Discussion:
During the last workshop I brought to the council's attention Minnesota statute 412.271 Subd. 8 which allows for a city council, at its discretion, to delegate its authority to review claims before payment. The statute requires certain internal accounting and administrative control procedures to ensure the proper disbursement of public funds. The city's revised purchasing policy establishes proper procedures that aid in maintaining the necessary internal controls.
Per the same statute, a list of all claims paid under the procedures established by the city council shall be presented to the council for informational purposes only at the next regularly scheduled meeting. The statute also requires a resolution authorizing the procedures established by council.
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 occur every other week, but there are times throughout the year where council has three weeks in between meetings causing an even greater delay.
The processing of an invoice can often take several business days by the time an invoice is received, routed to the appropriate personnel, verified for accuracy, approved by supervisor(s) and finally routed to finance. Once an invoice makes it way to the finance department, the process of preparing invoices for an entire council batch can take another 3 to 5 days. Depending upon the timing invoices are received, checks typically are not being mailed until close to 30 days after an invoice is received. By implementing the automated accounts payable system and releasing checks weekly, the city may have the opportunity to negotiate better pricing or receive additional discounts if payment can be guaranteed within so many days.
The new automated process will eliminate a lot of the idle time, as invoices will no longer be sitting in transition. This process will also improve the processing time within the finance department as staff will be preparing multiple batches per week as data input will be done on the front end rather than in one large batch at the end of the process.
As the purchasing policy stipulates, purchases above $25,000 are going to have either specific council approval and/or will be approved by the council through the budget process. For example, the purchasing of police patrol vehicles is typically reviewed by the council multiple times before the check is prepared for payment. The patrol vehicles are in
the CIP, operating budget, and a specific memo requesting authority to purchase vehicles is presented to council. At this point, the payment should be a formality.
These are the internal controls in place that the council can see. There are additional internal controls behind the scenes that ensure purchases are abiding to the purchasing policy and budget parameters. The behind the scenes internal controls include review of the council memo by the city administrator and appropriate director along with review by the finance department to ensure accurate accounting and budgetary control.
There was some discussion at the workshop about implementing a dollar limit on delegating the authority to release checks under this statute. On the surface that sounds like a feasible solution. However, from an operational standpoint it does not increase any efficiencies as staff then has to separate batches of invoices by dollar amounts. This would also require separate council communication, as checks above the threshold would need to have official council action, where as the checks below the threshold would be presented for informational purposes. At this point, staff would recommend either delegating all authority to release checks or to continue with the current process.
The city has strong internal controls and is continuously monitoring controls and procedures to ensure preservation of city assets. The delegation of authority to release checks should have no effect on the city's internal controls. On occasion there are disputes between the city and vendors, in those situations the authorized purchasing department is aware of the situation and will not release checks until the matter has been resolved to the city's liking. That happens today and will continue to happen with this proposed process.