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Item 9ACity of Southlake, Texas MEMORANDUM June 14, 2005 TO: Shana Yelverton, City Manager FROM: Sharen Elam, City Finance Director SUBJECT: Approval of Resolution No. 05 -028, Amending the Purchasing Policy Action Requested: Approval of Resolution No. 05 -028, Amending the Purchasing Policy. Background Information: The current purchasing policy was adopted in September 7, 1993. The proposed updates address the changes in state law and organization growth over the years. The revisions will provide stronger controls for city purchases. The largest revision to the policy is the implementation of the procurement card program. The objectives of the program are: • Increase purchasing controls • Centralize the administration of purchasing program • Improve expense and supplier analysis across organization • Revenue enhancements on purchase The benefits of the program are: • Eliminate open accounts with vendors • Pre - approved limits by employee responsibilities • Finance staff will be program administrator • Insured for fraud • Earn cash rebates (MasterCard program) The other significant revision is the incorporation of a purchasing agent. With the addition of a purchasing agent, this will allow finance to centralize the purchasing process and fully implement and monitor the procurement program. Financial Impact: City will earn cash rebates (procurement card program is fundamentally the same as MasterCard program). Citizen Input/ Board Review: None required Legal Review: The attached policy was reviewed by the city attorney. Alternatives: The Council may approve it, deny it, or modify it. Supporting Documents: Supporting documents include the following items: • Resolution No. 05 -028 • Purchasing policy Staff Recommendation: Approval of Resolution No. 05 -028 RESOLUTION NO. OE-0� A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS, APPROVDNG A NEW PURCHMINC POLICY_ WHEREAS, the City Council on September 7, 1993, of 5otitl2ke adopted a Purchasing Policy, and WHEREAS, the City Manager has recommended substantial revisions to same; and WHEREAS, the City Council desires to approve the revisions; NOW THERE1; ORL, BE TT RMOLVEO B'Y T11s CITY COUNM OF THE CITY OF SOUTHLAKE, THAT: section 1: The City of SoutMake hereby adopts the Purchasing Policy, attached hereto as Exhibit "A" and irreorpbrated by reference herefiL Section 1 The fbrmer Purchasing Policy is repealed. Section 3: Taus resolutions shall become effktive on the _ day of , 7405.. PASSEL) AND APPROVED THIS THE DAY OF , 1445, Andy WBmbsganss, Mayor ATTEST: L ori Farwell, City Secretary w,�5�wmiwdxeeau.erawu,�usvg faf w JA City of Southlake Finance Department 1400 Main Street, Suite 440 Southlake, Texas 76092 (817) 748 -8042 Purchasing Policy J Table of Contents Introduction and Statement of Purchasing Principles and Ethics L GENERAL INFORMATION A. Approval Authority B. Forms Requirements C. Capital Asset Purchases D. Emergency Purchases E. State and Inter -local Agreements F. Historically Underutilized Businesses IL SEALED BIDS /PROPOSALS A. Competitive Sealed Bids B. Competitive Sealed Proposals C. Exempt Purchases D. Separate, Sequential, and Component Purchases E. Change Orders F. Requirements for Contracts for Professional Services III. PROCUREMENT CARD (P -CARD) A. Purpose and Use B. Duties and Responsibilities C. Transaction/Card Limits D. Restrictions and Exemptions E. Obtaining and Revoking a Card F. Statement Review Process G. Miscellaneous 2 3 5 6 6 6 7 9 10 11 12 12 13 14 15 16 17 18 19 IV. INVOICING AND PAYMENT A. Invoice Processing 21 B. Payment Methods and Deadlines 22 C. Prompt Payment Act 23 V. OTHER IMPORTANT ITEMS A. Training 23 B. Use of Current Technology 24 C. Disposal of Surplus /Salvage Property 24 D. Records Retention 25 i INTRODUCTION A. The purpose of this policy is to assist City employees in meeting the standards of good business practices while complying with state and local government procurement regulations. In addition, specific restrictions are identified. It is important to note that a violation of the policy may result in disciplinary action up to and including termination and /or criminal charges when the violation involves a violation of any local, state, or federal law. All city employees assigned to procurement responsibilities are responsible for obtaining and understanding the restrictions and requirements contained in this policy. B. The City Manager, by City Ordinance adopted pursuant to Article 9.43 of the City Charter, has general authority to contract for budgeted expenditures not exceeding limits established by state law for competitive bids or proposals (the State Limit). All contracts for expenditures exceeding these limits must be expressly approved by City Council in advance of the purchase. C. Departments, as established by city ordinance, are managed by a Director. Directors are responsible for ensuring their departmental purchases are in compliance with the approved budget and this policy. D. No city officer, employee, elected official or advisory board member shall purchase, engage in any exchange, purchases or sale of property, goods or services with the City except as permitted by Section 2.264 of the Southlake Code of Ordinances. The City Manazer, the Human Resource Director, and the Finance Director may approve an employee purchasinm plan for purchases required to perform a iob. Payroll deductions will apply to any payment plan established by the Finance Director. In such cases, all applicable sales taxes shall be paid by the employee, and the appropriate payroll deduction forms must be completed and signed by all parties. E. In accordance with Section 9.40 of the City Charter, no payment shall be made or obligation incurred against any budget unless the City Manager first certifies that there are or will be sufficient funds available to meet the obligation when it becomes payable. F. Statutes governing local government purchasing impose criminal penalties for violating provisions of the various Acts enacted by the Legislature to oversee purchasing. In addition to complying with this policy, each employee is responsible for complying with the provisions of Section 2.14 of the City Charter and the City's Ethics Ordinance, as codified in Chapter 2 of the Code of Ordinances, insofar as those provisions relate to: (1) any attempt to realize personal gain through employment of the City by any conduct inconsistent with the proper discharge of the employee's duties, or (2) to participate directly or indirectly in a purchase when there is a conflict of interest, as defined by Chapter 2, or (3) to accept or agree to accept from another person, a gratuity or offer of employment in connection with any decision relating to the procurement or sale of goods, materials and /or services for the City. G. City Council or board or commission members are not authorized to make expenditures except that the City Council may expend City funds when acting in an official capacity as the governing body or in accordance with the City Council travel policy. I. General Information and Policies A. Approval Authority 1. LIMITS. Management level employees may approve certain purchases based on the amount and type of purchase. Where MasterCard is accepted, the Procurement Card (P -Card) procedures set forth in Section III of this Policy shall be used for all purchases below $5,000. All other purchases will follow the requirements listed below: 2. 3 PURCHASE FORM MINIMUM BID HISTORICALLY AMOUNT APPROVAL BY REQUIRED UNDERUTILIZED BUSINESSES $35.00 and None less Petty Cash Voucher Deputy Director None $35.01 - None $499.00 Purchase Order Director None $500 -$999 Purchase Order Director Telephone Telephone $1,000- Purchase Order Director Written Over $3,000 — $4,A99 contact minimum of two $5,900- Purchase Order City Manager Written contact minimum of $2V99 two $25,000 and Purchase Order City Council Sealed bid or Up to $25,000 — more proposal contact minimum of two gnature form will be kept on file in the Finance Department for all authorized signers. When a staffing change occurs within a department, the department Director shall forward a new form to the Finance Department. COMPLIANCE. Each department Director is responsible for compliance with the budget. ROLE OF FINANCE DEPARTMENT. The Finance Department is responsible for administration of the procurement process of the City. The Finance Department may employ a purchasing agent, under the supervision of the Finance Director, whose responsibilities will include the following functions: a. observe and enforce the procedures outlined in this manual; b. encourage competitive bidding; C. develop and maintain good vendor relations so that competitive pricing will assure that the City receives the highest quality for the lowest cost; d. investigate and report any possibilities of collusion among bidders; 3 e. help resolve any vendor issues such as inferior products or service, pricing discrepancies, or late deliveries; f. issue purchase orders and contracts for goods and services that total $1,000 or more; g. review and recommend purchases that can be combined to take advantage of volume discounts; h. keep informed on the latest purchasing state and local laws, policies, and procedures and relay them to the Finance Department and City Manager; and i. research and use interlocal and governmental cooperatives to obtain the best pricing for the City. B. Forms Requirements 1. FORMS. Forms utilized in the procurement process include the folloNving: ■ Purchase Order (PO), ■ Request for Transfer of Funds (budget transfer), ■ Telephone Bid Tabulation. Each form serves a specific purpose. Strict adherence to these requirements is necessary for a clean audit opinion. Please refer to the Section IV,Invoicing and Payment, for step by step instructions for completing these forms. 