HomeMy WebLinkAboutOrd 558-2011 Adopting Financial Policy.pdfCITY OF ANNA, TEXAS
ORDINANCE NO. 558-2011
AN ORDINANCE OF THE CITY OF ANNA, TEXAS, ADOPTING A FINANCIAL
POLICY; REPEALING ORDINANCE NO. 511-2010; REPLACING IN FULL ALL PRIOR
FINANCIAL POLICIES, INVESTMENT POLICIES, AND INVESTMENT STRATEGIES;
PROVIDING FOR A SAVINGS, SEVERABILITY, AND REPEALING CLAUSE; AND
PROVIDING FOR PUBLICATION AND AN EFFECTIVE DATE.
WHEREAS, the City of Anna, Texas ("the City") is committed to principles and
practices of open and fair government that honor the public trust; and
WHEREAS, the City of Anna, Texas City Council (the "City Council") has determined
that it is in the interests of the citizens of Anna to adopt a new Financial Policy that
establishes policies and procedures to govern the management and care of public
funds; and
WHEREAS, The Public Funds Investment Act ("the Act") requires annual review of
the City's investment policy and investment strategies and the recording of any
changes made to said policies and strategies; and
WHEREAS, the City has determined it is in its best interest to comply with the
requirements found in the Governmental Accounting Standards Board (GAS B)
Statement 54 -"Fund Balance Reporting and Governmental Fund Type Definitions";
and
WHEREAS, the City Council desires to repeal and replace all prior financial policies,
investment policies, and investment strategies with the financial policy, investment
policy and investment strategies by adoption of this ordinance;
NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF
ANNA, TEXAS, THAT:
Section 1. Recitals Incorporated.
The above-referenced recitals are incorporated herein as if set forth in full for all
purposes.
Section 2. Ordinance No. 511-2010 Repealed.
City of Anna Ordinance No. 511-2010 is hereby repealed in its entirety and the financial
policy, investment policy and investment strategies adopted under said ordinance are
replaced in their entirety with the financial policy, investment policy, and investment
strategies adopted under this ordinance.
Old. 558-2011 Amending City's Financial Policies Page 1 of2 09-27-11
Section 3. Investment Policy Reviewed.
The City Council has hereby reviewed the City's investment policy and investment
strategies and any changes made to the previous investment policy or investment
strategies are recorded in the Financial Policy attached hereto as Exhibit 1, said exhibit
being incorporated herein for all purposes as if set forth in full.
Section 4. Financial Policy Adopted.
The City Council hereby approves and adopts the Financial Policy attached hereto as
EXHIBIT 1, said exhibit being incorporated herein for all purposes as if set forth in full.
Said Financial Policy, including but not limited to the investment policy and investment
strategies set forth therein, supercedes and replaces the provisions of the previous
Financial Policy adopted under City of Anna Ordinance No. 511-2010 on September 28,
2010.
Section 5. Savings, Severability and Repealing Clauses.
All ordinances of the City in conflict with the provisions of this ordinance are repealed to
the extent of that conflict. If any section, subsection, sentence, clause, or phrase of this
ordinance, or its application to a particular set of persons or circumstances, is declared
invalid or adjudged unconstitutional by a court of competent jurisdiction, it does not affect
the remaining portions of this ordinance, as the various portions and provisions of this
ordinance are severable. The City Council, declares that it would have passed each and
every part of this ordinance notwithstanding the omission of any part that is declared
invalid or unconstitutional.
Section 6. Effective Date.
This ordinance shall become effective after its passage and upon the posting and/or
publication, if required by law.
PASSED by the City Council of the City of Anna, Texas. on this the 2th day of
September, 2011.
ATrEST:
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On:!. 558-2011 Amending City's Financial Policies 09-27-11
City of Anna, Texas
Financial Policies
September 21,2011 o
BUDGET POLICY
Introduction:
The City of Anna, Texas financial policies set forth the basic framework for the fiscal
management of the City. These policies are to ensure consistency in the City's financial
processes related to revenue, expenditures, purchasing, accounting, investing, fiscal management
and integrity, and fund balance. The City's financial policies are intended to assist the City
council and City staff in evaluating current activities and proposals for future programs. The
policies are to be reviewed on an annual basis and modified to accommodate changing
circumstances and conditions. The City of Anna will ensure long-standing policies that provide
guidelines for current decision-making processes and future plans.
Operating Budget Policies:
The fiscal year of the City of Anna shall begin on October 1 of each calendar year and end on
September 30 of the following calendar year. The fiscal year will also be established as the
accounting and budget year.
The operating budget will be balanced with current revenues and a portion of beginning
resources or fund balances which will be greater than or equal to current expenditures or
expenses. The City Manager's budget shall assume, for each fund, operating revenues that are
equal to, or exceed operating expenditures.
Annual estimates of revenues in all funds will be based on historical trends, and reasonable
expectations and assumptions regarding growth, the state of the economy, and other relevant
factors. A conservative approach will be observed in estimating revenues.
