Finance Policy (Town of Cary)

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Prepared by: Karen Mills, Finance Director
Adopted by Council: 4/21/2015
Effective: 4/21/2015
Supersedes: 6/12/2008 

I. Objectives

A.   To align the Town of Cary’s (“The Town’s”) long-term financial planning with short-term daily operations

B.   To maintain the Town’s stable financial position

C.   To ensure that Council’s adopted policies are implemented in an efficient, effective and cost conscious manner, while continuing to ensure compliance with contractual and statutory requirements.

D.   To protect the Town from emergency fiscal crisis by ensuring the continuance of service even in the event of an unforeseen occurrence

E.   To secure the highest possible credit and bond ratings by meeting or exceeding the requirements of bond rating agencies through sound, conservative financial decision making 

II. Operating Budget 

It is the Town’s policy that the operating budget be prepared in accordance with Generally Accepted Accounting Principles and according to the standards necessary to achieve the GFOA Distinguished Budget Presentation Award.  To receive the award, the Town must publish a comprehensive and professionally prepared budget report that serves as a policy document, an operations guide, a financial plan, and a communications tool.

A.   Revenue Policy 

The Town seeks to implement a diversified taxing policy that will ensure reasonable stability for operation at continuous service levels, but that will provide elasticity necessary for responding quickly to increased service demands due to new development.  Revenue management includes within its focus, an ongoing process for reviewing and analyzing each revenue source to ensure that proceeds from each source are at an optimum level.  Every attempt will be made to project revenues within 5% of final actual results, and the projections will be based on historical trends, growth patterns, and the economy.  To meet these objectives the Town observes the following guidelines:

1. Ad Valorem Tax 

As provided by the North Carolina Local Budget and Fiscal Control Act, estimated revenue from the Ad Valorem Tax levy will be budgeted as follows: 

a. Assessed valuation will be estimated based on historical trends, growth patterns, and anticipated construction.
b. The estimated percentage of collection will not exceed the percentage of the levy actually realized in cash as of June 30 during the preceding fiscal year, in accordance with state law.

c.    The tax rate will be set each year based on the cost of providing general governmental services and paying debt service.  Consideration will be given to future net revenue requirements for capital improvement project operational expenditure impacts and programmed debt service.

 2. User Fees 

The Town sets fees that will maximize user charges in lieu of Ad Valorem Taxes for services that can be individually identified and where the costs are directly related to the level of service.  This objective is in keeping with the Council’s goal that growth should pay for itself, and not place a burden on current residents who do not use the service.  Emphasis of user charges over Ad Valorem Taxes results in the following benefits: 

a.   User charges are paid by all users, including those exempt from property taxes.

b.   User charges avoid subsidization in instances where the service is not being provided to the general public.

c.   User charges are a means of rationing the provision of certain services.

d.   User charges for certain services can be justified on the basis of equity and efficiency, by producing information on the demand level for services and by helping to make the connection between the amount paid and the service received. 

3. Grant Funding 

Grant funding may be used for a variety of purposes including 1) current Town operations, 2) a departmental long-range plan, 3) a capital project identified in the Capital Improvement Budget/Plan, 4) regulatory requirements, or 5) opportunities to address the mission and goals of the Town.  Staff will pursue opportunities for grant funding. Application will be made after a grant is evaluated for consistency with Council goals and compatibility with Town programs and objectives. All grants pursued by the staff of the Town of Cary will be presented to Council for consideration before application is made. Any deviation from this policy must be granted by Finance and Administration/Budget. Any awarded funds will be accepted only after Council review and action.

4. Utility rates 

Utility rates will be reviewed annually considering net revenue requirements, realistic sales forecasts, contractual obligations including bond covenants, and utility conservation goals. Revenue requirements may include funds programmed for rate stabilization, utility capital projects, and reimbursement of indirect costs to the General Fund. Rates will be structured to meet conservation program goals with consideration for customer acceptance and reasonable efficiency in utility billing and collection administration.

5. Other Revenue 

All other revenue will be programmed through the annual budget process to meet Town Council’s goals and objectives.