2. PURCHASE ORDERS. Purchase orders (PO) are used for all purchases for which a reasonable estimate of cost is available. POs shall be completed and bids shall be obtained and submitted to the Finance Department for approval prior to placing an order. Purchase orders may be completed at the beginning of a new fiscal year based on budgeted amounts and forwarded to Finance immediately. NOTE: It is important to note that a completed, authorized purchase order in the hands of a vendor constitutes a contract to purchase and obligates the city to that vendor. Blanket POs are used for purchases of similar items from the same vendor within a one month time frame. The PO is issued with a "Not to Exceed" amount and used for purchases during a single month. All blanket POs are closed at the end of each month. The same process used for a regular PO is used for these as well. 3. REQUEST FOR TRANSFER OF FUNDS. The operating budget is adopted annually and serves as an estimate of expenditures for a twelve month period. Economic conditions or unforeseen events may dictate excess spending in a specific line item. A request for transfer of funds is used by directors who 11 project a year -end overage in a specific budgeted line item within their managerial responsibility. a. Directors shall review monthly the line item budgets under their managerial control. In the event a year end projection exceeds the originally adopted budget, the Director shall submit to the City Manager for approval a budget transfer form requesting money to be moved from one line item to another. b. The form shall be completed and signed by both the Director and the City Manager before it is forwarded to the Finance Department for processing. If Finance determines the transfer to be unnecessary or inappropriately coded, the form will be returned to the Director for correction. Material changes shall be re- submitted to the City Manager for approval. At no time shall the total departmental budget exceed the originally adopted total budget unless the City Council has amended the budget or authorized a transfer of funds in accordance with Subchapter B of Section 9 of the City Charter. The City Council must authorize any transfer between departments or between funds by amending the adopted budget by ordinance. The adopted budget may be amended by City Council approved ordinance any time during the fiscal year. 4. TELEPHONE BIDS. A tabulation bid form shall be used to obtain telephone bids for purchases costing $500 to $999. A minimum of three bids shall be solicited. All information fields on the form must be completed and accurate for the bid to be approved by Finance. Incomplete forms are considered invalid, and shall not be processed, thus delaying the process. 5 WRITTEN BIDS. a. Written bids ($1,000 - $24,999) shall be made on the bidding vendor's letterhead, the vendor's formal bidding document, or by vendor e -mail and include: ■ the name, address, and telephone number of the vendor, ■ specifications of the item(s) or service(s) being purchased, ■ detailed description, ■ quantity, ■ price and expiration thereof, ■ expected delivery date (if known), ■ terms and conditions of the purchase, and ■ bidding deadline. b. A minimum of three written bids shall be solicited. The Finance department will award the bid based on price, quality of product, reliability of vendor, and other relevant factors focusing on the lowest responsible bid and in coordination with the requesting department (i.e. the best value for the city). A purchase order accompanied by the bids received and finance recommendation must be completed and signed by the City Manager prior to placing the order. NOTE: Both telephone and written bids may be verified by the city's independent audit firm at any time. Bids are valid for 4 months from the date of issue. C. Capital Asset Purchases 1. DEFINITION. The Governmental Accounting Standards Board, the regulatory agency for governmental finance, defines capital assets to include land, land improvements, easements or right -of -way, buildings, building improvements, vehicles, machinery, equipment, furniture, works of art, historical treasures, infrastructure and other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period (one year). 2. THRESHOLD. The capitalization threshold (see Appendix A ) established by this policy is $5,000 for a single item and includes ancillary costs such as freight and transportation, site preparation, and professional fees. The city is also required to report donated assets for which the estimated fair value plus ancillary costs meet the capitalization threshold. 3. GASB34. All departments and employees are required to follow the city's GASB34 Policy for Asset /Infrastructure Reporting when making capital acquisitions. D. Emergency Purchases 1. REQUESTS. In general, Texas Local Government Code Section 252.022 allows cities to make emergency or exempted purchases without competitive bidding. Exemptions applicable to the City of Southlake include: ■ Public Calamity — prompt purchase is necessary to relieve the necessity of the local residents or to preserve city property, Public Safety — prompt purchase is necessary to preserve or protect the safety or public health of the local residents, and 0 ■ Unforeseen Damage — prompt purchase is necessary due to unforeseen damage to public property or equipment. 2. LIMITS. For emergency purchases below the State mandated limit for competitive bids or proposals, the City Manager may declare the emergency and must sign all authorizing documents. Emergency purchases exceeding the State limits may be declared an emergency by the City Council or the City Manager. In such event, all authorizing documents signed by the City Manager must be ratified by City Council within 30 days. E. State and Interlocal Agreements 1. CHAPTER 791, TEXAS GOVERNMENT CODE. Various legislation provides an alternative to the competitive bidding process for government entities that `piggy- back' on other government agency contracts. Certain purchases made under federal, state, county, or local government contract satisfy the competitive bid requirements. 2. REQUIREMENTS. The city may take advantage of these programs by City Council resolution identifying the specific contract in which the city desires to participate and authorizing the City Manager to act on behalf of the city or by other action required by law. A list of cooperative purchasing programs in which the City of Southlake is currently involved are listed in Appendix B . 3. POLICY. All departments are strongly encouraged to participate in these cost and time saving procurement opportunities. Copies of these interlocal agreements are available in the City Secretary's Office. F. Historically Underutilized Businesses An employee who requests an expenditure of more than $3,000 but less than $25,000 must contact a minimum of two historically underutilized businesses (HUBs). The HUBs shall be contacted on a rotating basis, based on information provided by the Texas Building and procurement Commission. A list of HUBs appears on the website of the Texas Building and Procurement Commission, www.gsc.state.tx.us under the Centralized Master Bidders list. If the list fails to identify a historically underutilized business in the category or area of the goods or services to be acquired in Tarrant or Denton County, the employee shall note that fact on the applicable PO and is not required to take further action in this regard. See Sec. 252.0215, Texas Local Government Code. II. Sealed Bids/Proposals Purchases greater than or equal to the state limit must adhere to the Local Government Code Chapter 252 regarding competitive sealed bids or proposals, unless otherwise exempt as described herein. As of the date of approval of this policy, the state limit for expenditures or procurements by the City is $25,000. See Texas Local Government Code, Sec. 252.021. The state limit for the purchase of insurance is $5,000. Sealed bids and sealed proposals are used for different types of purchases and are discussed below. A. Competitive Sealed Bids 1. COMPETITIVE SEALED BIDS. Competitive sealed bids are a solicitation to vendors to bid on the acquisition of goods or services by the city. The process is outlined below: a. Department Directors shall formally request permission from City Council to advertise for bids. This is usually done during the budget approval process for each fiscal year. Non - budgeted items must be formally presented to Council and are approved only by an ordinance amending the budget in accordance with Section 9 of the City Charter. 7 b. Specifications for the goods or services are compiled in a formal document by the requesting department or an outside party of their choosing. The document should clearly: (1) set the minimum acceptable standard for the goods or services; (2) provide for reasonable tests and /or inspections by city staff for acceptability; and (3) provide for award opportunity to the lowest responsible bidder or, if applicable, to the bidder who provides goods or services at the best value for the City. The Director shall forward the specifications to the Finance Department for approval. C. The City may use the "best value" method to award contracts provided the specifications specify the factors the City will consider in determining "best value" and that the contract may be awarded either to the lowest responsible bidder or to the bidder who provides goods or services at the best value for the City. If the City desires to award a contract for goods or services under the "best value" method, the City must indicate in the bid specifications that the contract may be awarded either to the lowest responsible bidder or to the bidder who provides goods and services as the best value to the City. In the bidding of a contract for the construction of a facility, the City Council may utilize a method other than competitive bidding if, before advertising, the City Council determines which method provides the best value for the governmental entity. The "best value" method may not be used and the contract must be awarded to the lowest responsible bidder for contracts for the construction of (1) highways, roads, streets, bridges, utilities, water supply projects, water plants, wastewater plants, water and wastewater distribution or conveyance facilities, wharves, docks, airport runways and taxiways, drainage projects, or related types of projects