City & County of San Francisco – Office of the Controller

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CITY & COUNTY OF SAN FRANCISCO – OFFICE OF THE CONTROLLER 2016 Edition

Accounting Policies & Procedures

Ben Rosenfield, Controller

Contact: Jocelyn Quintos, [email protected], 415-554-6609

City & County of San Francisco – Office of the Controller

ACCOUN T IN G POL ICIES & PROCEDURE S

City & County of San Francisco – Office of the Controller ACCOUN T IN G POL ICIES & PROCEDURE S

Contents 1

| OVERVIEW......................................................................................................... 19 1.1 | Purpose of this Document ............................................................................................... 19 1.2 | Roles and Responsibilities .............................................................................................. 19 1.3 | General Principles ........................................................................................................... 21 1.4 | Governing Laws, Rules, and Regulations..................................................................... 22 1.5 | Revisions and Updates ................................................................................................... 22 1.6 | Exceptions to this Policy .................................................................................................. 22 1.7 | Internal Controls .............................................................................................................. 23 1.7.1 | Internal Control Questionnaire ..................................................................................................... 28

2

| BUDGETING & APPROPRIATIONS .................................................................... 35 2.1 | Overview .......................................................................................................................... 35 2.2 | Budgeting*........................................................................................................................ 35 2.3 | Appropriations* ............................................................................................................... 35 2.3.1 | Automatic Appropriations ............................................................................................................. 36 2.3.2 | Supplemental Appropriations....................................................................................................... 36 2.3.3 | “De-Appropriation” of Capital Projects- ................................................................................... 36 2.4 | Cost Allocation* ............................................................................................................... 36 2.5 | Surplus Transfers .............................................................................................................. 36 2.5.1 | Controller’s Office Surplus Transfer Guidelines ........................................................................ 36 2.5.2 | How Departments Request Surplus Transfer .............................................................................. 38 2.5.3 | Controller’s Office Review of Surplus Transfers ........................................................................ 43 2.5.4 | Reporting of Surplus Transfers ..................................................................................................... 43 2.5.5 | Related Administrative Provisions of the Budget Ordinance .................................................. 44 2.5.6 | Surplus Transfers Frequently Asked Questions (FAQs) ............................................................. 46 2.6 | Reserves* .......................................................................................................................... 48 2.6.1 | Release of Reserves ....................................................................................................................... 48 2.7 | Budget Corrections* ........................................................................................................ 48 Page 1

City & County of San Francisco – Office of the Controller

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2.7.1 | Budget Correction vs. Surplus Transfer ....................................................................................... 48 2.8 | Midyear Actions* ............................................................................................................. 48 2.8.1 | Budget Cuts ...................................................................................................................................... 48 2.9 | Reporting* ........................................................................................................................ 48 2.9.1 | Calculation of Fund Balance ......................................................................................................... 48 2.9.2 | Negative Fund Balance ................................................................................................................. 48 3

| CONTRACTS & ENCUMBRANCES...................................................................... 49 3.1 | Overview .......................................................................................................................... 49 3.2 | Contracting Rules & Regulations, Admin. Code Chapter 6* ..................................... 49 3.2.1 | General Contracting Procedures ................................................................................................. 49 3.2.2 | Consultant Contract Requirements Guide ................................................................................... 50 3.2.3 | Formal Construction Contract Requirements Guide .................................................................. 51 3.2.4 | Formal Construction Contract Processing Timeline .................................................................... 52 3.2.5 | Informal Construction Contract Requirements Guide ................................................................ 55 3.2.6 | Informal Construction Contract Processing Timeline .................................................................. 56 3.3 | Contracting Rules & Regulations, Admin. Code Chapter 21*................................... 59 3.3.1 | Scope ................................................................................................................................................ 59 3.3.2 | Definitions ......................................................................................................................................... 60 3.3.3 | Reg. 21.03(a): General Authority of the Purchaser of Supplies: Approval of Purchases62 3.3.4 | Reg. 21.03(e)(3): Dollar Limit for Optional Equipment in Vehicles ........................................ 63 3.3.5 | Reg. 21.03(e)(5): Definition of Specialized Vehicles ............................................................... 64 3.3.6 | Reg. 21.03(j): Information Technology (IT) Purchases .............................................................. 64 3.3.7 | Reg. 21.05(b): Procurement of Professional Services .............................................................. 64 3.3.8 | Reg. 21.06(c): Other Electronic Transactions.............................................................................. 64 3.3.9 | Reg. 21.3(b): Competitive Sealed Bidding: Bid Opening ...................................................... 65 3.3.10 | Reg. 21.3(d): Correction, Withdrawal, or Rejection of Bids; Cancellation of Awards ...... 65 3.3.11 | Reg. 21.3(g): Additional Purchases ............................................................................................. 67 3.3.12 | Reg. 21.3(i): Bid Protests ............................................................................................................... 68 3.3.13 | Reg. 21.5(a): Other Purchases: Commodities & Services Less Than $50,000 ................... 69 3.3.14 | Reg. 21.5(b): Sole Source ............................................................................................................. 70 3.3.15 | Reg. 21.5(c): Perishable Foods ..................................................................................................... 73 3.3.16 | Reg. 21.5(d): Proprietary Articles ............................................................................................... 74 3.3.17 | Reg. 21.5(e): Pilot Project ............................................................................................................. 75 3.3.18 | Reg. 21.6: Multiple Low Offers .................................................................................................... 75 3.4 | Becoming a City Vendor ................................................................................................ 76 3.4.1 | Roles and Responsibilities .............................................................................................................. 78 3.4.2 | Vendor Compliance Status ..........................................................................................................100 3.4.3 | Security and Internal Controls ....................................................................................................107

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3.5 | Technology Marketplace ............................................................................................. 108 3.5.1 | Overview and Contracting Tiers ................................................................................................109 3.5.2 | Hardware, Software and Maintenance ....................................................................................109 3.5.3 | Professional Services ....................................................................................................................114 3.5.4 | Tier 3: Micro-LBE Set Aside .........................................................................................................119 3.5.5 | Exceptions and Restrictions in Using Technology Marketplace .............................................122 3.5.6 | Technology Store Fee...................................................................................................................122 3.6 | Blanket Purchase Order, Purchase Order & Direct Voucher*............................... 125 3.6.1 | Encumbrances*...............................................................................................................................125 3.6.2 | Purchase Orders* .........................................................................................................................126 3.6.3 | Blanket Purchase Order* ............................................................................................................127 3.6.4 | Direct Voucher / Payment without Encumbrance* ...................................................................128 3.7 | Sugar-Sweetened Beverage Funding Ban ................................................................ 129 3.8 | Contracting Frequently Asked Questions (FAQs) ..................................................... 133 4

| EXPENDITURES................................................................................................ 137 4.1 | Overview ........................................................................................................................ 137 4.2 | Invoices ............................................................................................................................ 137 4.2.1 | Forms of Invoicing (Electronic vs. Hard Copy) ..........................................................................137 4.2.2 | Information on Invoices.................................................................................................................138 4.3 | Approval of Invoices ..................................................................................................... 139 4.4 | Payment Considerations ............................................................................................... 141 4.4.1 | Prompt Payment to Vendors........................................................................................................141 4.4.2 | Construction/Contract Payment* ................................................................................................147 4.4.3 | One-Time Payment .......................................................................................................................152 4.4.4 | Advance Payment .........................................................................................................................155 4.4.5 | Late Payment .................................................................................................................................158 4.4.6 | Credit Memorandum ....................................................................................................................158 4.4.7 | Payment Disbursement .................................................................................................................159 4.4.8 | Payment Cancellation...................................................................................................................162 4.5 | Sales & Use Taxes ......................................................................................................... 164 4.5.1 | Definition of Sales Tax and Use Tax .........................................................................................164 4.6 | IRS 1099 Miscellaneous (MISC) Reporting Rules ..................................................... 168 4.6.1 | Requirement of Encumbrances, Vendor Numbers, and Sub-objects ....................................169 4.6.2 | 1099 Reportable Payments ........................................................................................................170 4.6.3 | No 1099 Payments to City Employees .....................................................................................173 4.7 | Payments-Related Frequently Asked Questions....................................................... 174 4.8 | Employee Travel & Business Expenses ....................................................................... 176 4.8.1 | Business Travel Reimbursement Guidelines ...............................................................................176

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4.8.2 | Travel Reimbursement Frequently Asked Questions ...............................................................196 4.8.3 | Non-Travel Expense Reimbursement Guidelines .....................................................................202 4.8.4 | Continuous Monitoring on Employee Reimbursement..............................................................206 4.9 | Payment Mechanisms .................................................................................................... 206 4.9.1 | Revolving Funds .............................................................................................................................206 4.9.2 | Wire Transfers ...............................................................................................................................215 5

| PROCUREMENT CARD (P-CARD) .................................................................... 220 5.1 | Overview ........................................................................................................................ 220 5.1.1 | Program Definitions ......................................................................................................................220 5.1.2 | General Information .....................................................................................................................220 5.1.3 | City Program Administration.......................................................................................................226 5.1.4 | Department Roles and Responsibilities .....................................................................................227 5.2 | Use of the Card ............................................................................................................. 231 5.2.1 | Allowable Purchases.....................................................................................................................231 5.2.2 | Prohibited Purchases ....................................................................................................................232 5.3 | Program Compliance .................................................................................................... 233 5.3.1 | Contact Information ......................................................................................................................235 5.4 | Form Automation ........................................................................................................... 236 5.4.1 | General Guidelines and Internal Controls ...............................................................................236 5.4.2 | To Request a New Card ..............................................................................................................237 5.4.3 | To Modify, Replace, or Cancel a Card .....................................................................................240

6

| INVENTORY..................................................................................................... 241 6.1 | Policy Guidelines ........................................................................................................... 241 6.2 | Accounting Guidelines .................................................................................................. 245

7

| WORK ORDERS* ............................................................................................. 247 7.1 | Overview ........................................................................................................................ 247 7.1.1 | Memorandum of Understanding (MOU)...................................................................................248 7.1.2 | Budget Process (Budget Established through AAO) ................................................................250 7.1.3 | Manual Establishment of Budget and Encumbrance ...............................................................251 7.1.4 | Spending Controls.........................................................................................................................251 7.1.5 | Work Order Billings .....................................................................................................................251 7.1.6 | Work Order Adjustments and Modifications ...........................................................................251 7.1.7 | Work Order Appropriation Carryforward..............................................................................251 7.2 | Procedures for Work Orders ...................................................................................... 252 7.2.1 | Budgeting .......................................................................................................................................252 7.2.2 | Encumbrance ..................................................................................................................................253 7.2.3 | Billing...............................................................................................................................................254

