HomeMy WebLinkAboutOrd 853-2020 Adopting Financial PoliciesCITY OF ANNA, TEXAS
ORDINANCE NO. X- '; O
AN ORDINANCE OF THE CITY OF ANNA, TEXAS ADOPTING FINANCIAL POLICIES
WHEREAS, the City of Anna Texas (the y") 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 ("City Council") has determined that it
is in the interest of the neighbors of Anna to adopt Financial Policies that establish policies
and procedures to govern the management and care of public funds required for
operation of the City;
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. Financial Policy Adoption.
The Council hereby approves the Financial Policies attached hereto as Exhibit 1 and
incorporated herein for all purposes.
Section 3. 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All ordinances of the City in conflict with the provisions of this ordinance are repealed to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 notwistanding the omission of any part that is
declared invalid or unconstitutional.
Section 4. Effective Date
This ordinance shall become effective after its passage and upon the posting and/or
publication, if required by law.
PASSED AND APPROVED by the City Council of the City of Anna, Texas, this, the 14day
of April, 2020.
ORD. PAGE 1 OF 2
ATTESTED:
Carrie L. Land, City Secreta
ORD.
APPROVED:
mikeI
PAGE 2 OF 2
ayor
City of Anna,Texas
Financial Policies
Adopted: Apri114, 2020
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FINANICAL POLICIES
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, internal controls, and find balance, as well as integrity, communication, prudent
stewardship, planning, accountability, and full disclosure. These policies are intended to:
A. Assist the City to ensure long-term financial stability and a healthy financial position;
B. Assist the City Council and City staff in evaluating current activities and proposals for
future programs;
C. Demonstrate to the Neighbors of Anna, the investment community, and the bond rating
agencies that the City is committed to strong fiscal operations;
D. Fairly present and fully disclose the financial position of the City in conformity with
accounting practices generally accepted in the United States of America; and
E. Demonstrate compliance with finance -related legal and contractual issues in accordance
with the Texas Local Government Code and other related legal mandates upon the City.
The policies are to be reviewed on an annual basis and modified to accommodate changing
circumstances and conditions.
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FINANCIAL MANAGEMENT POLICIES
I. ACCOUNTING, AUDITING, AND FINANCIAL REPORTING
A. Accounting
The Finance Director and Accounting Manager are responsible for establishing and
maintaining the chart of accounts and for properly recording financial transactions.
B. Funds
The accounts of the City are organized and operated on the basis of fiends and account
groups. Each fund is created for a specific purpose except for the General Fund. The General
Fund is used to account for all transactions not accounted for in other funds. Fund
accounting 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 funds, which Council approves 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.
C. External Auditing
The City will be audited annually by an outside independent auditing firm or other times as
may be deemed necessary.
1. External Auditor Repute —The auditors must be a CPA and must demonstrate that they
have the breadth and depth of staff to conduct the City's annual audit in accordance with
generally accepted auditing standards, generally accepted government auditing
standards, and contractual requirements.
2. Timing - 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.
3. Financial Statements - 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
Board (GASB) is the accepted standard-setting body for establishing governmental
accounting and financial reporting principles.
4. Management Letter — The external auditor will prepare and review the Management
Letter with the City Council within 180 days from the end of the fiscal year. The external
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auditor will present and review the audit with City Council at a regular scheduled
meeting.
5. Rotation of External Auditor - As stated in the City Charter, the City shall not use the
same firm for more than five consecutive years.
D. External Financial Reporting
The City will prepare and publish a Comprehensive Annual Financial Report (CAFR)a The
CAFR will be prepared in accordance with generally accepted accounting principles and
will be presented annually to the Government Finance Officers Association (GFOA) for
evaluation and awarding of the Certification of Achievement for Excellence in Financial
Reporting. The CAFR will be published and presented to the City Council within 180 days
after the end of the fiscal year.
E. Internal Financial Reporting
The Finance Department will monitor revenues and expenditures as compared to current
year budgets and investigate any variances found. Staff will prepare internal financial
reports on a monthly basis sufficient for management and Council to plan, monitor, and
control the City's fiscal affairs. This report will compare previous year-to-date (YTD)
actuals to current YTD actuals of the same quarter, as well as percentage of budget
remaining.
In addition, a more detailed analysis and report will be completed on a quarterly basis and
provided to the City Manager and City Council. The report shall accurately reflect the City's
current position in regard to revenue and expenditure performance, as well as any additional
information that reflects the City's current and future fiscal position.
F. Banlc Depository
The City 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 the 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 bank depository
shall be used. Depositories shall be selected 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.
II. INTERNAL CONTROLS
A. Written Procedures
The Finance Director is responsible for developing City-wide written administrative
directives on accounting, cash handling, and other financial matters which will be approved
by the City Manager.
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B. Internal Audit Program
I. Committee - An internal audit committee, consisting of the Finance Director,
Accounting Manager, and Budget Manager will be established. Annually, the Internal
Audit Committee will review the administrative directives for any process improvements
or changes and submit them for approval to the City Manager
2. Departmental Audits — Departmental processes will be reviewed on an on-going basis to
ensure dual control of City assets and to identify the opportunity for fraud potential, as
well as to ensure that departmental internal procedures are documented and updated as
needed.
3. Employee or Transaction Review — Programs to be audited include petty cash (cash
drawers), city credit card accounts, time entry, and travel expense. Discrepancies will
be identified and remedied. The Department Director will be notified of the situation
and, in cases of serious infractions, the City Manager will also be notified as well.
C. Department Director's Responsibility
Department Director's responsibilities to the City are to ensure that good internal controls
are followed throughout his or her department, that all guidelines on cash handling and
internal controls are implemented, and that all internal or external auditor internal control
recommendations are addressed.
III. OPERATING BUDGET POLICIES
A. Preparation
Budgeting is an essential element of the financial planning, control, and evaluation process
of municipal government. The City's "Operating Budget" is the City's annual financial
operating plan. The budget shall be prepared on the basis of priorities outlined by the City
Council and the City Manager in the Strategic Plan. In addition, the budget shall be prepared
and presented to meet the requirements of Section 102 of the Texas Local Government Code.
1. Scope —The scope of the budget
including the Debt Service Fund,
consists of governmental and proprietary funds
Fund, Federal Seizure Fund, Park
excludes the Capital Project Funds.
,
?rant Fund, Special Revenue Fund, State Seizure
Development Fund and Fire Capital Fund, but
The City's Capital Improvement Plan (CIP) will be presented to Council annually along
with the budget. Each project is approved by Council, at which time Council approves
an overall project budget for the life of the project.
2. Budget Process -The budget is prepared by the Finance Department with the cooperation
of all City departments and is submitted to the City Manager who makes any necessary
changes. The City Manager shall present a budget message along with the proposed
budget document to Council on or before the fifteenth (15) day of August of the fiscal
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year as stated in Section 7.02 of the City Charter.
The proposed budget and all supporting schedules shall then be filed with the City
Secretary and open for public inspection once submitted to the City Council. The
proposed budget shall also be published on the City website the following day.
The final adopted budget document shall be enacted by City Council on or before
September 20th of each fiscal year as reflected in Section 7.06 of the City Charter. The
adoption of the budget must be by an affirmative vote of a majority of the City Council.
The budget document shall then be submitted annually to the GFOA for evaluation and
consideration of awarding the Award for Distinguished Budget Presentation.
3. Basis of Budgeting —The basis of budgeting will be the same as the basis of accounting;
that is, that budgets for the General Fund and all special revenue funds are prepared on
the modified accrual basis of accounting, and budgets for the Utility (Proprietary) Fund
are presented on a full accrual basis, except that capital purchases and depreciation are
not adjusted until year-end financial reporting.
4. City Council Participation —The budget review process shall begin annually with the
review of the Strategic Plan by City Council, City Manager, and Directors. Council will
further participate in the review process which shall span enough time to address policy
and fiscal issues.
5. Balanced Budget —Total proposed expenditures shall not exceed the total estimated
income. The City's goal is to balance the operating budget with current revenues,
whereby, current revenues match and fund on-going expenditures. The City considers
the budget balanced when total expenditures are equal to total revenues. However, the
budget is also balanced when total expenditures are less then total revenues, a surplus.
There may also be instances where the City plans to spend excess fund balance
accumulated from previous years on one-time non-recurring purchases, while
maintaining established reserves. The City considers the budget to be balanced in this
case as well. However, the plan shall not be to build on-going expenditures into this type
of funding.
6. Forecasting The
budgeting process for the annual budget necessitates the preparation
of future projections of both revenues and expenditures. It should be recognized that the
balanced budget requirement requires the conservative estimate of revenues and
expenditures. Inherent in the forecasting process is the identification of assumptions
used in the forecasting calculations. A statement of assumptions should be presented to
the City Manager and Council.
7. Filing and Adoption —Upon the presentation of a proposed budget acceptable to the City
Council, the City Council shall call and publicize a public hearing, naming the date and
time for the public hearing on the budget. The public hearing allows for the neighbors
to participate in the process. Required notice of the public hearing is to be published on
two occasions in the City's official newspaper, which shall not be less than ten (10) nor
more than thirty (30) days after the date of the notice as stated in Section 7.05 of the City
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Charter.
At a later date and time, the Council must adopt the budget by Ordinance. This budget
then becomes the City's Official Budget, effective for the fiscal year beginning the
following October 1St. A copy of the Official Budget shall be filed with the City
Secretary and posted on the City's website in accordance with the provisions of Section
102 of the Texas Local Government Code.
In the event the budget is not adopted on or prior to September 20th, the preceding fiscal
year budget will continue to be in force on a month -by -month basis until a new budget
is adopted, Section 7.06 of the City Charter,
8. Budget Amendments —Expenditures within 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, and must
be passed by an affirmative vote of the majority of the Council. 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. The City's Charter (Section 7.09) addresses amending the adopted budget.
B. Performance Measures and Productivity Measures
Where appropriate, performance measures and productivity measures will be used as
guidelines and reviewed for efficiency and effectiveness. This information will be included
in the annual budget document.
C. Multi -Year Planning Model
As part of the planning process, the City will maintain afive-year planning model to reflect
significant changes over time and to utilize during the budget process to determine the long-
term operating impact additional requests will have on the budget.
D. Control and Accountability
Each Department Director will be responsible for the goals and objectives adopted as part
of the City's Strategic Plan and for monitoring their individual departmental budget for
compliance and spending limitations. The Budget Manager will provide the Department
Directors and management staff a monthly financial report on their budget.
IV. REVENUE MANAGEMENT
A. Revenue Monitoring
Revenues actually received will be regularly compared to budgeted revenues and variances
will be investigated. Any variances found will be summarized in the corresponding budget
report.
B. Simplicity
The City will strive to keep the revenue stream simple, which will result in a decrease of
compliance costs for the taxpayer or service recipient and a corresponding decrease in
avoidance to pay.
C. Certainty
An understanding of the revenue source increases the reliability of the revenue system. The
City will try to understand its revenue sources and enact consistent collection policies so that
assurances can be provided that the revenue base will materialize according to budgets and
plans.