associated with civil engineering construction; or (2) buildings or structures that are incidental to projects that are primarily civil engineering construction projects. See Texas Local Government Code Section 252.043(c). d. The purchasing agent or the Finance Department shall submit the completed invitation to bid to the City Secretary's Office in a sealed envelope with a bid list attached to the front. The bid list should include recommendations by the Director as well as other available vendors provided by the Finance Department e. The City Secretary is responsible for advertising the date, time, and location of the bid opening in the city's official newspaper with detailed information for the advertisement provided by the requesting department. f. The newspaper chosen is required by law to have `general circulation' in the city and to comply with Section 12.05 of the City Charter. g. The first advertisement must, by law, be published at least 14 days prior to the scheduled bid opening h. The advertisement must be published at least twice within two consecutive weeks prior to the scheduled bid opening i. Bid packages shall be assembled and mailed to participating vendors by the requesting department. One copy shall be forwarded to Finance. j. Vendors shall be instructed to return all bids in a sealed package to the City Secretary's Office k. At the specified date and time, sealed bids shall be opened and tabulated by the department. The requesting department representative, the City Secretary and a representative of the Finance Department shall attend the bid opening. The bid opening shall be open to the public. The requesting Department Director is responsible for coordinating attendees. 1. When two or more identical bids are received, the bid award shall be granted based on a casting of lots. M. Casting of lots shall be conducted at a time when all qualified bidders (or designee) may be present. n. A vendor with a place of business within the corporate city limits of Southlake shall automatically be awarded a bid in preference to an outside bidder in the case of a tie. o. The city reserves the right to reject any or all bids. P. Contracts or purchases shall be awarded at a regularly scheduled City Council meeting (unless bids come in under $25,000). q. The Director shall prepare a recommendation and is responsible for formal documentation necessary for the City Council meeting agenda. B. Competitive Sealed Proposals 1. DEFINITION. Competitive sealed proposals (RFP- Request for Proposals) are similar to bids, but are limited to the procurement of high - technology products, 0 high technology services, and business and employee insurance coverage. High - technology procurements are defined as follows: a. Data processing equipment and software, including peripherals, b. Telecommunications equipment, including radio and microwave systems, C. Electronic delivery control systems such as building energy management and security, and d. Technical services related to the above items. 2. PROCESS. The process is the same as described for competitive sealed bids with some variations: a. Product specifications use performance standards rather than a description of the goods or services. The RFP shall list the factors and weight of each factor on which the proposal will be evaluated. b. Vendors submit a proposal of their own design to satisfy the requirements outlined in the RFP. C. After the proposals are opened, the City may enter into negotiations with as many vendors as necessary to arrive at an agreement that most benefits the City. C. Exempt Purchases 1. REQUIREMENTS. Texas Local Government Code, Chapter 252.022 allows for exceptions to the competitive sealed bidding /proposal requirements. Exemptions are specifically identified in the statute and listed below: a. Emergency purchases as described in Section I D. hereof, b. Personal or professional or planning services; C. Temporary services paid on a daily basis; d. Purchase of land or right of way; e. Purchase of items that are only available from a single source: (1) Due to patents, copyrights, secret processes, or natural monopolies, (2) Films, manuscripts, or books, (3) Gas, water or other Utility services, (4) Exclusive distribution of replacement parts or components of existing city equipment, (5) Books, papers, and other library materials available from an exclusive distributor, (6) Rare books, papers, and certain library materials. f Paving, street widening, and other public improvements for which 1/3 of the cost is paid by special assessment, g. An authorized public improvement for which funding is short by an amount needed to complete the project according to initial plans authorized by the voters; h. A contract by which a developer participates in the construction of public improvements under Chapter 212c of the Local Government Code; i. Personal property sold: (1) at auction by a state licensed auctioneer, (2) at a going out of business sale, (3) by a political subdivision of the state, 10 (4) by a state agency, (5) federal agency, or (6) by a regional planning commission. J . Goods purchased by the City for subsequent retail sale by the City; k. Services performed by blind or severely disabled persons; and 1. Electricity. As of the date of adoption of this policy, Texas statute does not allow exceptions for any other reason than those listed above. In the event Section 252.022 of the Texas. Local Government Code is amended to provide for additional exceptions, such exceptions are adopted herein by reference. D. Separate, Sequential, and Component Purchases In applying the requirements for competitive bids or proposals, separate, sequential, or component purchases ordered or made with the intent of avoiding the state requirements shall be considered a single purchase. According to Local Government Code Section 252.062, an employee or elected official of the city who intentionally or knowingly makes or authorizes such a purchase may be charged with a Class B Misdemeanor and is subject to prosecution and/or disciplinary action up to and including termination of employment. The statutory definitions of these terms are as follows: 1. COMPONENT PURCHASES 252.001.2 — purchases of component parts of an item that in normal purchasing practices would be purchased as an all- inclusive single purchase. 2. SEPARATE PURCHASES 252.001.6 — purchases made separately that under normal purchasing practices would be purchased as an all- inclusive single purchase. 3. SEQUENTIAL PURCHASES 252.001.7 — purchases made over time that in normal purchasing practices would be purchased as an all- inclusive single purchase. E. Change Orders 1. WHEN APPLICABLE. If changes in plans or specifications are necessary after the performance of a contract is begun or it is necessary to decrease or increase the quantity of work to be performed, or of materials, equipment or supplies to be furnished, a change order may be approved. The change order should be approved in writing and a copy issued to the vendor prior to starting the additional work. 2. LIMIT. If a change order involves a decrease or an increase of $25,000 or less, the City Manager is authorized by City Council to approve the change. The original contract price may not be increased by more than $25,000 without formal City Council approval and the original contract price may not be increased by more than 25 %. The original contract price may not be decreased by more than 25% without the consent of the contractor. F. Requirements for Contracts for Professional Services 1. EXEMPT SERVICES. Professional services, including such services as accounting, architecture, engineering, surveying, medicine and planning, are exempt from the competitive bid process as provided by Texas Local Government Code, 252.022(4). Chapter 2254, of the Texas Government Code (the Professional Services Procurement Act) governs the award of contracts for professional services. It provides: a. a government entity may not select a provider of professional services or a group or association of providers or award a contract for the services on the basis of competitive bids submitted for the contract or for the services, but shall make the selection and award: 11 (1) on the basis of demonstrated competence and qualifications to perform the services, and (2) for a fair and reasonable price. b. The professional fees to be paid under the contract: (1) must be consistent with and not higher than the recommended practices and fees published by the applicable professional associations; and (2) may not exceed any maximum provided by law. 2. PROCEDURE. a. In procuring architectural, engineering, or land surveying services, or other services listed in the Professional Services Procurement Act, the City shall: (1) first select the most highly qualified provider of those services on the basis of demonstrated competence and qualifications, and (2) then attempt to negotiate with that provider a contract that is at a fair and reasonable price. b. If a satisfactory contract cannot be negotiated with the first choice provider, then the City shall: (1) formally end negotiations with that provider, (2) select the next most highly qualified provider, and (3) attempt to negotiate a contract with that provider at a fair and reasonable price. C. This process shall be followed until a fair and satisfactory contract is negotiated and accepted by both parties. 3. INSURANCE REQUIREMENTS. Contractors, consultants, concessionaires and certain suppliers whose work, or employees, may expose the City and the public to risk of any kind, are required to sign an indemnity clause along with a contractual agreement that will transfer the risk of the project from the City to the contractor. They must also provide a current insurance certificate to the City that shows their liability meets the City's standard requirements. These requirements should be included in the Request for Bids or Proposals and are made part of the contract or purchase order. Insurance requirements may vary from project to project depending on the type of work or service being provided. 