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HomeMy WebLinkAboutOrdinance No. 2428-2009the CItyd f KENAI. ALASKA CITY OF KENAI ORDINANCE NO. 2428 -2009 Suggested by: Administration AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AMENDING KMC 7.25.020 TO: 1) BETTER DEFINE HOW BUDGET TRANSFERS IN AMOUNTS OF LESS THAN FIVE THOUSAND DOLLARS ($5,000) ARE ACCOMPLISHED; 2) PROVIDE THAT BUDGETARY CONTROL FOR A CAPITAL PROJECT IS DONE AT THE PROJECT LEVEL RATHER THAN THE OBJECT LEVEL; AND, 3) PROVIDE THAT OBJECT LEVEL BUDGET TRANSFERS IN CAPITAL PROJECTS IN EXCESS OF FIVE THOUSAND DOLLARS ($5,000) OR MORE SHALL BE REPORTED TO THE KENAI CITY COUNCIL ON A MONTHLY BASIS. WHEREAS, KMC 7.25.020(a) provides how budgetary transfers in amounts less than five thousand dollars ($5,000) are accomplished; and, WHEREAS, the term "fund" in KMC 7.25.020(a) should be better described to determine to which funds the transfer limitation apply; and, WHEREAS, historically capital projects have been managed for budgetary purposes on the object level which provides for Council authorization for each part of a project such as separating money allocated for construction from money allocated for engineering; and, WHEREAS, it would provide more flexibility to manage capital projects on the project basis where the Council would authorize the total amount of the project rather than an object basis where the Council authorizes the total amount of the project and the amount allocated for subcategories such as construction and engineering; and, WHEREAS, in a budgetary system where capital projects are managed on a project basis, budget transfers in excess of five thousand dollars ($5,000) should be reported to the Council on a monthly basis so Council is properly informed of the status and management of the capital project. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, that Kenai Municipal Code 7.25.020 is hereby amended as follows: 7.25.020 City budget control. (a) After approval by the Finance Director as to availability of unencumbered balances, transfers in amounts less than five thousand dollars ($5,000.00) may be made in line item accounts within [A FUND] the General Fund, Special Revenue Funds, Debt Service Funds, Enterprise Funds and Internal Service Funds without approval by the City Council. The City Clerk may make such transfers within. the General Fund Department of the City Clerk, and the City Attorney may make such transfers within the General Fund Department of Law. The City Manager may make New Text Underlined [DELETED TEXT BRACKETED] Ordinance No. 2428 -2009 Page 2 of 2 such transfers in all other areas except in the Legislative Department. The budgetary level of control will be the project level for Capital Project Funds. Object level transfers of five thousand dollars ($5,000) or more within a project will be reported to the Council on a monthly basis. (b) The City Council, by resolution, may make transfers in any amounts of unencumbered balances of line item accounts within a Department or within a fund. (c) The City Administrator is directed to charge all disbursements to "cost centers" established by the budget. A "cost center" is defined as a provision for expenditure specified by the budget of the City of Kenai for a department or activity specifically so recognized. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 19th day of August, 2009. ATTEST: Carol L. Freas, City Clerk Approved by Finance: 7< G�G� PAT PORTER, MAYOR New Text Underlined' !DELETED TEXT BRACKETED Introduced: August 5, 2009 Second Reading: August 19, 2009 Third Reading: September 2, 2009 Effective: October 2, 2009 the ctf o i e KENAI, ALASKA To: Rick Koch, City Manager /5: From: Terry Eubank, Finance Director Date: August 26, 2009 Re: Ordinance 2428 -2009 "Village with a Past, y with a Future" FINANCE DEPARTMENT 210 Fidalgo Avenue, Kenai, Alaska 99611 -7794 Telephone: 907 283 -7535 ext 221 FAX: 907 283 -3014 Background Kenai Municipal Code (KMC) 7.25.020 governs amendments to the City's budget. Currently all budget adjustments, irrespective of the fund type, greater than $5,000 require approval by the City Council via resolution. Budget adjustments that increase overall expenditures are accomplished via ordinance. Goal The administration's goal in amending KMC 7.25.020 is to enhance the finance department's ability to provide cost analysis on capital projects, maintain the financial controls of KMC 7.25.020 and avoid project delays as a result of line item budget deficiencies. A typical construction project will utilize three accounts; project administration, design/engineering, and construction. Line item budget deficiencies occur when excess funds remain in one of the three project accounts and one or both of the other accounts have insufficient funds for the project's expenditures. Overall the project may have adequate funding but within individual line items there are budget deficiencies. Current Practice Currently capital projects are being appropriated utilizing only the construction line item. All costs whether for administrative expenditures, design /engineering services, or actual construction services are charged to the construction account. This practices eliminates the need for budget revisions but financial reports generated by the City's accounting system do not breakdown the project's expenditures by category for project managers. Proposed Change The amendment to KMC 7.25.020 will leave unchanged the limitation on the City Manager to amend budgets by up to $5,000 in all fund types except capital project funds. This is accomplished by replacing "a fund" with "the General Fund, Special Revenue Funds, Debt Service Funds, Enterprise Funds and Internal Service Funds" in 7.25.020 (a). The clarifier "General Fund" was also added to the Departments of Law and the City Clerk. The remainder of the changes to 7.25.020 (a) were added to change the budgetary level of control in construction projects from a line item level (administration, design /engineering, or construction) to a project level (all line item accounts in total). Remaining Financial Controls As previously stated, one of the goals is to assure financial controls are not eliminated by the proposed changes. Currently the City Council must approve any contract or change order that exceed or will exceed $15,000 as a result of the change order. This process will remain unchanged. Currently budget revisions are not being performed because the entire budget is in one account. With this change project budgets will be created using accounts for the different categories and any amendments greater than $5,000 will be reported to the council in the next available council packet actually enhancing council reporting. The Council will retain the sole authority to increase the overall funding to individual projects. Conclusion The changes proposed by Ordinance 2428 -2009 will enhance the financial reports produced for projects, it will enhance reporting of changes in project costs, it will maintain the Council's authority to approve contract and change orders, it will maintain the Council's authority to control project costs at the total project level, and will avoid potential delays in projects caused by individual line item deficiencies.