Expenditures in all funds will be managed so as to ensure the fund's obligations are met when
due. Throughout the year the Finance Department will provide regular budgetary comparisons
reports to Department Directors and the City Manager. These reports will highlight Adopted
Budget, Adjusted Budget, Current, Year to Date, and Previous Year expenditures and revenues.
These periodic budgetary comparisons statements of revenue and expenditures will allow
department directors to adequately manage their department's budget and anticipate revenues
and expenditures.
Expenditures within the each Fund will remain within each department's original appropriation
unless an intra-fund budget transfer is approved by the City Manager. The City Manager is
authorized to approve intra-fund transfers. Only the City Council may approve inter-fund
transfers. Budget amendments will occur when total actual expenditures exceed budgeted
expenditures in any fund(s). Budget amendments are authorized only by the City Council
approved by ordinance. If at any time during a fiscal year the City Manager estimates that
current year expenditures in any fund will exceed available revenues, the City Manager will
submit a plan to the City Council addressing the estimated deficit including a plan of action to
overcome the estimated deficit.
Anna's budget is coordinated to identify major policy issues for the City Council to consider
several months prior to the budget approval date. In this way, the Council has adequate time to
September 27, 2011 1
evaluate decisions and ensure proper decisions are made. The budget review process will include
City Council, City staff, and citizen participation through public hearings.
Each department head is responsible for ensuring proper budgetary procedures are followed
throughout his or her department.
Investments made by the City of Anna will be in compliance with policies contained in the City
of Anna Investment Policy and the Public Funds Investment Act. All investments will be
evaluated upon safety, liquidity, and yield. Interest earned from investment of available funds is
based on departmental ownership of the invested dollars and will be booked to the appropriate
department's fund when realized.
After City council adoption, the budget shall be in effect for the budget year. Final adoption of
the budget by the City council shall constitute the official appropriations for the current year and
shall constitute the basis of the official levy of the property tax. Following the final adoption of
the budget by ordinance, the City Council shall pass an ordinance levying property taxes for the
current year.
Fund Balance:
A key element of the financial stability of the City is to establish guidelines or "safe harbors" for
fund balance. Unassigned fund balance is an important measure of economic stability. It is
essential that the City maintain adequate levels of unassigned fund balance to mitigate financial
risk that can occur from unforeseen revenue fluctuations, unanticipated expenditures, and similar
circumstances. The fund balance also provides cash flow liquidity for the City's general
operations.
For governmental funds, it is important to distinguish between fund equity and fund balance. A
fund's equity is typically the difference between its assets and liabilities. Fund balance is an
accounting distinction made between the portions of fund equity that are spendable and non
spendable. The Governmental Accounting Standards Board has established 5 classifications of
fund balance:
1. Nonspendable fund balance -includes amounts that are not in a spendable form or are
required to be maintained intact. Examples are inventory or permanent funds (i.e.
endowment funds).
2. Restricted fund balance -includes amounts that can be spent only for the specific
purposes stipulated by external resource providers either constitutionally or through
enabling legislation. Examples include grants and child safety fees.
3. Committed fund balance -includes amounts that can be used only for the specific
purposes determined by a formal action of the government's highest level of decision
making authority. Commitments may be changed or lifted only by the government taking
the same formal action that imposed the constraint originally.
September 27, 2011 2
a. The City Council is the City's highest level of decision-making authority and the
fonnal action that is required to be taken to establish, modifY, or rescind a fund
balance commitment is a resolution approved by the Council at the City's Council
meeting. The resolution must either be approved or rescinded, as applicable, prior
to the last day of the fiscal year for which the commitment is made. The amount
subject to the constraint may be detennined in the subsequent period.
4. Assigned fund balance -comprises amounts intended to be used by the government for
specific purposes. Intent can be expressed by the governing body or by an official or
body to which the governing body delegates the authority. In governmental funds other
than the general fund, assigned fund balance represents the amount that is not restricted
or committed. This indicates that resources in other governmental funds are, at a
minimum, intended to be used for the purpose of that fund (Le. only funds in the capital
projects fund may be used for capital projects).
a. The City Council has authorized the City Manager to assign fund balance to a
specific purpose as approved by this fund balance policy.
5. Unassigned fund balance -is the residual classification of the general fund and includes
all amounts not contained in other classifications. Unassigned amounts are technically
available for any purpose.
Minimum Unassigned Fund Balance
The City shall set aside resources during years of growth to fund a reserve for years of decline
and/or to fund capital out of current funds for projects that would have otherwise been funded
through debt financing. It shall be the goal of the City to maintain an unassigned fund balance in
the General Fund of25% of total appropriations.
Minimum Unrestricted Net Assets
The City shall set aside resources during years of growth to fund a reserve for years of decline
and/or to fund capital out of current funds for projects that would have otherwise been funded
through debt financing. It shall be the goal of the City to maintain unrestricted net assets in the
Utility Fund (a non-governmental type fund) of25% of total appropriations.
At the close of each fiscal year, the unencumbered balance of each appropriation shall revert to
the fund from which it was appropriated.