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7.2.4 | Services to Outside Agencies .....................................................................................................255 7.2.5 | Adjustments ....................................................................................................................................256 7.2.6 | Liquidation / Carry forward ......................................................................................................257 8

| RECEIPTS & REVENUE ..................................................................................... 259 8.1 | Receipts ........................................................................................................................... 259 8.1.1 | Grants* ...........................................................................................................................................259 8.1.2 | Cash Receipts.................................................................................................................................259 8.2 | Properly Handling Cash ............................................................................................... 260 8.2.1 | Department Documentation ........................................................................................................260 8.2.2 | Cash Handling Segregation of Duties ......................................................................................262 8.2.3 | Security for Cash Receipts ...........................................................................................................264 8.3 | Properly Recording Revenue ....................................................................................... 277 8.3.1 | Cash Difference / Overage .......................................................................................................278 8.3.2 | Non-Sufficient Funds (NSF) Checks ............................................................................................282 8.3.3 | Interest Revenue* ..........................................................................................................................287 8.3.4 | Chargebacks & Merchant Activity Reconciliation* .................................................................287 8.4 | Cash Handling and Revenue Recording FAQs ......................................................... 288 8.5 | Revenue Transfer* ......................................................................................................... 291 8.5.1 | Definition of Revenue Transfers / Other Allocations ..............................................................292 8.5.2 | Common Revenue Transfers & Other Allocations ....................................................................292 8.5.3 | Review and Approval Path .........................................................................................................293 8.5.4 | Compliance with City Policies, Guidelines, and Regulations .................................................293

9

| INVESTMENTS HELD WITH TRUSTEES* ............................................................ 294 9.1.1 | Fiscal Agents ..................................................................................................................................294

10 | FIXED ASSETS*.............................................................................................. 295 10.1 | Overview of Fixed Assets ......................................................................................... 295 10.1.1 | Authoritative Literature - Generally Accepted Accounting Principles .................................295 10.1.2 | Regulations & Contractual Arrangements ................................................................................295 10.1.3 | Definitions & Thresholds ...............................................................................................................296 10.1.4 | Capital Asset Process Overview ................................................................................................301 10.1.5 | Construction/Development in Progress (CIP) ...........................................................................303 10.1.6 | Intangible Assets ...........................................................................................................................306 10.1.7 | Capital Leases ...............................................................................................................................307 10.1.8 | Contributed Assets ........................................................................................................................308 10.1.9 | Placed In Service ..........................................................................................................................308 10.1.10 | Ownership & Multiple Funding ..............................................................................................308 10.2 | Depreciation ................................................................................................................ 309

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10.2.1 | Straight Line Depreciation Method ...........................................................................................309 10.2.2 | Depreciating an Asset that was not Purchased at the Beginning of a Fiscal Year ...........309 10.2.3 | Amortization of Intangible Assets ..............................................................................................310 10.2.4 | Department’s Monitoring Procedures ........................................................................................310 10.3 | Asset Management ..................................................................................................... 311 10.3.1 | Inventory of Capital Assets .........................................................................................................311 10.3.2 | Disposal of Fixed Assets ..............................................................................................................315 10.3.3 | Transferring Fixed Assets.............................................................................................................317 10.4 | Capital Assets Impairment ........................................................................................ 319 10.5 | Reporting...................................................................................................................... 320 10.5.1 | Government-wide Financial Statements & Accrual Basis Accounting ..................................321 10.5.2 | Governmental Fund Financial Statements & Modified Accrual Basis Accounting .............321 10.6 | Fixed Asset Year-End Process ................................................................................... 321 10.7 | Fixed Assets Frequently Asked Questions .............................................................. 321 10.8 | Elaboration of Key Fixed Assets Terms .................................................................. 325 10.8.1 | Building (Including Improvements or Betterments) ...................................................................325 10.8.2 | Land.................................................................................................................................................326 10.8.3 | Improvements Other than Buildings (i.e., Exhaustible Land Improvements) ........................327 10.8.4 | Maintenance & Repairs Expense ...............................................................................................328 10.9 | Chapter 56 Developer Agreement* ....................................................................... 328 10.9.1 | Overview ........................................................................................................................................328 10.9.2 | Administrative Code – Chapter 56: Developer Agreements ..............................................331 10.9.3 | Developer Impact Fees ................................................................................................................346 10.9.4 | Development Agreement-Related Transactions.......................................................................349 10.9.5 | Development Agreement-Related Donated Capital (Fixed Assets) ....................................349 10.9.6 | Developer Agreement FAQs .......................................................................................................349 11 | 11.1 11.2 11.3

DEBT* ............................................................................................................ 352 | Overview ..................................................................................................................... 352 | Reserves ....................................................................................................................... 352 | General Obligation Fund Reporting ....................................................................... 352

12 | GRANTS & GIFTS*.......................................................................................... 353 12.1 | Definitions..................................................................................................................... 353 12.1.1 | Regulations Affecting Grants & Gifts .......................................................................................354 12.2 | Grants ........................................................................................................................... 355 12.2.1 | Grant Budgeting ...........................................................................................................................356 12.2.2 | Grant Changes ..............................................................................................................................381 12.2.3 | Grant Revenues .............................................................................................................................384 12.2.4 | Grant Expenditures ......................................................................................................................389 Page 6

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12.2.5 | Grant Reconciliation .....................................................................................................................404 12.2.6 | Grant Close-out.............................................................................................................................411 12.2.7 | Grant External Audits ..................................................................................................................413 12.3 | Gift & Donation Guidelines ...................................................................................... 418 12.3.1 | Gift & Donation Budgeting .........................................................................................................418 12.3.2 | Gift & Donation Revenues ...........................................................................................................418 12.3.3 | Gift Expenditures ..........................................................................................................................421 12.3.4 | Gift Reporting ...............................................................................................................................421 12.4 | Donated Capital Assets Guidelines ........................................................................ 421 12.4.1 | Procedures to Record Capital Asset Donations .......................................................................422 12.4.2 | Procedures for “In Kind” Donations ...........................................................................................422 13 | FINANCIAL REPORTING* ............................................................................. 423 13.1 | Overview ..................................................................................................................... 423 14 | EMERGENCY PROCEDURES* ......................................................................... 424 14.1 | Overview ..................................................................................................................... 424 14.2 | Emergency Purchasing& Payment............................................................................ 424 14.2.1 | Emergency Vendor Number Set Up ..........................................................................................424 14.2.2 | Emergency Procurement Card (P-Card) ...................................................................................424 14.2.3 | Emergency Vendor Check Writing ............................................................................................425 14.3 | Finance & Administration........................................................................................... 429 14.3.1 | Cost Tracking .................................................................................................................................429 15 BANKING SERVICES .......................................................................................... 432 15.1 | Overview ..................................................................................................................... 432 15.2 | Bank Account Opening and Closing ........................................................................ 432 15.3 | Collections and Deposits ........................................................................................... 433 15.4 | Stale Dated Checks .................................................................................................... 435 15.5 | Revolving Fund Replenishment .................................................................................. 435 15.6 | Fraud Controls ............................................................................................................. 435 15.7 | Accounting & Reconcilement ..................................................................................... 435 15.7.1 | Instructions & Recommended Controls for Processing Returned Items .................................436 15.7.2 | Instructions for Accounting for Banking & Credit Card Fees .................................................437 15.8 | Third Party Contracts ................................................................................................. 438 15.9 | Notifications on Incoming Receipts and Payment Requests through Electronic Funds Transfers (EFTs) 441 15.10 | Emergency Banking Procedures ............................................................................ 441 15.11 | Banking Services FAQs ........................................................................................... 441 15.11.1 | NSF Items ...................................................................................................................................443

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15.11.2 15.11.3 15.11.4 15.11.5 15.11.6 15.11.7 15.11.8

| Bank Fees & Credit Card Fees ..............................................................................................445 | Chargebacks and Merchant Activity Reconciliation ...........................................................446 | Cash Differences (Overages and Shortages) .....................................................................448 | Reconciliations & Other Transactions.....................................................................................449 | Online Banking ..........................................................................................................................452 | FIS Applications ........................................................................................................................455 | Helpful Tips ................................................................................................................................458

16 | HOW-TO & SCREENSHOTS* .......................................................................... 474 16.1 | Purpose of this Section............................................................................................... 474 16.2 | General ........................................................................................................................ 474 16.2.1 | Notepad .........................................................................................................................................474 16.2.2 | Creating/Copying a RIMS Template ........................................................................................476 16.2.3 | Finding a Vendor ..........................................................................................................................480 16.2.4 | Finding a Commodity ...................................................................................................................481 16.2.5 | Purchasing Document/Match Type/Approval Path Matrix...................................................482 16.3 | Budgeting and Appropriations ................................................................................ 483 16.3.1 | Surplus Transfers ...........................................................................................................................483 16.4 | Procurement ................................................................................................................. 484 16.4.1 | Creating a Blanket Purchase Order..........................................................................................484 16.4.2 | Blanket Purchase Order Release ...............................................................................................487 16.4.3 | Creating a Direct Purchase Order ............................................................................................491 16.4.4 | Creating a Requisition..................................................................................................................493 16.5 | Payments (FAMIS Purchasing – ADPICS) ................................................................ 497 16.5.1 | Creating an Invoice ......................................................................................................................497 16.5.2 | Posting a Voucher .........................................................................................................................502 16.5.3 | Deleting an Erroneous Voucher ..................................................................................................503 16.5.4 | Change Orders / Document Cancellations ..............................................................................507 16.6 | Payments (FAMIS Accounting) ................................................................................... 511 16.6.1 | Direct Payment ..............................................................................................................................512 16.6.2 | Employee and Travel Reimbursement (No Advance) .............................................................516 16.6.3 | Encumbrance Payment and Retention/Lien Withhold .............................................................521 16.6.4 | Credit Memo ..................................................................................................................................526 16.6.5 | Revenue Refund .............................................................................................................................529 16.7 | Travel Advance ........................................................................................................... 532 16.7.1 | Issuance of a Travel Advance .....................................................................................................532 16.7.2 | Settlement of Travel Advances ...................................................................................................536 16.7.3 | Corrections and Adjustments for Travel Advance Entries ......................................................545 16.8 | Sales Tax Accrual ....................................................................................................... 549

