HomeMy WebLinkAboutResolution 7056 4;4CITY OF ORONO
RESOLUTION OF THE CITY COUNCIL
�, NO. 7056
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A RESOLUTION TO ADOPT THE
CITY OF ORONO FINANCIAL MANAGEMENT POLICIES
WHEREAS,financial management policies guide in the preparation and management of
the City's overall budget and major objectives to be accomplished; and
WHEREAS, Government Finance Officers Association (GFOA) best practices
recommends government formally adopt financial policies; and
WHEREAS,the Fund Balance Policy, last amended by Resolution 6105, and Investment
Policy, last amended by Resolution 6399, will be amended to be part of this Resolution; and
WHEREAS,the Operating Budget Policy, Revenue Policy, Expenditure and Purchasing
Policy, Debt Management Policy, Fixed Asset Policy and Grant Policy will be adopted;
NOW,THEREFORE,BE IT RESOLVED,that the City of Orono Council, hereby
authorizes the adoption of the Financial Management Policies
Adopted by the City Council of the City of Orono, Minnesota, at a regular meeting held
December 9, 2019.
ATTEST:
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Anna Carlson, City Clerk Dennis Walsh, Mayor
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City of Orono
lFinancial Management Policies
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The City of Orono has an important responsibility to its citizens to plan the adequate funding of
services desired by the public, to manage the municipal finances wisely, and to carefully account
for public funds.The City strives to ensure that it is capable of adequately funding and providing
local government services needed by the community. The City will maintain or improve its
infrastructure on a systematic basis to insure the maintenance of quality neighborhoods for its
citizens.
Contents
OPERATING BUDGET(POLICY 1) 1-1
FUND BALANCE(POLICY 2) 2-1
REVENUE(POLICY 3) 3-1
EXPENDITURE AND PURCHASING(POLICY 4) 4-1
INVESTMENT(POLICY 5) 5-1
DEBT MANAGEMENT(POLICY 6) 6-1
FIXED ASSET(POLICY7) 7-1
GRANT(POLICY 8) 8-1
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City of Orono
Financial Management Policies
Policy 1 - Operating Budget
1-1. PURPOSE
The operating budget is the annual financial plan for funding the costs of City services and
programs.The general operating budget includes the General Fund, Special Revenue Funds, and
Capital Project Funds. Enterprise operations are budgeted in separate Enterprise Funds.
1-2. BALANCED BUDGET
The City Administrator shall submit a balanced budget for the General Fund in which
appropriations shall not exceed the total of the estimated revenues and available fund balance.
Balanced budget is defined as a budget in which current revenues plus net operating transfers
and one-time use of excess reserves will be sufficient to support budgeted expenditures. One-
time revenues or use of excess reserves will not be used to fund on-going expenditures. One-
time funding sources shall only be used to fund capital improvements, equipment, one-time
expenditures, or to improve fund balance. The City will provide for all current expenditures with
current revenues.The City will avoid all budgetary procedures that balance current expenditures
at the expense of meeting future years' budgets, such as postponing expenditures, rolling over
short-term debt, and using reserves to balance the operating budget.
1-3. BUDGET PERIOD
The City's budget year is the calendar year. The City legally adopts an annual budget for the
General Fund. Budgets for Special Revenue Funds, Debt Service Funds, Capital Project Funds,
Enterprise Funds, and Internal Service Funds are for management purposes only.
1-4. BASIS OF BUDGETING
The modified accrual basis will be used for all of the Governmental Funds in the budget. The
accrual basis will be used for the budgets of the Enterprise Funds. The basis of budgeting is the
same as the basis of accounting used in the City's audited financial statements.
1-5. BUDGET AMENDMENT PROCESS
Budget appropriations are by department total within the General Fund rather than by account.
Budget changes that involve the transfer of appropriations among accounts only require the
approval of the City Administrator or designee. Council approval is required for budget changes
that involve a transfer of appropriations between funds or from contingency accounts. The
budget changes can be made at any Council meeting.
1-6. LONG-TERM FINANCIAL FORECASTS
The Finance Director will coordinate the development of the five-year capital improvement plan
budget and five-year outlook with the development of the operating budget. Operating costs
associated with new capital improvements will be projected and included in future operating
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budget forecasts. The budget will provide for adequate maintenance of the building and
equipment, and for their orderly replacement.The impact on the operating budget from any new
programs or activities being proposed should be minimized by providing funding with newly
created revenues whenever possible.
1-7. BUDGET FORM AND INFORMATION
Excess revenues from a specific fiscal year will be placed into the City's reserves in a manner
consistent with the City's fund balance reserve policies. The operating budget will describe the
goals to be achieved and the services and programs to be delivered for the level of funding. All
unencumbered appropriations for the City's operating budget lapse at year end. Amounts
reserved for encumbrances are classified as assigned fund balance. Budget carryovers from a
prior fiscal year must be approved by the City Administrator, Finance Director and City Council.