B.   Expenditure Policy 

1.  Budget Management: 

Expenditure budgets are reviewed by staff, the Town Manager, and Town Council prior to adoption and are continually monitored throughout the budget year.  Budgeted funds will only be spent for categorical purposes for which they were intended.  The annual operating budget ordinance defines staff authorization for operating budget adjustments. No appropriations of the proceeds of a debt instrument will be made except for the purpose for which such debt instrument was issued.   Donations will be spent only toward the intent for which they were given. 

2. Fiscal Management: 

Current operating expenditures will not exceed current operating revenues. 

3. Continuing Contracts: 

For continuing contracts, funds will be appropriated in the annual budget ordinance to meet current year obligations arising under the contract, in accordance with G.S. 160A-17. 

4. Non Profit Funding: 

The Town will review the financial position of nonprofit corporations or organizations receiving funding to determine the entity’s ability to carry out the intended purpose for which Town funding was granted.  For organizations receiving $1,000 or more in any fiscal year, the Town may require the nonprofit to have an audit performed for the fiscal year in which the funds are received and to file a copy of the audit with the Town. 

C.   Interfund Transfers

1. The Town may transfer cash from enterprise funds to general government funds only after operating expenses, capital outlay and debt service obligations of the enterprise have been met. 

2. Interfund transfers are allowed for the allocation of direct or indirect costs of services rendered by one fund to another.  

3. The Town will strive to ensure that the enterprise funds are financially self sufficient. 

III. Capital Improvement Policy

 A.   Capital Improvement Plan  

1. The Town will update and readopt annually an eleven-year capital improvement plan (“CIP”), including the upcoming annual capital improvement budget (“CIB”) and a ten-year projection of capital needs and expenditures which details the estimated cost, description and anticipated funding sources for capital projects.  The plan will include costs that have been estimated including consideration for inflation.  The inflation rate will be determined annually in the budget process and will be disclosed in the capital budget report. 

2. The first year of the eleven year CIP will be the basis of formal fiscal year appropriations during the annual budget process.  If new project needs arise during the year, a budget amendment identifying both the funding sources and project appropriations will be utilized to provide formal budgetary authority for the subject projects.  The Capital Improvement Budget and Plan will generally address those capital assets with a value of more than $25,000 and a useful life of over three (3) years. 

3. The Town will emphasize preventive maintenance as a cost-effective approach to infrastructure maintenance.  Exhausted capital goods will be replaced as necessary. 

4. Restricted revenue sources will be utilized whenever possible before unrestricted sources. 

B.   Capital Formation 

  1. Financing Sources: 

The Town acknowledges pay-as-you-go financing as a significant capital financing source, but will ultimately determine the most appropriate financing structure for each capital project on an individual basis after examining all relevant factors of the project. Fund balances in excess of aforementioned LGC guidelines may be used as a capital source for pay-as-you-go financing.

2. Impact Fees: 

Impact fees will be calculated based on the Capital Improvement Plan.  Impact fee revenues will be used as one of the capital sources for pay-as-you-go financing.

3. Transfers: 

Capital funding provided by transfers from another fund will be programmed to specific capital projects or programs. 

IV. Accounting/Financial Reporting Policy

 Financial Operations and Reporting Policy  

 V.  Cash Management Policy

For operational policy issues (receipts and disbursements), see Financial Operations and Reporting Policy.  Also see Investment Policy

VI. Purchasing and Contracting Policy  

A.   A preaudit certificate, signed by the Finance Director or Deputy Finance Officer, will appear on any contract, agreement, or purchase order before it becomes an obligation of the Town, in accordance with G.S. 159-28(a). 

B.   All purchasing will be in accordance with general statutes.  The purchasing process will be a hybrid system of responsibility shared by the requesting department and the Finance Department. 

C.   No officer or employee of the Town who is charged with: 

            1) preparing plans, specifications, or estimates for public contracts

            2) awarding or administering contracts

            3) inspecting or supervising construction 

 will receive a gift or favor from any contractor, subcontractor, or supplier who 

            1) has a contract with the Town

            2) has performed under such a contract within the past year

            3) anticipates bidding on such a contract in the future. 