If minimum fund balance falls below the goals stated above, the City Manager will develop a
strategy to initially evaluate current government wide spending to detennine areas where cost
efficiencies may be realized and implement those efficiencies. Should the analysis prove
insufficient to attain the goal, a multi-year strategy will be put in place to meet the goals through
a combination of cost cutting, cost recovery, and revenue enhancing strategies.
Order ofExpenditure ofFunds
When multiple categories of fund balance are available for expenditure (for example, a
construction project is being funded partly by a grant, funds set aside by the City Council, and
September 27, 2011 3
unassigned fund balance), the City will start with the most restrictive category and spend those
funds first before moving down to the next category with available funds.
Financial Policies:
The accounts of the City are organized and operated on the basis of funds and account groups.
Fund accounting segregates funds according to their intended purpose and is used to aid
management in demonstrating compliance with finance-related legal and contractual provisions.
The City's annual budget shall be prepared and adopted on a basis consistent with generally
accepted accounting principles for all governmental and proprietary funds except the capital
projects fund, which adopts project-length budgets.
Account balances shall be reported on the modified accrual basis of accounting within the
General Fund and other governmental funds and the accrual basis of accounting in the Utilities
Fund.
Quarterly Reports:
Revenues actually received will be regularly compared to budgeted revenues and variances will
be investigated. This process will be summarized in the quarterly budget reports prepared and
submitted by the City Manager's Office.
The City Manager shall submit to the City Council each quarterly financial report of the City.
The report will compare budget estimates against the previous quarter's realized revenues
including year to date realized revenues. The previous fiscal year's performance will also be
included.
General Obligation Bonds! Debt:
Anna shall have the power to borrow money on the full faith and credit of the City and to issue
general obligation bonds for permanent public improvements. The City will also be allowed to
borrow money for any other public purpose not prohibited by the Constitution and laws of the
State of Texas, and to issue refunding bonds to refund outstanding bonds of the City previously
issued. All such bonds shall be voted on and issued in conformity with the laws of the State of
Texas.
Any and all bond funds approved by the vote of the Citizens of Anna will be expended only for
the purposes stated in the bond issue.
The City shall also from time to time borrow money utilizing other available instruments
including revenue bonds, certificates of obligation, et al.
In all cases, the City shall evaluate the following prior to incurring debt obligations:
• Ensure that the purpose of the debt is consistent with type of debt instrument
• Where possible, match the useful life of the asset with the maturity of the debt
September 27, 2011 4
• Review the maintenance & operations property tax rate against the debt service tax rate
and ensure that no more than 35% of the total tax rate is used for debt obligations.
The City will manage the length and maturity of its long-term debt in order to lower net interest
cost and to maintain future flexibility by paying off debt earlier.
Revenues:
The City of Anna strives to maintain and enhance a diversified and stable revenue system to
shelter it from fluctuations in any single revenue source. The City also pursues an aggressive
policy of collecting all money due to the City. The City will continue an aggressive policy to
reduce the level of delinquent taxes.
For every annual budget, the City shall levy two property tax rates: maintenance/operations
(M&O) and debt service (I&S). The debt service levy shall be sufficient for meeting all principal
and interest obligations associated with the City'S outstanding debt, less money transferred into
the debt service fund from other funds and any self-sustaining debt such as revenue bonds, for
the budget year. The operation and maintenance levy shall be accounted for in the General Fund.
The City is primarily a bedroom community with a heavy reliance upon property taxes. In order
to supplement property taxes, the City has and will continue to support economic development
and community development to create a vibrant community with a growing sales tax base to
defray the reliance upon property taxes.
The City Manager shall project revenues from every source based on actual collections from the
preceding years and estimated collections of the current fiscal year. There are a variety of factors
that may impact revenues for an upcoming fiscal year, and the City Manager will take these into
account when projecting collections. Sales tax revenue projections should be conservative due to
the nature of this more volatile revenue source.
Types of City Funds:
• General Fund is the government's primary operating fund.
• Debt Service Fund accounts for the resources accumulated and payments made for
principal and interest on long-term obligation debt of governmental funds.
• Capital Projects Fund accounts for the acquisition of capital assets or construction of
major capital projects not being financed by any other fund.
• Utility Fund is used to account for the City'S water and wastewater operations and
certain long-term debt.
Financial Statements:
An annual independent audit will be completed and filed with the City Secretary within one
hundred eighty (180) days from the completion of each fiscal year, the results of which shall be
presented to and approved by the City Council. The financial statements to the City are to be
prepared in conformity with generally accepted accounting principles (GAAP) in the United
States of America as applied to governmental units. The Governmental Accounting Standards
September 27, 2011 5
Board (GASB) is the accepted standard-setting body for establishing governmental accounting
and financial reporting principles.
The City shall contract with a qualified independent auditing firm on an annual basis, and shall
use the same firm no more than five consecutive years.
September 27,2011 6
INVESTMENT POLICY
A component part of the overall financial management of the City of Anna, Texas is an effective
cash management plan. Many factors determine the amount of funds on hand during any fiscal
year, but these funds are an important revenue source for the City budget. It is imperative that
these funds be managed in such a way as to be responsive to the public need and consistent with
a conservative cash management plan. To provide this framework for effective cash
management, an Investment Policy and a Statement of Investment Strategy have been prepared.