12 III. Procurement Card A. Purpose 1. GENERALLY. The purpose of the P -Card program (P -card) is to establish a more efficient, cost - effective method of purchasing and paying for small dollar transactions as well as high volume, repetitive purchases. The program was designed as an alternative to the traditional purchasing process (purchase orders) as described in the previous sections of this policy. The purchasing card can be used with any supplier that accepts MasterCard as a form of payment. When used to its potential, the purchasing card program will result in a significant reduction in the volume of purchase orders and related documentation including invoices and checks. In addition, corresponding work processes associated with ordering and check writing will be reduced. B. Use of Card 1. EMPLOYEE'S AGREEMENT. The Cardholder User's Guide provides the general guidelines for using the purchasing card and each employee should read it carefully and sign the Cardholder's Agreement. An employee's signature on the Cardholder Agreement shows an understanding of the intent of the program and agreement to follow the established guidelines. 2. RULES. The following rules apply to the use of the purchasing card. a. The purchasing card is issued in the cardholder's name and he /she is responsible for the security of the card All purchases made on a purchasing card are the responsibility of the cardholder: Failure to follow these guidelines may result in disciplinary action up to and including termination and/or criminal prosecution when the violation involves a violation of any local, state, or federal law. b. The purchasing card may be used at any vendor or service provider that accepts MasterCard and is not on the restricted vendor list. It may be used for in store purchases, mail, telephone, fax, or internet orders. C. The purchasing card may only be used to purchase items that are included in a currently approved budget line item. d The purchasing card may be used to purchase supplies and services less than the single transaction limit that was established e. Use must not exceed the credit limit assigned to your card in a given month. f. Cardholders must reconcile the statement received from the issuing financial instituion to ensure all charges are accurate. The statement reconciliation MUST be completed within seven days of receipt of the statement and submitted to Finance. Failure to properly reconcile a statement may result in suspension of the account. 13 g. The purchasing card is not intended to avoid or bypass appropriate purchasing or payment procedures as outlined in this policy. C. Duties and Responsibilities 1. DEFINITIONS. For purposes of this section, the following terms shall mean the following: Cardholder - A cardholder is an employee designated by the department director to utilize the purchasing card. The cardholder is responsible for following the guidelines in regards to purchases, selection of vendors, security of card and monthly statement reconciliation. Customer Service - The purchasing card program is serviced using a team approach with the bank's Customer Service Center. This center is available 24 hours a day, 7 days a week to assist the cardholder with general questions about the purchasing card account. Department Director - The department Director is responsible for designating cardholders, assisting the program administrator with cardholder spending limits, monitoring adherence to this policy, and approving monthly cardholder statements. In the event of change in the employment status of a cardholder, the department Director shall retrieve the purchasing card, cut the card down the center of the magnetic strip, and forward it to the program administrator, immediately. The Human Resource Director shall verify that this action has taken place. Program Administrator - The program administrator is designated to answer questions, address issues and oversee the administration of the program. The program administrator has a direct relationship with the Bank. All purchasing card requests must go through the program administrator. Site Administrator — The site administrator is the employee designated to oversee the administration responsibilities for their department. If a card is lost or stolen, Customer Service should be notified immediately, then the program administrator. D. Transaction /Card Limits 1. EMPLOYEE LIMITS. All purchasing cards are assigned cardholder spending limits. Limits may vary for each cardholder and will be established by the program administrator in coordination with the department Director. An employee shall not make or authorize a purchase in excess of his or her assigned spending limit. 2. CHANGE IN LIMITS. Each cardholder will be given information on the limits of his/her card upon signing up for the program. To change limits on a card, a. the department Director shall forward a request in writing to the program administrator; and b. the program administrator will notify both the Director and the Cardholder when the change is effective; Changes take two to three days to process. 3. AUTHORIZED TRANSACTIONS. Each purchasing card may have a single transaction limit, a daily limit, a weekly limit, etc. These limits may include both dollar amounts and number of transactions. A transaction amount includes the purchase price, plus ancillary charges. The following monthly and transaction limits are applicable, unless changed by the Finance Department: Cardholder Per Per Month Class Transaction EXECUTIVE $1,000 $10,000 City Manager, Department Directors 14 MANAGEMENT $1,000 $5,000 Deputy Directors, Division Supervisors ADMINISTRATIVE STAFF $500 $3,000 Secretaries, Division Supervisors LINE STAFF $100 $2,000 All other employees Note: After an employee has reached the limit, the employee must utilize the regular purchase order process or the department Director may petition the program administrator for a temporary increase in transaction limits. 4. BUDGETARY LIMIT. At no time may the total transaction limits for any division exceed the adopted budget. An employee who authorizes a purchase which exceeds the limits may be subject to disciplinary action. E. Restrictions and Exemptions 1. PROHIBITED USES. The P -Card program restricts use with certain types of suppliers and merchants. If a P -card is presented for payment to a restricted vendor, the authorization request will be declined. Employees may not use the card for the following: a. Any purchase for personal use, b. Cash refunds or cash advances, C. At a merchant type not considered prudent or of good judgment, d. Transaction amount greater than the cardholder's transaction limit, e. Items under contract, unless authorized by the program administrator, f. Alcohol or liquor, patronization of bars, drinking places and package liquor stores, g. Separate, sequential, and component purchases made with intent to circumvent City purchasing policy or the provisions of Texas Local Government Code Section 252.061 or 252.062, or h. Any other purchase specifically excluded in this policy. 2. PERSONAL USE RESTRICTIONS. An employee shall not use the card to pay spouse /family expenses incurred while traveling or otherwise. Cardholders should pay personal expenses separately. 3. TAX. The City is a sales tax - exempt entity and does not by state law pay Texas sales tax. Cardholders should present a sales tax exemption form when making a purchase. This exemption does not apply to hotel /motel taxes or taxes imposed by other states. F. Obtaining and Revoking a Card 1. WHO MAY REQUEST. All requests for new cards shall be forwarded by email to the program administrator. Only department Directors have authority to request additional cards. 2. PROCESS. The following process shall be used to obtain a card: a. Upon receiving a request, the program administrator will coordinate with the Director to determine appropriate limits. b. The employee shall submit a completed and signed application form to the program administrator. C. The program administrator will request issue of the card from the issuing financial institution. 15 d. Upon receipt of the card, the program administrator will schedule the employee's training. e. Upon completion of training, the cardholder shall sign the cardholder agreement in the presence of the program administrator. f The program administrator will issue the card to the new cardholder. 3. AGREEMENT. The new cardholder shall receive copies of the Cardholder Agreement, all applicable forms, the Users Guide for the issuing financial institution website, and the City's Purchasing Policy. The employee shall acknowledge receipt of such documents. 4. REVOCATION. At the discretion of the department Director or at the direction of the Finance Director the purchasing card is subject to revocation at any time. The program administrator may also recommend to the Finance Director and department Director that a card be revoked upon suspected violation of the Purchasing Card policy and procedures. Revocations are made on -line and take effect immediately. 5. SUSPENSION. The program administrator is further authorized to temporarily suspend use of a card via electronic methods if unauthorized use is discovered and such use poses a threat to internal financial controls. The Director and cardholder will be notified via e -mail of the suspension. DESTRUCTION. All revoked or inactive cards shall be immediately returned to the program administrator after the card has been cut down the center of the magnetic strip. G. Statement Review Process RECONCILING THE MONTHLY P -CARD STATEMENT. a. A P -Card statement will be sent to the cardholders after the billing cycle closes on the 15th day of each month. The P -Card statements will be similar in appearance to a typical consumer credit card statement. b. The employee is not responsible for paying the P -Card statement. The city will submit payment to the financial institution for all employee transactions. C. Using the itemized receipts provided by the vendors, cardholders shall verify that purchases and returns are accurately listed on the P -Card statement. d. After confirming the transactions on the monthly P -Card statement, the cardholder shall sign the P -Card statement indicating that they did, in fact, make those purchases. e. Once the statement is reconciled, the cardholder shall complete a purchase order. The P -Card statements, receipts and PO shall be forwarded to the location P -Card Site Administrator. f The P -Card Site Administrator is responsible for assigning account codes in the online card management program for all cardholders based on the purchase orders received from the cardholders. g. Once all of the account numbers have been entered into the online card management program, the Site Administrator shall print a report of all P- Card purchases to be reviewed by the department Director. If all of the purchases are appropriate, the department Director will sign the purchase order. The Site Administrator will then send the program administrator the purchase order, the reconciled statements and attached receipts, and the account code distribution report through inter - office mail. h. The program administrator shall review all entries before uploading the information into the general ledger. 