1-8. LEVEL OF CONTROL
The City Administrator will ensure that a budgetary control system is in place to adhere to the
adopted budget.The City Administrator or designee may approve the transfer of budget amounts
between accounts within a department's budget. City Council approval is required for any
increase in a department's budget.The budget changes can be made at any Council meeting.The
legal level of budgetary control is at the department level in budgeted funds.
1-9. PERFORMANCE MEASUREMENT
The Finance Department will provide regular quarterly reports comparing actual revenues and
expenditures to the budgeted amounts. The City's annual Budget shall be made available to
citizens and the public upon request and available on the City's website. The City shall maintain
transparency and accountability of its financial resources and assets.
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City of Orono
Financial Management Policies
Policy 2 - Fund Balance
2-1. PURPOSE
The City understands it has a responsibility to maintain prudent financial operations to ensure
stable city operations for the benefit of city residents and businesses. Fund balance reserves
are an important component in ensuring the overall financial health of a community, by giving
the City cushion to meet contingency or cash-flow timing needs. The Office of the State Auditor
recommends that at year-end, local governments maintain an unreserved fund balance in their
general fund and special revenue funds of approximately 35 to 50%of fund operating revenues,
or no less than five months of operating expenditures.
2-2. POLICY
1. The City will maintain a minimum unassigned General Fund balance of 45%of the fund's
annual operating budget.
a) Unassigned fund balances in excess of 50%will be transferred to the Community
Investment Construction Fund. Such transfer is pursuant to Council approval.
b) Unassigned fund balance of less than 45%will be addressed through the budgeting
process or by transfers in from other funds.
c) An assignment or restriction of fund balance may be used to offset revenues earned
in one year where substantial services are required to be performed in the next
fiscal period.
2. When both restricted and unrestricted resources are available for use, it is the City's
policy to first use restricted resources, and then use unrestricted resources as they are
needed. When unrestricted resources are available for use, it is the City's policy to use
resources in the following order: 1) committed, 2) assigned, 3) unassigned. These fund
balance classifications apply only to Governmental Funds, not Enterprise Funds or
Internal Service Funds.
3. The Park Fund is a Special Revenue Fund that provides for parkland acquisition and
improvements. Its major funding source is Park Dedication Fees which are restricted for
this use.
4. The Drug/Felony Forfeiture Fund is a Special Revenue Fund that provides for expenditures
related to drug and alcohol enforcement activities. Its major revenue sources are the sale
of forfeited vehicles and drug enforcement activities. The funds are restricted for law
enforcement use related to drug and alcohol enforcement.
5. The Lurton Park Fund is a Special Revenue Fund that provides for the development and
maintenance of Lurton Park. These funds are restricted by a stipulation of the property's
owner when the land was donated to the City.
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6. The Senior Housing TIF Fund is a Special Revenue Fund that accounts for the Tax
Increment Financing District No. 1-1 which was created to provide housing opportunities
for seniors within the City. Its funding source is the property taxes on the captured value.
The funds are restricted.
7. The Affordable Housing Fund is a Special Revenue Fund that provided purchase assistance
to qualified home buyers. Funding was through grants from the Metropolitan Council,
Hennepin, CDBG grants. The funds are restricted.
8. Capital project Funds are used to account for the financing of street projects, equipment
replacement, public safety equipment, and facility rehabilitation or renovation. Revenue
sources are provided mainly through transfers, special assessments, bond sales, and park
dedication fees. The City's goal is to maintain fund balances in the Municipal State Aid
(MSA), the Improvement Equipment Outlay, the Community Investment, and the
Pavement Management Plan (PMP) funds in an amount sufficient to support the ongoing
capital expenditures planned in the CIP. Revenues not legally restricted will be assigned.
9. Fund balances in Debt Service Funds for future debt payments are restricted.
10. The Enterprise Funds are used to account for the City's utility operations. This includes
the following funds: Water, Sewer, Storm Water, Recycling, and Cable. The City's long
term goal is to have self-sustaining funds that do not require revenue from special
assessment, issuance of debts or taxes.
a) For Water, Sewer and Storm Water Funds, the City's goal is to maintain 25%
operating reserve and 25%capital reserve.
b) The Recycling Fund's goal is to maintain 25%operating reserve.
c) The Cable Fund does not have a reserve and its purpose is to fund the Council
Chamber improvements and operating expenses related to recording and
streaming council meetings.
11. The Internal Service Funds are used to track revenue and expense shifts between
departments. These include the following funds: Insurance, Fleet Management,
Compensated Absences, and Information Technology.
a) The Insurance Fund was created to account for total insurance revenue and
expenses between all departments.The purpose of this fund is to allow for high
deductible, which results in long term savings for the City. It has been
determined that a fund balance of$300,000 is adequate for this purpose and
fund balance in excess of$300,000 will be transferred to a fund designated by
the City Council.
b) The Fleet Management Fund is used to account for total expenses related to city
vehicles. Each fund pays into this fund to cover their appropriate portions of
expenses.
c) The Compensated Absences Fund is used to account the liability owed to
employees for compensated absences such as Sick, Vacation and Comp-Time.