D. Equity
The City will strive to maintain equity in the revenue system structure. That is, the City will
seek to minimize or eliminate all forms for subsidization between entities, funds, services,
utilities, and customers. The revenue system will strive to have the characteristics of fairness
and neutrality as it applies to cost of service, willingness to pay, and ability to pay.
E. Administration
The benefits of revenue will exceed the cost of producing the revenue. The cost of collection
will be reviewed for cost effectiveness as a part of the indirect cost and cost of service
analysis. Where appropriate, the City will use the administrative process of State or Federal
Collection agencies in order to reduce administrative costs.
F. Diversification and Stability
In order to protect the government fluctuations in a revenue source due to fluctuations in the
economy, and variations in the weather (in the case of water and wastewater) a diversified
revenue system will be maintained.
G. Property Tax Revenues
Propert
y shall be assessed at 100% of the fair market value as appraised by the Collin County
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Appraisal District. Reappraisal and reassessment shall be done regularly, as required by state
law. A 98.6% collection rate will serve as a minimum tax collection with a delinquency rate
of 1%&
All delinquent taxes will be pursued and turned over to a private attorney. A penalty will be
assessed to compensate the attorney as allowed by state law, and in accordance with the
attorney's contract.
H. Sales Tax Revenue
The State Comptroller's Office collects, administers, and disburses sales tax on a monthly
basis. However, there is a two-month lag between the month of sales and when the City
receives the revenue. The Budget Manager monitors and reports the activity, reflecting any
state audit adjustments, refunds to gross collections, or fees withheld for the collection
process.
Accounting staff reports the sales tax revenues based on the month of sales. This results in
sales tax received in the month of October and November being accrued back to the previous
year.
I. User -Based Fees
For services associated with a user fee or charge, the direct or indirect costs of that service
will be offset by a fee where possible. There will be aperiodic review of fees and charges to
ensure that fees provide adequate coverage of the cost of services.
J. Interest Income
Interest earned from investment of available monies will be distributed to the funds in
accordance with the equity balance of the fund from which monies were provided to be
invested.
Interest earned on accounts held with the City's depository will be distributed based on the
cash balance of each of the funds.
K. Impact Fees
Impact Fees are currently imposed for water, wastewater, and roadway in accordance with
applicable City Ordinances and state law. Impact fees will be re-evaluated at least every five
years, as required by state law.
L. Utility Rates
The City will review utility rates periodically, and if necessary, adopt new rates that will
generate revenues required to fully cover operating expenditures, meet the legal restrictions
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of all applicable bond covenants, and provide for an adequate level of working capital needs
and debt service requirements. This policy does not preclude drawing down the working
capital to finance current operations. It is in the City's best interest to utilize cash balances in
excess of required working capital to finance capital projects. Components of the utility rate
will include transfers to the General Fund for administrative costs, franchise fees, or payment
in leu of property tax (PILOT) or a combination thereof when possible.
V. EXPENDITURE CONTROL
A. Appropriations
Appropriations are budgeted for at the fund level. If budget amendments (increase in
appropriations) are necessary, they must be approved by the City Council. Budget transfers,
between line items within the same fund, are allowed as long as the adjustments do not exceed
the total budgeted appropriations for that fund. These budget transfers are approved by the
City Manager.
B. Contingency
Pursuant to the City Charter, a contingency appropriation may be included in the annual
budget in an amount not to exceed more than three (3) percent of the total General Fund
expenditures. The contingency is to be used in the event of unforeseen items of expenditures.
The contingency must apply only to current operating expenditures and must not include any
expenditures which are appropriated from assigned or committed fund balance.
In the event the City Manager approves an expenditure where contingency funds are to be
utilized, the budget shall be transferred to the appropriate line item within the department.
C. Purchasing
All Purchasing shall be in accordance with the City's Purchasing Policy.
D. Central Control
Significant vacancy (salary) savings and capital budgetary savings in any department will be
centrally controlled; and may not be spent by the department without the authorization of the
City Manager.
E. Order of Expenditure of Funds
When multiple funding sources are available for expenditure (for example, a construction
project is being funded partly by a grant, bond funds, and capital projects funds), the City will
start with the most restrictive category and spend those funds first before moving to the next
category with available funds.
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F. Prompt Payment
All invoices will be paid within thirty (30) days of receipt in accordance with the prompt
payment requirements of State law. Procedures will be used to take advantage of all purchase
discounts where considered cost effective.
VI. BUDGET CONTINGENCY PLAN
This policy is designed to establish general guidelines for managing revenue shortfalls
resulting from local and national economic downturn that adversely affect the City's revenue
stream.
A. Immediate Action
Once a budgetary shortfall is projected, the City Manager will take the necessary actions to
offset the projected shortfall with a reduction in current expenditures. The City Manager may:
a. Freeze all hiring and filling of vacant positions except those deemed to be absolutely
necessary;
b. Review and delay all planned remaining capital expenditures not funded by bond
proceeds;
c. Delay all "non-essential" spending or equipment replacement purchases.
B. Further Action
If the above actions are insufficient to offset the revenue deficit and the shortfall continues to
increase, the City Manager will further reduce operating expenses to balance the variance.
Any remaining service level reductions, including workforce reductions, will be reviewed and
addressed between the City Council and City Manager.
VII. ASSET MANAGEMENT
A. Investments
1. Investment Policy -The City Council has formally approved a separate Investment Policy
for the City that meets the requirements of the Public Funds Investment Act (PFIA),
Section 2256 of the Texas Local Government Code. The policy is reviewed annually by
the Council and applies to all financial assets held by the City.
2. Quarterly Report
- As required by the Public Funds Investment Act (PFIA), a Quarterly
Investment Report will be prepared and provided to the City Council. The report shall
consist of at a minimum the following:
a) A comparison of the prior quarter investment's book and market value;
b) Contain the current quarter and year-to-date (YTD) average yields;
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c) Reference the amount of interest income by quarter and YTD;
d) List each investment instrument for the previous and current quarter with its rate of
return, purchase and maturity date, book value, and market value;
e) Provide a summary of the investments by fund group;
f) Compare the total investment portfolio performance to the performance of a
government investment pool.
B. Cash Management
The City's cash flow will be managed to maximize the cash available to invest. The City's
depository accounts shall be pooled to limit the numbers of accounts and to allow for the
City to pool investment purchases between funding sources.
The Finance Director is responsible for establishing internal controls for banking activities
such as wires, ACH payments, and transfers. Dual authorization shall be required for all
wires and ACH payments.
VIII. FIXED ASSETS
The City's fixed (capital) assets are to be reasonably safeguarded and prudently insured
against loss. The Finance Department is responsible for properly accounting for, reporting
and capitalizing the assets in accordance with GAAP.
A. Capitalization Criteria
For the purposes of budgeting and accounting classification, the following criteria apply to
assets to be capitalized:
a) The asset must be owned by the City.
b) The asset must be tangible.
c) The expected useful life must be longer than three (3) years or must extend the useful
life of an existing asset by more than two (2) years.
d) The original cost of the asset must be greater than $5,000.
e) Useful life will be established based on available sources that are in accordance with
GAAP.
f) On-going repairs and general maintenance will not be capitalized.
g) Assets not meeting the above criteria will be expensed.
B. New Purchases
All costs associated with bringing the asset into working order will be capitalized as part
of the asset cost. This will include start-up costs, engineering or consultant type fees that
are incurred once the decision to purchase is made. The cost of land acquired should
include all related costs associated with the purchase.
C. Improvements and Replacements
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Improvements will be capitalized when they extend the useful life of an asset or when they
make the asset more valuable than it was originally. The replacement of asset components
will normally be expensed unless they are of a significant nature and meet all of the
capitalization criteria.
D. Contributed Capital
Infrastructure assets received from developers will be recorded as equity contributions once
the City Manager or Director of Public Works approves the letter of acceptance.
E. Reporting and Inventory
The Finance Department will maintain the permanent records of the city's fixed assets,
including description, cost, department of responsibility, date of acquisition, depreciation,
and expected useful life. Periodic, random sampling will be performed to inventory fixed
assets assigned to a department. Responsibility for safeguarding the City's fixed assets lies
with the department that has been assigned the asset. When an asset leaves a department's
responsibility due to disposition, sale or transfer, the assigned department is responsible to
report the change in status or location to the Finance Department.
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FUND BALANCE AND WORKING CAPITAU RESERVE POLICY
The City of Anna (City") believes that sound financial management principles require that
sufficient funds be retained by the City to provide a stable financial base at all times. To retain this
stable financial base, the City needs to maintain a General Fund fund balance and Utility Fund
working capital reserve sufficient to fund all cash flows of the City, to provide financial reserves
for unanticipated expenditures and/or revenue shortfalls of an emergency nature, and to secure and
maintain investment grade bond ratings. A fund's equity in the General Fund is the difference
between its total assets and total liabilities. On the other hand, working capital reserve in the
Utility Fund is an excess of current assets over current liabilities. The purpose of this policy is to
specify the size and composition of the City's financial reserves and to identify certain
requirements for replenishing any fund balance or working capital reserves utilized.
The Governmental Accounting Standards Board ("GASB") issued Statement No. 54, Fund
Balance Reporting and Governmental Fund Type Definitions ("GASB -54'). One objective of this
standard was to improve, including the understandability, the usefulness of fund balance
information by providing clear fund balance classifications.
GASB -54 requires local governments to focus on the constraints imposed upon resources when
reporting fund balance in governmental funds. Governmental funds are typically used to account
for tax -supported activities (i.e. General Fund, Debt Service Fund). The fund balance
classifications indicate the level of constraints placed upon how resources can be spent and identify
the sources of those constraints. The following five classifications serve to inform readers of the
financial statements of the extent to which the City is bound to honor constraints on the specific
purposes for which resources in the General Fund can be spent.
DEFINITIONS
• Nonspendable Fund Balance —Fund balance reported as "nonspendable" represents fund
balance that is (a) not in a spendable form such as prepaid items or (b) legally or
contractually required to be maintained intact such as an endowment.
• Restricted Fund Balance —Fund balance reported as "restricted" consists of amounts that
can be spent only on the specific purposes stipulated by law or by the external providers of
those resources.
• Committed Fund Balance —Fund balance reported as "committed" are self-imposed
limitations set in place prior to the end of the fiscal period. These amounts can be used
only for the specific purposes determined by a formal action of the City Council, which is
the highest level of decision-making authority, and that require the same level of formal
action to remove the constraint.
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Assigned Fund Balance — Fund balance reported as "assigned" consists of amounts that are
subject to a purpose constraint that represents an intended use established by the City
Council or by their designated body or official. The purpose of the assignment must be
narrower than the purpose of the General Fund. Formal action is not necessary to impose,
remove, or modify a constraint in Assigned Fund Balance.
e Unassigned Fund Balance —Fund balance reported as "unassigned" represents the residual
classification of fund balance and includes all spendable amounts not contained within the
other classifications.
ORDER OF EXPENDITURES
When expenditures are incurred for the purposes for which multiple categories of fund balance
can be utilized, the City will start with the most restrictive category and spend those funds first
before moving down to the next category with available funds.