2. RECORDS RETENTION. The Finance Department shall be responsible for retaining on file original itemized receipts, invoices, P -Card statements, and approval forms. This documentation will be located in the Finance file room and is subject to audit review. THE RETENTION PERIOD FOR THIS 16 DOCUMENTATION IS FIVE (5) YEARS for non - capital and indefinitely for capital purchases. H. Miscellaneous 1. RETURNS, CREDITS, DISPUTED TRANSACTIONS. NOTE: In most cases, disputes can be resolved directly between the cardholder and the vendor. a. If an item needs to be returned for any reason, cardholders may send the item back to the vendor in a manner agreed upon. b. The vendor will issue a credit on the P -Card for the items that are returned. This credit will be documented by a credit receipt and appear on a subsequent monthly P -Card statement. C. Documentation of the return (Le. credit receipt) is issued by the vendor and used for statement reconciliation. d. If the cardholder and the vendor cannot resolve the issue, contact the program administrator. An employee is responsible to report disputed items within thirty (30) days of the P -Card statement date. e. The financial institution will investigate the dispute on the cardholder's behalf and assist in a resolution. The program administrator will complete a Transaction Dispute Form and forward it to the financial institution for processing. 2. METHOD OF PAYMENT. All cardholder transactions are consolidated and billed on a monthly cycle. Because the vendor will be paid through MasterCard, the vendor should NOT submit an invoice. If the vendor does send an invoice, the documentation will be promptly returned by finance with an explanation that the transaction was made with a P -Card. 3. DOUBLE - BILLING CAUTION. To safeguard against the possibility of double - billing, vendors shall be instructed by the cardholder NOT to send a bill. The P- Card statements shall be checked for duplicate billing and the program administrator shall be notified if charges appear more than once for a single purchase. 4. CARDHOLDER AUDITS. a. At any time prior to the statement reconciliation process, the Finance Department may retrieve various reports directly from the financial institution listing all transactions posted on a card. Cardholders may be asked to produce original receipts for review. These records should be safeguarded and readily available. b. Random audits of P -Card purchases will periodically be conducted. The objective of these audits will be to determine compliance with P -Card and City purchasing policies and procedures. Each department is responsible for validating transactions and for safeguarding P -Card records prior to submission for payment. 5. MANAGEMENT INFORMATION REPORTS. The financial institution web - site provides detailed management reports for the purpose of monitoring cardholder usage, policy compliance and frequency of vendor usage. The program administrator is responsible for reviewing city -wide transactions on a daily, weekly and monthly basis. In addition, each department director and location site administrator has the ability to retrieve reports to monitor activity. 6. CARD CANCELLATION /REPLACEMENT. Upon request of the program administrator or department Director or upon termination of employment, cards must be cut down the center of the magnetic strip and returned to the program administrator immediately. 7. CARD SECURITY. Authorized use of the P -Card is limited to the employee in whose name the card is issued. The cardholder will assure that the card is kept in an accessible but secure location and that the account number on the card is not posted or left in a conspicuous place. 17 NOTE: An employee shall not loan a P -Card to another employee or other person. In the event that a cardholder is going to be absent from work for an extended period of time, a card may be issued to another employee for the duration of the absence. 8. LOST OR STOLEN CARDS. See Appendix C. Appendix C may be amended in the event the phone numbers of the Customer Service representative change. If an employee's procurement card is lost or stolen, the employee shall also notify the Program Administrator. 9. WHO TO CALL. See Appendix C. IV. Invoicing and Payment Vendor and P -Card payments are processed by the Finance Department and may take the form of a check, a wire transfer, or an ACH (Automatic Clearing House) transaction. Each payment type and the associated processes are discussed below. A. Invoice Processing 1. REQUISITION. The ordering employee shall complete a pre- numbered requisition and obtain ALL necessary signatures. 2. FINANCE DEPARTMENT. The requisition is forwarded to the Finance Department. The ordering department retains the gold and blue copies. 3. DISTRIBUTION. The Finance Department shall complete the purchase order and distribute as follows: ■ Yellow copy is kept by Finance. Pink copy is kept in the ordering department. White original is sent to the vendor upon placing the order. 4. DEADLINE. Deadline for processing paper work is as follows (and further discussed in Section B: PAYMENT PAPER WORK SPECIAL TYPE DEADLINE REQUIREMENTS /COMMENTS Check Tuesday at 5:00 p.m. Large amounts require two manual signatures Wire transfer Weekday at 3:30 p.m. Requires two staff with wire transfer authorization ACH 4:00 p.m. - two Ex. For a Friday morning due transaction weekdays prior to date, the ACH should be done by due date Wednesday at 4:00 p.m. 5. BIDS. Bids are obtained and awarded by Finance in coordination with the requesting department. 6. INVOICE. Finance enters the PO in the system to await the invoice. 7. RECEIPT. Upon receipt of the item(s) ordered, the requesting department shall check off all items on the packing slip and compare it to the requisition (blue copy). The packing slip shall be initialed, dated, and immediately forwarded to the Finance Department with the blue copy of the requisition. 8. DISCREPANCIES. If there are discrepancies between the packing slip and the PO, the ordering department shall contact the vendor to clarify the issues. The ordering department shall also notify the Finance Department of all discrepancies. 9. VENDOR. Vendors shall forward invoices to the Finance Department. There are NO exceptions to this requirement. 10. PAYMENT. Upon receipt of the invoice, the Finance Department shall enter the invoice data into the payables system and begin payment processing. B. Payment Methods and Deadlines Deadlines for processing payments are as follows: PAYMENT BY CHECK. a. Payments made by check are usually used to process payments for purchases not included in the other payment types and for large dollar purchases. b. Checks are issued on Friday of each week. Manual checks are not available. C. The Finance Department shall maintain a file for each vendor on an annual basis. The vendor payment packets shall include the following: ■ Check copy, ■ Original purchase order or PAM, ■ Original invoice, ■ Original packing slip, ■ Original bid documents (telephone and written). 2. PAYMENT BY WIRE TRANSFER. Wire transfers are the usual form of payment for items such as bank fees, land purchases, bond payments, taxes, and insurance premiums. Request for payment of these items are placed on a Payment Authorization Memo (PAM). The form is completed with signatures prior to being paid. These payable packets shall include the check copy, the original PAM, the original invoice, and the wire transfer confirmation. PAYMENT BY ACH TRANSACTION. ACH transactions are used for state reimbursements, P -Card statements, payroll direct deposit, and payroll taxes. Request for payment of these items is placed on a form specific to the item. All forms must be completed and signed by appropriate parties prior to payment being issued. The form, statement, and ACH transaction confirmation are included as justification documents for the necessary journal entry and are maintained in the Finance Department. C. Prompt Payment Act REQUIREMENTS. Texas statutes govern the timeliness of payments owed by the city. According to the law, payments are due the later of 30 days after: ■ the date supplies, materials, or equipment are received, the date services are rendered, or the date the invoice is received, unless one of the exceptions set forth below applies. See Chapter 2251, Texas Government Code. 2. INTEREST. The law permits interest accrual of one percent (1 %) per month on past due amounts, beginning on the day after the payment is due and ceasing on the postmarked date of the payment. The city is required to notify vendors of billing discrepancies no later than the 21S day after the invoice is received. Should the dispute be settled in favor of the vendor, interest as described above shall be applied 19 on the past due amounts. Settlement in favor of the city requires the vendor to submit a corrected invoice for payment. EXCEPTIONS. The Prompt Payment Act does not apply to payments made by the city when: a. contract provisions outline other payment terms, b. invoices are not mailed to the appropriate address as instructed by Finance, or C. federal contracts, grants, regulations, or statutes prevent timely payment with federal funding. 