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16.9 | Work Orders ............................................................................................................... 553 16.9.1 | Work Order Budget (Increase) – Requesting Department ...................................................553 16.9.2 | Work Order Budget (Decrease) – Requesting Department .................................................557 16.9.3 | Work Order Budget (Increase) – Performing Department ...................................................560 16.9.4 | Work Order Budget (Decrease) – Performing Department .................................................563 16.9.5 | Work Order - Manual Encumbrance .........................................................................................566 16.9.6 | Work Order - Encumbrance Adjustment – Increase/Decrease ............................................570 16.9.7 | Manual Billing – With Encumbrance ..........................................................................................573 16.9.8 | Manual Billing – Direct Billing ....................................................................................................577 16.9.9 | Work Order Billing Adjustments – Over-Liquidation of Encumbrance................................580 16.9.10 | Work Order Billing Adjustments – Under-Liquidation of Encumbrance .........................584 16.9.11 | Work Order Billing Adjustments – Decrease Over-billing Without Encumbrance ........584 16.9.12 | Work Order Billing Adjustments – Increase Billing Without Encumbrance ....................587 16.10 | Cash Receipts............................................................................................................ 588 16.10.1 Cash Receipts – General Entry ..................................................................................................588 16.10.2 | Cash Difference between Point of Sales (POS) and Actual Cash Collected .................592 16.10.3 | Bank Adjustment for Departments with Individual Depository Accounts ........................603 16.10.4 | Bank Adjustment for Departments Using City’s Main Depository Account .....................610 16.10.5 | Unidentified Cash Receipts for Departments Using City’s Main Depository Account ..615 16.10.6 | Credit Card Fees ......................................................................................................................621 16.10.7 | NSF for Departments using City’s Main Depository Account ............................................623 16.10.8 | NSF for Departments with Individual Depository Account ................................................634 16.11 ............................................................................................................................................. 653 16.12 | Revolving Funds ........................................................................................................ 653 16.12.1 | Creating a Revolving Fund .....................................................................................................653 16.12.2 | Replenishing an Existing Revolving Fund ..............................................................................656 16.12.3 | Close Revolving Fund with Return of Cash ...........................................................................660 16.12.4 | Adjusting Revolving Fund ........................................................................................................663 16.13 | Revenue Transfers and Other Allocations ............................................................ 681 16.13.1 | Transfer Revenue from General Fund to Agency Fund ......................................................683 16.13.2 | Record Collection of Revenue Offset by Expenditures Account .......................................685 16.13.3 | Record Application of Revenue for an Unidentified Receipt ............................................688 16.13.4 | Recognize Unearned Revenue as Revenue ..........................................................................690 16.13.5 | Transfer Actual and Budget Proceeds from Sale of Bonds within a Department’s Capital Project Fund .....................................................................................................................................................693 16.13.6 | To Transfer Actual and Budget Revenue Between Different Sub-funds (ITI/ITO) .........700 16.13.7 | To Transfer Actual and Budget Revenue Between Different Funds (OTI/OTO) ............707 16.14 | Inventory .................................................................................................................... 714

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17 | APPENDICES* ............................................................................................... 715 17.1 | Definition of Terms...................................................................................................... 715 17.2 | FAMIS Transaction Codes .......................................................................................... 715 17.3 | Sub-Object Codes (Chart of Accounts) .................................................................. 715 17.4 | General Ledger Codes ............................................................................................. 715 17.5 | San Francisco Administrative Code, Chapter 6..................................................... 716 17.5.1 | Article I: General Provisions ......................................................................................................716 17.5.2 | Article II: Construction Contracting ...........................................................................................721 17.5.3 | Article III: Professional Services Contracting ..........................................................................755 17.5.4 | Article IV: Exemptions from and Alternatives to Competitive Bidding...............................758 17.5.5 | Article V: Violations of Administrative Code Chapter 6; False Claims; Procedures for Debarment; Monetary Penalties .................................................................................................................772 18

| INDEX* .......................................................................................................... 776

Sections in the Table of Contents marked with an asterisk (*) indicate that the topic will be updated as part of an FY 2016 Accounting Task Force.

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List of Tables Table 1-1. Internal Control Questionnaire Template ....................................................................................................................................28 Table 2-1. When to Use Document Type “SU” for Transfers/Reallocation of Funds ............................................................................38 Table 2-2. Guidelines to Complete the Surplus Transfer Request Form .....................................................................................................41 Table 3-1. Consultant Contract Requirements ................................................................................................................................................50 Table 3-2. Formal Construction Contract Requirements ...............................................................................................................................51 Table 3-3. Formal construction Contracting Timelines ...................................................................................................................................53 Table 3-4. Informal Construction Contract Requirements .............................................................................................................................55 Table 3-5. Informal Construction Contracting Timelines ...............................................................................................................................57 Table 3-6. Proprietary List 7-03 .......................................................................................................................................................................74 Table 3-7. Vendor Types in the City Vendor File ..........................................................................................................................................76 Table 3-8. Sample Professional Service Project Checklist ........................................................................................................................ 119 Table 3-9. Vendors Subject to Technology Store Fee ............................................................................................................................... 123 Table 4-1. Prompt Payment Definitions ........................................................................................................................................................ 142 Table 4-2. Examples of Variations in Tax Rates ........................................................................................................................................ 165 Table 4-3. Sales/Use Tax Index Codes Table ............................................................................................................................................ 166 Table 4-4. 1099-Reportable and Non-Reportable Payments ................................................................................................................ 171 Table 4-5. 1099 Posting in FAMIS ................................................................................................................................................................. 171 Table 4-6. Flying vs. Long-Distance Driving Example ................................................................................................................................ 188 Table 4-7. Federal Domestic Meal & Incidental Expense (M&IE) Rates ................................................................................................ 192 Table 4-8. Federal Departure and Return Day M&IE Rates .................................................................................................................... 193 Table 4-9. Non-allowable & Non-reimbursable Costs .............................................................................................................................. 195 Table 4-10. Non-allowable & Non-reimbursable Costs ........................................................................................................................... 197 Table 4-11. Treasurer's EFT Request Template ........................................................................................................................................... 216 Table 4-12. Cancellation Transaction Codes............................................................................................................................................... 218 Table 5-1. Sample Vendor Numbers for P-Card Departments ............................................................................................................... 229 Table 8-1. Cash Handling Internal Control Examples................................................................................................................................ 263 Table 10-1. Capitalization Thresholds .......................................................................................................................................................... 298 Table 10-2. Suggested Useful Lives for Non-Infrastructure Capital Assets .......................................................................................... 299 Table 10-3. Suggested Useful Lives for Infrastructure Capital Assets ................................................................................................... 301 Table 12-1. Documents Required for Grant Accept & Expend Process ................................................................................................ 358 Table 12-2. Gift Index Codes ........................................................................................................................................................................ 419 Table 14-1. Project Detail Coding Indicating FEMA Public Assistance Categories ............................................................................. 430 Table 16-1. Descriptions of Fields in Screen 1500 .................................................................................................................................... 497 Table 16-2. Descriptions of Fields in Screen 1510 .................................................................................................................................... 499 Table 16-3. Descriptions of Fields in Screen 1515 .................................................................................................................................... 500 Table 16-4. Descriptions of Fields in Screen 1500 Before Posting the IV ............................................................................................ 502 Table 16-5. Descriptions of Fields in Screen 1410 .................................................................................................................................... 503 Table 16-6. Descriptions of Fields in Screen 1800 .................................................................................................................................... 506 Table 16-7. Descriptions of Fields in Screen 1810 .................................................................................................................................... 506 Table 16-8. Document Type Change Registrictions .................................................................................................................................... 508 Table 16-9. Common Document Types and Transaction Codes in FAMIS Accounting ........................................................................ 511 Table 16-10. Sub-objects to Use for Employee & Travel Reimbursement ............................................................................................ 520 Table 16-11. Screen 4250 - Transaction Code Details for Sales Tax Accrual ................................................................................... 527 Table 16-12. Screen 4250 - Transaction Code Details for Revenue Refund....................................................................................... 531 Table 16-13. Transaction Code Details for Settling Travel Advances when Expenses Equal Advance or Travel Advance is Being Returned in Full ......................................................................................................................................................................................... 537

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Table 16-14. Screen 4255 – Transaction Code Details for Settlement of Advance When Expenses are Less Than Travel Advance ................................................................................................................................................................................................................ 538 Table 16-15. Transaction Code Details for Settlement of Advance When Expenses are More Than Travel Advance ............. 543 Table 16-16. Transaction Code Details for Adjust Liquidation Entry ..................................................................................................... 545 Table 16-17. Transaction Code Details for Settling Travel Advances When Wrong Transaction Code is Used and Liquidation Posted .................................................................................................................................................................................................................... 547 Table 16-18. Screen 4250 - Transaction Code Details for Sales Tax Accrual ................................................................................... 550 Table 16-19. Screen 4250 - Transaction Code Details for Budget Entry ............................................................................................ 555 Table 16-20. Screen 4250 - Transaction Code Details for Budget Entry ............................................................................................ 560 Table 16-21. Screen 4250 - Transaction Code Details for Budget Entry ............................................................................................ 563 Table 16-22. Screen 4250 - Transaction Code Details for Manual Work Order Encumbrance ..................................................... 568 Table 16-23. Screen 4250 - Transaction Code Details for Manual Work Order Billing ................................................................. 572 Table 16-24. Screen 4250 - Transaction Code Details for Manual Work Order Billing ................................................................. 575 Table 16-25. Screen 4250 - Transaction Code Details for Manual Work Order Billing With No Work Order Encumbrance578 Table 16-26. Screen 4250 - Transaction Code Details for Budget Entry ............................................................................................ 581 Table 16-27. Screen 4250 - Transaction Code Details for Budget Entry ............................................................................................ 585 Table 16-28. Screen 4255 - Transaction Code Details for Recording Cash Receipts ....................................................................... 589 Table 16-29. Screen 4255 - Transaction Code Details for Recording Cash Shortage Between POS & Actual Cash................ 594 Table 16-30. Screen 4255 - Transaction Code Details for Recording Cash Shortage Between POS & Actual Cash................ 599 Table 16-31. Screen 4255 - Transaction Code Details for Recording Cash Shortage Between FAMIS & Bank ......................... 603 Table 16-32. Screen 4255 - Transaction Code Details for Recording Cash Overage Between FAMIS & Bank ......................... 607 Table 16-33. Screen 4255 - Transaction Code Details for Treasurer CR Entry for Shortage/Overage ...................................... 610 Table 16-34. Screen 4255 - Transaction Code Details for Department’s CR Entry For Shortage/Overage .............................. 612 Table 16-35. Screen 4255 - Transaction Code Details for Treasurer CR Entry for Unidentified Receipts ................................... 616 Table 16-36. Screen 4255 - Transaction Code Details for Department’s CR Entry for Shortage/Overage ............................... 619 Table 16-37. Screen 4255 - Transaction Code Details for Credit Card Fees .................................................................................... 622 Table 16-38. Screen 4255 - Transaction Code Details for Treasurer NS Entry for NSF Checks When Dept. is Using City’s Main Depository Account ............................................................................................................................................................................................. 624 Table 16-39. Screen 4255 - Transaction Code Details for Dept. CR Entry for NSF Checks When Dept. is Using City’s Main Depository Account ............................................................................................................................................................................................. 629 Table 16-40. Screen 4255 - Transaction Code Details for Treasurer CR Entry for Unidentified Receipts ................................... 635 Table 16-41. Screen 4255 - Transaction Code Details for Treasurer CR Entry for Unidentified Receipts ................................... 639 Table 16-42. Screen 4255 - Transaction Code Details for Treasurer NS Entry for Unidentified Receipts ................................... 644 Table 16-43. Screen 4255 - Transaction Code Details for Treasurer CR Entry for Unidentified Receipts ................................... 646 Table 16-44. Screen 4255 - Transaction Code Details for Treasurer CR Entry for Unidentified Receipts ................................... 650 Table 16-45. Adjustment Transaction Codes for a Revolving Fund ........................................................................................................ 673 Table 16-46. Transaction Codes to Adjust Incorrect Data Elements Used to Close or Decrease a Revolving Fund .................... 677 Table 16-47. Transaction Code to Adjust Revolving Fund Overage ..................................................................................................... 680 Table 16-48. Transaction Code to Adjust Revolving Fund Shortage ..................................................................................................... 680 Table 16-49. Transaction Codes to Adjust Revolving Fund Balance ...................................................................................................... 681 Table 16-50. Transaction Codes to Transfer Revenue to Agency Fund ................................................................................................ 683 Table 16-51. Transaction Codes to Increase Revenue and Expenditure Accounts .............................................................................. 685 Table 16-52. Transaction Codes to Record an Unidentified Receipt ..................................................................................................... 688 Table 16-53. Transaction Codes to Recognize Unearned Revenue as Revenue ................................................................................. 690 Table 16-54. Common Transaction Codes to Transfer Bond Proceeds to Capital Project Fund ...................................................... 693 Table 16-55. Transaction Codes to Transfer Revenue Between Different Sub-funds.......................................................................... 700 Table 16-56. Transaction Codes to Transfer Revenue Between Different Funds ................................................................................ 707