Purpose:
The Investment Policy is authorized by the City Council of the City of Anna in accordance with
Chapter 2256, Texas Government Code, also known as the Public Funds Investment Act (PFIA).
The Policy addresses the methods, procedures and practices that must be exercised to ensure
effective and judicious fiscal management of City funds. All such funds will be managed within
the guidelines of this Policy with the exception of the Deferred Compensation Agency (TMRS)
fund. Bond funds, in addition to this Policy, shall be managed in accordance with their issuing
documentation and all applicable state and federal law.
In addition to the Policy, the Statement of Investment Strategy, also approved by the City
Council, provides a separate written investment strategy for each of the City's funds. Each
investment strategy describes the investment objectives for each particular fund according to the
following priorities:
1) Investment Suitability
2) Preservation and Safety of Principal
3) Liquidity
4) Marketability Prior to Maturity of each Investment
5) Diversification
6) Yield.
Annual Review:
The Investment Policy and the Statement of Investment Strategy will be reviewed on an annual
basis by the City Council. Revisions and/or amendments will be approved and documented by
the City Council.
Investment Objectives:
The investment of funds will be governed by the following investment objectives, in order of
priority:
September 27, 2011 7
1. Preservation and Safety of Principal
a. Preservation of capital is the foremost objective of the City. Each investment
transaction shall seek first to ensure that capital losses are avoided, whether they
are from securities defaults, erosion of market value, or other risks
2. Liquidity
b. The City's investment portfolio will remain sufficiently liquid to enable the City
to meet all operating requirements that can be reasonably anticipated. Liquidity
will be achieved by matching investment maturities with forecasted cash flow
requirements
3. Yield
c. The investment portfolio of the City shall be designed to attain a market rate of
return throughout budgetary and economic cycles taking into account risk
constraints and liquidity needs. Return on investment, while important, is of less
importance than safety and liquidity.
Authorized Investments:
While the Public Funds Investment Act allows a wide range of eligible securities, the City has
chosen to allow only the following securities, which are somewhat more conservative and more
restrictive than some of the other investments permitted under the PFIA:
1. Direct obligations of the United States government with a maturity not to exceed two
years from the date of purchase.
2. Fixed rate or discount notes with a maturity not to exceed two years from the date of
purchase by, guaranteed by, or for which the credit of any of the following Federal
Agencies and Instrumentalities is pledged for payment: Federal National Mortgage
Association (FNMA), Federal Home loan Bank (FHLB), Federal Farm Credit Bank
(FFCB), Student loan Marketing Association (SLMA), and Federal Home loan Mortgage
Corporation (FHLMC). The City may not invest more than 25% of the City's previous
month's average balance of liquid financial assets in instruments covered under this
paragraph (2).
3. Bonds or other interest bearing obligations having a stated final maturity of two years or
less of which the principal and interest are guaranteed by the full faith and credit of the
United States Government.
4. FDIC insured Certificates of Deposit issued by national banks domiciled in Texas with a
stated final maturity of two years or less. Certificates of Deposit balances exceeding
FDIC insurance limits will be fully collateralized by securities listed in 1 and 2 above.
Collateral will be held by the City's third-party custodian.
5. Repurchase agreements collateralized with U.S. Treasury securities at a minimum market
value of 102 percent of the dollar value of the transaction, with any accrued interest
accumulated on the collateral included in the calculation. The City may not lend
securities but only invest excess cash against receipt of appropriate collateral. Repurchase
September 27,2011 8
agreements will be entered into only with primary government securities dealers (as
defined by the Federal Reserve) who have executed a City-approved Master Repurchase
Agreement. Collateral will be delivered to and held by an AAA rated (as raged by Fitch,
Moody's or Standard & Poor's) third party safekeeping agent approved by the City and
held in the City's name. The maximum term for direct repurchase agreements will be
limited to 90 days or less. The City may not invest more than 10% of the City's previous
month's average balance of liquid financial assets in repurchase agreements.
6. SEC-registered, AM-rated (as rated by Fitch, Moody's or Standard & Poor's), no-load
money market mutual funds with a dollar-weighted average portfolio maturity of 90 days
or less. Assets will consist exclusively of those securities listed as authorized investments
in this section. The investment objective of the fund must be to maintain a stable dollar
net asset value of USD 1.00. The maximum stated maturity of any single security in the
fund will be 13 months, and the dollar weighted average portfolio maturity will be 90
days or less. The City may not invest funds under its control in an amount that exceeds
10% of total assets of any individual money market mutual fund. The City may not invest
more than 10% of the City's previous month's average balance of liquid financial assets in
any single money market funds. Cumulatively, the City may not invest more than 25% of
the City's previous month's average balance of liquid financial assets in money market
funds. A fund prospectus shall be reviewed for compliance with policy prior to depositing
monies.