4. POLICY. Each employee shall, at all times, take advantage of prompt payment discounts. V. Other Important Items This section includes items not addressed elsewhere, but deemed important to address in the Purchasing Policy. A. Training 1. REQUIRED. All employees of the city who are or at any time will be involved in the procurement process shall receive training from representatives of the Finance Department. The training shall include, but not be limited to: a. Individual discussion of the Purchasing Policy with a Finance Department representative, b. Group discussion of the Purchasing Policy with a Finance Department representative, C. On -line individual tutorials for the P -Card web -site or New World Procurement module, and d. Group training for the P -Card web -site or New World Procurement module. 2. RESPONBILITY OF EMPLOYEE. If at any time an employee needs to obtain additional training in the procurement process, he /she is responsible for notifying the department Director to schedule a training session. The Finance Department shall periodically schedule group refresher sessions and publish the time and location of the session. B. Use of Current Technology The city maintains a progressive and proactive approach to technology. In relation to procurement, the current technology used by city staff includes: ■ IBM AS400 New World Procurement and Payables modules, Bank One Smart Data Online P -Card system (internet- based), Microsoft Office Suite. Each software package and the associated hardware have independently prepared procedure manuals. The point at which a department or individual obtains access to these products shall determine the training schedule for that employee. As new technology is added, effected employees shall be notified and trained as necessary. C. Disposal of Surplus /Salvage Property 1. SURPLUS PROPERTY. Surplus goods and equipment should be disposed of in a manner that will yield the greatest possible benefit to the City. a. Whenever possible, items will be batched together and sold at public auction. A department director who has equipment or personal property that is worn out, outdated, or no longer needed for current operations should submit to the Director of Finance and the City Manager a written list of property that the director recommends to be designated as surplus. The City Manager must approve the designation. 20 b. Property may be disposed of by public auction, written bids, telephone bids or by negotiation. Wherever possible, items will be batched together and sold at public auction. All funds received from the sale of surplus goods will be paid to the City of Southlake. C. A record of the sale should be provided to the Finance Department, along with documentation of the sale of any goods classified as a fixed asset owned by the City. This is to assist in maintaining the City's inventory of fixed assets. The procedures outlined in GASB 34 Policy for disposal of assets shall be observed. 2. SALVAGE PROPERTY. The disposal process for salvage property shall be the same as for surplus goods. 3. PROHIBITIONS. Employees and appointed or elected officials and members of their immediate family are prohibited from bidding, purchasing, or obtaining any surplus or salvage property. There may be exceptional circumstances whereby property may be transferred to an employee. For the exceptional circumstances to apply, the Director of the department in which the property is located must submit a written recommendation to the Finance Director and the City Manager. The Finance Director and the City Manager must also approve the transfer in writing. An example of such an exception is a ballistic vest tailored to a specific officer or a work attire item such as a fire helmet used by a retiring firefighter. D. Records Retention 1. Refer to the City's records retention schedule included in Appendix D. 2. The Finance Department shall maintain all payable records for fiscal year end plus 3 years, except that P -Card statements and supporting documentation are retained for fiscal year end plus 5 years, and capital asset records are retained until 3 years after disposal (indefinitely). 21 Appendix A DEFINITIONS Ancillary Costs – additional charges paid to make a capital asset operational or useable by the acquiring organization. This includes transportation, shipping and handling, installation, site preparation, consultation, professional services directly related to making the asset operational. Assets – tangible and intangible items owned by an organization that could be liquidated to pay debt. Blanket Purchase Order – a purchase order used to acquire items over a one month period that are ordered at the same time, but delivered and invoiced separately. Capital Assets – tangible and intangible items owned by an organization that have a useful life exceeding one (1) year and the acquisition cost, including ancillaries, meets or exceeds the capitalization threshold. The cost of these items is depreciated over the life of the asset. Capitalization Threshold – an amount established by policy at which an asset becomes a capital asset requiring the city to record depreciation over the life of the asset. The City of Southlake has established $5,000 as the capitalization threshold. Casting of Lots – a random means of selecting a vendor in the event of a tie for sealed bids. Cooperative Purchasing – a written agreement between two or more governmental agencies (including school districts) in which the bidding process as outlined in Texas statute is met by the primary agency and secondary agencies "piggy- back" on the primary contract. The advantage to these agreements is time and money savings. Donated Assets – a tangible or intangible item voluntarily given to an organization without compensation to the donating entity. GASB 34 – Governmental Accounting Standards Board Statement 34 required the most comprehensive change in governmental financial statement reporting in the history of the Board. Governments must identify and report infrastructure assets and depreciation, and the new financial statements are intended to provide a more realistic picture of the financial viability of the government agency, allowing for comparison with private industry financial statements. Government Accounting Standards Board – the regulatory body for governmental accounting and reporting. Local Government Code – the Texas statute that governs city processes and policies. P -Card – a MasterCard provided by Bank One in contract with the State of Texas for purchasing with the intent of improving efficiency, decreasing cost, and encouraging participation in the state's cooperative purchasing program. Procurement – the process by which an organization acquires products or services. Reconciliation – the process by which billing statements are compared to city records or receipts to ensure the accuracy of the charges. State Limit —the dollar amount of expenditures, under Section 252.021 of the Texas Local Government Code, which is the threshold for required bids or competitive sealed proposals. Surplus Property – property owned by the city that has a market value and is no longer needed. Salvage Property – personal property owned by the city that because of use, time, accident, or any other cause is so worn, damaged or obsolete that it has no value for the purpose for which it was originally intended. 22 ,� Appendix B COOPERATIVE PURCHASING AGREEMENTS Tarrant County Purchasing Cooperative Contact: Erin Boddie (817) 884 -1414 Texas Association of School Boards Buy Board Contact: http: / /www.tasb. buyboard .com /BuyBoard_Biz /index.html Texas Building and Procurement Commission Contact: http: / /www.tbpc .state.tx.us /stpurch/index.html U. S. Communities Purchasing Cooperative Contact: Houston — Galveston Area Council (H -GAC) Contact: James McBride, Jr. (800) 926 -0234 https: / /www.h_ag cbu Appendix C LOST OR STOLEN CARDS. If a cardholder's P -Card is lost or stolen, the cardholder must immediately notify the program administrator and Bank One Customer Service at 1- 800 - 316 -6056. A Customer Service Representative will block use of the card. Written notification will follow to Bank One with a completed Lost Card Form. WHO TO CALL. 1 -800 -316 -6056 Program Administrator: Telephone: E -mail: Lost or stolen cards (report immediately) 24 Appendix D These requirements have been adopted by the City Council on the 1st day of December, 1998 By Resolution No. 98 -74 Financial Records Retention Notes: a) AUDIT REQUIREMENTS - Most local governments are required by state law to conduct annual or biennial audits of their records and accounts. These audit requirements were taken into account in setting the retention periods in this schedule. The following retention rules also apply: LIn any local government for which there is no statutory audit requirement and audits are conducted irregularly or in a local government in which a statutorily required audit is delayed, any record in this schedule whose retention period dates from the end of a fiscal year (FE) must be retained for the retention period stated or one year after audit, whichever later. 