Furthermore, the Town will not directly, nor indirectly, enter into a contract for the provision of goods and/or services with any employee(s) of the Town or any businesses in which a Town employee has greater than a ten percent ownership.  If any such contract is entered into, it shall be canceled upon discovery and the delivery of goods and/or services there under shall no longer be accepted.  Any Town employee(s) who knowingly enter into such a contract with the Town shall be subject to disciplinary action as provided for by Town ordinances and/or policies. 

D.   The Town will participate in a program that allows for the opportunity to purchase under state contracts and in cooperative agreements with other governmental units.  

E.   Encumbrances will be recorded as obligations arise for budgetary control. 

F.   The Town’s cost estimates for construction and repair and procurement of goods and services will be confidential prior to bidding and are subject to all of the provisions contained in G.S. 133-33. 

G.   Surplus property will be disposed of in accordance with State Statute.  The Purchasing Agent may declare surplus any item of excess personal property reported to him or her in writing by a department head when both the Purchasing Agent and the department head estimate its value to be less than the amount specified in G.S. 160A-266.  Before final disposition is made, the Purchasing Agent will notify the Town Manager and other departments of the availability of any excess items considered fit for possible re-utilization.  The Purchasing Agent will dispose of the property so as to secure a fair value for the Town and to accomplish the disposal efficiently and economically.  Accordingly: 

1.  Public notices of such disposition are not required.  

2.  The Purchasing Agent may set the value of each item, and convey title to the property.

3.  Disposals may be made by public and private sales and exchanges.  

4.  The Purchasing Agent will submit to the Town Council any reports required by state statute. 

H.         Expenditures of capital outlay funds for the purchase of budget approved equipment, furniture and vehicles will be approved by Finance staff.  Expenditures of capital outlay funds for equipment, furniture and vehicles not included in the budget process must be approved by the Town Manager or Assistant Town Manager. 

I.          The Town prefers a process of open competition in the selection of architectural, engineering, surveying and construction management at risk services for the Town believing it to be in keeping with our Statement of Values and to be in the best interest of the Town for the best overall project.  As authorized by G.S. 143-64.32, all architectural, engineering, and surveying services contracts of the Town will be selected through a competitive process unless otherwise approved by the Town Manager or Assistant Town Manager.  The award of these contracts will be made on the basis of demonstrated competence and qualification of the firm making the proposal and the fee proposed to provide the service required.  The Town exempts all projects where an estimated professional fee is less than $30,000 from the provisions of G.S. 143-64.31 which states that such services should be negotiated with the best qualified firm.  For each project where the estimated professional fee is equal to or greater than $30,000 the Town Manager or Assistant Town Manager will consider making the exemption from G.S. 143-64.31, in writing, stating the reasons and circumstances for the exemption. 

J.         Contracts authorized by Council, either through direct award or budget authorization may be executed by the Town Manager.  Subsequent orders changing the original contract which do not exceed the approved cost of the contract will be executed by the Town Manager or the Assistant Town Manager. 

K.         The Town will make a good faith effort to solicit minority business participation in accordance with G.S. 143-128.  The Town’s adopted minority participation goal for building construction or repair projects in the formal and informal range, and in the selection of architects, engineers, surveyors, and construction management at risk service providers is ten percent (10%). 

L.         Inventory will be maintained at a level which ensures that essential items are immediately available and that non-essential items are available immediately or within a timely basis. Inventories and supplies will be maintained at minimally appropriate levels for operations to increase cash availability for investment purposes. Inventory levels will be audited through physical counts at least once per year. 

VII. Utility Billing and Collections 

A.   Provisions for Utility Service 

            1.  Service Requests 

a. All customers will be charged a service charge on their initial utility bill for each metered service initiation. The charge is established in the annual operating budget of the Town. 

b. If service initiation requires more than two site visits by Town personnel an additional service charge will be applied for each visit thereafter. 

c. If a customer requests service after hours an additional after-hours service charge will be applied for each visit  

2.  Customer Deposits  

a. Customer Deposits:  Any occupant requesting utility service will be required to do one of the following for each separate meter: 

1. Pay an initial deposit based on the size of the meter.

2. Have satisfactory credit with the Town or provide one satisfactory letter of credit from any utility company.*

* Satisfactory credit means no returned checks, no disconnection(s) for nonpayment and no more than three late payments for the most recent 12 month period. 