7. State or local investment pools organized under the Interlocal Cooperation Act and
authorized by the City Council. The investment pool must be rated AM-rated (as rated by
Fitch, Moody's or Standard & Poor's) and have a dollar-weighted average portfolio
maturity of 60 days or less. Assets will consist exclusively ofthose securities listed in this
section D. The investment objective of the pool must be to maintain a stable dollar net
asset value. All securities owned in the pool will have a stated remaining maturity of 13
months or less. The City may not invest more than 10% of the City's previous month's
average balance of liquid fmancial assets in a single investment pool. Cumulatively, the
City may not invest more than 55% of the City's previous month's average balance of
liquid financial assets in investment pools in aggregate, nor more than 25% in anyone
pool.
Prohibited Investments:
The City is expressly prohibited from entering into options trading or futures contracts, hedging
or purchasing any security that is not authorized by Texas State law, or any direct investment in
asset backed or mortgage-backed securities. The City expressly prohibits the acceptance of
Interest-only (10) and Principal-only (PO) Collateralized Mortgage Obligations (CMOs) as
collateral for bank deposits or repurchase agreements. "No transactions may be entered for
speculation. No transaction may be entered using leverage. II
Protection of Principal:
The City shall seek to control the risk of principal loss due to the failure of a security issuer or
grantor. Such default risk shall be controlled by investing only in the safest types of securities as
September 27, 2011 9
defined in the Policy, by collateralization as required by law, and through portfolio
diversification by maturity and type.
The purchase of individual securities shall be executed by "delivery versus payment" (DVP)
method through the City's safekeeping agent. By so doing, City funds are not released until the
City has received, through the safekeeping agent, the securities purchased. Exceptions would be
deposits made to investment pools and mutual funds.
Diversification by Investment Type:
Diversification by investment type shall be maintained by ensuring an active and efficient
secondary market in portfolio investments and by controlling the market and opportunity risks
associated with specific investment types. Undue concentrations of assets in a specific maturity
sector shall be avoided. Bond proceeds may be invested in a single security of investment if it is
determined that such an investment is necessary to comply with Federal arbitrage restrictions or
to facilitate arbitrage record-keeping and calculation.
Diversification by Investment Maturity:
In order to minimize risk of loss due to interest rate fluctuations, investment maturities will not
exceed the anticipated cash flow requirements of the funds. Maturity guidelines by fund are as
follows:
Operating Funds:
The weighted-average days to maturity for the operating fund portfolio shall be fewer than 270
days and the maximum allowable maturity shall be two years.
Construction and Capital Improvement Funds:
The investment maturity of construction and capital improvement funds shall generally be
limited to the anticipated cash flow requirement or the "temporary period" as defined by Federal
tax law. During the temporary period bond proceeds may be invested at an unrestricted yield.
After the expiration of the temporary period, bond proceeds subject to yield restriction shall be
invested considering the anticipated cash flow requirements of the funds and market conditions
to achieve compliance with the applicable regulations. The maximum maturity for all
construction or capital improvement funds shall not exceed the expected final expenditure date
for the bond proceeds.
Debt Service Funds:
Debt Service Funds shall be invested to ensure adequate funding for each consecutive debt
service payment. Investments will be made in such a manner as not to exceed an "unfunded" debt
service date with the maturity of any investment. An unfunded debt service date is defined as a
coupon or principal payment date that does not have cash or investment securities available to
satisfy said payment. Debt Service reserve funds shall have as the primary objective the ability to
generate a dependable revenue stream with a low degree of volatility. Purchased securities for
reserve funds will have a stated final maturity of three years of les~.
September 27, 2011 10
Ensuring Liquidity:
Liquidity shall be achieved by analyzing and anticipating cash flow requirements, by investing in
securities with active secondary markets and by investing in eligible money market mutual funds
and local government investment pools. A security may be liquidated for the following reasons:
1. To meet unanticipated cash requirements
2. To re-deploy cash into other investments expected to outperform current holdings
3. To otherwise to adjust the portfolio.
Depository Agreements:
The City will select and designate a qualified bank depository for a three to five year period.
Consistent with the requirements of state law, the City will require that all deposits be federally
insured or collateralized with eligible securities. If deposits are collateralized, they will be held
by the City's safekeeping agent. The depository will be required to sign a Safekeeping
Agreement with the City and the City's safekeeping agent. The Agreement shall define the City'S
rights to the collateral in case of default, bankruptcy, or closing and shall establish a perfected
security interest in compliance with Federal and State regulations. It shall further address any
concerns in relation to acceptable collateral, levels of collateral, substitution and addition of
collateral, and reporting and monitoring of collateraL
Safekeeping and Custody:
Securities purchased for the City's portfolios will be delivered in book entry form and will be
held in third party safekeeping by a Federal Reserve member financial institution designated as
the City's safekeeping and custodian bank. The City will execute Safekeeping Agreements prior
to utilizing the custodian's safekeeping services. The safekeeping agreement must provide that
the safekeeping agent will immediately record and promptly issue and deliver a safekeeping
receipt showing the receipt and the identification of the security, as well as the City'S interest. All
securities owned by the City will be held in a Customer Account naming the City as the
Customer.