2.With regard to any special fund of a local government or elective county office for which there is no statutory audit requirement and the fund is not audited, any records listed under item numbers 1025 -26, 1025 -27, 1025 -28, and 1025 -30 associated with receipts and disbursements from or to the fund must be retained for FE + 10 years. b) GRANT RECORDS - Subsections (1) -(3) apply to any local government, except school districts, receiving federal, state, or private grants; subsection (4) applies to school districts only. 1.Direct Federal Grants - This subsection applies to grants received by a local government directly from a federal grantor agency. i) Most federal grantor agencies require that grant- related records be retained for audit purposes for 3 years from the filing of expenditure reports. A few agencies, however, require a 5 -year retention. Reference should be made to the specific terms of each grant to determine whether a 3 -year or 5- year retention period is required and whether additional retention provisions apply. ii) In addition to item number 1025- 08(a) -(b), financial and programmatic records of grant - funded projects, including copies or documentation of relevant accounting, banking, purchasing, and payroll records, and other documents and working papers associated with the financial and programmatic administration of the grant funds or used to prepare reports or forms required by federal law or regulation must be retained for the following periods: A) For grants continued or renewed annually or at other intervals except quarterly - 3 or 5 years from the date of submission of the annual or other periodic expenditure report. B) For grants continued or renewed quarterly - 3 or 5 years from the date of submission of the expenditure report for the last quarter of the federal fiscal year. C) For grants for which the requirement of a final expenditure report has been waived - 3 or 5 years from the date the report would have been due. D) For all other grants - 3 or 5 years from the date of submission of the final expenditure report. iii) The retention periods for the following types of records are exceptions to the periods noted above: A) Records of non - expendable property or equipment acquired with grant hinds - 3 or 5 years from the date of transfer, replacement, sale, or junking of the item. 25 B) Cost allocation plans and indirect cost records - 3 or 5 years from date of submission or, for plans prepared and retained by the grantee, from the close of the fiscal year covered by the plan. C) Income records - 3 or 5 years from the end of the fiscal year in which the income is used. iv) If any litigation or audit commences before the expiration of the 3 or 5 year period, the records must be retained until all litigation or audit findings are resolved or until the end of the regular 3 or 5 year period, whichever later. v) If records are transferred to the grantor agency at its request, copies of the records need not be retained. 2.Indirect Federal Grants - This subsection applies to federal grants received as subgrants from state agencies or other local governments (e.g., regional councils of government). The expenditure reports are submitted to the federal agency by the state or local subgrantor agency after all subgrantees have submitted reports to the subgrantor. Consequently, records under item number 1025- 08(a) -(b) and records described in section (b)(1) must be retained by local government subgrantees for the following minimum retention periods: i) For grant programs with a 3 -year federal retention requirement - FE + 5 years. Ii) For grant programs with a 5 -year federal retention requirement - FE + 7 years. Copies of reports or records submitted to the subgrantor agency must be retained by the local government for the periods indicated. 3. State and Private Grants - This schedule extends the 3 -year federal retention requirement described in section (b)(1) to state (excluding federal subgrants) and private grant records unless the state or private grantor agency has established different retention requirements, in which case those requirements shall prevail. It is an exception to the extension of federal grant requirements to state and private grants that for state or private grants renewed quarterly as described in section (b)(1)(ii)(B), the 3 -year retention requirement runs from the date of submission of the expenditure report for the last quarter of the state fiscal year for state grants and from the last quarter of the local government's fiscal year for private grants. 4.Grant Records and School Districts (including Educational Service Centers) - See Local Schedule SD (Records of Public School Districts). Because of the difficulty of effectively separating financial data that evidence the expenditure of federal funds from those that document the expenditure of local or state - allocated funds, a 7 -year retention period has been adopted for most financial records of school districts. The use of the term "school district" in this schedule includes educational service centers, county departments of education, and educational cooperatives. Fiscal Administration and Reporting 1025 -01 Audit Records (by both internal and external auditors). a) Annual or biennial cumulative audit. RETENTION: PERMANENT. b) Annual, biennial, or other periodic audit of a department, program, fund, or account if included in a cumulative audit under (a). RETENTION: 2 years. 26 c) Annual, biennial, or other periodic audit of a department, program, fund, or account if not included in a cumulative audit under (a). RETENTION: PERMANENT. d) Special audits ordered by a governing body, a court or grand jury, or mandated by administrative rules of a state or federal agency. RETENTION: PERMANENT. e) Working papers, summaries, and similar records created for the purposes of conducting an audit. RETENTION: 3 years after all questions arising from the audit have been resolved. 1025 -02 Bank Security Records - Records documenting the pledging of bonds or securities by banks serving as depositories for public funds including depository contracts, security pledges and statements, surety bonds, and similar records. RETENTION: 4 years after termination, expiration, or release of contractual obligations. 1025 -03 Bond Records (see retention note to item number 1025 -09). a) Bond administrative records consisting of preliminary studies, proposals and prospectuses, authorizations and certifications for issuance or cancellation, and related policy correspondence. RETENTION: PERMANENT. b) Bond certificates and redeemed coupons. RETENTION: 1 year after payment. (Exempt from destruction request requirement) [By law - Civil Statutes, art. 7171 -1 for counties (see statute for procedural instructions for destruction); by authority of this schedule for all other local governments.] c) Bond registers. RETENTION: PERMANENT. d) Records relating to the exchange, conversion, or replacement of bonds by bondholders. RETENTION: 1 year and exempt from destruction request requirement if information is contained in a bond register; PERMANENT, if information is not contained in a bond register. 1025 -04 Budgets and Budget Documentation a Annual budgets (including amendments). RETENTION: PERMANENT. b) Special budgets (includes budgets for capital improvement projects, grant - funded projects, or other projects prepared on a special or emergency basis and not included in an annual budget). RETENTION: PERMANENT. c) Working papers created exclusively for the preparation of budgets, including budget requests, justification statements, and similar documents. RETENTION: 2 years. d) Encumbrance and expenditure reports (status reports showing expenditures and encumbrances against a budget). RETENTION: 2 years. e) Budget change documentation, including line item or contingency /reserve fund transfers and supplemental budget requests. RETENTION: 2 years. 1025 -05 Capital Assets Records - Documentation relating to the capital and fixed assets of a local government. a) Equipment or property history cards or similar records containing data on initial cost, including disposal authorizations when disposed of RETENTION: FE of date of disposal + 7 years for school districts; + 3 years for other governments. 27 b) Equipment or property cost and depreciation schedules or summaries used for capital outlay budgeting or other financial or budget control purposes. RETENTION: FE + 7 years for school districts; + 3 years for other governments. c) Equipment or property inventories (including sequential number property logs). RETENTION: Until superseded + 3 years. d) Property sale, auction, or disposal records of government -owned equipment or property. RETENTION: 1 year. (Exempt from destruction request requirement). [By law - Local Government Code, Section 263.155(b) for counties; by authority of this schedule for all other local governments.] Retention Note: Property sale or auction records under (d) do not include records arising from the sale or auction of property foreclosed or seized by a taxing unit for failure to pay property taxes or for the sale or auction of property seized by law enforcement officers. For such records use Local Schedule TX (Records of Property Taxation) or Local Schedule PS (Records of Public Safety Agencies) respectively. 1025 -06 Federal Revenue Sharing Records - Records concerning the use of federal revenue sharing funds by a local government, including revenue and expenditure summaries; status, budget, and audit reports; and other reports or documentation required by federal law or regulation. RETENTION: 3 years. [By regulation - 31 CFR 51.1l(b), 51.12(c), and 51.108(a) and (d).] 1025 -07 Financial Reports - Annual, sub - annual, or irregularly prepared financial reports or statements on the accounts, funds, or projects of a local government created either for internal use or for submission to state agencies as may be required by law or regulation, except reports of similar types noted in this or other commission schedules. a) Monthly, bimonthly, quarterly, or semiannual reports. RETENTION: FE + 3 years. b) Annual reports. RETENTION: PERMANENT. c) Long range fiscal planning reports. RETENTION: PERMANENT. d) Capital improvement reports. RETENTION: PERMANENT. 