Fund balance is equal to the liability owed to employees at each year-end.
d) The IT Fund is used to account for total expenses related to software and
technology. Each fund pays into this fund to cover their appropriate portions of
expenses.The long-term goal of this fund is to provide funding for all technology
improvements.
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2-3. PROCEDURES
1. City shall maintain necessary funds in accordance with City policy and Minnesota
statutes.
2. Annual financial statements shall be prepared in accordance with generally accepted
accounting principles establishing the fund balance at the end of each year. As part of
this process the Finance Director is authorized to make the appropriate assignments of
fund balance.
3. As part of the annual budget process the Finance Director shall prepare a current
analysis of the City's fund balance. The analysis shall include the prior year ending fund
balance as established by the annual financial statements, and the projected fund
balance for the current year.
4. Council shall review the amounts in fund balance in conjunction with the annual budget
approval, and make adjustments as necessary to meet expected cash-flow needs.
5. The policy should be periodically reviewed, especially if the composition or timing of
revenue receipts change.
2-4. RESPONSIBILITY AND AUTHORITY
Administrative implementation of policies is the responsibility of staff and council.
2-5.ADDITIONAL RESOURCES
Original Policy—Resolution 5994, adopted November 22, 2010
Amended Policy—Resolution 6105, adopted November 12, 2011
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Financial Management Policies
Policy 3 - Revenue
3-1. PURPOSE
The City will strive to maintain a diversified and stable revenue system to shelter it from sharp
annual fluctuations in any one revenue source.
3-2. RESPONSIBILITY
The City Administrator is the responsible authority overseeing all City revenues. Responsibility
for administering this Revenue Policy has been delegated to the Finance Department.
3-3. POLICY
1. The City will conservatively estimate and budget for its annual revenues by an objective,
analytical process.All existing and potential revenue sources will be re-examined annually
prior to adopting a budget.
2. The City will pursue an aggressive policy of collecting revenue to ensure that the City's
revenue estimates are met, all taxpayers are treated fairly and consistently, and
delinquencies are kept to a minimum.
3. The City will pursue opportunities for federal or state grant funding in order to provide
citizens assurance that the City is striving to obtain any and all state and federal funds to
which it is entitled,thereby reducing dependence upon local taxpayers for the support of
local public services.
4. The City will establish all user charges and fees for the General Fund program activities at
a level related to the full cost of the providing services, or as adjusted (by the Council)for
particular program goals. Sensitivity to market rates will also be taken into account.
Ongoing, the City will review the full cost of activities supported by user fees to identify
the impact of inflation and other cost increases and the City Council will review these fees
along with net property tax costs at budget time.
5. The City will set fees and user charges for each Enterprise Fund such as water or
wastewater at a level that fully supports the total direct and indirect cost of the activity,
including depreciation of capital assets and debt service, and to maintain a positive cash
flow and provide adequate working capital.These fees and user charges will be reviewed
each year at budget time. Replacement (or bonding for replacement) of enterprise
infrastructure will be paid for from accumulated (or annual) earnings from the particular
system. Transfers of equity from an Enterprise Fund to the General Fund should only be
done on a one-time exception basis, for example, to fund an unusual, extraordinary
expense and in no event shall such equity transfers be made in consecutive years except
those considered a reimbursement for administrative costs. Equity transfers must be
approved in advance by the City Council.
6. Donations Received shall be referred to the City Council for action acknowledging receipt
and for a budget amendment if needed for an expenditure.
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Financial Management Policies
Policy 4 - Expenditure and Purchasing
4-1. PURPOSE
The City Council recognizes that public funds may only be spent if the expenditure meets a public
purpose and the expenditure relates to the governmental purpose for which the City of Orono
was created. The meaning of "public purpose" is constantly evolving. The Minnesota Supreme
Court has followed a broad approach and has generally concluded that "public purpose" means
an activity that meets ALL of the following standards:
• The activity will primarily benefit the community as a body.
• The activity is directly related to functions of government.
• The activity does not have as its primary objective the benefit of a private interest
whether profit or not-for-profit.
This policy is intended to provide guidelines regarding which expenditures are for public purposes
and authorized in accordance with the City's annual budget process, and which expenditures are
not considered to fall within the public purpose definition and are therefore not allowed. There
is a public benefit in ensuring high employee productivity and morale.
4-2. RESPONSIBILITY
The City Administrator is the responsible authority overseeing all City expenditures and as such
is the chief purchasing agent for the City. Responsibility for administering this Expenditure and
Purchasing Policy has been delegated to the Finance Department. Further, all officers and
employees authorized by their Department to make purchases for the benefit of their respective
departments are responsible for complying with this policy and corresponding procedures.
4-3. POLICY
Expenditures of public funds must comply with the public purpose standards defined above.
For non-routine, non-budgeted operating expenditures over$10,000, council approval is needed
before purchase.