Competitive Bidding:
It is the policy of the City to require and document at least three competitive bids or proposals
for all security purchases and sales except for:
1. Transactions with money market mutual funds and local government investment
pools;
2. New agency securities purchased at issue through an approved broker/dealer; or
3. Overnight "sweep" transactions with the City depository bank.
Authority to Invest:
Management responsibility for the investment program is assigned to the City Manager by the
City Council. As such, the City Manager shall oversee and approve any deposit, withdrawal,
investment, transfer, documentation, and otherwise manage City funds according to this policy.
Any limitations placed on this authority will be specifically stated. No person may engage in an
investment transaction or the management of funds except as provided under the terms of the
Investment Policy, the Statement of Investment Strategy, and other operational procedures
September 27,2011 11
established by the City Manager. The Finance Director shall be considered the Investment
Officer for the purposes of this policy.
Within twelve (12) months after taking office or assuming duties, each Investment Officer shall
attend a training session relating to his/her investment responsibilities and receive not less than
ten (l0) hours of instruction. On an ongoing basis, all Investment Officers shall receive not less
than ten (10) hours of instruction in each subsequent two-year period. Training must include
education in investment controls, security risks, strategy risks, market risks and compliance with
the Public Funds Investment Act.
Prudent Investment Management:
The designated Investment Officer shall perform hislher duties in accordance with the adopted
Investment Policy and internal procedures. In determining whether an Investment Officer has
exercised prudence with respect to an investment decision, the investment of all funds over
which the Investment Officer had responsibility, rather than the prudence of a single investment,
shall be considered. Investment Officers acting in good faith and in accordance with these
policies and procedures shall be relieved of personal liability.
Standard of Care:
The standard of care used by the City shall be the "prudent investor rule" and shall be applied in
the context of managing the overall portfolio within the applicable legal constraints. The Public
Funds Investment Act states:
"Investments shall be made with judgment and care, under circumstances then
prevailing, that a person ofprudence, discretion, and intelligence would exercise in the
management of the person's own affairs, not for speculation, but for investment,
considering the probable safety ofcapital and the probable income to be derived. /I
Standard of Ethics:
The designated Investment Officer shall act as custodian of the public trust avoiding any
transaction which might involve a conflict of interest, the appearance of a conflict of interest, or
any activity which might otherwise discourage public confidence. The Investment Officer shall
refrain from personal business activity that could conflict with proper execution of the
investment program, or which could impair hislher ability to make impartial investment
decisions. Additionally, the Investment Officer shall file with the Texas Ethics Commission and
the City a statement disclosing any personal business relationship with an entity seeking to sell
investments to the City or any relationship with the second degree by affinity or third degree of
consanguinity to an individual seeking to sell investments to the City.
Internal Controls:
The City Manager will establish a system of internal controls that shall be designed to prevent
losses of public funds arising from fraud, employee error, and misrepresentation by third parties,
unanticipated changes in financial markets, or imprudent actions by investment officials.
Controls deemed most important would include, but not be limited to:
1. Control of collusion
2. Separation of duties
September 27, 2011 12
3. Separating transaction authority from accounting and record-keeping
4. Custodial safekeeping
5. Avoidance of bearer-form securities
6. Clear delegation of authority
7. Written confirmation of telephone transactions
8. Minimizing the number of authorized investment officials
9. Documentation of transactions
Marked to Market
The City's complete investment portfolio will be marked to market monthly with pncmg
information coming from reliable and generally accepted sources. Should the price of a particular
security not be available from reliable and generally accepted sources, the price may be
estimated but the City Manager and City Council must be informed immediately of such action.
Investment Committee &: Reporting
To review strategies, policies and investment results under the City's Investment Policy, an
investment committee comprised of the City Manager, City Finance Director, Investment
Officer(s), and the Finance Supervisor will meet on a quarterly basis. The Investment Committee
will prepare a brief report for the City Council as appropriate but at a minimum every quarter.
September 27, 2011 13
PURCHASING POLICY
The City Manager is authorized to make purchases and enter into contracts on behalf of the City
if the amount does not exceed $50,000. All purchases, transactions and contracts for
expenditures involving more than $50,000 must be expressly approved in advance by the City
Council during a duly noticed public meeting. Notwithstanding anything to the contrary in this
Purchasing Policy or in any other City ordinance, rule, regulation or policy, all purchases,
transactions and contracts for expenditures regardless of amount must be expressly approved in
advance by the City Council during a duly noticed public meeting if-with respect to such
purchase, transaction or contract for expenditure-any City Official (as defined in the Anna
Code of Ethics) is: (1) required to file a Conflicts Disclosure Statement under Chapter 176 of the
Texas Local Gov't Code or the Anna Code of Ethics, as amended; or (2) is a Vendor as that term
is described under Section 176.002 of the Texas Local Gov't Code, which includes acting as an
agent of a Vendor. Otherwise, the following purchasing procedure is outlined in accordance with
the noted dollar thresholds of expenditures.
Petty Cash:
Any and all purchases under $15.00 should be paid from Petty Cash. This reduces paperwork
and eliminates checks. Petty Cash may also be used for minor purchases of goods or services that
are more than $15.00, where deemed appropriate. A receipt from the purchase is required at time
of reimbursement and the employee requesting reimbursement will be required to sign a receipt
for the cash.
