Agenda - Council - 08/08/1989 - Closed Executive Session and Regular Meeting

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City Council and Residents May 23, 1989 3. Purchase Order System The City has a purchase order system which is used on cer- tain large purchases. We believe this system should be expanded to cover all purchases with a few specific exclu- sions. This will provide additional budget controls, inter- nal controls, documentation of authorizations, and consistent usage of this valuable procedure. Purchase orders can be used to increase budget control because they provide a means of identifying the portion of the budget that is currently encumbered (i.e., obligated by purchase order and therefore unavailable for future spending). To streamline the purchasing process, admin- istration could be authorized to approve purchase orders for items within the Council-approved annual budget (except for expenditures covered by contract and bid laws). Any pro- posed deviations from the budget would require additional approval by the Council. Purchase order forms can also provide an authorization trail. Completed forms would indicate the parties ini- tiating and approving the transaction. Copies of the orders would be used by receiving and accounting departments to verify that quantities and prices of items received and invoiced are in accordance with authorized amounts. Finally, purchase orders can be used to improve cash manage- ment. A periodic review of open purchase orders can help the Finance Office project cash availability requirements. Inadequate Collateral Under Minnesota State Statutes Section 118, deposits in a financial insti- tution exceeding Federal Deposit Insurance Company (FDIC) coverage must be secured by collateral pledged by the bank to the City. Due to the maturity of investments and a change in personnel, the City's deposits were undercollateralized on a few days during the year. Other than this exception, the City has had a good record of collateral coverage. We encourage continued adherence to tight collateral policies and emphasize the need to monitor coverage throughout the year. ~eposits Payable It is the City's policy to collect a deposit for all water meters issued. These deposits are then booked as a liability which offsets the meter inventory. Given the growth of the City, it has become very difficult to account for the meters and deposits. Often, when a home is sold, the meter is not returned for the deposit, so the City is unsure as to whom the deposit is "owed." We recommend that the City pass a resolution declaring that all deposits are non-refundable fees charged for the use of