1025 -08 Grant Development and Administrative Records a) Successful grant applications and proposals and any documentation that modifies the terms of a grant. RETENTION: FE + 7 years for school districts; + 3, 5, or 7 years for other governments. Retention Note: See note (b) at beginning of Part 2 of this schedule. b) Financial, performance, and compliance reports submitted to grantor or subgrantor agencies. RETENTION: FE + 7 years for school districts; + 3, 5 or 7 years for other governments. Retention Note: See note (b) at beginning of Part 2 of this schedule. c) Reports, planning memoranda, studies, correspondence, and similar records created for and used in the development of successful grant proposals. RETENTION: 3 years. d) Any records of the type noted in (a) or (b) relating to unsuccessful grant proposals. RETENTION: AV. (Exempt from destruction request requirement) fi 1025 -09 Investment Transaction Records - Documentation relating to the investment of public funds (e.g., certificates of deposit) that evidences the investment of funds, the performance or return of investments, the cancellation or withdrawal of investments, and similar activity. RETENTION: FE + 7 years for school districts; + 5 years for other governments. Retention Note: It is an exception to the retention period for this item that records of investments and the calculation of arbitrage rebate amounts (if any) on proceeds from the sale of tax exempt bonds must be retained for 6 years after the retirement of the last obligation of the bond issue. Accounting Records Retention Note: PAYROLL RECORDS - For records relating to the disbursement of payroll see Section 3 -2. 1025 -25 Accounting Policies and Procedures Documentation - Policy and procedure directives and similar records documenting accounting methodology. RETENTION: Until superseded + 5 years. 1025 -26 Accounts Payable and Disbursement Record - Claims, invoices, statements, copies of checks and purchase orders, expenditure authorizations, and similar records that serve to document disbursements, including those documenting claims for and reimbursement to employees for travel and other employment- related expenses. RETENTION: FE of date of payment + 7 years for school districts; + 3 years for other governments, except for the following: a) Accounts payable records sufficient to document the purchase costs of capital equipment or other fixed assets if capital asset documentation of the type noted under item number 1025 -05(a) is not created. RETENTION: FE of date of disposal + 7 years for school districts; + 3 years for other governments. b) Fund transmittal reports accompanying the transmittal of funds to federal, state, or other local government agencies (e.g., sales tax to the State Comptroller of Public Accounts), to retirement systems, or to other entities if the funds are collected in whole or in part on behalf of other agencies or individuals (e.g., retirement deductions of employees), except those accompanying the transmittal of federal and state payroll and unemployment taxes [see item number 1050- 53(b)]. RETENTION: FE of period covered by report + 3 years. 1025 -27 Accounts Receivable Records - Bill copies or stubs, statements, billing registers, account cards, deposit warrants, cash receipts, receipt books, cash transfers, daily cash reports, cash drawer reconciliations, and similar records that serve to document money owed to or received by a local government and its collection or receipt. RETENTION: FE of date of receipt + 7 years for school districts; + 3 years for other governments, except for the following: a) Accounts receivable records documenting the receipt of any monies by any local government that are remittable to the State Comptroller of Public Accounts (e.g., court costs in criminal cases, sales tax). RETENTION: Remittance due date + 7 years for school districts; + 5 years for other governments. b) Account card or similar record documenting payments to a local government in which the government holds a property lien until the debt is satisfied (e.g., liens arising from demolition, lot cleaning), including original liens and lien releases. RETENTION: FE of date of final payment and release of lien + 3 years. we c) Account card or similar record relating to the receipt of cash deposits as sureties for the delivery of services (e.g., water and wastewater). RETENTION: FE of termination of service or refund of deposit + 3 years. d) Records of accounts deemed uncollectable, including write -off authorizations. RETENTION: FE of write -off date + 7 years for school districts; + 3 years for other governments. Retention Note: For accounts receivable records associated with the collection of property taxes, all local governments, including school districts, should use Local Schedule TX (Records of Property Taxation). 1025 -28 Banking Records - Bank statements, canceled checks, check registers, deposit slips, debit and credit notices, reconciliations, notices of interest earned, etc. RETENTION: FE + 7 years for school districts; + 5 years for other governments. 1025 -29 Cost Allocation and Distribution Record - Records created to document the allocation of costs among accounts and funds of a local government, including records relating to chargebacks and other interdepartmental or interfund accounting transactions. RETENTION: FE + 7 years for school districts; + 3 years for other governments. Retention Note: If any of the records in this group are used as ledger and journal entry documentation, they must be retained for FE + 5 years (see item number 1025 -30) by all local governments. 1025 -30 Ledgers, Journals, and Entry Documentation Retention Note: Be certain to verify before the disposal of any ledger or journal under this item number that the ledger or journal does not serve to document financial activities that require a longer retention period (e.g. investment documentation of proceeds of tax exempt bonds under item number 1025 -09). a) General ledger showing receipts and expenditures from all accounts and funds of a local government. LFor fiscal years for which an annual audit report (see item number 1025 -01) exists. RETENTION: FE + 7 years for school districts; + 5 years for other governments. Retention Note: Review before disposal; some ledgers may merit permanent retention for historical reasons. 2.For fiscal years for which an annual audit report (see item number 1025 -01) does not exist. RETENTION: PERMANENT. b) Subsidiary ledgers. RETENTION: FE + 7 years for school districts; + 5 years for other governments. Retention Note: Review before disposal; some ledgers may merit permanent retention for historical reasons. c) Receipt, disbursement, general, or subsidiary journals. RETENTION: FE + 7 years for school districts; + 5 years for other governments. Retention Note: Review before disposal; some journals may merit permanent retention for historical reasons. 30 d) Journal vouchers and entries or similar posting control forms (including supporting documentation such as correspondence and auditor adjustments that evidence journal entries and amendments). RETENTION: FE + 7 years for school districts; + 5 years for other governments. Retention Note: If bill stubs (see item number 1025 -27) are used as entry documentation for account journals, they must be retained by all local governments other than school districts for FE + 5 years rather than the FE + 3 year retention period for accounts receivable records. e) Perpetual care fund registers of municipally -owned cemeteries. RETENTION: PERMANENT. [By law - Health and Safety Code, Section 713.005(a).] 1025 -31 Transaction Summaries - Periodic summaries or reports of accounting transactions or activity by department, budget code, program, account, fund, or type of activity, including trial balances, unless the summary is of a type noted elsewhere in this part. a) Daily. RETENTION: 30 days. (Exempt from destruction request requirement) b) Weekly. RETENTION: 90 days. (Exempt from destruction request requirement) c) Monthly, bimonthly, quarterly, or semiannual RETENTION: 2 years. d) Annual. RETENTION: FE + 7 years for school districts; + 3 years for other governments. Retention Note: If an annual trial balance is not maintained, then the least frequent sub - yearly trial balance must be retained for FE + 7 years by school districts and FE + 3 years by all other local governments. 1025 -32 Unclaimed Property Documentation - Any form of record sufficient to verify information on unclaimed property previously reported to the State Treasurer showing the name and last known address of the apparent owner of reportable unclaimed property, a brief description of the property, and the balance of each unclaimed account, if appropriate. RETENTION: Date on which property is reportable + 10 years. [By law - Property Code, Section 74.103(b).] Purchasing Records Retention Notes: RELATIONSHIP WITH ACCOUNTS PAYABLE RECORDS - In a local government in which purchasing and accounts payable records (see item number 1025 -26) are maintained by the same individual or department, duplicate copies of a record need not be created and /or retained to satisfy the retention requirements of this section if the record is used in documenting both the ordering and procurement of and payment for goods and services. In such instances, retention requirements for accounts payable records prevail over those noted in this section. 1075 -01 Bids and Bid Documentation *a) Successful bids and requests for proposals, including invitations to bid, bid bonds and affidavits, bid sheets, and similar supporting documentation. RETENTION: FE of award + 7 years for school districts; + 3 years for other governments. Retention Note: If a formal written contract is the result of a successful bid or request for proposal, the successful bid or request for proposal and its supporting documentation must be retained for the same period as the contract. See item number 1000 -25. 31 b) Unsuccessful bids. RETENTION: 2 years. c) Informal bid records, such a requests for quotations or estimates, for the procurement of goods or services for which state law or local policy does not require the formal letting of bids. RETENTION: 1 year. (Exempt from destruction request requirement) 1075 -02 Inventory Records (Parts and Supplies). RETENTION: 1 year. (Exempt from destruction request requirement) 1075 -03 Purchase Order and Receipt Records a) Purchase orders, requisitions, and receiving reports. RETENTION: FE + 7 years for school districts; + 3 years for other governments. b) Purchasing log, register, or similar record providing a chronological record of purchase orders issued, orders received, and similar data on procurement status. RETENTION: FE + 3 years. c) Packing slips and order acknowledgments. RETENTION: AV. (Exempt from destruction request requirement) d) Vendor and commodity lists. RETENTION: Until superseded. (Exempt from destruction request requirement) 32 -,