For budgeted routine operating expenditures, department heads or supervisors may submit
order prior to council approval. Examples include, but are not limited to: utility bills, such as
electricity or natural gas, automotive fuel, lift-station repairs, and water plant chemicals.
When an invoice is received for the purchased good or service, it will be forwarded to the
appropriate personnel for account coding and payment approval. All invoices need proper
approval prior to submitting to Finance Department for processing of the payment. The Finance
Department will verify and make sure invoices are coded correctly in the accounting system.
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Financial Management Policies
Policy 5 - Investment
5-1. PURPOSE
The purpose of this investment policy is to establish:
• The City's investment objectives
• Investment reporting practices to management and council
• Appropriate investment instruments
• Criteria for selection of banks and dealers
• Requirements regarding maturities and diversification
• Investment principles of risk, prudence and ethics, and
• Responsibilities of the investment function
5-2. SCOPE
The investment policy applies to all funds in the custody of the City, including:
• The General Fund
• The Special Revenue Funds
• The Debt Service Funds
• The Capital Projects Funds
• The Enterprise Funds
• The Internal Service Funds
Unless specified by City Council action, or otherwise required, City monies will be pooled in the
Pooled Investment Trust Fund with the resulting investment income accruing to the various City
funds as provided in Resolution No. 2105.
5-3. OBJECTIVES
The objectives of the City's investment program are:
1. To preserve investment principal in the overall portfolio is the primary objective.
2. To remain sufficiently liquid to meet expenditure requirements. It is essential that cash
is available when needed, therefore, the objective is to maximize yield while matching
maturity dates with expenditure needs including provision of a cushion for possible
unforeseen needs.
3. To diversify the investment portfolio by individual financial institution, government
agency or by corporation in the case of commercial paper to reduce the exposure to risk
of loss.
4. As custodians of the public trust, all participants in the investment process shall seek to
act responsibly and avoid any transaction that might impair the credibility of the City.
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5-4. REPORTING
The investment reporting includes budgetary, interim/internal, and annual.
1. Budgetary Reporting. As part of the annual budget process interest income shall be
estimated for all budgeted funds based on a cash flow forecast.
2. Interim/Internal Reporting. The Finance Department shall provide to management and
the Council a quarterly report, including the total of all investments. The report will
include a description of each investment, purchase date, maturity date, rate-of-return,
cost, and par value.
3. Annual Reporting. The Finance Department shall provide an annual report on the
investment program. In addition to the quarter-end information the report will include
an annualized rate of return, the total interest earned for the period, the current market
value of the investments, and a comparison to the prior year.
5-5. INSTRUMENTS
Minnesota municipalities are restricted to certain types of investments, as reflected in Minnesota
Statutes 118A.04. The permissible investments are:
1. U.S. Treasury Obligations, which have the full faith and credit of the U. S. Government
pledged for repayment.
2. Federal Agencies, which are created and supervised by the federal government so that,
for all practical purposes, there is an absence of credit risk.
3. General Obligations of the State of Minnesota or any of its subsidiaries issued to provide
for essential services that are rated by at least one national rating agency with a rating
level of at least the following:
• general obligation rated "A" or better
• revenue obligation rated "AA" or better
4. Commercial paper issued by United States corporations or their Canadian subsidiaries
that is rated the highest quality (Al, P1, Fl, D1) by at least two nationally recognized
rating agencies and matures in 270 days or less.
5. Certificates of deposit that are fully-insured by the Federal Deposit Insurance Corporation
(FDIC). Deposits exceeding FDIC_insurance levels shall be covered by a surety bond or
collateralized with U.S. Treasury or agency securities computed at market value which
shall be at least ten percent more than the amount of each deposit in excess of the
insured portions. Collateral consisting of first mortgages shall be at least forty percent
more than the amount of deposit in excess of the insured portion. All collateral shall be
assigned to the City from the depository. The institution issuing the certificate of deposit
shall have a minimum allowable net worth to asset ratio of 5.0%. If the dealer/broker
marketing the certificate of deposit subscribes to the rating service of IDC Financial
Publishing, Inc., the institutions overall IDC ranking shall be excellent (165-199) or
superior (200-300).
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6. Bankers Acceptances shall be restricted to those of U.S. banks eligible for purchase by the
Federal Reserve System.
7. Repurchase Agreements must be from a national or state bank in the U.S. that is a
member of the Federal Reserve System and whose capital and surplus is at least
$10,000,000 or is a primary reporting dealer in U.S. government securities to the Federal
Reserve Bank of New York; or a securities broker-dealer licensed pursuant to chapter 80A,
or an affiliate of it, regulated by the securities and exchange commission and maintaining
a combined capital and surplus of$40,000,000 or more, exclusive of subordinated debt.
The City shall receive a confirmation safekeeping receipt with a complete description of
the collateral on the repurchase agreement.
8. Shares in mutual funds investing exclusively in U.S. government and agency issues with
maturities of no longer than 13 months, referred to as "money market funds".