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List of Figures Figure 1-1. Signature Authorization Form .......................................................................................................................................................27 Figure 2-1. Surplus Expenditure Budget Transfer Request ..........................................................................................................................40 Figure 2-2. Controller's Surplus Transfer Tracking Sheet .............................................................................................................................44 Figure 3-1. Sample Sole Source Waiver Request form ...............................................................................................................................71 Figure 3-2. Vendor Profile Application & New Vendor Number Request ...............................................................................................79 Figure 3-3. IRS Form W-9 ...................................................................................................................................................................................81 Figure 3-4. P-25 Business Tax Declaration Form ...........................................................................................................................................82 Figure 3-5. CMD 12B-101 Declaration ...........................................................................................................................................................83 Figure 3-6. MCO Declaration ............................................................................................................................................................................86 Figure 3-7. HCAO Declaration ..........................................................................................................................................................................87 Figure 3-8. Insurance Requirements ..................................................................................................................................................................88 Figure 3-9. Payment (Labor & Material) Bond ..............................................................................................................................................89 Figure 3-10. Performance Bond ........................................................................................................................................................................91 Figure 3-11. LBE Program Application ............................................................................................................................................................93 Figure 3-12. CMD Form 104 (Chapter 12B Blanket Sole Source Form) ................................................................................................. 102 Figure 3-13. CMD Form 201 (Chapters 12B and 14B Waiver REquest Form) ..................................................................................... 105 Figure 3-14. FAMIS Screen 9560 VendoR Class/Status ............................................................................................................................ 107 Figure 3-15. Process Flow – Ordering IT Hardware, Software & Maintenance ................................................................................. 110 Figure 3-16. Technology Marketplace Quote Approval Form 1 ............................................................................................................ 111 Figure 3-17. Technology Marketplace Quote Approval Form 2 ............................................................................................................ 112 Figure 3-18. Process Flow – Ordering Professional Services .................................................................................................................. 115 Figure 3-19. Technology Marketplace Quote Approval Form 3 ............................................................................................................ 117 Figure 3-20. Process Flow – Ordering Through Micro-LBE Set-aside Contracts .................................................................................. 121 Figure 3-21. Sample of how Expenditures & Encumbrances Affect Appropriation Balances .......................................................... 126 Figure 4-1. Invoice Receipt Date Illustration 1 ............................................................................................................................................ 144 Figure 4-2. Invoice Receipt Date Illustration 2 ............................................................................................................................................ 144 Figure 4-3. Notepad Entry for Disputed Invoice ......................................................................................................................................... 145 Figure 4-4. Stop Notice Workflow ................................................................................................................................................................ 149 Figure 4-5. Check Pickup Request Form ........................................................................................................................................................ 161 Figure 4-6. Lost Warrant Affidavit Form ..................................................................................................................................................... 163 Figure 4-7. Authorized Travel Signatories for Travel Pre-approval...................................................................................................... 177 Figure 4-8. Request for Employee Offset .................................................................................................................................................... 181 Figure 4-9. Payroll Request for Employee Offset Repayment Agreement .......................................................................................... 182 Figure 4-10. Declaration of Offset Due to an Unliquidated Travel Advance Letter .......................................................................... 183 Figure 4-11. Determining Allowable Transportation Cost ........................................................................................................................ 186 Figure 4-12. Reserving Allowable Conference Lodging ........................................................................................................................... 190 Figure 4-13. Revolving Fund Voucher Form & Instructions ........................................................................................................................ 211 Figure 5-1. Cardholder Acknowledgement Disclosure .............................................................................................................................. 222 Figure 5-2. Travel Expense Form ................................................................................................................................................................... 224 Figure 5-3. Field Expense Form ...................................................................................................................................................................... 225 Figure 5-4. Online P-Card Enrollment & Agreement Form ....................................................................................................................... 238 Figure 5-5. P-Card Cardholder Acknowledgment Disclosure .................................................................................................................. 239 Figure 7-1. Work Order MOU Template ..................................................................................................................................................... 249 Figure 8-1. Cash Handling Receipt and Recording .................................................................................................................................... 278 Figure 8-2. Sample Cash Difference / Overage Report .......................................................................................................................... 280 Figure 8-3. Sample NSF Check Collection Letter ........................................................................................................................................ 284

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Figure 10-1. Capital Asset Types and FAACS Categories ....................................................................................................................... 297 Figure 10-2. Capitalization Thresholds from Other Jurisdictions ............................................................................................................ 299 Figure 10-3. Fixed Asset Process Overview ................................................................................................................................................ 303 Figure 10-4. FAACS CIP Transfer Form ........................................................................................................................................................ 304 Figure 10-5. FAACS Retired/Disposed Assets Form .................................................................................................................................. 316 Figure 10-6. Sample Fixed Asset Disposal Process Flow (SFMTA)* ....................................................................................................... 317 Figure 10-7. FAACS Input form ...................................................................................................................................................................... 318 Figure 10-8. Inter-Departmental Transfer Process Flow* ......................................................................................................................... 319 Figure 10-9. PPTS Screen 1............................................................................................................................................................................. 330 Figure 10-10. PPTS Screen 2 .......................................................................................................................................................................... 331 Figure 12-1. Grant Ordinance Cover Memo & Checklist ......................................................................................................................... 360 Figure 12-2. Grant Ordinance Template ..................................................................................................................................................... 362 Figure 12-3. Grant Information Form & Disability Checklist .................................................................................................................... 364 Figure 12-4. Format for Including Position Information in Ordinance .................................................................................................... 368 Figure 12-5. Direct-Charge Budget Structure for Grant with Grant-funded Personnel for Another Department ....................... 372 Figure 12-6. FAMIS Screen 5070, Grant Set-up Screen .......................................................................................................................... 375 Figure 12-7. FAMIS Screen 5300, Index Code Set Up............................................................................................................................. 377 Figure 12-8. Memo Format for Budget Revision Notification to Board ................................................................................................. 383 Figure 12-9. FAMIS Screen 6250, Appropriation Inquiry ........................................................................................................................ 403 Figure 12-10. FAMIS Screen 6260, Appropriation Detail Inquiry ......................................................................................................... 404 Figure 12-11. FAMIS Screen 6410 w/ Reserved Appropriation ........................................................................................................... 404 Figure 12-12. Sample Reconciliation Spreadsheet .................................................................................................................................... 407 Figure 12-13. FAMIS Screen 6220, Grant Summary Inquiry .................................................................................................................. 409 Figure 12-14. FAMIS Screen 6410, Grant Trial Balance Inquiry ........................................................................................................... 409 Figure 12-15. FAMIS Screen 5070, Closed grants with closing date .................................................................................................... 413 Figure 12-16. Gift of Property and Goods Acknowledgement Letter .................................................................................................. 420 Figure 12-17. Memo Format for Annual Report on Gifts of < $10,000 .............................................................................................. 421 Figure 14-1. Overview of Onsite Vendor Check Laptop Workflow ...................................................................................................... 426 Figure 14-2. Disaster Vendor Check Request Form.................................................................................................................................... 427 Figure 14-3. Sample Disaster Index Code & Project Code ..................................................................................................................... 431 Figure 15-1. Sample Letter for NSF Notification & Collection ................................................................................................................ 434 Figure 15-2. Sample Diagram for the Flow of Funds in an Online/IVR/Phone/Mobile Payment Application ............................ 439 Figure 15-3. Sample Diagram for the Flow of Funds in a Card Present Environment ....................................................................... 440 Figure 15-4. Treasury Accounting & Banking Services Contacts ............................................................................................................. 443 Figure 15-5. Sample FIS Invoice ..................................................................................................................................................................... 457 Figure 16-1. Screen 4010 - Add a Notepad Description ........................................................................................................................ 475 Figure 16-2. Accessing the Notepad ............................................................................................................................................................. 476 Figure 16-3. Screen 4610 – Recurring Transactions by Document Type .............................................................................................. 477 Figure 16-4. Screen 4015 – RIMS Document Header & Description of Fields .................................................................................... 478 Figure 16-5. Screen 4255 – RIMS Detail Document & Descriptions of Fields ...................................................................................... 479 Figure 16-6. Screen 9600 – Vendor Name Inquiry ................................................................................................................................... 481 Figure 16-7. Screen 1100 – Commodity Table Inquiry ............................................................................................................................ 482 Figure 16-8. Purchasing Document / Match Type / Approval Matrix .................................................................................................. 483 Figure 16-9. Screen 2342 – Blanket Purchase Order Writing & descriptions of Fields ................................................................... 484 Figure 16-10. Screen 2348 – Blanket Purchase Order Detail Entry & Descriptions of Fields ......................................................... 485 Figure 16-11. Screen 2341 – BPO Department Security ......................................................................................................................... 486 Figure 16-12. Screen 2343 – BPO Security ................................................................................................................................................ 486 Figure 16-13. Screen 2360 – Direct Purchase Order Writing (Release From BPO) & Description of Fields ............................... 487 Figure 16-14. Screen 2365 – Direct Purchase Order Detail Entry & Description of Fields ............................................................. 488