POLICY ON COMMITTING FUND BALANCE
In accordance with GASB -54, it is the policy of the City of Anna ("City") that fund balance
amounts will be reported as "Committed Fund Balance" only after formal action and approval by
City Council. The action to constrain amounts in such a manner must occur prior to year end;
however, the actual dollar amount may be determined in the subsequent period.
For example, the City Council may approve a motion prior to year end to report within the year-
end financial statements, if available, up to a specified dollar amount as Committed Fund Balance
for a specified purpose. The exact dollar amount to be reported as Committed Fund Balance may
not be known at the time of approval due to the annual financial audit not yet being completed.
This amount can be determined at a later date when known and appropriately reported within the
year-end financial statements due to the governing body approving this action before year-end.
It is the policy of the City that the City Council may commit fund balance for any reason that is
consistent with the definition of Committed Fund Balance contained within GASB -54. Examples
of reasons to commit fund balance would be to display intentions to use portions of fund balance
for future capital items, stabilization funds, or to earmark special General Fund revenue streams
unspent at year-end that are intended to be used for specific purposes.
After approval by the City Council, the amount reported as Committed Fund Balance cannot be
reversed without utilizing the same process required to commit the funds. Therefore, in accordance
with GASB -54, it is the policy of the City that funds can only be removed from the Committed
Fund Balance category after motion and approval by the City Council.
POLICY ON ASSIGNED FUND BALANCE
In accordance with GASB -54, funds that are intended to be used for a specific purpose but have
not received the formal approval action at the governing body level may be recorded as Assigned
Fund Balance. Likewise, redeploying assigned resources to an alternative use does not require
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formal action by the governing body.
GASB -54 states that resources can be assigned by the governing body or by another internal body
or person whom the governing body gives the authority to do so, such as a committee or employee
of the City.
Therefore, having considered the requirements to assign fund balance, it is the policy of the City
that the City Manager will have the authority to assign fiend balance of this organization based on
intentions for use of fund balance communicated by the City Council.
UNASSIGNED FUND BALANCE OF THE GENERAL FUND
It is the goal of the City to achieve and maintain an unassigned General Fund fund balance equal
to 40% of total appropriations. The City considers a balance of less than 25% to be a cause for
concern, barring unusual or deliberate circumstances, and a balance of more than 40% as
excessive. An amount in excess of 40% can be used in one of the following ways:
• Increase the pay-as-you-go contributions needed to fund capital projects in the City's
Capital Improvement Plan. These funds will be transferred out to the Governmental Non -
Bond Capital Projects Fund.
• Increase funds contributed and transferred out to the Equipment Replacement Fund to
assist in financing large capital equipment purchases.
• Reduce accrued liabilities, including but not limited to the TMRS pension liability and
capital lease liabilities.
Prior to year-end, an Ordinance will be presented to Council when appropriate to give specific
authority to the City Manager to make transfers of unexpended appropriations and excess revenues
up to a certain threshold. The exact dollar amount to be transferred may not be known at the time
of approval. This amount can be determined at a later date when known and appropriately reported
within the year-end financial statements due to the governing body approving this action before
year-end.
In the event that the unassigned General Fund fund balance is less than the policy anticipates, the
City shall adjust budget resources in the subsequent fiscal years to restore the balance or establish
a time frame and work plan to replenish the fiend balance. The work plan may include tax increases,
fee increases, reduction of services, and/or reduction of expenditures (i.e. hiring freeze, salary
freeze, or reduction of travel/training).
Appropriation drawing down on unassigned General Fund fund balance shall require the approval
of the City Council and shall be only for one-time expenditures, such as capital purchases, and not
for ongoing expenditures unless a viable plan designated to sustain the expenditures is
simultaneously adopted.
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WORKING CAPITAL RESERVES OF THE UTILITY FUND
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 a working capital reserve in the
Utility Fund of 25% of total appropriations in order to provide for potential unanticipated needs or
the impact of weather.
The City considers a balance of less than 25% to be a cause for concern, barring unusual or
deliberate circumstances, and a balance of more than 40% as excessive. An amount in excess of
40% can be utilized in one of the following ways:
• Increase the pay-as-you-go contributions needed to fund capital projects in the City's
Capital Improvement Plan. These fiends will be transferred out to the Enterprise Non -Bond
Capital Projects Fund.
• Increase funds contributed and transferred out to the Equipment Replacement Fund to
assist in financing large capital equipment purchases.
• Reduce accrued liabilities, including but not limited to the TMRS pension liability and
capital lease liabilities.
Prior to year-end, an Ordinance will be presented to Council when appropriate to give specific
authority to the City Manager to make transfers of unexpended appropriations and excess revenues
up to a certain threshold. The exact dollar amount to be transferred may not be known at the time
of approval. This amount can be determined at a later date when known and appropriately reported
within the year-end financial statements due to the governing body approving this action before
year-end.
In the event the working capital reserves in the Utility Fund are less then the policy anticipates, a
utility rate plan study will be utilized to determine the appropriate course of action when
determining rates and establishing a timeframe to replenish the working capital reserves. This
could include cost cutting, cost recovery, and revenue enhancing strategies.
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DEBT MANAGEMENT POLICY
The purpose of this policy is to set forth the parameters for issuing new debt as well as managing
the outstanding debt portfolio, identifying the types and amount of permissible debt, and
maintaining or improving the current bond rating in order to minimize borrowing costs and
preserving access to credit. Adherence to a debt management policy signals to rating agencies
and capital markets that a government is well managed and should meet its obligations in a timely
manner. Debt levels and their related annual costs are important long-term obligations that must
be managed within available resources.
This Policy establishes specific guidelines to ensure that the City adheres to sound financial
practices whenever it incurs debt. The City should consider this Policy when recommending the
issuance of debt. This Policy may be amended from time to time by the City Council to reflect
innovative, but prudent financial and business practices. It is the intent of the City to establish
this policy in order to:
• Ensure high quality debt management decisions;
• Ensure the debt management decisions are viewed positively by rating agencies,
investment communities, and citizens;
• Ensure support for debt issuance both internally and externally;
• Ensure the legal and prudent use of the City's bonding authority through an effective
system of financial security and internal controls;
• Promote sound financial management that utilizes long range financial planning;
• Use debt financing where appropriate to match projected revenue streams;
• Evaluate critical debt issuance options.
POLICY STATEMENT
Under the governance and guidance of Federal and State laws and the City's Charter, ordinances
and resolutions, the City may periodically enter into debt obligations to finance the construction
or acquisition of infrastructure and other assets; or to refinance existing debt for the purpose of
meeting its governmental obligation to its residents. It is the City's desire and direction to ensure
that such debt obligations are issued and administered in such fashion as to obtain the best long-
term financial advantage to the City and its residents, while making every effort to maintain and
improve the City's bond ratings.
The City shall not issue debt obligations or utilize debt proceeds to finance current operations of
the City.
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WA'A ' 0 WVW IVA ' V V /_ U I - \ - _' _kL1W :- ►/_
A Capital Improvement Program shall be prepared, submitted to, and approved by the Council
annually. The Capital Improvement Program shall consist of at least a 5 -year priority listing of
long-term capital projects, accompanied by a financing plan which reflects potential financing
options for all projects in the plan, and is supported by the appropriate sources of revenue. The
financing plan shall be in accordance with the debt management policies contained herein. The
CIP guides capital expenditures and funding requirements, and generally includes:
• All capital projects, including outside funding sources such as grant funding, and those
proposed to be financed, as available.
• The fiscal impact these capital projects, once completed, will have on the City's operating
budget.
As a Home Rule Charter City, the City of Anna is not limited in the amount of debt it may issue.
However, the Texas Constitution, Article XI, Section 5 provides that the general property tax is
limited to $2.50 per $100 of assessed valuation. Because the property tax is comprised of two
components, Operations and Maintenance (O&M), plus Interest and Sinking (I&S) (which is the
payment of principal and interest on legal debt instruments), the constitutional limits on the City's
property tax rate effectively establishes an absolute ceiling on the amount of debt that may be
funded by property tax revenues.
The determination of how much indebtedness the City can afford begins by assessing the
sufficiency of future revenues through the use of along -term financial projection. Factors such as
debt service coverage requirements outlined in the bond indentures, the impact on the tax or utility
rates, and any impact on the bond ratings shall be carefully considered.
Debt service will be structured, to the greatest extent possible, to match projected cash flows,
minimize the impact of future property tax levies, and maintain a relatively rapid payment of
principle. The term of the debt issuance should not be greater than the expected useful life of the
asset being financed, or the maximum maturity permitted by State law for the obligations to finance
the acquisition or construction of the asset.
RESPONSIBILITY
The primary responsibility for developing financing recommendations rests with the City Manager
and Finance Director. In developing financing recommendations, consideration will be given as
follows:
• The time proceeds are expected to remain on hand and the related carrying costs;
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• The options for interim financing including short term and interfund borrowing, taking
into consideration federal and state reimbursement regulations;
• The effect of the proposed action on the tax rate and user charges;
• Trends in interest rates;
• And other factors as appropriate.
PROFESSIONAL CONSULTANTS
A. Financial Advisor — A Financial Advisor will be used to assist in the issuance and
administration of the City's debt. The Financial Advisor will provide the City with objective
advice and analysis on debt issuance. Financial services provided to the City shall include but
shall not be limited to those listed below.
• Provide analysis of the City's financial capacity to authorize, issue, and service any
debt instruments that are considered;
• Monitor market opportunities, providing interpretation of market conditions which
factor into timing of issuance;
• Take primary responsibility for review of the quantitative analysis of the cash flows
provided by the underwriter. Prepare reports matching all calculations for bond sizing,
debt service schedules, savings calculations, bond calls, escrow calculations and cash
flows on the project;
• Coordinate assembly of data necessary for preparation of necessary petitions,
ordinances, notices as may be required for elections to authorize debt instruments;
• Maintain liaison with Bond. Counsel utilized by the City in preparation of legal
documents regarding authorization, sale and issuance of debt instruments;
• Prepare official statements of disclosure as required;
• Advise and facilitate obtaining credit ratings as necessary when issuing debt;
• Attend meetings and make presentations as requested;
• Participate in activities associated with rating agency reviews;
• Other services as defined by the contract.
B. Bond Counsel —The Bond Counsel will issue an opinion as to the legality and tax-exempt
status of any obligation. The City will also seek the advice of Bond Counsel on all other types
of financing and on any other questions involving federal tax or arbitrage law. The services
provided by Bond Counsel will include but not limited to the list below.
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• Provide an objective legal opinion with respect to the authorization and issuance of
debt obligations and whether interest paid is tax-exempt under federal and/or state laws
and regulations;
• Research applicable law; preparing documents; consulting with City staff and the
Financial Advisor; reviewing proceedings; and performing additional duties as
necessary to render the opinion;
• Provide continuing legal advice regarding any actions necessary to ensure that interest
will continue to be tax-exempt;
• Participate, when requested, in activities associated with rating agency reviews;
• Attend City Council meetings when the debt obligation for which Counsel is providing
services is being considered;
• Prepare the ordinance authorizing issuance of the obligations;
• Other services as defined by the contract.
