund annual debt service payments or to the Community Services Fund to support parks or service programs. Interfund loans are temporary in nature. The requirements for interfund loans are as follows: • The Council must approve all interfund loans by resolution. The resolution will include a planned schedule of repayment of the loan principal as well as setting a reasonable rate of interest to be paid to the lending fund. • The borrowing fund must reasonably be able to anticipate sufficient revenue to repay the principal and interest payments as required by the authorizing resolution. • The rate of interest should not be lower than the "opportunity cost" if the funds were otherwise invested, such as the LGIP (Llocal Government Investment Pool) rate or a bank CD rate for a similar term; not higher than the external rate available to the municipality. • Interest is not required in the following circumstances: o If the borrowing fund has no independent source of revenue other than the lending fund; o The lending fund is the General Fund, which, being unrestricted, can provide interest free loans to other funds. • The term of the interfund loan will not exceed three years. Any interfund loans that are not repaid within three years will be scrutinized for a "permanent diversion" of moneys. (Note: These restrictions and limitations do not apply to those funds which are legally permitted to support one another through appropriations, transfers, advances, etc.) Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 17 of 23 For short-term cash deficits in non -General Fund operating funds during the course of the year, City interfund loans are preferable to outside short-term or private sector lines of credit. XII. PURCHASING POLICY Purchases of goods, services and capital items will be made consistent with the annual budget appropriations, state and federal law, the City's Purchasing Ordinance and the State Auditor's requirements. The City's Purchasing Ordinance will outline the City Manager's spending and contracting authority. Any purchases or contracts above those authority limits must be authorized in advance by City Council (some exceptions for public emergencies will apply). The City Manager may delegate spending authority (within his/her limits) to Department Heads to facilitate operating efficiency. The City Manager and Department Heads purchase goods and services at a reasonable cost, using an open, fairly documented and competitive process whenever reasonable and possible. The Finance & Administrative Services Director is charged with developing administrative/operating procedures to implement sound purchasing policies. These procedures will be based on guidelines provided in State Law and by the State Auditor's Office. All purchase made by the City will ultimately be approved by the Council through the voucher approval process. XIII. GRANTS MANAGEMENT POLICY Leveraging City and community resource with external financial assistance can enhance the quality and level of public services, facilities and infrastructure. City Policy is to seek and accept grants and other financial assistance consistent with the City's strategic plan. External assistance also carries with it the goals and restrictions of the grantor. Grant relationships are partnerships where the goals of both the City and grantor must be in alignment. The benefits, costs and long-term implications of the partnership must be considered prior to formal application. The City's Grants Management Policy involves the following steps: Search — City departments staff and officials are encouraged to actively search out and identify potential grants which may further the City's vision and goals, within the City's financial limitations. Pre -Application — Department Directors and staff shall pursue grants within their purchasing authority identified in City Purchasing Policies. The City Manager shall be advised of all grant considerations over a $10,000 total. Formal Application — Formal applications directly by the City, or indirectly by other agencies involving the City, must fall within Departmental Purchasing levels. Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 18 of 23 All grants will seek reimbursement of direct cost departmental and City wide indirect or administrative costs to the maximum extent allowable by the grantor. Grants by other agencies involving the City or by the City involving other grantees must have City Manager, or Council approval beyond the $60,000 Purchasing levels. Award and Conti -act — Upon formal Notice of Grant Award (NOGA) or informal notification, a written contract must be approved prior to any City commitment, formal or otherwise. All grant contracts must be within the City's Purchasing levels. Any needed budget amendments for grant match not otherwise within general budget authority shall be adopted prior to formal grant acceptance and contract signing. Accountine and Re portin — City departments shall coordinate with Finance to assure that grants comply with Federal, State and local requirements for timely reimbursements, monitoring of vendors and sub recipients, as well as City Purchasing Policies. Any notification of audit of grant programs or funds should be sent to the Director of Finance and Administrative Services even if the audit is coordinated in another department. Close Out — Multi-year grants shall have periodic accounting reviews not less than at the close of each fiscal year. Upon conclusion of each grant, the Department grant manager shall prepare a grant close-out report in coordination with the City's Finance Department. A complete grants management file record shall be maintained per City policy, either in the Department, Finance or