Clerks What You Can and Cannot Do: An introduction to legal compliance for cities

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1 Clerks What You Can and Cannot Do: An introduction to legal compliance for cities League of Minnesota Cities 2018 Clerks Orientation Conference June 21, 2018 Saint Cloud, Minnesota David Kenney Assistant Legal Counsel Office of the This outline is an educational resource. This outline is not legal advice and should not be relied upon in lieu of legal advice. The contents of this outline may be changed at any time.

2 Minutes The clerk shall keep: (1) a minute book, noting therein all proceedings of the council; (2) an ordinance book to record at length all ordinances passed by the council , subd. 1 (statutory cities). Copyright: 2018 Office of the

3 Minutes Open Meeting Law Minn. Stat. 13D.01, subd. 4: The votes of the members... must be recorded in a journal kept for that purpose... The vote of each member must be recorded on each appropriation of money, except for payments of judgments, claims, and amounts fixed by statute.

4 Minutes Open Meeting Law The journal must be open to the public during all normal business hours where records of the public body are kept. Minn. Stat. 13D.01, Subd. 5

5 Minutes Additional Information...there may be circumstances in which it would be advisable for the [governing] board to provide for the minutes to include information over and above what is necessary to satisfy minimum statutory requirements for a record of its official actions. Op. Atty. Gen. 851-C, March 5, 1992

6 Minutes Additional Information What about an unruly meeting heated discussions, insults, accusations, slander? The governing board decides. Op. Atty. Gen. 851-C, March 5, 1992

7 Minutes -- Recommendation Recommended Practice Minutes should be signed by the clerk once prepared. Minutes should then be signed by a designated member of the city council once adopted.

8 Destruction of Records Cities must make and preserve all records necessary for a full and accurate knowledge of their official activities. The chief administrative officer is responsible for the preservation and care of the agency s government records, which include all written or printed books, papers, letters, contracts, documents, maps, plans, computer-based data, and other records made or received pursuant to law or in connection with the transaction of public business. Minn. Stat

9 Destruction of Records Any person who intentionally and unlawfully removes, mutilates, destroys, conceals, alters, defaces or obliterates a public record is guilty of a misdemeanor. Minn. Stat

10 Destruction of Records -- Options 1. A city council may adopt the General Records Retention Schedule

11 Destruction of Records -- Options 2. A city council may adopt its own records retention schedule. Forms are on the Minnesota State Archives website:

12 Destruction of Records -- Options 3. A city may ask the State Records Disposition Panel for permission to destroy data [Application for the Disposal of Records (Form PR-1)]

13 Destruction of Records For more information, contact: Minnesota Historical Society State Archives Department Library and Archives Division 345 West Kellogg Boulevard St. Paul, Minnesota (651)

14 Uniform Municipal Contracting Law Minn. Stat Contract: an agreement... for the sale or purchase of supplies, materials, equipment or the rental thereof, or the construction, alteration, repair or maintenance of real or personal property.

15 Uniform Municipal Contracting Law The procedures to follow depend on the estimated amount of the contract. Contracts estimated to have a value over $100,000 must be made by sealed bids, solicited by public notice, and awarded to the lowest responsible bidder. Minn. Stat This will change to contracts over $175,000 on August 1, 2018

16 Uniform Municipal Contracting Law The requirement that the successful bidder be responsible protects cities from having to choose unqualified or unscrupulous low bidders. It allows a city council to consider factors such as the bidder s financial responsibility, integrity, skill and ability, and the likelihood that the bidder will do satisfactory work. A city can even include evaluation criteria for responsible bidders in the bid specifications.

17 Uniform Municipal Contracting Law Contracts estimated to be worth more than $25,000, up to $100,000, can be made either by sealed bids or by direct negotiation based on quotations. (This will change to contracts between $25,000 and $175,000 on August 1, 2018) Two or more quotes must be obtained if possible, and the quotations must be kept on file for at least one year.

18 Uniform Municipal Contracting Law Contracts with estimated values of $25,000 or less may be made either upon quotation or in the open market. If quotations are used, at least two quotations must be obtained if practicable, and the quotations must be kept on file for at least one year.

19 Contracting Best Value RFP For construction, building alteration, improvement or repair [and maintenance] contracts. Focus is on the contractor

20 Contracting Reverse Auction Purchases Electronic purchasing process. Open, interactive environment. Vendors compete to provide supplies, materials and equipment (not services) at the lowest price.