The City will not invest in the following instruments:
a) Reverse Repurchase agreements
b) Mortgage-Backed securities, as defined in Minnesota Statutes 118A.04 Subd. 6
c) Future Contracts
d) Options
e) Guaranteed investment contracts
5-6. BANKS AND DEALERS
The City will conduct its investment transactions with financial institutions designated by the City
Council. These institutions will meet the following criteria:
1. Banks,Savings Banks and Savings and Loans shall be restricted to those having a minimum
capital and surplus of$10,000,000 and a net worth to asset ratio minimum of 5.0%, except
for the City's main checking account at the Bridgewater Bank, Navarre.
2. Security broker/dealers shall be restricted to those regulated by the SEC, have a minimum
capital of$40,000,000 and may include "primary" dealers or regional dealers.
3. Municipalities must obtain from their brokers certain representations regarding future
investments. Minnesota Statutes 118A.05 requires the City to provide each broker with
information regarding the City's investment restrictions. All brokers will provide the City
with a Broker/Dealer Certification stating that they will do business with the City
according to Minnesota Statute and the Orono Investment Policy. The Broker/Dealer
Certification will be signed by an officer of the company.
5-7. MATURITIES AND DIVERSIFICATION
The City's policy for portfolio diversification shall be to stagger maturities which will avoid undue
concentration of assets while providing stability of income and reasonable liquidity. Short-term
investments will mature on or near the anticipated date of need to pay for recurring operations.
Long-term investments are made for debt service requirements; and represent an opportunity
to extend maturities and achieve higher yields. Maturities should not be extended beyond eight
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years and the longer term securities may be sold if it is advantageous to do so in the opinion of
the Treasurer. Generally the allowable portfolio maximum for a specific maturity is 5% and 35%
for a specific dealer.
5-8. RISK, PRUDENCE AND ETHICS
The standard of prudence to be used by investment officials involved in the investment process
shall be the "prudent investor" and shall be applied in the context of managing the overall
portfolio. Investment officers acting in accordance with this policy and with MN Statute 118A
and exercising due diligence shall be relieved of personal responsibility for an individual security's
credit risk or market price changes, as provided in MN Statute 118A.02 Subd 2.
5-9. DELEGATION OF AUTHORITY
The City Council hereby delegates the management of the investment program and the
designation of depositories to the city treasurer, as authorized in Minnesota Statute 118A.02. In
his absence the deputy treasurer or the city administrator shall exercise the same authority.
The treasurer shall have full authority, as stated in Resolution No. 2089, to initiate such wire
transfers or interbank transfers as may be necessary to accomplish the investment objectives as
stated within this policy. The treasurer shall provide the Council with a detailed list of electronic
wire transfers at the next available council meeting.
The treasurer shall be authorized to designate depositories on behalf of the City Council at times
other than the beginning of the year, as provided in Resolution No. 2563, and will provide to the
Council the identity of each new depository and the investment purchased as part of the
quarterly investment report.
5-10. ADDITIONAL RESOURCES
Original Adoption —December 12, 1988
Amended Policy—Resolution 4246, adopted February 22, 1999
Amended Policy—Resolution 5952, adopted July 26, 2010
Amended Policy— Resolution 6399, adopted April 28, 2014
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City of Orono
Financial Management Policies
Policy 6 - Debt Management
6-1. PURPOSE
The purpose of the debt policy is to ensure that debt is used wisely and that future financial
flexibility remains relatively unconstrained. Debt is an important mechanism to fund capital
expenditures. It can reduce long-term costs due to inflation, prevent lost opportunities, and
equalize the costs of improvements to present and future constituencies. Debt management
is an integral part of the financial management of the City. Adequate resources must be
provided for the repayment of debt, and the level of debt incurred by the City must be
effectively controlled to amounts that are manageable and within levels that will maintain or
enhance the City's credit rating. A goal of debt management is to stabilize the overall debt
burden and future tax levy requirements to ensure that issued debt can be repaid and
prevent default on any municipal debt. A high debt level places a financial burden on
taxpayers and can create economic problems for the community. The debt policies ensure
that the City's outstanding debt does not weaken the City's financial structure, provides
manageable limits on debt, and allows for the best possible credit rating.
6-2. POLICY
The city will limit long-term debt to capital improvements which cannot be financed from
current revenues. Incurring long-term debt serves to obligate future taxpayers. Excess
reliance on long-term debt can cause debt levels to reach or exceed the government's ability
to pay. Therefore, conscientious use of long-term debt will provide assurance that future
residents will be able to service the debt obligations left by former residents.
The city will repay borrowed funds, used for capital projects, within a period not to exceed
the expected useful life of the project. This policy reflects the view that those residents who
benefit from a project should pay for the project. Adherence to this policy will also help
prevent the government from over-extending itself with regard to the incurrence of future
debt.
The city will not use long-term debt for financing current operations. This policy reflects the
view that those residents who benefit from a service should pay for the service. Utilization of
long-term debt to support current operations would result in future residents supporting
services provided to current residents.