APPROACH TO FINANCING
A sound debt management program integrates pay-as-you-go project financing with projects
financed through the issuance of debt. Pay-as-you-go financing may include; intergovernmental
grants from federal, state, and other sources, current revenues and fund balance, private sector
contributions, public/private partnerships, and/or leasing. The City's Capital Improvement
Program utilizes this combined approach to fund the City's capital projects and capital assets.
The City's Debt Management Policy promotes the use of debt only in those cases where public
policy, equity, and economic efficiency favor debt over cash (i.e., pay-as-you-go) financing or in
the case where cash financing is not a possibility.
Once the City has determined that "pay-as-you-go" is not a feasible financing option, the City rmay
use Short-term or Long-term debt to finance capital projects.
A. Short Term Debt —Maturity often (10) years or less
Short term obligations may be issued to finance projects or portions of projects. Typically, tax
notes will be considered for smaller issues (less than $1 million). The City may also secure
interim financing which shall eventually be refunded with the proceeds of long-term
obligations. Short-term obligations may be backed with a tax or revenue pledge of available
resources. Capital leases may be used to purchase high-priced equipment to manage year-to-
year capital expenditure levels.
B. Long Term Debt (Bonds) —Maturity of ten (10) years up to thirty (30) years
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Long term general obligation or revenue bonds shall be issued to finance significant capital
improvements or capital assets as set forth by the Capital Improvement Program (CIP). Long term
debt may be incurred for only those purposes as provided by State law. The following list is factors
which favor long term debt issuance.
• Revenues available for debt service are sufficient and reliable such that long-term financing
can be marketed with an investment grade credit rating.
• Market conditions present favorable interest rates.
• The project is required to meet or relieve capacity needs and current resources are
insufficient or unavailable.
• The life of the project or capital asset to be financed is 10 years or longer.
Notwithstanding the above considerations, the City may consider the use of long-term debt in
special circumstances for projects other than capital projects to better manage its assets and
liabilities over time.
CAPITAL LEASING
Leasing shall not be considered when funds are on hand for the acquisition unless interest expense
associated with the lease is less than the interest that can be earned by investing the funds on hand
or when other factors such as budget constraints override the economic consideration.
Whenever a lease is arranged with a private sector entity, atax-exempt rate shall be sought.
Whenever a lease is arranged with a government or other tax-exempt entity, the City shall strive
to obtain an explicitly defined taxable rate so that the lease will not be counted in the City's total
annual borrowings subject to arbitrage rebate.
The advice of the City's Bond Counsel shall be sought in any leasing arrangement and when
federal tax forms 8038 are prepared to ensure that all federal tax laws are obeyed.
OTHER FINANCING ALTERNATIVES
From time to time other types of financing may become available. Examples of these options are
low-interest loans from State agencies. At the direction of the City Manager and Finance Director,
the City's Financial Advisor will prepare an analysis of the option.
GENERAL DEBT GOVERNING POLICIES
The primary use of debt the City is to fund capital projects; however, other debt may be issued as
necessary and appropriate. Because of the use of facilities will occur over many years, it is
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appropriate to allocate the cost of the facilities over the useful life of the financed project. The
City establishes the following policies concerning the issuance and management of debt:
• The City will not issue debt obligations or use debt proceeds to finance current operations
or normal maintenance.
• The term of the bond shall not exceed thirty (30 years) unless there are extenuating
circumstances that justify the longer term.
• The City shall publish and distribute an official statement for each publicly traded Bond
issue.
• The City shall consider the purchase of private bond insurance at the time of the issuance,
if it is financially beneficial to the transaction.
• Debt financing includes, general obligation bonds, certificate of obligation bonds, revenue
bonds, lease/purchase agreements and other obligations permitted to be issued under Texas
law.
• The City and the Financial Advisor shall review its outstanding debt annually for the
purpose of determining if the financial marketplace will afford the City the opportunity to
refund an issue and lessen its debt service costs. As a general rule, the present value savings
of a particular refunding should exceed four (4%) of the refunded maturities, unless a
restructuring or bond convent revision is necessary in order to facilitate the ability to
provide services or issue additional debt in accordance with established debt policies, the
refunding is done in combination with a new money issuance and involves maturities that
would not be efficient to be refunded on a stand-alone basis, or a refunding that generates
savings due to historically low interest rates or an unusual yield curve.
• The City shall not issue bonded debt without enacting an authorizing Resolution.
• The City shall seek to maintain the highest bond rating practical to ensure that borrowing
costs are minimized and access to credit is preserved.
• The City shall use a competitive bidding process in the sale of debt unless the nature of the
issue warrants a negotiated sale or private placement.
• The bond proceeds will be invested in accordance with the City's Investment Policy.
Interest earnings received on the investment bond proceeds shall be used to assist the costs
associated with the capital project.
• Debt shall be primarily used to fi
nance capital projects or assets with a relatively long -life
expectancy, i.e., generally five (5) years or greater.
• Long-term debt will be structured such that the obligations do not exceed the expected
useful life of the respective project or asset.
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• The City will primarily issue fixed rate bonds to protect the City against interest rate risk.
The City does have the option to issue variable rate bonds and may, if market conditions
warrant considering such a structure.
• Short term debt may be issued as authorized by the City Council when circumstances or
opportunities are present and such issuance will not adversely affect the operating funds,
the ability to make debt payments, or jeopardize the financial integrity of the City or the
component units.
• The City shall have a program to comply with arbitrage rebate monitoring and filing.
Because of the complexity of arbitrage rebate regulations and the severity of non-
compliance penalties, the City will contract for these services. The City currently utilizes
Hilltop Securities for these calculations.
• The City is committed to continuing disclosure of financial and pertinent credit information
relevant to the City's outstanding securities and will abide by the provisions of Securities
and Exchange Commission (SEC) Rule 15c2-12 concerning primary and secondary market
disclosures. The City currently has a contract with Hilltop Securities to work with City
staff to compile and file the required information in a timely manner.
DEBT ISSUANCE AND REVENUE SOURCES
General capital improvements shall be financed in accordance with the capital improvements
program. Funds shall be for the financing of general improvements in accordance with the
following:
• To the extent funds described above are in excess of that required by the City's General
Fund operating budget, all or a portion of the excess amount shall be used for pay-as-you-
go financing of general capital improvements or assets.
• It shall be a goal, but not a requirement, of the City to finance a portion of the city -at -large
capital improvement budget with pay-as-you-go financing with current resources
remaining from year-end savings.
• Outstanding bonds will be retired according to the debt repayment schedule.
• Assumptions for taxable assessed value increases and revenues growth shall be
conservative and justifiable.
• Debt issued for water, sewer and other purposes for which operating and capital needs are
supported by user fees, shall first be considered for issuance in the form of revenue bonds,
certificates of obligation, or other debt instruments secured by the appropriate user fees.
User fees shall be adequate to support operating requirements and revenue bond covenants
for each purpose. Certificate of Obligation or General Obligation debt secured by
operating revenues may also need to be secured with property taxes.
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METHODS OF SALE
The City may use competitive sales, negotiated sales, or private placements. When considering
the method of sale, the City will take the following conditions into consideration:
a. Financial conditions;
b. Market conditions;
c. Transaction -specific conditions;
d. City -related conditions; and
e. Risks associated with each method.
Additionally, the City considers the following criteria when determining the appropriate method
of sale for any debt issuance:
a. Complexity of the Issue —Municipal securities with complex security features require
greater marketing and buyer education efforts on the part of the underwriter, to improve
the investors' willingness to purchase.
b. Volatility PD A
Yields — If municipal markets are subject to abrupt changes in interest
rates, there may be a need to have some flexibility in the timing of the sale to take advantage
of positive market changes or to delay a sale in the face of negative market changes.
c. Familiarity of Underwriters with the City's Credit Quality — If underwriters are familiar
with the City's credit quality, a lower True Interest Cost (TIC) may be achieved.
Awareness of the credit quality of the City has a direct impact on the TIC an underwriter
will bid on an issue. Therefore, where additional information in the form of presale
marketing benefits the interest rate, a negotiated sale may be recommended. The City
strives to continue to increase the bond rating.
d. Size of the Issue —The City may choose to offer sizable issues as negotiated so that pre -
marketing and buyer education efforts may be done to more effectively promote the bond
sale.
DEFINITIONS OF METHODS OF SALE
A Competitive Sale is when bonds are awarded in a sealed bid sale to an underwriter or syndicate
of underwriters that provides the lowest True Interest Cost (TIC) bid. TIC is defined as the rate,
which will discount the aggregate amount of debt service payable over the life of the bond issue
to its present value on the date of delivery.
A Negotiated Sale is when the City chooses an underwriter or underwriting syndicate, generally
from the pool selected through its RFQ process, that is interested in reoffering a particular series
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of bonds to investors.
A Private Placement is a sale of debt securities to a limited number of sophisticated investors.
The City may engage a placement agent to identify likely investors. A private placement is
beneficial when the issue size is small or when the security of the bonds is weak since the private
placement permits issuers to sell more risky securities at a higher yield to investors that are familiar
with the credit risk.
FINANCING ALTERNATIVES
It is the City's intent to develop a level of cash and debt funded capital improvement projects that
provide the citizens with the desired amount of City services at the lowest cost. The City may use
general obligation debt, certificate of obligation debt, revenues bonds, tax notes, and capital leases
as deemed appropriate by the City Staff, City's Financial Advisors, and approved by the City
Council. Below are guidelines the City utilizes in evaluating financing alternatives:
• The City will fund the majority of capital projects with voter -approved debt; however, on
occasion, it becomes necessary to seek additional financing in order to fund a particular
non -quality of life project.
• The total dollar amount of bond election propositions recommended to the voters shall not
exceed the City's estimated ability to issue said bonds within a normal 10 -year period.
• The use of reimbursement resolutions shall be encouraged as a cash management tool for
general obligation and certificate of obligation debt funded projects.
• Revenue Bond will be issued for projects will be issued for projects that generate revenues
that are sufficient to repay the debt. Except where otherwise required by State Statutes,
revenue bonds may be issued without voter approval and only in accordance with the laws
of Texas.
• The use of other debt obligations, permitted by law, including but not limited to tax notes
and lease purchase obligations will be reviewed on a case-by-case basis.
RATINGS
• The City will strive to maintain good relationship with bond rating agencies as well as
disclose financial reports and information to these agencies and to the public.
• The City will obtain a rating from one nationally recognized bond -rating agency on all
issues being sold on the public market.
• Timely disclosure of annual financial information including other information will be
provided to the rating agencies.
• Timely disclosure of a pertinent financial information that could potentially affect the
City's credit rating will also be presented to the ratings agencies required information
repositories and bond insurance companies insuring the City of Anna debt.
This Debt Management Policy shall be reviewed at least annually, and any mocations must be
adopted by the City Council.
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City of Anna, Texas
Purchasing and Procedures Manual
28�Page
TABLL OF CONTENTS
Chapter 1 INTRODUCTION...............................................................................
Section1. Background..............................................................................