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Figure 16-15. Screen 2406 – Purchase Order Address Table Maintenance ...................................................................................... 490 Figure 16-16. Screen 2360 – Direct Purchase Order Writing (Direct PO) & Description of Fields ............................................... 491 Figure 16-17. Screen 2365 – Direct Purchase Order Detail Entry & Description of Fields ............................................................. 492 Figure 16-18. Screen 2100 – Requisition header Entry & Description of Fields ................................................................................. 494 Figure 16-19. Screen 2110 – Requisition Detail Entry & Description of Fields ................................................................................... 495 Figure 16-20. Screen 2121 – Requisition Address Table Maintenance ................................................................................................ 496 Figure 16-21. Screen 1500 – Invoice Header Entry ................................................................................................................................. 497 Figure 16-22. Screen 1510 – Invoice Detail Entry (2-way Match Documents) .................................................................................... 498 Figure 16-23. Screen 1515 – Invoice Detail Entry (Progress Payment) ................................................................................................ 500 Figure 16-24. Screen 1500 – Invoice Header Entry (After Completing Line Details) ........................................................................ 501 Figure 16-25. Screen 1410 – Voucher Header Entry ............................................................................................................................... 502 Figure 16-26. Screen 1410 – Voucher Header Entry (With Existing VC)............................................................................................. 504 Figure 16-27. Screen 1800 – Direct Voucher Header Entry ................................................................................................................... 505 Figure 16-28. Screen 8500 – Document Cancellation & Description of Fields.................................................................................... 509 Figure 16-29. Screen 5999 - Table Lookup for Document Indicators ................................................................................................... 510 Figure 16-30. FAMIS Accounting - Screen 4000 – Enter “PR” ................................................................................................................ 513 Figure 16-31. Screen 4010 – Direct Payment Document Header & Description of Fields ............................................................... 514 Figure 16-32. Screen 4250 & Description of Fields .................................................................................................................................. 515 Figure 16-33. Screen 4000 – Enter “TE” ...................................................................................................................................................... 517 Figure 16-34. Screen 4015 – “TE” Employee Reimbursement & Description of Fields ...................................................................... 518 Figure 16-35. Screen 4255 – “TE” Employee Reimbursement & Description of Fields ...................................................................... 519 Figure 16-36. FAMIS Accounting - Screen 4000 - Enter "EP" .................................................................................................................. 522 Figure 16-37. Screen 4015 – Encumbrance Payment & Description of Fields .................................................................................... 523 Figure 16-38. Screen 4255 - RIMS Detail Document for Encumbrance Payment & Description of Fields ..................................... 524 Figure 16-39. Screen 4255 - Additional Encumbrance Transactions & Description of Fields .......................................................... 525 Figure 16-40. Screen 4010 – Document Header, credit memorandum ................................................................................................ 526 Figure 16-41. Screen 4250 - Sales Tax Accrual Entry & Description of Fields ................................................................................... 528 Figure 16-42. Screen 4010 – Direct Payment Document Header & Description of Fields ............................................................... 530 Figure 16-43. Screen 4250 - Revenue Refund Entry & Description of Fields ...................................................................................... 531 Figure 16-44. Screen 4000 – Enter “TA” ..................................................................................................................................................... 533 Figure 16-45. Screen 4015 – “TA” Travel Advance & Description of Fields....................................................................................... 534 Figure 16-46. Screen 4255 – “TA” Travel Advance & Description of Fields ....................................................................................... 535 Figure 16-47. Screen 4255 – “TA” travel advance & Description of Fields ........................................................................................ 537 Figure 16-48. Screen 4000 "CR" Document Type & Description of Fields ........................................................................................... 539 Figure 16-49. Screen 4255 – “CR” Cash Receipts – Line 1 – Deposit Cash Receipts ....................................................................... 540 Figure 16-50. Screen 4255 – “CR” Cash Receipts – Line 2 – Refund Travel Advance Expenditure .............................................. 541 Figure 16-51. Screen 4255 – “TA” Travel Advance & Description of Fields ....................................................................................... 542 Figure 16-52. Screen 4255 – “TA” Travel Advance & Description of Fields ....................................................................................... 544 Figure 16-53. Screen 4255 – “TA” Travel Advance & Description of Fields ....................................................................................... 546 Figure 16-54. Screen 4255 – “TA” Travel Advance & Description of Fields....................................................................................... 548 Figure 16-55. FAMIS Accounting – Screen 4010 – Sales Tax Accruals & Description of Fields ..................................................... 549 Figure 16-56. Line 1 – Screen 4250 - Increase Sales Tax Expenditures & Description of Fields ................................................... 551 Figure 16-57. Line 2 – Screen 4250 - Record Sales Tax or Use Tax Laibility in the Agency Fund (for Disbursement to the State) & Description of Fields ........................................................................................................................................................................... 552 Figure 16-58. FAMIS Accounting – Screen 4010 – Work Order Budget by Requesting Department - Description of Fields . 554 Figure 16-59. Line 1– Screen 4250 – Work Order Budget & Description of Fields ......................................................................... 555 Figure 16-60. Line 2– Screen 4250 – Work Order Budget & Description of Fields ......................................................................... 556 Figure 16-61. Line 1– Screen 4250 – Work Order Budget & Description of Fields ......................................................................... 558 Figure 16-62. Line 2– Screen 4250 – Work Order Budget & Description of Fields ......................................................................... 559

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City & County of San Francisco – Office of the Controller

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Figure 16-63. Line 1– Screen 4250 – Work Order Budget (Performing Dept.) & Description of Fields ...................................... 561 Figure 16-64. Line 2– Screen 4250 – Work Order Budget (Performing Dept.) & Description of Fields ...................................... 562 Figure 16-65. Line 1– Screen 4250 – Work Order Budget Decrease (Performing Dept.) & Description of Fields ................... 564 Figure 16-66. Line 2– Screen 4250 – Work Order Budget Decrease (Performing Dept.) & Description of Fields ................... 565 Figure 16-67. FAMIS Accounting – Screen 4010 – Manual Work Order Encumbrance ................................................................... 567 Figure 16-68. FAMIS Accounting – Screen 4250 – Manual Work Order Encumbrance - Description of Fields .......................... 569 Figure 16-69. FAMIS Accounting – Screen 4010 – Manual Work Order Encumbrance ................................................................... 571 Figure 16-70. FAMIS Accounting – Screen 4250 –Work Order Encumbrance Adjustment - Description of Fields ..................... 572 Figure 16-71. FAMIS Accounting – Screen 4010 – Manual Work Order Billing - Description of Fields....................................... 574 Figure 16-72. Line 1– Screen 4250 – Manual Work Order Billing & Description of Fields ............................................................ 575 Figure 16-73. Line 2 – Screen 4250 – Manual Work Order Billing & Description of Fields ........................................................... 576 Figure 16-74. Line 1– Screen 4250 – Manual Work Order Direct Billing & Description of Fields ................................................ 578 Figure 16-75. Line 2 – Screen 4250 – Manual Work Order Direct billing & Description of Fields .............................................. 579 Figure 16-76. Line 1– Screen 4250 – Work Order Billing Adjustment for Over-Liquidation of Encumbrance & Description of Fields ...................................................................................................................................................................................................................... 581 Figure 16-77. Line 2– Screen 4250 – Work Order Billing Adjustment for Over-Liquidation of Encumbrance & Description of Fields ...................................................................................................................................................................................................................... 582 Figure 16-78. Line 3– Screen 4250 – Work Order Billing Adjustment for Over-Liquidation of Encumbrance & Description of Fields ...................................................................................................................................................................................................................... 583 Figure 16-79. Line 1 – Screen 4250 – Work Order Billing Adjustment to Decrease Overbilling Without Encumbrance & Description of Fields ........................................................................................................................................................................................... 585 Figure 16-80. Line 2 – Screen 4250 – Work Order Billing Adjustment to Decrease Overbilling Without Encumbrance & Description of Fields ........................................................................................................................................................................................... 586 Figure 16-81. Screen 4015 – “CR” Cash Receipts – RIMS Header & Description of Fields ............................................................ 588 Figure 16-82. Screen 4255 – “CR” Cash Receipts – Line 1 – Deposit Cash Receipts ....................................................................... 590 Figure 16-83. Screen 4255 – “CR” Cash Receipts – Line 2 – Record Revenue .................................................................................. 591 Figure 16-84. Screen 4015 – “CR” Cash Receipts – RIMS Header & Description of Fields ............................................................ 593 Figure 16-85. Screen 4255 – “CR” Cash Receipts – Line 1 – Deposit Cash Receipts ....................................................................... 595 Figure 16-86. Screen 4255 – “CR” Cash Receipts – Line 2 – Record Revenue .................................................................................. 596 Figure 16-87. Screen 4255 – “CR” Cash Receipts – Line 3 – Record Shortage In Revenue ............................................................ 597 Figure 16-88. Screen 4255 – “CR” Cash Receipts – Line 1 – Deposit Cash Receipts ....................................................................... 599 Figure 16-89. Screen 4255 – “CR” Cash Receipts – Line 2 – Record Revenue .................................................................................. 600 Figure 16-90. Screen 4255 – “CR” Cash Receipts – Line 3 – Record Overage in Revenue ............................................................ 601 Figure 16-91. Screen 4255 – “CR” Cash Receipts – Line 1 – Clear Shortage Discrepancy ............................................................ 604 Figure 16-92. Screen 4255 – “CR” Cash Receipts – Line 2 – Clear Shortage Discrepancy ............................................................ 605 Figure 16-93. Screen 4255 – “CR” Cash Receipts – Line 1 – Clear Overage Discrepancy ............................................................ 607 Figure 16-94. Screen 4255 – “CR” Cash Receipts – Line 2 – Clear Overage Discrepancy ............................................................ 608 Figure 16-95. Screen 4255 – “CR” Cash Receipts – Line 1 – Treasurer CR Entry for Shortage/Overage.................................. 611 Figure 16-96. Screen 4255 – “CR” Cash Receipts – Line 1 – Department’s CR Entry For Shortage/Overage .......................... 613 Figure 16-97. Screen 4255 – “CR” Cash Receipts – Line 2 – Department’s CR Entry for Shortage/Overage ........................... 614 Figure 16-98. Screen 4255 – “CR” Cash Receipts – Line 1 – Treasurer CR Entry for Shortage/Overage.................................. 616 Figure 16-99. Screen 4255 – “CR” Cash Receipts – Line 2 – Treasurer CR Entry for Shortage/Overage.................................. 617 Figure 16-100. Screen 4255 – “CR” Cash Receipts – Line 1 – Department’s CR Entry for Unidentified Receipts ..................... 619 Figure 16-101. Screen 4255 – “CR” Cash Receipts – Line 2 – Department’s CR Entry for Unidentified Receipts ..................... 620 Figure 16-102. Screen 4255 – “CR” Cash Receipts – Credit Card Fees ............................................................................................. 622 Figure 16-103. Screen 4255 – “NS” NSF Checks – Line 1 –– Treasurer Entry ................................................................................... 625 Figure 16-104. Screen 4255 – “NS” NSF Checks – Line 2 –– Treasurer Entry ................................................................................... 626 Figure 16-105. Screen 4255 – “NS” NSF Checks – Line 3 –– Treasurer Entry ................................................................................... 626 Figure 16-106. Screen 4255 – “RA” NSF Checks – Line 1 –– Department’s Entry ............................................................................ 629

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City & County of San Francisco – Office of the Controller

ACCOUN T IN G POL ICIES & PROCEDURE S

Figure 16-107. Figure 16-108. Figure 16-109. Figure 16-110. Figure 16-111. Figure 16-112. Figure 16-113. Figure 16-114. Figure 16-115. Figure 16-116. Figure 16-117. Figure 16-118. Figure 16-119. Figure 16-120. Figure 16-121. Figure 16-122. Figure 16-123. Figure 16-124. Figure 16-125. Figure 16-126. Figure 16-127. Figure 16-128. Figure 16-129. Figure 16-130. Figure 16-131. Figure 16-132. Figure 16-133. Figure 16-134. Figure 16-135. Figure 16-136. Figure 16-137. Figure 16-138. Figure 16-139. Figure 16-140. Figure 16-141. Figure 16-142. Figure 16-143. Figure 16-144. Figure 16-145. Figure 16-146. Figure 16-147. Figure 16-148. Figure 16-149. Figure 16-150. Figure 16-151. Figure 16-152. Figure 16-153. Figure 16-154. Figure 16-155.