The city will adhere to a policy of full public disclosure with regard to the issuance of debt.
Full public disclosure with regard to the issuance of debt provides assurance that the
incurrence of debt, for which the public is responsible, is based upon a genuine need and is
consistent with underwriter guidelines.
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Financial Management Policies
Policy 7 - Fixed Asset
7-1. SCOPE
The City of Orono establishes and maintains a capital asset system to ensure adequate
accounting procedure and record and to provide users with consistent and comparable
asset information for current and future periods.
7-2. DEFINITION
Capital assets are assets that: 1)are used in City operations; 2) have an initial life in excess
of one year; 3) are valued over $10,000. The term embraces both tangible assets (land,
buildings, site & building improvements, machinery & equipment, infrastructure) and
intangible assets (easements, software, mineral rights). Assets acquired for the purpose
of sale or investments do not qualify as capital assets, regardless of their form, because
they are not used in operations.
7-3. POLICY
Fixed asset purchases or construction projects all require City Council approval. The
Council action approving the project or purchase is the first step in the recording of the
asset.
Assets that are purchased for an Enterprise Fund are all coded to account code 16500
which is titled "Fixed Assets—Const in Progress". This includes all engineering and legal
bills and other ancillary costs associated with the asset/project. This coding is done by
the Finance Director. A report detail report is run identifying these assets after the close
of the year to identify any additional assets that were purchased after the insurance
application was processed. Enterprise Fund assets are added to the appropriate schedule.
Other fixed assets are paid for from the various construction funds (402 — 437), unless
otherwise instructed. Reports are generated for these funds similar to the detail reports
that are run for the enterprise funds. In the case of the construction funds, any
engineering/legal fees are coded directly to the cost of the asset. These reports are then
used to update the General Fixed Asset Schedule (GFA).
In the case of the Police Department, fixed assets are coded to object codes 500 — 580.
Reports for these items are reviewed at the close of the year. These assets are added to
the GFA listing at year end.
Assets that are disposed of are generally tracked by the revenue lines associated with the
sale of equipment. If an asset is traded in on the new asset, the trade in value is recorded
as a revenue and the new asset is recorded at its full price. This way, the disposal of the
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asset is recorded as a revenue on the books at the same time the new asset is purchased.
Detail revenue reports are used to identify the deletions from the Fixed Asset record.
During the insurance renewal process, assets listings distributed to the Departments and
are compared to the listings from the LMCIT. This is a final check to verify if assets are
missing or need to be deleted from the fixed asset listing.
7-4. DEPRECIATION
The City's capital assets are depreciated using the straight-line method over the
estimated useful lives. If assets are acquired in June or before, half a year will be
depreciated. If the assets are acquired July or after, depreciation will start in the next
year. For capital projects, acquired date is the date the project is complete.
In the Enterprise Fund, assets will be recoded from the 16500 to the appropriate asset
account once acquired in its entirety. Depreciation will start based on the on the half-
year convention described above at this time.
Estimated useful life guideline is as follows:
Storm Sewer
Storm Sewer System 50 years
Storm Sewer Improvements/Replacements 50 years
Ravine Stabilization 25 years
Ravine Improvement 30 years
Concrete 100 years
Corrugated Metal 50 years
Sanitary Sewer
Lift Station Rehabilitation 25 years
Grinder Station Rehabilitation 30 years
Lift Station Monitoring 20 years
Main Rehabilitation 50 years
Force main/Sewer main Replacement 70 years
Water
Scada Upgrade 10 years
Water Plant Painting 15 years
Salt Brine Tank Rehabilitation 50 years
Well Inspection & Maintenance 10 years
Well Rehabilitation 20 years
Well Screen 30 years
Water Main Replacement 75 years
Water Valve Replacement 50 years
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Water Meter Replacement 15 years
Cable
Equipment 10 years
General
Land Not Depreciable
Irrigation System 15-25 years
Parking Lots 30 years
Wells 30-40 years
Infrastructure &Streets
Bridge 75 years
Street Lights 50 years
Sidewalks 40 years
Road 40 years
Buildings
Building Foundation/Frame/Structure 50 years
Roof 20 years
Counter 25 years
Clubhouse 40-50 years
Garage 25 years
Carpeting 15 years
Furnace 20 years
Plumbing 25 years
Parks
Playground Equipment 25 years
Docks 25 years
Grounds Equipment 10 years
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City of Orono
Financial Management Policies
Policy 8 - Grant
8-1. PURPOSE
With continued decreases in local government revenues,grant revenues have become an
even more important part of the City's overall resource picture, especially in funding
capital improvements. Although grant programs themselves are being reduced and
becoming more competitive, actively seeking out grant revenues that assist in achieving
identified City goals and objectives should nonetheless play a key role in the City's overall
financial health strategies
The purpose of this policy is to set forth an overall framework for guiding the City's use
and management of grant resources.