Section 2. Mission and Goals of Public Purchasing, a 0 a a 0 0 0 9 V W 0 0 a a 0 & 6 & a 0 a a 4 a a a 4 4 a a 0 a a 1 0 6 6 0 0 a a 0 a 0 4
Section 3. Purchasing Policy Statement........................................................... 5
Section 4. Other Resources.......................................................................... 6
Chapter 2 PURCHASING ETHICS........................................................................ 7
Section 1. Ethics Policy Statement................................................................. 8
Section 2. Accountability of City Employees .................................................... 8
Section 3. Ethical Standards........................................................................ 9
Chapter 3 PURCHASING PROCEDURES.............................................................. 11
Section 1. Conflict of Interest......................................................................
12
Section 2. Department Responsibilities........................................................... 12
Section 3. Purchasing Parameters................................................................. 12
A. Petty Cash (0 to$50)............................................................. 13
Be Purchases less than $3,000 (0 to $2,999.99)... boom 13
C. Purchases $3,000 but less than $50,000......... oaM*90049 Mom 13
D. Purchases $50,000 and Over .................................................... 14
Section 4. Tax Exempt Certificate...... ... *40 60004 6 4 0 a 0 660*0 0 666 0 & 6 6 6 a 6 a 6 4 a 0 A 0 a 0 0 4 a a a 6 0 a 0 a 0 0 a Waal 14
Section 5. Purchasing Procedure Violations............ mom &ao&&&M&6 blame 14
Section 6. Exceptions to Competitive Bidding... ... 016*0446*0 960664440 666664666 moo 14
A. Emergency Purchases..................... moo 404 15
Be Sole Source Purchases.. a 4 a 0 a 0 W 0 a 0 a a a 0 0 0 a 9 6 a 9 6 6 6 a 4 a a a 0 M 4 4 0 a 0 M a a a a 0 4 0 0 0 a a 0 6 a a 0 a 8 a 6 a 15
C. Other Exceptions............... moo*mtomt4to Salome 00*004 emblem 0#0 am* 16
Section 7. Professional Services. . W 17
Section 8. Lease Purchases... 000***M**Moo lolled 500*96 060 V66964*66 1 17
Section 9. Purchasing Card Program (P-Card)....................boob... 6 0 0 6 .................... 17
Section 10. Purchase Order Processing. . 6 6 9 6 0 6 17
Section 11. Receiving and Inspection......... malleable a*&*&* Mae &me 666 18
Section 12. Prompt Payment Act.................................................................. 18
Chapter 4 COMPETITIVE BID PROCESS............................................................. 19
Section 1. Request for Quote (Purchases $3,000 and less than $50,000 ..................... 20
Section 2. Bid/Request for Proposal Process (Purchases $50,000 and Over) ............... 20
A. Procedure Requirements for Bids/Request for Proposals (RFP)........... 21
Be Establishing Bid Specifications............ 666 sea mom 22
C. Awarding the Bid............................................................pool. 22
D. Contested Bids............ momme*000 mom &ama%*6*a blamed 22
E. Awarding the Request for Proposal (RFP) .................................... 23
F. Verification of Insurance......................................................... 24
G. Bonding Requirements.. 94 *0 WoWaWo*6o&*o moo ott4*4 too 24
H. Change Orders to Contracts...................................................... 25
Section 8. State Contracts and Cooperatives. . a a 6 a 6 0 a & 6 6 & 0 & 4 a & a & a & 0 0 4 A a a a a a 0 0 4 a 0 a 4 & a me 6 a a 6 6 a 0 25
Chapter 5 DISPOSAL OF SURPLUS PROPERTY, . a a a 0 a 9 0 4 4 4 0 4 M 1 0 0 9 a 4 0 0 0 0 0 A 0 0 0 a 0 a 0 0 0 a a a a 0 0 6 0 6 6 6 a
27
Chapter 6 DEFINITIONS.................................................................................... 29
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CHAPTER 1 INTRODUCTION
30�Page
CHAPTER 1 INTRODUCTION
Section 1. Background
The Purchasing Policy and Procedure Manual provides the City departments information to
assist in malting decisions regarding the purchase of goods and services necessary to perform
the functions of their offices and/or departments effectively.
City staff must ensure that purchasing responsibilities are accomplished in compliance with
Texas Local Government Code, including Chapters 252 and 271, Purchasing and Contracting
Authority of Municipalities, other relevant federal, state, and local statutes, and City of Anna
policies. This is accomplished primarily through competitive bids/proposals with the City's best
interests always paramount. The City of Anna embodies best practices, promotes transparency,
fairness, and competitiveness in state and local government.
This policy is provided to protect employees and the use of public funds. Employees will be
held accountable for the proper use and administration of the purchasing process. This
policy/manual has been prepared for the use of City personnel and other interested parties to
serve as policy for all procurement related activities. It is the responsibility of each employee
involved in the procurement process to understand the policies, the meaning, and the intent.
Individuals making purchases in a manner that does not adhere to the City's Purchasing Policy
or enters into a private transaction with the vendor, assumes responsibility for payment and may
be subject to disciplinary action.
Section Z. Mission and Goals of Public Purchasing
The mission of the Purchasing Policy of the City of Anna is to:
• Foster an understanding and appreciation of sound purchasing practices throughout ail
departments of the City;
• Acquaint all persons (internally and externally) in respect to the City's purchasing
policies and procedures;
• Ensure compliance with local, state, and federal laws applicable to city purchasing;
• Attempt to gain the most value in every purchase;
• Eliminate high cost, convenience buying;
• Provide an ongoing supply of quality goods and services to all City offices; and
• Protect the interests of City of Anna neighbors.
The goals of public purchasing are to:
• Purchase the proper goods and services;
31�Page
• Obtain the best possible price for goods or services, without sacrificing the quality needed;
• Ensure a continuing supply of goods and services are available where and when needed,
• Ensure responsible bidders are given a fair opportunity to compete for the City's business;
• Ensure the proper disposition of surplus property through internet auctions or sealed bids;
• Ensure public funds are safeguarded,
• Ensure public funds are not used to enrich elected officials or City employees or to confer
favors; and
• Provide all vendors, including Historically Underutilized Businesses (HUBS), equal
access to the City's competitive processes for the acquisition of goods and services.
Section 3. Purchasing Policy Statement
Purchasing is a function of all departments. Department Directors, Assistant Directors, and
Managers are responsible for ensuring that departmental purchases are in compliance with the
approved budget and the City's Purchasing Policy. Purchasing procedures are guided by several
established policies. These consist of the following:
• All purchasing shall adhere to sound purchasing policies to ensure that Anna neighbors
receive the best value for city purchases.
• Regardless of the expenditure, it is the policy of the City of Anna to garner competition
that produces the highest quality goods and services at the lowest possible price whether
the item or service is subject to quotes or bids.
• It is the policy of the City to allow the City Council to make final award on any
expenditure of $50,000 or greater in accordance with Texas Statutes.
• All purchasing shall be in accordance with the laws of the State of Texas including
Chapters 252 and 271 of the Texas Local Government code.
http://www.statutes.leg;is.state,tx.us/Docs/LG/htm/LG.252.htm
http://www.statutes.legis.state.tx.us/Docs/LG/htm/LG.271.htm
• Purchasing activities shall be managed with proper controls.
• When required or preferred, a competitive bidding process will be utilized to obtain
purchases at the lowest possible cost and to provide for an open and fair process for all
interested vendors.
• No City Council member or employee shall have a financial interest, direct or indirect, in
any contract with the City, nor shall be financially interested, directly or indirectly, in the
sale to the City of any land, or rights in any land, materials, supplies or service except on
behalf of the City as a Council member or employee. Any knowing violation of this
section shall constitute malfeasance in office, and any member or employee found guilty
thereof shall be subject to removal from such office or position. Any violation of this
section shall render the contract voidable at the discretion of the City Council.
32�Page
Section 4.Other Resources
An additional resource is provided through the in below from the Texas State Comptroller's
Office. The State of Texas Procurement and Contract Management Guide was written to provide
a holistic approach to government procurement. (Reference: Comptroller.Texas.Gov)
https://comptroller.texas.gov/purchasing/publications/procurement-contract.php
33�Page
CHAPTER 2 PURCHASING ETHICS
(For City Representatives & Vendors)
CHAPTER 2 PURCHASING ETHICS
For City Representatives & Vendors)
Section 1. Ethics Policy Statement
The Ethics Policy is cumulative of any provisions governing ethics or conflicts of interest under
state law and the City of Anna's Home -Rule Charter all as amended. In the event of any conflict
between any such provisions, the most restrictive provision shall govern. This section will
promote the objectives of protecting government integrity and facilitating the recruitment and
retention of qualified ethical personnel needed by the City of Anna.
The City also requires ethical conduct from those who do business with the City. City
representatives and vendors/entities are required to adhere to all federal, state, and municipal
laws and ordinances.
Section 2. Accountability of City Employees
The City wants to promote and protect its governmental integrity. As a public entity, the City
is expected to be able to demonstrate to the neighbors that it has spent their tax dollars wisely.
All participants in the City are responsible for ensuring 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.
It is essential for employees to take ownership of, and be responsible for, their actions to
preserve the public trust and protect the public interest. All City staff engaged in procurement
for the City shall comply with the ethical standards set forth in the following criteria:
• Plan purchases to minimize the use of emergency or expedited purchases;
• Ensure that purchasing policies and procedures are understood prior to ordering;
• Apply sound business judgement;
• Purchase the proper goods or services to suit the City's needs;
• Get the best possible price for the goods or services using City policies;
• Purchases shall have appropriate and adequate supporting documentation including a
clear explanation of the reason for the purchase
• Guard against misappropriation of City funds;
• Facilitate competition from responsible bidders;
• Safeguard public funds and receive the best value for the public dollar;
• Never use public spending to enrich elected officials or City employees; and
• Never make purchases for personal use in the City's name.
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Section I 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
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 of a 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.
7. No City representative may purchase City property for their own personal use unless it
is purchased through the City's public auction.
8. No City representative, City Council, Boards or Commissions, or employees, may use
the purchasing power of the City to make private purchases or to avoid the payment of
sales tax.
CHAPTER 3 PURCHASING PROCEDURES
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CHAPHR 3 PURCHASING PROCEDURES
Section L Conflict of Interest
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.
Section 2. Department Responsibilities
It is the responsibility of the Department Director and/or Authorized Designee to ensure the
following:
• The appropriate budget has been identified and is available;
• The appropriate method of purchase has been identified;
• City management and/or City Council approves of the purchase,
• City policy is being followed;
• State and Federal laws are being enforced,
• Documentation for the purchase is att
ached to the PO, such as quotes, emergency
purchase order with the City Managers signature, invoice, and/or documentation
reflecting the vendor is a sole source vendor;
• Invoices are submitted in a timely manner to adhere to the Prompt Payment Act as
described Section 12; and
• When applicable, a Certificate of Interested Parties (Form 1295) is provided to the
Finance Department. Chapter 2252.908 of the Texas Government Code requires a
business entity entering into certain contracts with a governmental entity to file a
Certificate of Interested Parties, Form 1295. Generally, all contracts requiring a vote
of the City Council are included. Contractors are required to register via the Texas
Ethics Commission Website where a Form 1295 is generated. The City must
acknowledge receipt of the form via the same portal no later than the 30th day after the
contract date.
https://www.ethics.state.tx.us/whatsnew/elf info form1295.htm
Section 3. Purchasing Parameters
At no time, shall purchases by broken down into smaller quantities or specialized activities so
as to avoid the requirements stated below. This practice is against State law and City policy.