1. 5/8 inch meter........................................................$60

2. 1 inch meter...........................................................$100

3. 1.5 inch meter........................................................$150

4. 2 inch meter...........................................................$200

5. 3 inch meter...........................................................$300

6. 4 inch meter...........................................................$400

7. 6 inch meter...........................................................$600 

b. Any customer without a deposit on file whose water service has been disconnected for nonpayment twice within the most recent twelve month period will be billed a deposit as specified in the above paragraphs. In addition any customer who is transferring services within the Town who has not maintained satisfactory credit will be billed a deposit.

c. Deposits will be refunded under the following conditions: 

1. After the first consecutive twelve months of satisfactory credit for utility service with the Town upon customer request.

2. At the option of the Town, deposits may be credited against the customer’s utility account.

3. Upon customer request for termination of service, less an amount equal to any unpaid balance.

4. Interest will not be paid on deposits. 

            3.  Customer Billing  

a. All customers will be charged monthly for base charges per utility for the availability of service and administrative costs.  In addition, volume charges for utility services based on per 1,000 gallons metered service consumption will be billed based on water and sewer rates established in the annual operating budget of the Town.  Rates for customers outside the Town limits are higher than rates for customers inside the Town limits based on a multiplier established in the annual operating budget. 

b. Customers are billed in one of four monthly billing cycles.  Routinely, due dates are calculated to be 25 days from the billing date, however, due dates may be established for as few as 20 days at the discretion of the Finance Director. 

c. Partial payments are applied in the following priority order: 

1. Billed Deposits

2. Miscellaneous charges

3.  Solid Waste

4. Sewer

5. Water 

 d. Full payment must be received by the due date or service is subject to disconnection for nonpayment. 

e. Delinquency notices will be mailed after the due date.  All customers are granted an exemption from a late payment penalty once every calendar year.  The one annual exemption will not appear on a customer’s bill; therefore any late payment penalties billed must be paid by the customer. 

f. Delinquency notices will include the scheduled date for disconnection of services for nonpayment which shall not be less than 10 days past the due date. 

g. Customers whose service is disconnected for nonpayment will have a door hanger placed at their service address at the time of disconnection noting the reason for disconnection and instructions for obtaining reconnection. 

h. Customers whose service is reconnected after working hours must pay all amounts due by 12:00 noon the following day or service will be disconnected again. 

4. Temporary Termination of Utility Service 

a. Solid Waste:  Customers may request one month minimum temporary termination of solid waste services by calling the Finance Department.  During the temporary termination of service period, solid waste monthly charges will be reduced 50% of the monthly solid waste fees established by the annual operating budget of the Town. Unoccupied dwellings that are for sale will not be charged for solid waste pickup. 

b. Water and Sewer:  Customers will continue to receive water and sewer services based on usage. 

c. Billing consideration:  Customers may request an alternate billing address for temporary periods, and the customer must call to reinstate the service address as the mailing address. 

5. Termination of Service 

Any person requesting disconnection of service will be required to provide a forwarding address. 

6. Involuntary Disconnection of Service 

a. The Town may disconnect water service for one or more of the following reasons: 

1. Failure of the customer to pay billings for utility service as required in the Billing Information Section of this policy.