Clerk's Office. The City Council Adoi)ted Federal. Awards Standards Procurement Policy and Code of Conduct Policy for all Federal Loans and A' nts on July_ 10, 2017, Standards [or federal awards are detailed in Appendix AA. =4- ;ITA-INa -V--1 'S MLZN - POLK2 APPENDIX A: INVESTMENT POLICY — To the extent possible, funds not needed for o erations should be invested in approved roved investment vehicles. Investments shall be madewith`u,dannent and care, under circumstances thenrevailin that -persons of.prudescretion and intelligence in the Ln Li ei,nent oil"their owra al"fairs t, of lo�g�,t!l tipj l q orwinve tmnt, considering the m (_Ih lbi_ s l"ty o f their ca ital as well as the probable income to be derived. The standard o f prudence to be used by investments officials shall be the prudent person standard and shall be amlied in the context of manning the overall portfolio,,. Investment � fficers actin in accordance with written rocedures and the investments policy and exercising due diligence shall be relieved of personal respoij!ii ail�ty 9tjiL4n individual's security's, credit risk of market price changes, provided deviations from expectations are re ortcdin a timely fashion and aimrooriate action is taken to control adverse developments, Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 19 of 23 The City will strive to maximize the return on its investments, with the priniary objective of preservin �e a Udin diversification. prudent investment practices incl Investments will be made in accordance with the following objectives: 1) Lelgal e "w " i t ' h the , " R , evised Code of Washington (RCW)the BARS. manual, these policies and any gpplicable administrative arogecltare. 2) Safety: Investments of the City will be Undertaken in a manner that seeks to ensure the preservation of clDital in the overall portfolio. To attain this obiective, diversification is reouired in order that potential losses on individual securities do no exceed the income g.e q ated by other investments. ,icLuidjt,y,Ljjie City's investments will remain sufficiotly liquid to enable the Ceity t rnect all operating reg uirernents that might be reasonably anticil2ated. )Yield: '"I'he City's investments wil I be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the City' investment risk constraints and cash flow characteristics. "Hie Finance & Administrative Services Director will approve financial iiistitutions to be �"Iilmmble to conduct investment business witli the Cityin accordance with Washington State Law. The Finance & Administrative Services Director will periodically furnish the City M�araa to seed Coaancil with a ac aoat that shall include the amount of interest earned to date. At least annually, a report surnmarizing, investment activity and rate of return will be provided. APPENDIX B- CITY OF PORT TOWNSEND FEDERAL AWARDS STANDARDS, PROCUREMENT POLICY & CODE OF CONDUCT CITY OF PORT TOWNSEND FEDERAL AWARD STANDARDS ran 9-01M, I.."stablisli and maintain internal controls that provide reasonable assurance that Federal awards are being managed in compliance with all federal regulations and with the terms and conditions of the award. The Cit v of Port "Fownsend will Ballow the Uniform Guidance, the LqgM AgDxy Q'L�a&Ijncs (L.AQ) distributed byThe Washington State Devartment of 1'ransportation (WSD6T), and the City of Port Townsend's Coin rehensive Financial ManaggMggtj!&cy I ( uidelines. INTERNAL CONTROLS The City of Port Townsend ...wild maintain effective internal control over the Federal Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 20 of 23 awardid that the City of Port Townsend is niana gin pj(L) .......... _in ' reasonable assurance that _..— — port — the Federal award in co iance with Federal statutes, regulations, and the terms and conditions of the Federal award. • Take prompt action when instances of noncompliance are identified includitig norpcorn liar ce identified in audit findings. • Take reasonable measures to safe guard pip.,r.!!&.personaljy identifiable information and other information the Federal g��ding..agency -qr-pass- through entity nates as serpsitive. ADVANCE PAYMENTS AND REIMBURSEMENTS Payment methods must niinirnize the time "elapsing between the transfer of funds from the United States TreaStIrY or the pass-through et2jjjy_�� disbursement by the City of Port Townsend whether the payment is niade by electronic funds transfe issuance or redeMption tion warrants, or Dayment by other means. • Advanced pqymencs must be limited to the minimum amounts needed and be timed to be in accordance with the aKLLija, immediate„ cash requirements of the ........................... (I.ity qjLj'� )E.....o.-. q.Townsend to carr out the purpose of thea pj�)� ....- project, Any yaqq�AV4 rents must be consolidated to cover antici ed _Ad _y..t cash needs. • The-K:jjyQf* Port Townsend shall minimize the time elapsed between receipt of federal aid funds and subse(I Uent pqyment of incurred costs. ALLOWABLE COSTS Federal awards will meet the followin2 gencral criteria to be allowable excepLtwhene.., otherwise authorized by statute: • Be necessary nd reasonable for tile performance of the Federal award, Conforill to any limitations or exclusions set forth in these principles or in the Federal award as totypes or amount of cost items; • Be consistent with oficies and procedures that av uniformly to both Federally- financed and other activities of the City of Port Townsend; • Be accorded consistept treatnicnt, Not be included as cost or used to meet -cost sharing or matching re(mirements of any other Federally . .... fin:4nq jTroram in either the Current q�i a.priqLper:iod, - Be adqqjjajeI documented. y Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 21 of 23 PROCUREMENT When piggiging oPert and services under a Federal award the City of Port Townsend will follow 2 CFR _200.318 General procurement standards through 200.326 Contract provisions or City of Port Townsend purchasing procedures whichever is more restrictive. The following table outlines procurement requirement when Mina Federal funds.. Procurement Goods Services Method Micro -Purchase - No $3„ 000 e m 0 or less required pates. However Must use more restrictive Must use more $3,000 federal threshold must consider orrice as mu�._.