Approval Authority
The following approval levels shall be utilized in all procurement related matters.
1. All procurement card (P -Card) transactions shall be approved by the respective Department
Director or Assistant Director.
2. All other Procurement Related Expenses below:
Amount
A proval Requirements
Designated
0 - $49999
Supervisors
Assistant
$55000 - $99999
Director or
Department Director
Department Director
$10,000 - $499999
and
City Manager
Department Director
City Manager
Council
$50,000+
and
I and
Approval
**The purchasing the°esholds below pertain to the total purchase from a single vendor, not per
item. This also includes purchases by multiple departments. * *
A. Petty Cash (0 to $50.00)
Petty Cash is deemed appropriate when it allows for more efficient procurement of minor goods
and services. Petty Cash may only be used for non -routine minor purchases of goods or services
up to $50.00. An employee requesting the Petty Cash must have approval from their Department
Director, Assistant Director, or Designated Supervisor. Documentation for the use of Petty Cash
is required at time of reimbursement and must include an invoice or itemized receipt for the
purchase. The employee requesting reimbursement will be required to sign for receipt of the cash.
Employees issued P -cards should not utilize petty cash for purchases.
B. Pccrchases less than $3,000 (0 to $2,999.99)
A one-time purchase by a single department or from multiple departments under the same
Department Director for supplies do not require quotes to be obtained. Quotes are recommended
when possible even if they are verbal. Purchases may be made with the P -Card depending on the
employee's card limit.
C. Purchases $3,000 but less than $50,000
A one-time purchase by a single department or from multiple departments under the same
Department Director requires three written quotes. Two of the quotes shall be from HUB vendors
as required by statue. A quote form should be completed and approved by the appropriate
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approval level in the above chart, prior to making the purchase. If service is performed on City
property a certificate of insurance shall be obtained. Work should not begin before insurance is
obtained and verified.
D. Purchases $50,000 and over
A one-time purchase or cumulative purchases by a single department or from multiple
departments requires a formal sealed bid. All purchases over $50,000 must also include a
contract, insurance, and bonds (if needed). City Council approval is required. See Chapter 4
on Competitive Bidding requirements.
Section 4. Tax Exemption Certificate
The City is exempt from payment of all local tax, state sales tax, and federal excise tax, with the
exception of Hotel/Motel tax. This is solely due to being a municipality.
At the time of purchase, vendors may request a Sales and Use Tax Exempt Certificate and/or a
W-9 form be completed by the City prior to removing any sales tax from the invoice. Please
contact the Finance Department to obtain a form to submit to the vendor.
Section 5. Purchasing Procedure Violations
Employees will be held accountable for the proper use and administration of the Purchasing
Process. The Department Directors or Approving Manager is responsible for ensuring that
employees comply with the policies outlined in this manual. The statues governing local
government purchasing impose criminal penalties for violating the provisions of various Acts
enacted by the Legislature to oversee purchasing. Any misuse of the City's purchasing power
carries various legal and/or future employment consequences.
LOCAL GOVERNMENT CODE 252.062 — CRIMININAL PENALTIES
A municipal officer or employee commits an offense, if the officer or employee intentionally or
knowingly makes or authorizes separate, sequential, or component purchases to avoid the
competitive bidding requirements of Section 252.021. An offense under this subsection is a Class
B misdemeanor. http://www.statutes.legis.state.tx.us/Docs/LG/htm/LG.252.htm
Section 6. Exceptions to Competitive Bidding
In some cases, competitive bidding is not possible to procure a good or service. Below are the
exceptions to utilizing a competitive bidding process. These exceptions must also accompany
the Sole Source/Emergency or Exceptions to Competitive Bidding Form as well as a letter on
company letterhead in the event the purchase is a sole source purchase. An example of the form
is located in the back of the policy.
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A. Emergency Purchases
Texas statutes generally allow the local government to make "emergency or exempted purchases"
without competitive bidding as per Texas Local Government Code 255.022 "General
Exemptions". A political subdivision is generally exempted from competitive bidding or
contacting Historically Underutilized Businesses (HUB) if one of the following occurs:
1. Public Calamity — In the case of a public calamity, the prompt purchase of items is required
to provide for the needs of the public or to preserve the property of the political subdivision.
2. Preservation or Protection — The item is necessary to preserve or protect the health or safety
of residents of the political subdivision.
3. Unforeseen Damage — The item is made necessary by unforeseen damage to public property.
Normal Working Hours —The City Manager is authorized to declare or determine if an
Emergency Purchase is warranted. When the emergency occurs during normal business hours
and the expenditure exceeds the department approval limit, the Department Director shall contact
the City Manager or his designee to obtain authorization. The City Manager shall advise the City
Council of any such emergency in excess of $50,000. Purchase Order (PO) should be prepared
and approved by both the Department Director and the City Manager or designee as soon as
possible. The Emergency Purchase Order (EPO) Form shall provide which emergency situation
from the above list has occurred. The PO, EPO Form, and the invoice should then be turned into
Accounts Payable for processing.
After Office Hours/Weekends/Holidays —When an emergency occurs after hours and the
expenditure exceeds the department approval level, the department authorized designee should
contact the Department Director for authorization and take whatever steps are necessary to make
the procurement. The Department Director shall complete the EPO Form and obtain the City
Manager or his designee's signature the following morning. As stated previously, the EPO Form
should justify which one of the occurrences from the list above resulted in the emergency.
Purchases made in emer�ency situations are moi°e costly than routine purchases; therefof•e, they
must be kept at a minimum. Poor planning, overlooked requirements or negligence ma cause
the need for expedited purchases, but are not trite emer eg ncies.
B. Sole Source Purchases
Quotes are not required if the materials, goods, or supplies can only be purchased from a sole
vendor, in other words, a sole source. Reasonable efforts must be made to ensure purchases from
sole sources are correctly classified as such. Materials, goods, and/or supplies cannot be
requested so as to remove other suitable alternative vendors/sources. The department must attach
justification to validate the sole source procurement meets one of the requirements listed below.
1. The good/service is a one of a kind or patented, copyrighted, secret process or unique item;
2. The product is only available from a regulated or natural monopoly; or
3. The product is a component of an existing system which is only available from one supplier.
41�Page
Sole source purchases are approved only after the lack of alternate sources has been determined
and proof of sole source is documented. The requesting department should do everything
possible to strengthen the City's bargaining position. Costs related to procurement should always
be considered before an order is placed, including post -purchase costs. Post -purchase costs could
include multi-year maintenance contracts, replacement parts or trade-in value. Written
justification should include one or more of the following:
1. Statement on company letterhead from vendor attesting to the fact that the items) being
requested are only available from that vendor.
Z. A statement from the Department Director or authorized designed providing information
concerning previous attempts to obtain competitive bids on the item(s) requested including
the name of the company and person contacted, in an effort to find other sources.
C. Other Exceptions
Maintenance of City Fleet Vehicles —The City has contracted with Enterprise Fleet Management
(EFM) for the lease purchase of new City vehicles. In addition, maintenance and repair of City
vehicles shall be taken to a vendor who is contracted with EFM. EFM staff will ensure that
proper repairs and/or maintenance is completed on the vehicles and appropriate charges are
incurred.
The following reasons are additional justification that an employee may not be able to utilize a
competitive bidding process:
• The requested product is an integral repair part or accessory compatible with existing
equipment.
• The requested product has unique design/performance specifications or quality
requirements that are not available in comparable products.
• Repair/maintenance is available only from manufacturer or designated service
representative.
• Upgrade to enhancement of existing software is available only from one manufacturer.
• Purchase of land, right -of --way, or buildings
• Services performed by blind or severely disabled person
• Goods purchased for the subsequent resale
• Service proposed by vendor is unique, therefore, competitive bids are not available or
applicable.
• Professional Services (See Section 7 below on further requirements)
Local Government Code Chapter 252.022 Competitive Requirements for Purchases defines the
general exemptions: https://statutes.capitol.texas.Dov/SOTWDocs/LG/htm/I.G.252.htm
Section 7. Professional Services
Cities are prohibited by law from awarding a contract by competitive bidding for some
professional services including architects, interior designers, engineers, or certified public
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Page
accountants. The Professional Services Procurement Act established a set of procedures that
must be followed to contract for these services.
The selection of these providers shall be based on demonstrated competence, experience, and
qualifications of the firm.
Section 8. Lease Purchases
State law authorizes cities to enter into lease purchase agreements. However, normal statutory
procurement requirements generally apply to these lease purchase agreements. This is the case
when a lease purchase agreement for personal property will involve an expenditure of more than
$50,000 in city funds. The contract must then be competitively bid unless the type of item
purchased is covered by a specific exception to the statutory procurement requirements.
All lease purchases
shall
be
coordinated by
the Finance Department dice to this type ofpu�°chase
and financing-
being
unique
and accounted
for diEferentlX.
Section 9. Purchasing Card Program (P -Card)
The P -Card is a method that allows employees to make small dollar approved City purchases
quickly and efficiently by paying vendors immediately with a credit card. A purchase shall not
be made with a card unless it is the most productive purchasing method. All employees issued a
'-Card are expected to understand all City policies related to using City funds. At no time does
the P -Card override the City's purchasing policy, which is guided by procurement law. The City
bears no legal liability from inappropriate use. (See the City's Purchasing Card Policy)
Section 10. Purchase Order Processing
All invoices shall be accompanied by a purchase order unless otherwise indicated below.
Purchase orders shall be submitted to Accounts Payable for processing after obtaining the
appropriate approval signatures with all supporting documentation attached. Purchase orders
submitted without appropriate approval or required documentation will be returned to the
ori ig nating department. Subject to the limits on the City Manager's authority to make purchases
and enter into contracts on behalf of the City, purchases of the following items do not require the
solicitation of bids or purchase order. However, if the purchase was made by a purchasing card,
a PO made payable to J P Morgan will be required. Departments shall clearly place the vendor
number and account number on the invoice itself.
• Insurance Premium Payments
• Retirement System Payments (TMRS) or other Payroll Expenditures
• Debt Service Payments
• Utility Service Payments
• Operating Leases/Maintenance Agreements
• City Fleet Fuel Payments
• Contracted Services
43�Page
• Registration Fees
• Membership/Professional Association dues and fees
• Postage
• Subscription Services
Section 11. Receiving and Inspection
When materials, equipment, or supplies are received, the department/division that placed the
order is responsible for inspecting the shipment and initiating the payment process. This should
be done as promptly as possible to take advantage of early payment discounts and/or give the
Accounting Technician time to avoid interest penalties and comply with the 30 -day payment
requirements by state law.
Section 12. Prompt Payment Act
Department shall ensure Purchase Orders, invoices, and the appropriate documentation is
submitted to Finance in a timely manner. Invoices are to be paid no later than net 30 days.