8-2. GOALS
1. Set forth the importance of grant programs in accomplishing City goals and
objectives.
2. Establish general concepts and framework for seeking and managing grant
programs.
3. Identify roles and responsibilities in managing grant programs.
4. Establish criteria for evaluating the benefits and costs of grant programs.
5. Set forth the City's policy in complying with Single Audit Act requirements.
8-3. DEFINITION
1 . Grant — a monetary award of financial assistance or property provided to the City
to carry out an activity or project for a public purpose or public good.
2. Grant Manager — The Grant Manager is the individual responsible for the
administration of the project as stated in the grant proposal. The Grant Manager
shall be listed on the grant application as the primary contact when there are co-
grantees.
8-4. GENERAL CONCEPTS AND FRAMEWORK
1. The City will pursue grant funding from federal, state and other sources, consistent
with identified City goals and objectives.
2. Aside from entitlement grants, the City should focus its efforts on securing grants
for capital improvements.This approach will allow the City to compete for projects
we might not otherwise be able to afford while maintaining financial independence
should future grant sources diminish.
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3. Grants for operating purposes may be considered on a case-by-case basis after
careful consideration of the benefits of the program and the ongoing impacts on
the City if grant funding is no longer available.
4. The City should extensively analyze grants that fund "pilot" operating programs or
short-term staffing enhancements to existing programs. Taking on these programs
could ultimately aggravate the City's fiscal position should the desire for the
program remain once the grant funding is no longer available.
5. The City will only seek grants when sufficient staff resources are available to
effectively administer the program in compliance with grant requirements and
successfully perform the grant work scope and provide necessary matching
requirements (both cash and in-kind matches).
6. Indirect costs of administering grant programs will be recovered to the maximum
extent feasible.
7. Operating departments have the primary responsibility for seeking out grant
opportunities, for preparing effective grant applications and for successfully
managing grant programs after they have been awarded.
8-5. ROLES AND RESPONSIBILITIES
City Council
1. Approves all grant applications in excess of $10,000 and delegates receipt and
contract execution to the City Administrator if delegation is allowed by the grantor
agency.
2. Approves resolutions accepting grant funds and matching funds, if required.
City Administrator or Designee
The City Administrator is the only authorized person to sign contracts,agreements, and
grants on behalf of the City. If the grant is to be submitted electronically, then the City
Administrator shall be listed as the authorizing agent or person. The City of Orono is
the Grantee, not the specific department or division.
1. Receives grants and executes related contract documents when delegated to do so
by the Council.
2. Approves all grant applications under $10,000 and delegates receipt and contract
execution to the department head requesting the grant application if delegation is
allowed by the grantor agency.
Operating Departments
1. Develop systems for maintaining ongoing information regarding grant availability
within their functional areas of responsibility.
2. Evaluate benefits and costs of specific grant programs on a case-by-case basis:
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a) Purpose of the grant program and its consistency with identified City goals
and objectives.
b) Additional staffing,office space,facilities, supplies or equipment that will be
required if the grant is awarded.
c) Ongoing impacts of the grant program after it is completed.
d) Responsibilities of other departments and impacts on them in preparing the
grant application or performing work scope if the grant is approved.
e) Amount of indirect costs to be recovered from the grant,
f) Total program costs, including portion funded through grant revenues and
any required City contribution.
g) Source of funding for any required City share.
h) Compliance and audit requirements, paying special attention to those areas
where the grantor's administrative procedures are different than the City's.
3. Prepare grant application(s)
a) Work with the grantor agency in identifying special program requirements
and developing strategies for preparing a successful grant application.
b) Complete grant application documents.
c) Coordinate with affected departments as necessary.
d) For grants in excess of$10,000, prepare a Council agenda report requesting
authorization to seek grant funding. This report should describe the grant
program's conformance with this policy, including the results of the
cost/benefit analysis.
e) For grants of$10,000 or less, Operating Departments may submit the grant
application without further approval, subject to the following conditions:
• There will be no changes to existing staffing.
• Matching funds or in-kind contributions are already available within
existing resources, and no additional appropriation of unreserved,
undesignated fund balance or working capital is required.
• At the conclusion of the grant, there will be no ongoing commitments or
obligations to continue the program.
• The purpose of the grant program is clearly consistent with current City
plans, policies, and goals.
4. Administer grant programs if awarded.
a) For grants in excess of$10,000, prepare a City Council agenda accepting the
grant award, including a budget adjustment request in the fiscal impact
section, and attaching the grant summary form signed by Finance (see
attached).
b) Coordinate execution of grant documents by the City Administrator and
return executed documents to grantor agency.
