The finance department is in the beginning stages of implementing an automated accounts payable process.  The process is anticipated to go live around the end of June.  Similar to the Project Dox system undertaken for permits and licenses, this will move the accounts payable process to a completely automated approval process eliminating the need for paper invoices and speeding up the internal review process.  Thus enhancing vendor relations, improving staff efficiencies and strengthening internal controls. 

Staff already receives a majority of recurring type invoices electronically from vendors.  The current process requires staff to print and route invoices to the correct department for account coding and approval. From there the invoices are sent back to the finance department to begin the check preparation process.  The automated process will eliminate both the need to print invoices and other manual steps along the way.  In addition, with the automated system staff will know exactly where an invoice is at in the approval process at all times.  

Implementing this automated system will also ensure purchasing controls abide by the policy in place.  City ordinance 32.15 subd. (D)(7) states the city administrator is empowered to "Purchase or enter into contracts for previously budgeted items when the amount thereof does not exceed $15,000, and purchase or enter into contract for previously budgeted services, when the annual amount of such contract does not exceed $15,000.  For items and services in excess of $15,000, the City Administrator shall receive estimates, quotations, proposals, or sealed bids, as appropriate, and present them to the Council for official action." 

In January 2014, the Council approved an updated purchasing process.  This process spells out the procedures and stipulations for staff involved in making purchases on behalf of the city.  The process stipulated that the city administrator and department heads have authority to make purchases up to $25,000. 

This difference between the approved process and the ordinance has caused confusion and needs to be clarified.  The purchasing process approved in 2014, was basically a process not a policy.  The attached draft purchasing policy is more in-depth than the prior approved purchasing process, yet does not delve into standard operating procedures (SOP).  SOP's are intended to provide staff with specific instructions versus a policy which is a higher level document approved by Council.  

The draft purchasing policy increases the city administrators purchasing authority to $25,000.  If the Council concurs with this policy, an amendment to the ordinance would also accompany the purchasing policy at a future council meeting for official action.

In researching both the automated accounts payable process and purchasing policies of cities throughout the metro, I wanted to bring one matter to the Council's attention.  When visiting with staff from Edina they mentioned their automated accounts payable process from the time an invoice is received until a check is mailed has been cut down from 2 to 4 weeks to literally 2 or 3 days in some scenarios and on average its about 5-7 business days.

This begged a question from me as to how that can be since the Council needs to approve checks before they can be released and most Councils only meet twice a month.  Their response was that they process and mail checks every week and provide Council with a check register as informational material in their council packets.  Minnesota Statute 412.271 Subd. 8 allows for a city council, at its discretion, to delegate its authority to pay certain claims made against the city to a city administrative official.  The city needs to have internal accounting and administrative control procedures in place and must also delegate this authority via resolution.  This practice was not unique to Edina, as other cities in the metro have also moved in this direction. 

As staff looks to improve customer service by paying vendors more timely through automated accounts payable, the ultimate bottleneck remains that checks will continue to be held until official Council approval.  Most council meetings happen every other week, but there are times throughout the year where council has three weeks in between meetings, causing an even greater delay in payment. 

Is it necessary to hold checks for Council approval?  The city's internal controls are strong along with a new purchasing policy that will be programmed into the accounts payable system will heighten controls even further.  In addition, the Council will still be approving purchases on the frontend for items greater than $25,000.    

This question is a comfort level question and staff is fine with either decision.  I more or less wanted to make sure the Council understood the process.  Even if the release of checks continues with the current practice, this new automated system will generate increased staff efficiencies and heightened internal controls.  Both a definite benefit to the city.