21 Contracting Electronic Sales Electronic selling process. Open, interactive environment. Purchasers compete to purchase supplies, materials and equipment (not services) at the highest purchase price.

22 Contracting Cooperative Purchasing Venture This is the state contract. A members-only joint powers program. Operated by the Minnesota Department of Administration.

23 Contracting Cooperative Purchasing Venture (CPV) For a contract estimated to exceed $25,000, a municipality must consider the availability, price and quality of supplies, materials, or equipment available through the state's cooperative purchasing venture before purchasing through another source.

24 Contracting National Purchasing Alliance or Cooperative If the CPV is not used, municipalities may purchase supplies, materials or equipment (without bidding), through a national municipal association s purchasing alliance or cooperative.

25 Performance and Payment Bonds -- Minn. Stat Contracts over $100,000 for the performance of public work. The performance bond benefits the city by ensuring that the work is completed according to the terms of the contract. The payment bond benefits subcontractors and people who provide labor and materials, by seeing that their claims for labor and materials are paid.

26 Responsible Contractor Minn. Stat. 16C.285 (Effective January 1, 2015) Contractor must submit a signed statement under oath verifying compliance with each of the minimum criteria for a responsible contractor (among other requirements). Cities must give notice of requirements in bid solicitation. The League of Minnesota Cities has a sample notice available online: Competitive Bidding Requirements in Cities, (PDF document, p. 38.)

27 Responsible Contractor Applies to a construction contract: (1) expected to exceed $50,000 and (2) that is awarded pursuant to the lowest responsible bidder selection method or a best value selection method. Formal bidding is generally required at $100,000. Minn. Stat ($175,000 starting August 1, 2018) Remember this Law will apply to contracts between $50,000 and $100,000 (and $175,000 after August 1, 2018) if awarded based on formal bidding or best value

28 Claims and Disbursements Checks must be signed by the mayor, clerk and treasurer. Minn. Stat , subds. 1, 3. The city council controls the city s finances. So, city departments should not have their own checking accounts this includes city fire departments.

29 Claims and Disbursements Claims must be itemized if possible. Minn. Stat , subd. 2. (except wages paid on an hourly or daily basis.) For statutory cities the claimant must sign a declaration that the claim is correct and no part of it has been paid. This declaration may be printed on the back of the check (for endorsement). Copyright: 2018 Office of the

30 Claims and Disbursements Note for charter cities general declaration requirement in Minn. Stat has been deleted by 2017 legislature. Copyright: 2018 Office of the Minnesota

31 Claims and Disbursements Claims for reimbursements must be itemized! Question: What if the Police Chief returns from a trip and asks for $1,000 to cover expenses?

32 Claims and Disbursements Answer: Itemized receipts must support the claim and the actual amount should be reimbursed not an unsupported lump sum.

33 Claims and Disbursements Delegation Minn. Stat , subd. 8. A city council may delegate its authority to pay certain claims made against the city to a city administrative official. The city council must have internal accounting and administrative control procedures to ensure the proper disbursement of public funds. The procedures shall include regular and frequent review of the city administrative officials' actions by the council.

34 Claims and Disbursements Delegation Minn. Stat , subd. 8. A list of all claims paid shall be presented to the council for informational purposes only at the next regularly scheduled meeting. A city council that delegates must adopt a resolution authorizing a specified city administrative official to pay the claims that meet the standards and procedures established by the council. A city that does not prepare annual audited financial statements may not delegate.

35 Claims and Disbursements Immediate Payment Immediate Payment of Claims Minn. Stat , subd. 4. To avoid loss of discount privilege, etc. Payment may be made on an itemized claim if it has been endorsed by a majority of all members of the council. Claim must be acted upon formally at the next council meeting.

36 Imprest Funds (Petty Cash) Imprest Funds Minn. Stat , subd. 5. Established by the city council; and the council shall appoint a custodian. At the next city council meeting after disbursements are made, the custodian presents an itemized claim for all of the disbursements. The city council acts on the claim like any other claim. An order is issued to the custodian for the amount allowed; and the custodian uses this money to replenish the fund. If the council fails to approve the claim in full for any sufficient reason, the custodian shall be personally responsible for the difference. No claim for salary or personal expenses of an officer or employee may be paid from such funds.

37 Claims and Disbursements -- Electronic Funds Transfer (EFT) Statutory cities can pay claims and obligations using all forms of electronic or wire funds transfer. Minn. Stat Charter cities are also authorized to pay claims using EFT under Minn. Stat provided an ETF policy addressing delegation, confirmation and authorization is adopted as required by this statute.