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c) For grants of $10,000 or less, execute and return grant documents to
grantor agency.
d) Notify affected departments of grant award.
e) Provide the Administrative Services — Finance Department with electronic
copies of the following:
• Grant Award Letter;
• Grant Contract;
• Grant Summary Form;
• Grant Amendments;
• Reimbursement/ Drawdown request;
• Close Out Reports.
f) Maintain financial and other records in accordance with grant
requirements.
g) Complete and submit required reports, including requests for funds
(reimbursements, drawdowns, advances).
h) Monitor grant expenditures and receipt of revenues. All methods of
payments shall be made payable to the "City of Orono" and not to City
Departments or employees via check or electronic fund transfer.
i) Coordinate on-site management reviews by the grantor agency during the
grant term.
j) Ensure compliance with grant requirements, paying special attention to
those areas where the grantor's administrative procedures are different
than the City's.
k) Perform the grant work scope.
5. Complete grant closeout.
a) Complete the grant work scope.
b) Notify affected departments, that the project is completed and schedule a
"close-out" meeting if necessary to resolve any final procedural issues.
c) Ensure final receipt of grant revenues.
d) Prepare and submit any required grant close-out documents.
e) Return unobligated funds, if applicable, to funding agency.
f) Review grant file for completeness.
g) Retain all necessary program and financial records for the period of time
required by grantor agency, but not less than five (5) years after the City
audit.
h) Coordinate any on-site management reviews or audits by the grantor.
i) Resolve any audit findings.
Finance Department
1. Develops, recommends and maintains grant management policies.
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2. Provide technical assistance to operating departments in preparing grant
applications, submitting reports, maintaining records and responding to any audit
or information requests from granting agencies.
3. Upon approval by City Council, increase revenues and expenditure appropriations.
4. Coordinate the accounting and recording for all receipts and disbursements related
to the grant. Finance will determine setup and maintain the most appropriate
method(s) of accounting for grants in the financial system.
5. To ensure proper coding of the grant(s), the Accountant will receive general ledger
account coding from the Finance Director before posting receipt and expenditure.
6. If applicable, Finance will create an invoice to the grantor per the operating
department's request.
7. Provide technical support to the operating departments preparing and submitting
request for funds, drawdowns, advances, financial performance reports, close out,
etc.
8. Schedule Single Audit and coordinate preparation and distribution of single audit
reports.
Other Departments
Provides assistance to the managing department as identified during the grant
application and award process.
8-6. SINGLE AUDIT ACT REQUIREMENT
Background
The City is subject to the financial and compliance requirements of the Single Audit Act
of 1984, amended in 1996, which is applicable to all local and state governments
expending more than $750,000 in federal financial assistance during a fiscal year. The
purpose of the Act is to:
1. Improve the financial management and accountability of state and local
governments with respect to federal financial assistance programs.
2. Establish uniform requirements for audits of federal grants.
3. Promote efficient and effective use of audit resources.
4. Assure that federal departments and agencies rely upon and use audit work
performed during a single audit rather than performing the audit work themselves.
Under this Act,federal grants are included under an inclusive single audit program that
is incorporated into the City's annual audit and financial report preparation process.
During the audit, tests are made to determine the adequacy of the internal control
structure, including that portion related to federal financial assistance programs, as
well as to determine that the City has complied with applicable laws and regulations.
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City's Policy Regarding the Single Audit Approach
For federal grants included in the scope of the City's single audit approach, it is the
City's policy that all financial and compliance issues have been met through the single
audit, and follow-up audits to determine these issues are not necessary unless
specifically related to findings or recommendations included in the single audit report.
As noted above, the purpose of the Act is to establish uniform audit requirements,
promote efficient use of audit resources, and assure that federal agencies rely upon
audit work already completed; its purpose is not to audit local agencies twice.
Accordingly, the City will strongly resist any efforts by federal agencies to duplicate
audit work already performed in complying with Act requirements. As such, whenever
federal grantor agencies request final audits, the managing department should notify
the Department of Finance in order to ensure a consistent response to these types of
requests.
8-7. OTHER REGULATIONS
All grants are subject to Federal,State and Local Regulations.These regulations may be
updated from time to time by the Federal or State government. The applicable
guidelines will vary depending upon the grant awarded. The following are regulations
that provide guidelines for grant administration and followed by the City:
1. Office of Management and Budget (OMB)
a. Circular A-21 —cost principles for determining cost applicable to grants,
contracts and other agreements with educational institutions.
b. Circular A-87 — establishes principles and standards for determining cost
for Federal awards carried through grants, cost reimbursement contracts
and other agreements with State and local governments.
c. Circular A-102 — establishes consistency and uniformity among Federal
agencies in the management of grants. This included the adoption of
government-wide common rule for terms and conditions on grants.
d. Circular A-110 — uniform administrative requirements for grants and
agreements with Institutions of Higher Education, Hospitals and other
non-profit organizations.
e. Circular A-122 —establishes cost principles for determining cost of grants,
contracts and other agreements with non-profit organizations.
2. Federal Acquisition Regulation (FAR) subpart 31.2 — defines allowable and
unallowable costs regarding contracts with commercial organizations.
3. 45 Code of Federal Regulation (CFR) 74 — establishes uniform administrative
requirements to determine cost applicable to research and development under
grants and contracts with hospitals.
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