Texas Govefnment Code Chapter° 2251 stipulates that all local governments shall pay for goods
and services within thirty (30) days of the delivery or invoice date or interest is automatically
imposed.
44�Page
45�Page
CHAPTER 4 COMPETITIVE BID PROCESS
Section 1. Request for Quote (Purchases $3,000 and less than Xm,000)
Disadvantaged Businessesstorically Underuzed Businesses:
A municipality in making an expenditure of more than $3,000 but less than $50,000, is required
by state law to contact at least two (2) disadvantaged businesses or historically underutilized
businesses (HUB) on a rotating basis, in accordance with Texas Government Code, Title 10,
Subtitle D, Section 2161 and the General Services Commission Rule I TAC 111.11411.24. If
the list fails to identify a HUB in the County in which the city is situated, the City is exempt from
this section. HUB vendors must complete the certification process with the State of Texas
Comptroller of Public Accounts. See link below to the Texas Comptroller of Public Accounts
website to perform a search for HUBS.
https://mycpa.cpa.state.tx.us/�asscmblsearch/tpasscmblsearch.do
Price quotes should be solicited from an adequate number of vendors on a rotating basis to ensure
competition.
Section 2. Bid/Request for Proposal Process (RFP) (Purchases $50,000 and
Over)
Departments must take caution when determining whether a procurement requires a competitive
bid process. No specifications are to be written with the intent to exclude a possible bidder. The
following circumstances need to be considered and well thought out as they are of particular
concern to a city when departments are making a determination if a bid is required.
1. A city does not competitively bid an item because the total expenditure would be below the
$50,000 threshold and later purchase more items or more services are procured. The extra
procurement would take the total over the threshold. If the department knows this is a
possibility, even though the current procurement is under the threshold, a competitive bidding
process shall be utilized.
2. Individual departments making their own purchases of commodities or services that in total
take the City over the threshold. If the City in total reaches the threshold, a competitive
bidding process shall be utilized.
As stated in Chapter 3, Section 5, State law provides criminal penalties if a city makes component,
sequential or incremental purchases to avoid the competitive bidding requirements. If such a
charge is at issue, the prosecuting attorney would require the facts surrounding the involved
transaction. It is advisable for departments to look at their purchasing practices over past budget
years and consider whether certain items should be purchased through a competitive process.
A. Procedure Requirements for Bids/Request for Proposals (RFP)
State law requires competitive bidding for expenditures over $50,000. The City may choose the
46I
Pagc
bid process or the Request for Proposal option. Both options required City Council approval and
award.
The competitive bidding process has two purposes. The first one being to ensure that public
monies are spent properly, legally and for public projects only and to ensure the best possible
value is received for the money. Additionally, it is utilized to give those qualified and responsible
vendors who desire to do business with the City a fair and equitable opportunity to do so. Below
are the requirements for bids and proposals:
• A notice must be published establishing the time and place at which bids or proposals will
be publicly opened and read aloud. The notice must be published at least once a week for
two consecutive weeks. The notice must be published in a newspaper that is published in
the City. The first publication must appear before the 14th day before the date that the
bids or proposals are publicly read aloud.
• Specifications detailing the requirements that must be met by the goods or services or
information how to obtain copies of the specifications shall be included in the publication.
• Competitive bidding can be on a lump sum or unit price basis.
• In the event other factors other than price are utilized to make the selection, such as
previous performance, the specifications shall clearly state that such factors will be
considered in the award.
• The department must determine prior to the advertisement and before the notice is given
the method of procurement that provides the best value for the City.
• All bids shall be received at the City Hall and must be stamped with the time and date the
bids were delivered.
• All bids shall be addressed and opened at the designated time and place by the City
Secretary.
B. Establishing Bid Specifications
A specification is a concise description of goods or services the City seeks to buy and the
requirements the vendor must meet in order to be considered for the award. A specification may
include requirements for testing, inspection or preparing an item for delivery, or preparing or
installing use of it. The specification is the total description of the purchase.
The purpose of any specification is to provide personnel with clear guides for purchasing, and to
provide vendors with firm criteria of minimum product or service acceptability. A good
specification has four characteristics:
1. It sets a minimum acceptability of goods or services. The term "minimum acceptability"
is lcey since the vendor must know the minimum standard to determine what to provide.
A standard too high means tax dollars will be wasted. A standard too low means the
goods or services will not meet the expectations of the user.
2. It should promote competitive bidding. The maximum number of responsible vendors
should be able to bid the specification. Restrictive specifications decrease competition.
3. It should contain provisions for reasonable tests and inspections for acceptability of the
good or service. The methods and timing of testing and inspection must be indicated in
471
Page
the specification. Tests should refer to nationally recognized practices and standards,
when possible.
4. It should provide for an equitable award to the lowest responsible bidder. The buyer
obtains goods or services that will perform to expectations, and the vendor is able to
provide the goods or services at an agreeable price.
C. Awarding the Bid
Best Value — If best value is utilized, below are a list of items the department may utilize to make
the determination of "best value" for the City.
• Purchase price;
• Reputation of the bidder;
• The bidder's safety record;
• Warranties;
• The quality of the bidder's goods or services;
• The extent to which the goods or services meet the City's needs;
• The bidders' past relationships with the City or Department;
• The impact on the ability of the City to comply with laws and rules relating to
contracting with historically underutilized businesses (HUB) and nonprofit
organizations employing person with disabilities;
• The total long-term cost to the City to acquire the bidder's good or services; and
• Any relevant criteria specifically requested in the bid or proposal.
In the event no bids are received, the Department must re -advertise or choose to not undertake a
contract. If only one bid is received, the City Council may choose to accept the bid, reject the
bid and re -advertise, or determine not to undertake the project.
Bids are opened and read aloud at the designated time and place. The bid/bids must then be
presented to City Council. The City Council must then award the bid to the lowest responsible
bidder or if previously determined, the bidder with the "best value". The City Council does have
the option to reject all bids as well.
Once a bid has been opened, it may not be changed or altered to correct minor errors in the price.
However, under some circumstances, a bidder may be able to withdraw a bid if it contains a
substantial mistake that would cause a great hardship if enforced against the bidder.
D. Contested Bids
If a department is made aware of, or is contacted by a vendor regarding a protest relating to
advertising of bid notices, deadlines, bid opening and all other related procedures under the Local
Government Code, as well as any protests relating to alleged improprieties or ambiguities in the
specifications, the Department Director should first attempt to determine the reasons behind the
potential protest. If the Department Director fails to satisfy the vendor, they shall instruct the
vendor to prepare a written protest. At said time the Department Director shall notify the City
Manager and City Attorney.
48�Page
Appeals of protest of awards for $50,000 and over shall be filed with the City Secretary with a
concurrent copy to the City Manager and City Attorney.
The written protest should include the following:
• Include both the name and address of the protester, as well as the vendor they represent,
if different.
• Identify the bid number and item.
• Contain a statement of the grounds for protest and any supporting documentation.
• Protest must be submitted within five (5) days of the bid opening.
E. Awarding the Request for Proposal (RFP)
If an RFP was utilized and the best value option was established prior to the solicitation, the same
criteria listed above can be used to award the RFP.
When the RFPs are opened and acknowledged by public announcement, the vendor name is the
only item read aloud. This is to avoid disclosure of the contents of the proposals to competing
proposers until after the award of the contract. All proposals are open for public inspection after
the contract is awarded, but trade secrets are confidential information in the proposal and are not
open for public inspection (see Local Government Code, Chapter 252.049).
Unlike bids, once the proposals have been submitted, the City may conduct discussions with the
offeror or offerors whom the City determines to be reasonably qualified for the award of the
contract. However, such discussions must comply with the RFP and any guidelines established
by the City Council.
To obtain the best offers, the City may allow the submission of revisions after proposals are
submitted and before the award of the contract. (see Local Government Code, Chapter 252.042).
All offerors must be treated equally and fairly with respect to any opportunity for discussion and
revisions to the proposals.
Some -P+11
e items that should be evaluated and considered when reviewing an RFP areas follows:
• All calculations and sums shall be double checked for accuracy.
• Unit prices shall be extended to a total price for the requested quantity;
• The proposal shall be verified that it has been signed by an authorized signer of the
vendor;
• Verify all of the specifications outlined in the RFP have been met;
• List all areas where it fails to meet any condition(s) included in the specifications and
whether any failure disqualifies the proposal;
• Verify all required samples are included; and
• Include results of testing of samples, if required.
Contracts awarded by proposals are awarded by City Council. The contracts must be awarded to
the responsible bidder whose proposal is determined to be the most advantageous to the
49 1
Page
municipality, considering the relative importance of price and the other evaluation factors
included in the RFP. (see Local Government Code, Chapter 252.043).
The evaluation and recommendation should include at least the following:
• Merits of each proposal with recommendations about which one should be selected;
• Whether the vendor has submitted a responsive proposal, meeting all criteria in the RFP;
• Give information about whether the vendor has a record of being a responsible bidder,
capable of performing a contract and/or appears financially and technically capable of
adequately performing the contract; and
• Details of areas to be negotiated, including desired changes in the proposal.
F. Verification of Insurance
Vendors on City property or public right -of --way for the City of Anna shall provide the City a
certificate of insurance evidencing the coverage's and coverage provisions identified.
Contractors shall provide the City evidence that all subcontractors performing work on the project
have the same types and amounts of coverage's as required or that the subcontractors are included
under the contractor's policy.
All insurance and certificates) of insurance shall contain. the following provisions: (1) name the
City, its officers, agents and employees as additional insured's as to all applicable coverage with
the exception of Workers Compensation Insurance; (2) provide for at least thirty (30) days prior
written notice to the City for cancellation, non -renewal, or material change of the insurance; (3)
provide for a waiver of subrogation against the City for injuries, including death, property
damage, or any other loss to the extent the same is covered by the proceeds of insurance.
All insurance companies providing the required insurance shall be authorized to transact business
in Texas and rated at least "A" by AM Best or other equivalent rating services.
The vendor shall during the term hereof maintain in full force and affect the required insurance.
The City reserves the right to amend or require additional types depending on the nature of the
work.
G. Bonding Requirements
The Local Government Code mandates that a city contracting for public work in excess of
$50,000 shall require its contractor to execute a payment bond solely for the protection of
beneficiaries who supply materials and labor to the public works project and have a direct
contractual relationship with the contractor. The payment bond shall be in the amount of the
contract.
The Local Government
Code also mandates that a city contracting for public work in excess of
$100,000 shall require its contractor to execute a performance bond solely for the protection of
the City. The performance bond protects the City in the event of a contractor default and/or
termination. The performance bond must also be written for the total cost of the contract and
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Page
shall be executed by a corporate surety in accordance with the Insurance Code prior to
commencement of the work.
H. Change Orders to Contracts
After a City has awarded a bid or contract, a city may still increase or decrease the quantity of
work to be done or supplies to be furnished if it is necessary to do so. Such changes may not
increase or decrease the original contract price by more than 25 percent. In the event the increase
goes above 25 percent, the City shall must seek bids or proposals for the work or product which
would go beyond the 25 percent. If the City wants to decrease the contract amount by more than
25 percent, it shall obtain the approval of the contractor for such a change.