2. Failure of the customer to pay deposits as required in the Customer Deposits Section of this policy.

3. Discovery of meter tampering, including by-passing the meter or altering the function thereof. 

4. Failure of the customer to permit town employees access to their meter at all reasonable hours.  Locked gates, loose dogs, parked cars over meters, plants and shrubbery etc., are violations of Town policy. 

b. Customers whose service is scheduled for disconnection for nonpayment will be charged a nonpayment fee. A higher fee is charged for service restoration during non working hours as established in the annual operating budget of the Town.  Regular working hours are 8:00 AM to 5:00 PM, Monday through Friday, excluding holidays. 

c. When it becomes necessary for the Town to disconnect services for any of the reasons listed above, service will be restored only after payment of: 

1. All delinquent balances due the Town including additional fees and charges required by this policy.

2. Any material and labor cost incurred by the Town not already included in any additional charges.  Service may be restored after working hours, prior to the payment of charges. However, all amounts must be paid by 12:00 noon the following day or service will be disconnected again.  

d. Restoration of service after disconnection for nonpayment by anyone other than an authorized Town employee will result in a fine up to $1000. 

7. Customer’s Rights Prior to Disconnection of Service 

a. It is the policy of the Town to disconnect water service to customers for reason of nonpayment only after a reasonable opportunity to be heard when the accuracy of the bill is questioned.  Reasonable opportunity is defined as the period of time from the issuance of the bill until the due date.  

b. If a customer disputes the accuracy of his water and/or sewer charges, he has the right to discuss his complaints and contentions with the Finance Director or designee.  Services will not be disconnected for nonpayment of the bill in question until 10 days after the Finance Director or designee declares the bill to be accurate and has notified the customer.  The customer has the right to appeal to the Utility Board of Adjustment.  Services will not be disconnected for nonpayment of charges appealed to the Utility Board of Adjustment until 10 days after a decision by the Utility Board of Adjustment to uphold full or partial charges. 

8. Extensions 

a. All payment due date extensions, “payment agreements”, must be arranged through the Finance Department. For any agreement requiring more than one delayed or installment payment, a written confirmation will be mailed to the customer. This confirmation will include charges covered, required payment amounts and due dates. 

b. Default on the payments required by the agreement will result in disconnection of service for nonpayment. 

9. Meter Testing 

a. If a customer disputes the accuracy of his bill he may request a meter test.  The test will be performed by the Town in accordance with the American Water Works Association standards.  If the meter functions properly when tested, the customer will be required to pay a meter test fee which is established in the annual operating budget of the Town.  If the meter fails to register within the American Water Works Association standards there will be no meter test fee charged to the customer. 

10. Returned checks/Drafts 

a. All checks returned for uncollected or insufficient funds will be presented to the customer’s bank twice before contacting the customer for replacement.  Bank drafts will be presented only once.  The customer will be notified of a returned check or bank draft by telephone, door hanger or letter.  Staff may require that returned check or draft be replaced with cash, money order or certified check.  The customer’s account will be charged the state maximum allowable returned check fee.  If the customer does not replace the check or draft and pay all applicable charges, service is subject to disconnection for nonpayment. 

b. After three returned checks or drafts within a consecutive twelve month period, the customer will be classified as a “Cash Only” customer.  

11. Permanent Due Date Extension 

a. In instances of severe customer hardship, the Finance Director or designee may approve a permanent due date extension. 

B. Adjustments of Utility Bills  

  1. Scope: 

Except in extenuating circumstances, no consideration will be given to usage not questioned within six months of billing.  Usage charges questioned within six months of billing may be eligible for adjustments to water and/or sewer charges in the following situations: 

a.   Meter malfunction proven by testing in accordance with the American Water Works Association standards.

b.   Documented leaks.  Documentation may consist of a plumber’s bill, recent receipts for plumbing repair parts or Town staff verification of leak.  For leaks outside the sewer system, sewer charges for usage over the customer’s average may be removed.  Charges for water usage over the customer’s average may be adjusted to the Town’s lowest retail service rate.  Adjustments for a single leak incident are limited to charges resulting from the leak for over no more than six months.

c.   Inadvertent use beyond the customer’s control, subject to approval of the Finance Director or designee.  For inadvertent use outside the sewer system, sewer charges for usage over the customer’s average may be removed.  Charges for inadvertent water use beyond the customer’s control over the customer’s average may be adjusted to the Town’s lowest retail service rate.

d.   Crossed service connections.

e.   “Muddy” water due to construction, line freezes, etc., requiring extensive flushing.

f.    Billing errors. 

g.   Individual circumstances determined by the Utility Board of Adjustment to ensure customer equity and fair treatment.

h.   Adjustments for sewer charges and water penalty rate charges may be allowed one time per calendar year for filling pools and for filling pools following pool repair if the pool will be drained in accordance with State of North Carolina environmental regulations.  