Expenditures for Goods or Services $1-$500:
Department Directors are allowed to make purchases for goods or services under $500 without
seeking bids.
Expenditures for Goods or Services $501-$2s 999:
Expenditures for good or services over $500 but not exceeding $2,999 may be approved at the
department level by the Department Director. Department directors should request and review at
least three different quotes or bids unless the purchase is listed under the General Exemptions in
Texas Local Government Code Chapter 252.022. This is an informal bid process and can be
done via mail, e-mail, delivery service, telephone or facsimile. In lieu of providing three
different quotes or bids, and when authorized by the City Manager, Department Directors may
purchase goods or services in this category through a local government purchasing cooperative
or interlocal purchasing agreement of which the City of Anna is a member or eligible to
participate, where the products and services to be purchased have been submitted for
competitive procurement as outlined by state statute.
Expenditures for Goods or Services $3000-$49s 999:
Expenditures for good or services equal to $3,000 but not exceeding $49,999 are also bid on an
informal basis. At least three written bids or quotes are required unless the purchase is listed
under the General Exemptions in Texas Local Government Code Chapter 252.022. The City will
contact Historically Underutilized Business as stipulated in Texas Local Government Code
September 27, 2011 14
Chapter 252.0215 unless the purchase is listed under the General Exemptions in Texas Local
Government Code Chapter 252.022. In lieu of providing three different written quotes, goods or
services in this category may be purchased through a local government purchasing cooperative
or interlocal purchasing agreement of which the City of Anna is a member or eligible to
participate, where the products and services to be purchased have been submitted for
competitive procurement as outlined by state statute. All purchases in this category must be
approved in advance by the City Manager.
Once the bids have been received and evaluated, the department collecting bids or quotes shall
submit a requisition accompanied with a memorandum recommending a bidder. After
authorization has been received from the City Manager, the purchase requisition is processed.
Expenditures for Goods or Services $50,000 and over:
All purchases above $50,000.00 must be purchased under formal competitive sealed bidding
rules or as other wise permitted by the Local Government Code under Chapters 252 and 271. No
bid process shall begin until approved by the City Council and City Manager. The City Council
hereby selects as its designated representative the City Manager of the City of Anna, Texas to
discharge on its behalf any duty it may have now or in the future with respect to any purchase or
contract to determine the methodes) of purchase that will provide the best value to the City.
Professional Services:
Notwithstanding anything to the contrary in this Purchasing Policy or in any other City
ordinance, rule, regulation or policy, purchases of professional services regulated by the
Professional Services Procurement Act (PSP AP) shall be in accordance with the requirements
outlined in the PSPA as amended.
Emergency Purchases:
Notwithstanding anything to the contrary in this Purchasing Policy or in any other City
ordinance, rule, regulation or policy, the City Manager is authorized to make or approve any
emergency purchase necessary to respond to a public calamity, or to preserve or protect the
public health or safety of the municipality's residents in accordance with the General
Exemptions authorized in Section 252.022 of the Texas Local Government Code without seeking
bids or contacting Historically Underutilized Businesses. The City Manager shall advise the City
Council of any such emergency purchase in excess of $50,000. When an emergency occurs
during office hours and the expense exceeds the normal department approval amount, the
department director shall contact the City Manager to receive authorization for the emergency
purchase.
September 27,2011 15
PURCHASING CARD POLICY
Purpose:
The purpose of the Purchasing Card Program is to provide the City with an efficient and
controllable method of making small dollar commodity, service, and travel purchases. The City
will issue cards from a company that has received the State of Texas purchasing card contract or
under a Co-operative purchasing agreement with another municipality within the State of Texas.
The card will be primarily used in place of petty cash, small regular purchase orders, blanket
purchase orders (where sales are made over-the-counter), emergency purchase orders, and all
other credit cards. This card policy is not intended to replace, but rather supplement existing
purchasing, travel and other City policies. Participating in the purchasing card program will be
the option of the employer. Employees that are not issued a card may obtain travel advances or
reimbursements
Use:
The card will be used for the following:
I) Any transaction that does not exceed $1,500 or the cardholder's transaction limit,
whichever is less.
2) Over-the-counter type retail purchases normally made using a charge account or
discontinued credit cards.
3) Travel related purchases in compliance with the City of Anna Travel Policy.
4) Any other business related purchase as long as:
a. The vendor accepts credit cards, and the goods/services purchases are not covered
under a City supply contract. Accounting Department will periodically update
staff via email of any commodities that cannot be purchased with the purchasing
card.
b. All other purchases are to be made using the standard purchasing process.
Transaction/Card Limits:
Each individual purchasing card will have transaction and/or spending limits. The Finance
Director has the ability also to limit types of purchases, place of purchase and hours of day
purchases can be made on individual cards. The total purchase price as printed on the individual
credit card receipt is known as the "transaction amount". The purchasing card may be limited by
the merchant type, transaction amount, and monthly transaction limit. The Department Director,
Finance Director, and City Manager determine limits.