Section 3. State Contracts and Cooperatives
Texas Government Code, Chapter 791, and Texas Local Government Code, Chapter 271,
authorize the use of local cooperative purchasing programs. These chapters authorize the City to
use (piggyback on) another entity's bid and likewise allows another entity to use the City's
contracts. This action allows cities to obtain more advantageous volume purchases including
administrative savings and other benefits. These agreements must be in the form of an Inter -local
Cooperative Agreement which must be presented to Council for them to authorize the City
Manager to execute the agreement.
In addition to local cooperative purchasing programs, cities may also utilize contracts
competitively awarded by the State of Texas or the State of Texas Cooperative Purchasing
Program. The state purchasing cooperative promotes best value procurements through state
contract usage at the local level. In order to become a member of a state purchasing program,
City Council must pass a Resolution authorizing the City to participate in the program. A
minimal fee is then required annually to remain an active member in the program. Below is a list
of some of purchasing cooperatives:
❖ Collin County Governmental Purchasing Form (CCGPF)
Buyboard — https://www.buyboard.com
Department of Information Resources (DIR) — https:Hdir.texas.gov
Houston -Galveston Area Council (H -GAC) — http://www.h- ag c.com
•:� Texas Multiple Award Schedule Program (TXMAS) —
https://comptroller.texas.g
ov/purchasine/contracts/txmas/
Sourcewell (Formerly National Joint Power Alliance) -https://www.sourcewell-mn.gov/
The Interlocal Purchasing System (TIPS) —http://www.tips-usa.com
•:• OMNIA Part
ners (Formerly National IPA and U.S. Communities) —
https://www.omniapartners.com/publicsector/national-ipa-an-omnia-partner
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CIIAPTER 5 DISPOSAL OF SURPLUS PROPERTY
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CHAPTER 5 DISPOSAL OF SURPLUS PROPERTY
Disposal of surplus property may be sold by public auction (private auctioneer), Internet sale, or
sealed bids to the highest bidder. Employees may not directly purchase City property, unless it is
through the channels listed above where they are the highest bidder.
As surplus properties become available, notice of the items shall be circulated to all. departments
to determine whether any items could be used in another area of the City.
If the property is deemed to have no value, or if the value is less than the cost to process for an
auction, it will be disposed of by the most convenient method.
Finance shall be notified of any auction items to ensure the tracking of the fixed assets are
maintained.
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CHAPTER 6 DEFINITIONS
Advertisement — A public notice in a newspaper or general circulation containing information
about solicitation in compliance with legal requirements.
Best Value - A procurement method that emphasizes value over price. The best value may not
be the lowest cost. Value may include a combination of reputation, quality, long-term costs,
services, and time.
Bid Types —
a. Request for Quote (RFQ) Procurement process for purchases $3,000-$49,999
b. Request for Bid (RFB) Procurement process for $50,000 or greater
c. Request for Proposal (RFP) Negotiable Procurement process for $50,000 and greater.
Bidder — A vendor that submits a bid including acting on behalf of the vendor that submits a bid,
such as agents, employees and representatives.
Change Orders -Change orders may address differences in order quantity, quality, damages, or
additions. The original contract price may not be increased (under section 252.048 of the Local
Government Code) by more than 25% without going out for bid. The original contract price may
not be decreased under this section by more than 25% without the consent of the contractor.
Competitive Bidding — A transparent procurement process in which bids from competing
contractors, suppliers or vendors are invited by openly advertising the scope, specifications, and
terms and conditions of the proposed contract. The aim of competitive bidding is to obtain goods
and services at the lowest price for such goods or services through competition and preventing
favoritism. The City determines the lowest bidder that is responsible and awards the contract to
the lowest bidder.
Competitive Proposal Process — A transparent procurement in which proposals from competing
contractors, suppliers, or vendors are invited by openly advertising the scope, speccations, and
terms and conditions of the proposed contract.
Cooperative Procurement —The action taken when two or more entities combine their
requirements to obtain advantages of volume purchases or a variety of arrangements whereby
two or more public procurement units purchase from the same vendor using a single RFP.
Emergency Purchase Order (EPO) —Emergencies are defined to remove hazards, to protect
property and people, to alleviate financial loss and operation damage, and to expedite repairs.
The Emergency Exception to Competitive Bidding Form shall be completed and signed by the
City Manager by the next business day.
Historically Underutilized Business (HUB) —Texas Administrative Code, Chapter 2161
defines a "Historically Underutilized Business" or "HUB", in part, as one with ownership by "a
person who is economically disadvantaged because of the person's identification as a member of
a certain group, including black Americans, Hispanic Americans, women, Asian Pacific
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Page
Americans, and American Indians, who have suffered the effects of discriminatory practices or
similar insidious circumstances over which they have no control". Also referred to as a
disadvantaged business, Minority/Woman-owned Disadvantaged Business Enterprise or
WW/DBE.
Invitation to Bid (ITB) —Specifications and formal bidding documents requesting pricing for a
specified work, good, or service which has been advertised for bid in a newspaper.
Invoice — An itemized statement of merchandise or service provided by a vendor. It is the means
for settlement of financial obligations incurred when the purchase order is issued.
Lease — A contract for the use of personal property or real property for a period of time in return
for a specified compensation.
Lowest Responsible Bidder —The offer that provides the lowest price meeting all requirements
of the specifications, terms, and conditions of the Invitation to Bid, including any related costs to
the City in a total cost concept and which submittal, including all reported references contained
therein, provides the City with sufficient evidence of the bidder's financial and practical ability
to perform the contract, references of past performance indicating the ability to comply with the
Contract and satisfactorily complete the subject work, and other information provided to or
obtained by the City demonstrating the subject bidder's capabilities, competence, and success.
Modification — A document used to change the provisions in a contract.
Payment Bond — A surety bond executed in connection with a contract that secures solely for
the protection and benefit of those persons or entities that have a direct contractual relationship
with the Contractor to supply public work labor or material (Payment Bond Beneficiaries) and
with which such Contractor the City has contracted for a particular contract the payment
obligation of that Contractor to the Payment Bond Beneficiaries.
Performance Bond — A surety bond that provides assurance to the City that the Contractor will
faithfully perform the work in accordance with the plans, specifications, and contract documents.
Professional Services —Services rendered by members of a recognized profession possessing a
special skill/education as defined in Local Government Code.
Purchase —The act of obtaining approved goods or services by an authorized City representative.
Purchase Order (PO) — A legal contract for the purchase of goods and services establishing the
terms and conditions and incurs a financial obligation.
Request for Proposal (RFP) — A document requesting a proposal from vendors that specifies
the relative importance of price and other evaluation factors, and which allows for negotiations
after a proposal has been received and before award of the contract for the goods and services
sought. (See also Competitive Proposal Process above)
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Request for Qualifications (RFQ) — A document that requests details about the qualifications
of professionals whose services must be obtained in compliance with the Professional Services
Procurement Act or in conjunction with an alternative bid delivery process.
Sealed Bid3— 10 in response to an invitation to bid that is advertised in a newspaper and
submitted to the City Secretary in a manner that conceals the price.
Separate Purchase —Purchases made separately of items that in normal purchasing practices
would be purchased in one purchase.
Sequential Purchases —Inappropriate separation of purchases to avoid the required process of
obtaining quotes or bids.
Sole Source Purchase —Purchases that can be made from only one vendor as defined by State
Law.
Specifications —Detailed description for an item or service. Specifications must be complete
and sufficiently defined in order to provide the exact product or service required.
Tax Exemption —The City is tax exempt from paying local or state sales tax, and federal excise
tax. The City is not exempt from Hotel Occupancy Tax.
Vendor — A business entity or individual that seeks to have or has a contract to provide goods or
services to the City.
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Tl]f;.CITY(�4
rknna
SOLE SOLRCE «\AOR
E�IERGENC'1. OR EXCEPTION TO C'O�IPETITINT BIDDE' G FORM
«N'DOR \ ?ISE
.Sole .S'onrce items are mailable from onTr otre sauce Lecarrse of patents, c•vhrri,hts,
secret processes, or natural monolmlies..4 leper of juslifrcntion on cotr►pnm, letlerhenrl
mast accompmrr this form.
This form must accourpvey the purchase doctrrruerrt ��•lrenever arr errrergenc�,• or exception to
the couupetitive bidding process is requested. State and local laws subjects the City of Anna to
conrpetitive bidding roles. The City NIm mger will deterurine whether the
justification is appropriate. Requests for exception roust be supported by factual
statenrents that will pass an audit.
Please checl: all applicable cateeories and provide additional irrforuratiou uyhere indicated:
❑ Sole Source is the selection of one surpplier to the exclusion of all others. This decision
nuiv be based oil lack of competition. proprietary technology. copyright or a supplier's
unique capability. A letter of justification on company letterhead rrtust accorllmilN this
form
❑ The requested product is an integral repair• part or accessorti• courpatible tvitlr existing
equipment.
❑ The requested product haj unique desieniperformmuce specificatiom or quality
requirenuerpts that are not available in comparable produrets.
❑ Repair,!iufaintenance service is available only from rrnwufactuuer or
designated service representative.
❑ Upgrade to or euLmicement of existing sofhvare is available only from one immrfactuuer.
❑ Service proposed by vendor is unique: therefore. competitive bids are not available or
applicable.
❑ EMERGENCY
a procurement made because of a public calamity that requires the
irtunectiate appropriation of money
to relieve the necessity of the
municipality's residents or to presen-e the property of the rntuiicipality;
a procurement necessary to present e or prosafety,
protect the public health or fety
of the municipality's residents:
a procurement necessary because of unforeseen damage to public
machinert�. equipment. or other property.
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Prop isle a detailed exception incl attach suppoctiug doctmteutatiou:
I ce�tify� t1�,1t the aUo�•e u�iorn�.atiou is accurate to the Uest of ui}• la�o«�ledge.
Sienaau�e. Date
Depvtuteut Name
C'ih• \forager Approt,ll Date
Pouted Nene
Title
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PURCHASING CARD POLICY
BACKGROUND AND PURPOSE:
The purpose of the Procurement Card Program (also referred to as the Purchasing Card or "P -
Card") is for efficient and controllable methods to make cost-effective purchasing and for small
dollar purchases or for travel related purchases. A purchase should not be made with a card
unless it is the most productive purchasing method. This program is designed as an alternative
to the traditional purchasing process and can result in a significant reduction in volume of
purchase orders, invoices, and checks processed.
All employees issued a P -Card are expected to understand City policies related to using City
funds. At no time does the use of the P -card override the City's Procurement Policy, which is
guided by state procurement law. The City bears no legal liability from inappropriate use.
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. Employees who have been issued a P -Card must
utilize them for travel related purchases.
This policy addresses the following areas:
• Purchasing Limits
• Allowance/Prohibited Purchases
• Security
• Merchandise Returns
• Reconciliations
• Payment Processing
SCOPE:
The policy supports the use of purchasing cards for appropriate business transactions, while
assuring that the appropriate internal controls are in place to minimize the City's risk of financial
loss. All P -Cards shall be governed and used in a manner that complies with the said policy.
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