Screen 4015 – “RA” NSF Checks – Line 2 –– Department’s Entry ............................................................................ 630 Screen 4255 – “RA” NSF Checks – Line 1 –– Department’s Entry Once Check is Collected ............................... 632 Screen 4015 – “RA” NSF Checks – Line 2 –– Department’s Entry Once Check is Collected ............................... 633 Screen 4255 – “NS” NSF Checks – Line 1 – NSF Entry When Tied To A/R ........................................................... 636 Screen 4255 – “NS” NSF Checks – Line 2 – NSF Entry When Tied To A/R ........................................................... 637 Screen 4255 – “NS” NSF Checks – Line 3 – NSF Entry When Tied To A/R ........................................................... 638 Screen 4255 – “CR” NSF Checks – Line 1 – NSF Entry (After Replacement Check) When Tied to A/R .......... 640 Screen 4255 – “CR” NSF Checks – Line 2 – NSF Entry (After Replacement Check) When Tied to A/R .......... 641 Screen 4255 – “CR” NSF Checks – Line 3 – NSF Entry (After Replacement Check) When Tied to A/R .......... 642 Screen 4255 – “NS” NSF Checks – NSF Entry When Not Tied to A/R .................................................................... 644 Screen 4255 – “CR” NSF Checks – Line 1 – NSF Entry (After Replacement Check) – Not Tied to A/R ........... 646 Screen 4255 – “CR” NSF Checks – Line 2 – NSF Entry (After Replacement Check) – Not Tied to A/R ........... 647 Screen 4255 – “CR” NSF Checks – Line 3 – NSF Entry (After Replacement Check) – Not Tied to A/R ........... 648 Screen 4255 – “RA” NSF Checks – Line 1 –– NSF Entry When Not Tied To A/R ................................................. 650 Screen 4255 – “RA” NSF Checks – Line 2 –– NSF Entry When Not Tied To A/R ................................................. 651 Screen 4010 – Direct payment document header & Description of Fields ............................................................. 654 Screen 4250 – “PR” Document Detail Lines & Description of Fields ......................................................................... 655 Screen 4015 – “RF” Revolving Funds - RIMS Header & Description of Fields ........................................................ 657 Screen 4255 – RIMS Detail Document & Description of Fields .................................................................................. 658 Screen 4015 – “CR” Revolving Funds – RIMS Header & Description of Fields ...................................................... 661 Screen 4255 – RIMS Detail Document & Description of Fields .................................................................................. 662 Screen 4010 – Document Header, Journal Entry Adjustment & Description of Fields .......................................... 664 Screen 4015 – JE for Adjustment to Revolving Funds – Line 1 & Description of Fields ........................................ 665 Screen 4015 – JE for Adjustment to Revolving Funds – Line 2 & Description of Fields ........................................ 667 Screen 4015 – CR Revolving Funds – RIMS Header & Description of Fields .......................................................... 669 4255 – RIMS Detail Document, Line 1 - Reverse Incorrect Entry & Description of Fields ..................................... 670 4255 – RIMS Detail Document, Line 2 - Reverse Incorrect Entry & Description of Fields ..................................... 671 Screen 4250 Line 1 - Reverse Incorrect TC 213 Entry & Description of Fields ...................................................... 673 Screen 4250, Line 2 – Re-enter Transaction with Correct Data Elements & Description of Fields ..................... 675 Screen 4250, Line 1 – Reverse Incorrect TC 726 Entry & Description of Fields..................................................... 677 Screen 4250, Line 2 – Re-enter Transaction with Correct Data Elements & Description of Fields ..................... 678 Screen 4610 - Recurring Transactions by Document Type & Description of Fields ............................................... 682 Screen 4255, Line 1 – Decrease Revenue & Description of Fields ........................................................................... 683 Screen 4255, Line 2 – Increase Revenue to Agency Fund & Description of Fields ................................................ 684 Screen 4255, Line 1 – Increase Revenue & Description of Fields.............................................................................. 686 Screen 4255, Line 2 – Increase Expenditure Account & Description of Fields ........................................................ 687 Screen 4255, Line 1 – Decrease/Clear Unidentified Receipt & Description of Fields ......................................... 688 Screen 4255, Line 2 – Increase Revenue Account & Description of Fields .............................................................. 689 Screen 4255, Line 1 – Debit Liability Account & Description of Fields .................................................................... 691 Screen 4255, Line 2 – Increase Revenue Account & Description of Fields .............................................................. 692 Screen 4255, Line 1 – Increase Estimated Revenue Account & Description of Fields ........................................... 694 Screen 4255, Line 2 – Decrease Estimated Revenue Account & Description of Fields ......................................... 695 Screen 4255, Line 3 – Increase Revenue Account & Description of Fields .............................................................. 696 Screen 4255, Line 4 – Decrease Revenue Account & Description of Fields ............................................................ 697 Screen 4255, Line 5 – Increase Budget & Description of Fields ................................................................................ 698 Screen 4255, Line 6 – Decrease Budget & Description of Fields .............................................................................. 699 Screen 4255, Line 1 – Decrease Expenditure Budget in the Transfer-out Sub-fund & Description of Fields .. 701 Line 2 – Increase Transfer Out Budget in the Transfer-out Sub-fund & Description of Fields ............................. 702 Line 3 – Increase Transfer In Budget in the Transfer-in Sub-fund & Description of Fields ................................... 703

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City & County of San Francisco – Office of the Controller

ACCOUN T IN G POL ICI ES & PROCEDURE S

Figure 16-156. Figure 16-157. Figure 16-158. Figure 16-159. Figure 16-160. Figure 16-161. Figure 16-162. Figure 16-163. Figure 16-164.

Page 18

Line 4 – Increase Expenditure Budget in the Transfer-in Sub-fund & Description of Fields ................................. 704 Line 5 – Increase Actual Transfers Out Expenditure in the Transfer-out Sub-fund & Description of Fields ...... 705 Line 6 – Increase Actual Transfers in Revenue in the Transfer-in Sub-fund & Description of Fields ................... 706 Line 1 – Decrease Expenditure Budget in the Transfer-out Fund & Description of Fields .................................... 708 Line 2 – Increase Transfer Out Budget in the Transfer-out Fund & Description of Fields ..................................... 709 Line 3 – Increase Transfer In Budget in the Transfer-in Fund & Description of Fields ........................................... 710 Line 4 – Increase Expenditure Budget in the Transfer-in Fund & Description of Fields ......................................... 711 Line 5 – Increase Actual Transfers Out Expenditure in the Transfer-out Fund & Description of Fields .............. 712 Line 6 – Increase Actual Transfers in Revenue in the Transfer-in Fund & Description of Fields ........................... 713

City & County of San Francisco – Office of the Controller

ACCOUN T IN G POL ICIES & PROCEDURE S

1 | OVERVIEW 1.1 | Purpose of this Document This Controller’s Office Accounting Policies & Procedures is established by the Office of the Controller, Accounting Operations and Systems Division (AOSD) to provide general guidelines to City departments on how to properly process accounting transactions. Departments can use this document when creating the more specific and detailed policies and procedures required for their operations. All department accounting guidelines must be submitted to AOSD for review through the annual internal control questionnaire (ICQ) process. All policy exception requests must be approved by the Director of AOSD or designee. This document does not provide all the detailed instructions for entering transactions into the financial system. Please see Controller’s Office – FAMIS Accounting, Executive Information System (EIS), Purchasing, and Grants Training for further information: http://sfController.org/index.aspx?page=452.

1.2 | Roles and Responsibilities This policy and procedure manual is an important reference for department administrators, and it is intended to be supplemented by documents issued by other City control entities, including but not limited to the following: 

AOSD (http://www.sfController.org) The AOSD is responsible for ensuring that the City is in compliance with generally accepted accounting principles (GAAP) and standards (GAAS), applicable pronouncements established by Governmental Accounting Standards Board (GASB) and by Financial Accounting Standards Board (FASB), and internal control policies. The AOSD acts as the City’s main coordinator and liaison with auditors and the City's contracted independent Certified Public Accountant (CPA). AOSD’s primary mission is to oversee the financial activities of the City. The division certifies contracts, pays vendors, approves personnel requisitions and reviews, monitors, controls, and projects department expenditures on a continuous basis to assess overall fiscal condition. The division assists departments to achieve fiscal compliance, accuracy, timeliness and meaningfulness for the resulting financial information. The division is also responsible for producing the City's annual audited financial statements, including the Comprehensive Annual Financial Report (CAFR), the Single Audit Report, and other reports required by federal, state, and local regulations. Other functions include developing and maintaining City-wide financial systems, system policies, procedures, training, security, and documentation.