38 Credit Cards May be used only for public purchases. Credit cards may only be used by employees and officers otherwise authorized to make purchases for the city. If the city council does not authorize the credit card purchase, the officer or employee becomes personally liable.

39 Credit Cards Purchases made with the credit card must be consistent with other state law. For example, under Minnesota law, claims presented for payment must be itemized in writing. Q: Does the credit card bill, alone, itemize a vendor s claim?

40 Credit Cards The statutes governing the issuance of debt are restrictive. The credit card statutes authorize a method of payment, not a new form of debt. The city council should pay off the credit card charges on a monthly basis.

41 Credit Cards Before implementing the use of credit cards, a city should: adopt a comprehensive credit card policy that implements statutory requirements, and A good management practices and minimum internal control procedures.

42 Credit Cards Credit Card Policy Recommendations: Identify the employees and officers authorized to make purchases for the city who will be eligible to use the card; Identify the particular purchases allowed to be made with the credit card; Set up a review process for all purchases made with the credit card; Prohibit the use of the credit card for personal purchases; and Require supporting documentation for all purchases made with the credit card.

43 Conflicts of Interest Generally a public officer authorized to take part... in making any sale, lease, or contract in official capacity shall not voluntarily have a personal financial interest in [it] or personally benefit financially therefrom. Minn. Stat

44 Conflicts of Interest Special situations: City officer employed by a vendor. Is compensation linked to the city contract? Spouses and family members. Financial benefit to the city officer?

45 Conflicts of Interest -- Exceptions There are a number of exceptions to this prohibition the most important of which is contracts that do not need to be bid. See Minn. Stat , Subd. 5 This includes: all professional contracts, and contracts under the $100,000 bid threshold for purchases of equipment and supplies and for construction and maintenance of real and personal property.

46 Conflicts of Interest Procedures to know and follow To take advantage of this (Minn. Stat , subd. 5) exception, the council must adopt a resolution authorizing the contract in advance setting out the essential facts and determining that the contract price is as low as or lower than the price at which the commodity or service could be obtained elsewhere, and the interested officer must file with the clerk of the governing body an affidavit stating: (1) the name of the officer and office held; (2) an itemization of the commodity or services furnished; (3) the contract price; (4) the reasonable value; (5) the interest of the officer in the contract; (6) that to the best of his/her knowledge and belief the contract price was as low or lower than the price at which the commodities or services could have been obtained from other sources.

47 Conflicts of Interest One more statute to know Officers can never purchase real or personal property from the city. Employees can if they do so through sealed bids or public auction. The employee must not be involved in the bid or auction process, and city must follow proper notice requirements (at least one week published notice). Minn. Stat Note: There are separate statutory provisions concerning conflicts of interest for EDAs and HRAs.

48 Public Deposits The city s depository must be a a savings association, commercial bank, trust company, credit union, or industrial loan and thrift company. Minn. Stat. 118A.01, subd. 3.

49 Public Deposits Must be covered by: Federal deposit insurance (FDIC/ NCUA). A corporate surety bond, Pledged collateral

50 Public Deposits FDIC coverage based on official custodian who must have control over city funds Control includes possession, ability to open bank accounts, deposit funds and disburse funds If several officers must act together they will be treated as a single official custodian

51 Public Deposits Minn. Stat. Section indicates that the treasurer is to receive and safely keep all moneys belonging to the city. Further the treasurer is to pay out only on order of the mayor and clerk.

52 Public Deposits Under FDIC rules not every signer on check is official custodian Only officers with control over city funds are official custodians

53 Public Investments Investments must meet statutory criteria. See Minn. Stat. ch. 118A; Legal Restrictions on Public Investing, (OSA): blicinvesting_0707_statement.pdf Broker Certification Before completing an initial transaction with a broker, the city must provide annually to the broker a written statement of investment restrictions....

54 Public Investments The broker must acknowledge annually receipt of the statement of investment restrictions in writing and agree to handle the government entity's account in accordance with these restrictions. A government entity may not enter into a transaction with a broker until the broker has provided this written agreement to the government entity. The form is available online from the Office of the : Copyright: 2018 Office of the Minnesota

55 Thank you! Office of the 525 Park Street, Suite 500 St. Paul, Minnesota, David Kenney (651) Mark F. Kerr (651) This outline is an educational resource. This outline is not legal advice and should not be relied upon in lieu of legal advice. The contents of this outline may be changed at any time.