Cardholder Class *Per Transaction *Per Month
Management
City Manager, Department Directors
$ 2,500 $ 5,000
September 27,2011 16
Supervisory
Division Heads, Supervisors
$ 1,500 $ 3,000
Intermediate Level Users $ 500 $ 2,000
*The City Manager may set different limits for specific individuals as needed.
Restrictions:
Employees may NOT use the card for the following:
1. Any purchases of items for personal use
2. Cash refunds or advances
3. Any purchases of goods/services at a merchant type not considered prudent or of
good judgment
4. Any transaction amount greater than the cardholder's transaction limit
5. Items under contract, unless an emergency exception is granted by the Finance
Department
6. Alcohol, liquor, and tobacco products of any kind
7. Separate, sequential and component purchases or any transaction made with intent to
circumvent City purchasing policy or state law
8. Any other purchase specifically excluded in the City purchasing policy
Receipts:
All purchases must be supported by a receipt for the purchaser. Any purchase without a receipt
shall be the responsibility of the purchaser unless approved by the City Manager.
Audit review:
Purchases using the Anna Purchasing cards shall be reviewed for compliance with this policy by
City Auditor during the annual audit process.
September 27, 2011 17
ETHICS POLICY
This Ethics Policy is cumulative of any provisions governing ethics or conflicts of interest under
state law, the City of Anna's Home-Rule Charter, and the Anna Code of Ethics, all as amended,
and in the event of any conflict between any such provisions, the most restrictive provision shall
govern. This Ethics Policy will promote the objectives of protecting government integrity and
facilitating the recruitment and retention of qualified ethical personnel needed by the City of
Anna. Such policy is implemented by prescribing essential standards of ethical conduct without
creating unnecessary obstacles to entering public service.
As a public entity, the City is expected to be able to demonstrate to the public that it has spent
their tax dollars wisely. All participants in the City are responsible for insuring that money is
spent in accordance with the terms and conditions of all the policies of the City of Anna. Public
employees must discharge their duties impartially so as to assure fair competitive access to
government procurement by responsible contractors. Public officials and employees must take
precautions to avoid even the appearance of impropriety, self-dealing, favoritism, or undue
influence.
Therefore, all persons with the responsibility of handling City of Anna monies must obtain
and/or create as appropriate adequate documentation, including a clear explanation of exactly
what each purchase is for.
General Ethical Standards:
1. It shall be a breach of ethics to attempt to realize personal gain through public
employment with the City of Anna by any conduct inconsistent with the proper discharge
of the employee's duties.
2. It shall be a breach of ethics to attempt to influence any public employee of the City of
Anna to breach the standards of ethical conduct set forth in this code.
3. It shall be a breach of ethics for any employee of the City of Anna to participate directly
or indirectly in a procurement when the employee knows that:
a. The employee or any member of the employee's immediate family has a financial
interest in the procurement;
b. A business or organization in which the employee, or any member of the
employee's immediate family, has a financial interest pertaining to the
procurement;
c. Any other person, business or organization with whom the employee or any
member of the employee's immediate family is negotiating or has an arrangement
concerning prospective employment is involved in the procurement.
4. It shall be a breach of ethics for any employee of the City of Anna to accept, receive, or
arrange for any gratuity or any offer of employment in connection with any decision,
approval, denial, recommendation, preparation of any part of a program requirement or
purchase request, influencing the content or any specification or procurement standard,
rendering of advice, investigation, auditing, or in any other advisory capacity in any
proceeding or application, request for ruling, determination, claim or controversy, or
September 27, 2011 18
other particular matter pertaining to any program requirement of a contract or
subcontract, or to any solicitation or proposal thereof, pending before this government.
5. It shall be a breach of ethics for any employee of the City of Anna to approve or allow
any purchase, transaction or contract for expenditure regardless of the amount unless said
employee has been expressly authorized to do so in advance by the City Council during a
duly noticed public meeting if-with respect to such purchase, transaction or contract for
expenditure-any City Official (as defined in the Anna Code of Ethics) is: (1) required to
file a Conflicts Disclosure Statement under Chapter 176 of the Texas Local Gov't Code
or the Anna Code of Ethics, as amended; or (2) is a Vendor as that term is described
under Section 176.002 of the Texas Local Gov't Code, which includes acting as an agent
ofa Vendor.
6. It shall be a breach of ethics for any employee or former employee of the City of Anna
knowingly to use confidential information for actual or anticipated personal gain, or for
the actual or anticipated gain of any person.
September 27, 2011 19
BANK DEPOSITORY
The City Council shall select a bank depository that will meet the needs of the City and comply
with all state laws governing such depositories and the management and safeguarding of public
funds. The City shall issue a request for proposals/qualifications for bank depository services
every five years, or more often if necessary. However, said requirements shall not restrict the
number of years, either cumulatively or consecutively, that any single bank depository shall be
used. Depositories shall be selected based on a number of criteria, including, but not limited to,
ability to comply with state and local statutes, customer service, hours of operation, yield on
deposits, geographic proximity to City hall, services offered, etc.
September 27,2011 20