�p restrictive $3,000 federal reasonable and to the threshold extent practical distribute ouital?l' arrto su Pliers. Small Purchase $3,000 - $40,000 (Single $3,000 - $40,000 (Single trade), $3,000 - $65,000 Procedures trader $3,000 - $65,000 trade -,$3,000- (Multi trade' � $1 "3, tt0 - informal Obtain/(Multi document quotes 0,,0!Ou_(Nott-'UbJ , $5 0AQQ l iota Public from a reasonable '"orksria oje ts) Works project number of uualified sources at Must use more Must use more least thr !). restrictive Cit thresholciw restrictive tiv it ° threshold instead of $150 000„ instead of $150,000 Federal threshold Federal threshold Sealed Bids / Competitive $40„000 or inore_(Sin $40,000 or mote (S ._ rnie trade); $65,000 or more i iris (i clrm zl' trade); $0,5 000 or more . Multi trgdc t $50,000 war (Multi tr cio ..$.50 OQ nor (1 17 I"Liblio t�-ore on Public Works Projects Works Protects Must use more Must use more restrictive restrictive City City threshold threshold instead of instead of $150,000 $150,000 Federal Federal threshold threshold orrtrtr�amca �:psalms Used when conditions ar e noimana 1 ratcw forM theuse of sealed bids. *.... Must publicize re uest for, peals Exhibit A to Resolution I8-034 Comprehensive Financial Management Policy Guidelines Page 22 of 23 woJCttj ftpM an adequate number m of qualified source; • Maintain written method for conducting technical evaluations • Contract must be awarded to the responsive and responsible firm whose a Js most;, advantgtgeogs to the ro ram_ _ icor coinpct�tir�e....._............... Appropriate only when: proposals • Available onlv from a sin le source; or • ... Public crne�and • Ex ressl authorized by awarding orass- throu'l� axle c in response to written request itmoin the C Port Townsend; of • After soliciting a number of sources competition is decined inadequate.- Contracts nadeqgate. Contracts for more than the simplified acquisition threshold currents set at $1.50,000 must address administrative contractual or legal remedies in instances where contractors violate or _breach contract terms and provide for such sanctions and penalties aha :a trig e. mmmm �J 10.0 rcip tat city N ��uht��e�11 Contracts an sub -grants �- grants of arour�t in r:�x�css of1 Townsend will comply with all applicable standard r . rgpulati ns issued uprsuant to the Clean Air Act and the Federal `Nater Pollution Control Act.. Ctty of PortTownsend will nionit r procurements to avoid duplicative p rchases and exhaust all mandated sources before soliciting new sources. The City will also continue to enter into inter gilt 'it q rcer�rents to realize cost savings for :" � " savings shared _ goods and services when o sible, The City will verify and documentthatvendors are not suspended or debarred from doing business with the Federal government. SINGLE AUDIT ACT The City of Peart "Townsend as a recipient of Federal funds shall adhere to the Federal �......... ........... Ecnt.a-tions outlined in 2 CFR 200.501 as well as all a licable Federal and µState statutes and regulations, CLOSURE iviect y reement end date will be established in accordance with 2 (.;.TI? x'200.309, Any costs rnctrrd afo�tlac, ent tdate ark, not eli ible Ibr P ecera -_._ reimbursement. Exhibit A to Resolution 18-034 Comprehensive Financial Management Policy Guidelines Page 23 of 23 CITY OF PORT TOWNSEND CODE OF CONDUCT PURPOSE Thq DUr )ease of the Code of Conduct is to ensure the efficient, fair and professional administration of federal.. grant funds in compliance with 2 CFR 200.112 2 CFR §200.318 and other applicable federal and state standards, regulations. and laws., APPLICATION This Code of Conduct applies to all elected officials, gnplq c s or_jgof -tLe.. ",4y of Port "fownsciid cunyed in the award or administration of contracts supported by federal grant funds. REQUIREMENTS No elected official, employee or agent of the Cit of Port Townsend shallDarticit)ate in the selection, award or adiniiiistration of a contract sqp Li(Lqted b j2I funds it' __�L Lg�a fu _ a conflict oaf interest real or apparent, would be involved. Such a conflict would arise - - -.ttz!� when any of the followin2 has a financial or other interest in the firm selected for award: • The City employee, elected official, or agent; or • Any member of fficir immediate famjjy;_jH • 'I'heir parLner; or • An organization which employs, or is about to eMplqy any of the above. The Cit of Port Townsend's elected officials, employees or agents shall neither solicit nor acceplZratuifies , favors, or an3lhing of monetary value from contractors, Potential contractors or subcontractors. REMEDIES I , o the extent Mitte(Lby federal, state or local laws or regulations, violatim of these standards m!qy cgliseTenallies, sanctions or other disciplinary actions_( to and ............ . . — including; employment or contract terminatioil, to be taken aiLainst the City of Port . . ........... Towtisejid's elected qEficjqjs nlRcs eai gggjts, cab_the copractors _— eptial contractors Subcontractors or their agents. _ALIY._pqtgj corillict of interest will bc disclosed in writing to the Federal awardipZ_4genc y_qr,pass-through entity in accordance with applicable Federal award qqqy -.)IL _pL qy.,