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GSA: Office of Contract Administration (http://sfgsa.org/index.aspx?page=359) The General Services Agency (GSA) maintains the Office of Contract Administration (OCA). Guidelines issued by the OCA specify the rules to follow when City departments are ordering, contracting, purchasing, or bidding goods and services; see the OCA website for more information: http://sfgsa.org. The OCA supports City departments with the contracting and procurement of material, equipment, and services that are essential to providing government services. The OCA works with departments to ensure compliance with the City's legal requirements, while upholding the highest ethical and professional standards. GSA: Contract Monitoring Division (http://sfgsa.org/index.aspx?page=6058) GSA’s Contract Monitoring Division (CMD) implements and enforces the Chapter 12B Equal Benefits Ordinance, the Chapter 14B Local Business Enterprise Ordinance, and the Chapter 14C Benefit Corporation Discounts Ordinance adopted by the Mayor and the Board of Supervisors to protect the public interest in equality throughout the City & County of San Francisco’s government contracting process. GSA: Office of Risk Management (http://sfgsa.org/index.aspx?page=825) The Office of Risk Management provides services to City departments by assisting them in managing their risks of injury to people (including employees and the public at large) and City property. This program purchases insurance on behalf of, and acts in an advisory capacity to, City departments with respect to workers' compensation, public liability, City property, and City contracts. Risk Management is also active in bond and insurance matters to facilitate smallbusiness contracting with the City. GSA: Office of Labor Standards Enforcement (http://sfgsa.org/index.aspx?page=391) The Office of Labor Standards Enforcement (OLSE) enforces labor laws adopted by San Francisco voters and the San Francisco Board of Supervisors. OLSE ensures that public works contractors comply with prevailing wage regulations, enforces the Minimum Compensation Ordinance and Health Care Accountability Ordinance, and administers the City's Sweatfree Contracting Ordinance. OLSE also enforces labor laws of general application, including the San Francisco Minimum Wage Ordinance, Paid Sick Leave Ordinance, the Health Care Security Ordinance, the Family Friendly Flexible Workplace Ordinance, and the Fair Chance Ordinance. OEWD (http://oewd.org) The Office of Economic Workforce Development (OEWD) oversees activities and programs related to business attraction and retention, workforce development, international business, development planning, and neighborhood commercial revitalization. Treasurer-Tax Collector’s Office (http://sftreasurer.org) The Treasurer manages all City funds in order to gain the maximum return with low risk and high liquidity, including investing the City’s portfolio of pooled funds. The Treasurer works with all City departments to ensure that funds are received, deposited, and reconciled as quickly and accurately as possible, so as to provide maximum interest and investment returns for the people of San Francisco. The Treasurer administers and monitors the deposit accounts and wire transactions

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of all City agencies and contracts with banks for financial services. The Treasurer also disburses payments on the City’s General Obligation municipal bonds.  City Departments City departments are responsible for providing efficient and effective services to the public. To do so, they are responsible for adhering to all City rules and regulations, and for documenting their department-level policies and procedures. Department procedures must follow City policies and incorporate internal controls that are appropriate to the department’s operations, organizational structure, and risks. Departments must regularly communicate these policies and procedures to all staff who have a role, responsibility, or authority in the process. Department internal policies and procedures that represent exceptions to City policies and procedures must be documented and then reviewed and approved by the Department Head and Office of the Controller. Refer to Section 1.6 Exceptions to This Policy for information regarding how a City department can request an exception to these policies and procedures.

1.3 | General Principles The City & County of San Francisco is responsible for safeguarding taxpayers’ money and making the best use of its financial resources. It must comply with significant legal restrictions on its use of public funds specified by external resource providers—such as federal and state grantors—and embody the restrictions in the appropriated budget. It is important that City departments ensure and demonstrate compliance with all legal restrictions in using taxpayers’ money and financial resources. City departments have a special responsibility to demonstrate:  

Fiscal accountability—we can justify that our actions in the current period have complied with public decisions concerning the raising and spending of public money Operational accountability—we can report on the efficiency and effectiveness of public programs.

These Controller’s Office Accounting Policies & Procedures have been developed to provide City departments with guidelines on how to conduct their accounting operations in a manner that will achieve fiscal and operational accountability. In addition to these specific guidance contained in this document, City department personnel should exercise common sense and good judgment when conducting their accounting-related activities. Common sense considerations include:    

Is this activity reasonable and necessary? Is there an appropriate audit trail? Will this activity pass audit review, or public scrutiny? Has this accounting transaction complied with basic principles of separation of duties and internal controls?

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Any doubt to these, or other, considerations should lead to further discussion or questions with management for clarity. City departments should understand that it is important that they comply with both the letter and the spirit of this document.

1.4 | Governing Laws, Rules, and Regulati ons These accounting policies and procedures have been issued under the Controller’s authority under the following:        

San Francisco City Charter San Francisco Administrative Code San Francisco Ordinances US Internal Revenue Services (IRS) Regulations California State Franchise Tax Board Regulations California Civil Code Governmental Accounting Standards Board (GASB) “Blue Book” of Generally Accepted Accounting Principles American Institute of Certified Public Accountants (AICPA) Audit Guide of State and Local Government Units.

Refer to each section of these Controller’s Office Accounting Policies & Procedures for citations of the specific governing laws, rules, and regulations that affect a particular functional area.

1.5 | Revisions and Updates The Controller’s AOSD will be conducting annual updates to these Policies & Procedures. Interim notifications to City departments will be issued electronically and posted on the Controller’s Office website.

1.6 | Exceptions to this Policy Department requests for exceptions or addendums to this policy as they relate to a specific department’s needs and Charter requirements can be made by contacting the Controller’s Office and submitting the following in writing: 

An explanation of the business need or other circumstance(s) necessitating an exception to these Controller’s Office Accounting Policies & Procedures

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  

A description of how the department policy and procedure is more restrictive and places greater control on department operations than what is specified in these Controller’s Office Accounting Policies & Procedures An explanation of how the department policy and procedure satisfactorily meets all control objectives specified in these Controller’s Office Accounting Policies & Procedures. The full language of the department policy and procedure that differs from these Controller’s Office Accounting Policies & Procedures The Department Head’s signature on the exception request.

The Controller’s Office will review and respond to requests for exceptions on a case-by-case basis.

1.7 | Internal Controls City Department Heads are accountable for the funds and assets entrusted to them. They have to ensure that assets and funds are used effectively and efficiently for stated purposes. To discharge this responsibility, they must establish and maintain an adequate internal control structure and documentation that provides reasonable assurance of fiscal and budgetary accountability. The City uses the “COSO Internal Control Integrated Framework” as its internal control framework. All departments shall maintain effective internal control systems as an integral part of their management practices. City departments must establish and maintain policies and procedures with departmentspecific details supplementing the framework described here. All such policies and procedures are subject to Controller’s Office review. Effective internal control should provide management with reasonable, but not absolute, assurance that assets are safeguarded from unauthorized access, use or disposition; transactions are executed in accordance with management’s authorizations; financial and statistical records and reports are reliable; applicable laws, regulations and policies are adhered to; and resources are efficiently and effectively managed. Controls help us run our operations efficiently, report information and comply with laws and regulations. Control systems shall be continuously evaluated and weaknesses, when detected, must be promptly corrected. A satisfactory system of internal control shall be built to achieve, but not be limited to, the following: 



Control Objectives o Operational Objectives o Safeguarding of Assets o Reporting Objectives o Compliance Objectives Control Environment o Supportive Attitude o Integrity of Competent Personnel Page 23

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 

o Supervision and Accountability o Providing discipline and structure Risk Assessment o Specifying objectives with clarity o Identifying risks to achievement of objectives o Fraud awareness and prevention Control Activities o Authorization, execution, and recording of transactions o Segregation of duties Information and Communication o Documentation of system Monitoring Activities o Performing ongoing evaluations/monitoring o Communicating deficiencies in a timely manner for corrective action

Control Objectives Control objectives in the areas of operations, reporting, and compliance are to be identified or developed for each organizational activity. Objectives are connected to goals and should be measurable. Safeguarding of Assets Access to City assets should be limited to authorized personnel who require these assets in the performance of their assigned duties. Access can be defined as both direct physical access and indirect access through the preparation or processing of documents that authorize the use or disposition of resources. Supportive Attitude Executives, managers, and employees should maintain a supportive attitude towards internal controls. They should establish standards of conduct and address deviations in a timely manner. Integrity and Competent Personnel Key personnel should have high standards of integrity, and be competent through education, training, or experience to accomplish their assigned duties. Supervision and Accountability Qualified and continuous supervision shall be provided to assure that approved procedures are followed and are operating as intended. Lines of personal responsibility and accountability should be clear.

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Supervision should be competent and continuing so as to ensure the achievement of internal control objectives. Risk Assessment Risk assessment involves a dynamic and iterative process for identifying and analyzing risks to achieving the entity’s objectives, forming a basis for determining how risks should be managed. Management must consider possible changes in the external environment and within its own business environment that may impede its ability to achieve its objectives. Segregation of Duties Key duties and responsibilities need to be divided or segregated among different people to reduce the risk of error or fraud. For example, ordering, receiving, approving invoices, and processing payment should not be done by the same staff person. The extent of controls put into any payment process should be designed to mitigate risks such as misappropriation.

Assuming that the department has complied with the City’s rules and regulations for ordering of goods and services, the process for receiving, reviewing, and approving payments must follow good internal controls. This involves certifying that all transactions are valid, legal, and properly authorized. Also required is a segregation of duties for each part of the payment process and that all transactions and supporting documents are accurately and properly recorded on the documents and records. Departments shall develop a plan of organization that provides segregation of duties appropriate for proper safeguarding of the City’s assets. Key duties such as authorizing, approving or recording transactions, issuing or receiving assets, making payments, and reviewing or auditing shall be assigned to separate individuals to minimize the risk or loss. A satisfactory internal control system depends largely on the elimination of opportunities to perpetrate and then conceal errors or irregularities. This, in turn, depends on the assignment of work in such a fashion that no one individual controls all phases of an activity or transaction. Authorization, Execution, and Recording of Transactions A system of authorization and record-keeping procedures is needed to provide effective accounting control over assets, liabilities, revenues, and expenditures. Independent evidence shall be maintained to document that authorizations are issued by persons acting within the scope of their authority and that transactions conform to the terms of the authorizations. Documentation shall provide an adequate audit trail. Transactions shall be accurate, timely, properly recorded, and properly classified. Computer system controls should be utilized to safeguard records and preserve data integrity.

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A department may have many levels of approval for internal control purposes. It is important to have the signatures documented and a copy submitted to the Controller’s Office any time there are changes in approvers. Signature cards for employees authorized by their department to approve financial documents, either hard copy or in FAMIS must be submitted to the Controller’s Office. These will be checked in post-audits conducted by the Controller’s Office. Contact your department’s designated Controller’s Fund Accountant for the Signature Authorization Form.

Because only the Department Head has authority and responsibility to approve transactions, the Department Head must sign each signature card delegating approval authority to others. For FAMIS approvers, this is done separately from the FAMIS profile setup. Ensure your department’s Signature Authorization Forms (Figure 1-1) are on file with the Controller’s Office by contacting your designated Fund Accountant. To find your designated Controller’s Fund Accountant, go to the Accounting Operations and Grants Contacts link: http://sfController.org/modules/ShowDocument.aspx?documentid=2286

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FIGURE 1-1. SIGNATURE AUTHORIZATION FORM

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Documentation of System All departments should have an established system of policies and procedures to be followed in the performance of duties and functions. Such a system shall include, but not be limited to, documentation of internal controls, accountability for resources and recording of financial transactions, and such documentation shall be communicated and made available to all employees and auditors. Departments must have a documented system of internal controls to meet the guidelines identified in this section.

Monitoring Controls An effective system of internal review by both the department and the Controller’s Office should be established and documented. Managers should periodically monitor that internal control procedures are complied with and documented. The results of the periodic monitoring findings should be communicated to staff so that any deviations from policy may be corrected. Communication of results of periodic monitoring should be documented. Reasonable Assurance Internal control systems shall provide reasonable, but not absolute, assurance that the internal control objectives will be achieved. This standard recognizes that the cost of internal controls should not exceed the benefits derived therefrom, and that the benefits consist of reductions in the risks of failing to achieve the stated objectives.