2. Methodology: 

Adjustments based on average consumption will be made as follows:  

a. For customers with over two years’ billing history, a three month seasonal average consumption will be calculated using the same and surrounding two months for the past two years and the most recent month of the same year.  For example, to compute a seasonal average for usage in November X3, usage in October X3, October, November and December of X2, and usage in October, November and December in X1 would be averaged.  For customers with less than two years of billing history, the entire account history will be used to calculate the monthly average. 

3. Adjustments for crossed service connections, when discovered, will be made as follows: 

a. The affected customers’ utility billing histories will be netted for the past two years or all of the customer history, whichever is less. 

b. Credit will be applied to accounts, as appropriate, when overcharges are discovered.  No adjustment will be made when undercharges are found.  

4.  Construction, line freezes, or similar circumstances may cause a customer’s water to become “muddy.”  This is normally solved by having the customer flush his lines.  Water and sewer credit for up to 5,000 gallons may be posted upon the approval of the Finance Director or designee.  For any request for adjustment greater than 5,000 gallons, bill adjustments may be made with the approval of the Town in advance of the flushing with actual meter readings prior to and after line flushing. Credit for water and sewer used during line flushing will be applied to the customer’s account. No adjustment will be made for “muddy” water conditions caused by problems on the customer’s side of the line.  

5. Adjustment for utility billing errors will be made when overcharges are discovered.  There will be no adjustments for undercharges, which will be recovered, in subsequent routine billings.  Billing omissions will be billed retroactively when service use and/or availability can be determined and quantified.  Payment plans will be offered to customers with retroactive billings.  All adjustments for billing must be approved by the Finance Director or designee.  

C. Collection of Final Utility Bills and all Other Invoiced Charges 

1. If a customer’s charges are 60 days past due, the Finance Department will notify the issuing department of the need to suspend all related services.  Service may be resumed once the outstanding balance is paid in full.  With the approval of the Town Manager or Assistant Town Manager, additional unrelated Town services may be suspended for the past due customer. 

2. All accounts with delinquent balances for a period of time greater than 90 days may be reported to a national credit bureau. 

3. An allowance for uncorrectable accounts will be maintained and adjusted periodically for accounts greater than 120 days past due.  Charges deemed uncorrectable after 180 days past due will be forwarded to the Finance Director or designee for approval of write off. 

4. A history of charges for unpaid final utility bills that have been written off will be maintained for at least three fiscal years after the write off.  If a customer requests Town utility service in the future, all unpaid charges (including amounts written off) must be paid before service will be reinstated.  A deposit must also be paid prior to reinstatement.  Outside credit references will not be accepted in lieu of a deposit for these accounts. 

X. Maintenance of Fiscal Policy 

A.   The Town of Cary Financial Policy will be updated and submitted for Council approval at least biennially.  

B.   All policy statements contained in this document supersede any existing or former financial Town financial policies. 

XI. References

Other financially related Town Policies include:

Parks and Recreation Fees and Charges Policy (Town Policy #25)

Annexations (Voluntary): Rural Fire Department Debt Service (Town Policy #43)

Town Participation in Traffic Signalization Costs (Town Policy #47)

Parks and Recreation Refund Policy (Town Policy #54)

Police Department Fee Policy (Town Policy #55)

Transportation Development Fees Credit Certificate, Implementation of (Town Policy #64A)

Recreation Payment in Lieu for Parks and Greenways (Town Policy #65)

Special Assessment Charges Policy (Town Policy #69) 

Procedures for Using Town Funds for Reservoir Watershed Protection Impoundment Maintenance (Town Policy #106)

Employee Computer Purchase Policy (#114)

Financial Operations & Reporting Policy (#159) 

Investment Policy (#160) 

Internal Audit Policy (#161)

General Fund – Fund Balance Policy (#175) 

Debt Management Policy (#176)