1.7.1 | Internal Control Questionnaire Each year, departments are asked to complete an internal control questionnaire (ICQ). The ICQ must be signed by the department Chief Fiscal Officer (CFO). The ICQ is part of the Controller’s internal control monitoring activities, and is used to design the post-audit procedures for each year. TABLE 1-1. INTERNAL CONTROL QUESTIONNAIRE TEMPLATE Department/Division:

Date:

Prepared by:

Title:

Phone No.:

Reviewed and confirmed by:

Title:

Phone No.:

Controller's review by:

Title:

Phone No.:

Please provide detailed responses to the following internal control questions. If the relevant specific controls are described in your department's policies & procedures, please cite the section and page number. Cells that are greyed out are not "yes or no" questions, please include your answer in the "Explanation" column. Please note that department review and

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confirmation by the CFO are required above.

Yes

No

Explanation

ADMINISTRATION AND GENERAL 1

Department accounting procedures: a. How are they communicated to employees, and how often? b. How are they periodically compared to actual practices in the department?

c. The procedure categories marked with "Yes" are on file with the Controller's Office. If you have procedures for the categories that are marked "No" please forward them to us, otherwise please provide an estimated date of completion in the "Explanation" column. (Some categories may be N/A) 1. Cash Handling 2. Revenue 3. Purchasing & Payables 4. Payroll 5. Grants 6. Journal Entries 7. Budget Entries 8. Debt 9. Fixed Assets 10. Inventory 11. Trustee accounts 12. Claims 2

Are valuable and sensitive documents and accounting records physically safeguarded in areas with limited access? a.

Who has access? Is backup considered? Please provide names and titles.

b.

How often are the combination/keys changed?

4

c. Where in the department's procedures is this documented? Has the fiscal leadership or key fiscal personnel in your department changed in the past 12 months? If so, please describe. Please provide your most updated fiscal organizational chart. Do you have a record retention policy in place that satisfies legal and program requirements? If yes, please provide the latest copy.

5

How does the department ensure that only appropriate staff have access to electronic information and software/systems?

6

How does your department track changes in relevant legal and program requirements? Do managers periodically monitor compliance with requirements?

7

How does the department ensure that only appropriate staff are permitted to authorize all types of transactions: payroll, cash receipts, accounts payable, etc.?

8

Have you received any audit findings from any auditor or government agency in the past 12 months? If so, describe.

9

Is your department responsible for a source of funds not part of the City budget or financial statements (such as a facilities district or financing district)? If so, explain.

3

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Yes I

No

Explanation

CASH HANDLING

10

Does the department collect any cash? Cash includes coins, currency, checks and money orders.

11

Provide names and titles of ALL persons performing the following duties: - Collecting cash - Recording cash receipts - Revolving fund custodian(s) - Revolving fund reconciliation(s) - Banking and account maintenance

12

- Transmitting collections from satellite offices to the department's main accounting office? Please note the frequency of such transactions or N/A. a. List all City Treasury or other bank accounts that the department deposits to and their frequency (daily, weekly, monthly)? b.

Are cash collections verified daily by someone other than the cashiers? Please provide the names and titles.

c.

Give names and titles of those who account for cash overages and shortages.

d. How are cash collections documented (cash register tapes, pre-numbered receipt forms)? Are pertinent information (date, payer, means of payments, teller’s ID, account distribution, etc.) recorded? 13

Controller's Office guidelines require that checks are endorsed immediately upon receipt and are deposited by the next business day. Do you have any cash collection points where deposits are not made daily? If so, please provide reason in the Explanation section or provide the pertinent procedures.

14

Are unidentified receipts regularly monitored to ensure that they are reclassed into the proper revenue or general ledger accounts within 15 business days?

15

Does your department deposit any cash collections as an abatement of expenditures instead of revenue? If so, please provide explanation and examples.

16

Does your department prohibit cashing of checks against cash collections? If not, please explain.

17

Where and how are undeposited collections physically safeguarded? Provide names and titles of persons responsible.

18

Provide list of all revolving fund / imprest cash / change fund accounts, along with last reconciliation as of 12/31/2014 for all accounts. Please include the location of the revolving fund, amount, and custodian of the fund.

II

REVENUE

19

Who in your department is responsible for monitoring revenue?

20

Do you have any new funding sources or sources of revenue this year?

III

PURCHASING AND PAYABLES

21

In the procedures provided to the Controller's Office please provide the page numbers where the following explanations for nonprofessional services procurement can be found:

Yes

No

Explanation

Yes

No

Explanation

a. Bid procedures and the thresholds your department follows for procurement of commodities, general services, and professional services.

22

b.

Receipt of goods or services (e.g. how packing slip, delivery receipt are verified)?

c.

Processing vendor invoices including ensuring only original invoices are submitted for payment.

In the procedures provided to the Controller's Office please provide the page numbers where the following explanations for professional services procurement can be found: a.

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b.

Request for Proposal process to select the vendor

c. Determining if contractor meet the IRS definition of a non-employee d. Ensuring the department does not buy equipment or supplies under professional service contracts. 23

Provide names and titles of people who perform the following duties: a.

Approving goods or services for order, and their approval limits if applicable.

b.

Approving purchases and invoices for payment (should have signature card on file with Controller).

c. Signing for goods received. 24

Provide names and title of people authorized to do Prop Q purchases, and dates they last attended Prop Q classes.

25

Before committing unencumbered funds, how does staff verify that they are sufficient to meet the proposed expenditures?

26

Does your department purchase from out of state vendors? If so, please provide procedures for accruing sales tax.

27

a.

Who is the department’s equal benefits liaison with the Contracts Management Division (12B Compliance)?

b.

Does this liaison have written procedures to follow?

a.

Does your department have a policy or program on the use of DBE vendors?

b.

If yes, is there any documentation of this policy or program?

28

29

Has your department had an emergency that necessitated the purchase of a commodity or service in the last year? If yes, describe the procedure used to make the emergency purchase and please provide any declarations.

30

For all professional services: a.

Does your department get Civil Service Commission approval?

b.

Does your department conduct a Request for Proposal process to select the vendor?

c.

Does the department use a contract purchase order?

d.

Does the contractor meet the IRS definition of a non-employee?

e.

Does your department follow the checklist provided by OCA – Purchasing?

31

Does the department have approval from the Controller's Office on procedures for accepting electronic invoices (fax, e-mail) from vendors? If so, please provide a list of vendors and personnel authorized to accept them for processing.

IV

PAYROLL

32

Please attach any updated electronic version of the department's payroll processing policies/procedures since the last audit. If a control procedure already for exists in these policies, please reference it by giving section and page number. If no written policy exists, please attach a written description of how the department accomplishes the control objective asked about. Does the department ensure that field employees, whose time is not closely supervised, are actively engaged in assigned duties? If so, how is this accomplished?

33

Yes

No

Explanation

34

Are salary and benefits costs by appropriate funding source and sub-object for each pay period reconciled between the department's systems that record actual hours by pay period, and total expenditures by funding source and sub-object in FAMIS?

35

For terminating employees, are final payment calculations reviewed and approved by the CFO or his/her designee?

36

If employees are not directly supervised by the person who authorizes timesheets, are there procedures in place for verifying time worked and leave taken during each pay period?

37

If employee pay is charged to more than one funding source, how does the department ensure that actual wages and benefits are charged to funding agencies based on actual time spent on the funding objective?

38

Are Acting Assignments, Suspension of Z, Exemplary Pay, and Extended Range reviewed and approved by finance before approval by HR? Are the spending impacts of these approvals included in the department's spending projection?

V

GRANTS

Yes

No

Explanation

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39

Does your department receive government or private grant funds?

40

a. Does the department follow grants-related guidance issued by one or more funding agencies? b. Please provide list of these funding agencies and internet links to any such guidance.

41

a. Does the department have written instructions for how to set up grants in FAMIS? b. Please provide documentation for any rules governing the pattern of grant details, including required relationships to projects or other codes. If in accounting procedures, please indicate where.

42

a. Is authorization to perform grant accounting in FAMIS restricted to designated staff? b. Please provide names and job class for authorized staff. c. Do grants accounting staff receive specialized training? d. Please provide documentation of any grants training.

43

a.

Are all grant funded positions included in the ASO or supported by accept and expend authority?

b.

If so, please provide a list of grant funded positions for the post audit period.

44

Are all grants received set up as grants in FAMIS? If not, please provide the grant information.

45

a.

Do any of the department's grants require funding agency approval for budget modifications? If so, which ones?

b.

Please provide copies of Board notifications for any grant budgets that had line item increases over 15% during 2014.

46 47

Do you include indirect costs in all of your grant budgets? If not, please explain why, and indicate whether an appropriate waiver was included in the Accept and Expend resolution/ordinances, if used. a. What is the departments' indirect cost rate for grants? b. How is the indirect cost rate determined? Please provide supporting documentation.

48

c. Are indirect costs recovered from grants on a timely basis? Do any of your grants require matching funds? If so, how do you reflect them in FAMIS?

49

For recovering grant funds expended: a. Are reimbursement requests submitted according to a schedule? b. Does the department ensure they receive the funds requested? c.

50

Does the billing cycle match the grantor's requirements?

a. Are grantor's budgetary spending controls reflected in FAMIS? b. What controls are in place to ensure expenditures are in compliance with grantor's provisions?

51

Does the department retain documentation of all staff time worked on grants? If time not recorded on functional time sheets, how are allocated hours and benefits documented?

52

Have you received any communication from a funding agency that reports the results of a desk audit, site visit, fiscal or program monitoring, or grant/program audit? If so, please provide copies.

53

Has the department taken all corrective actions agreed to for any and all audits by funders, external auditors, and the Controller's post audit from the past two years? Please document.

54

Has the department refunded any revenue to grantors? If so, why?

55

a. Does the department pay grant funds to sub-recipients?

56

b. If so, are sub-recipients monitored? Please provide documentation of monitoring activities. a. Are periodic and final grant reports reviewed by a supervisor prior to submission? b. If so, how is review documented?

57

a. Are grants reconciled by the department at least quarterly?

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b. Was the most recent quarter's grant reconciliation sent to the Controller's Office? 58

Does the department ensure that grant funded purchases are made in compliance with grantors' requirements? Please describe how.

59

Has the dept. received any gifts or bequests in the calendar year? If so, were they reported to the Board of Supervisors? If so, please provide a copy of the letter to the Board.

VI

JOURNAL ENTRIES (including all adjusting doc types BA, JE, PJ, RE, RA, RT).

60

List the employees who initiate, review, and approve Journal Entries?

61

What are the usual reasons Journal Entries are initiated? Correction of errors, routine transactions that require journal entries, or closing?

62

What are the key transaction cycles or reconciliations used to initiate or generate journal entries?

VII

BUDGET

63

Who are the employees responsible for:

Yes

Yes

No

No

Explanation

Explanation

Developing your AAO budget? Obtaining supplemental appropriations? Initiating and reviewing Budget changes or reallocations? Determining what budget authority will be used in requesting a change, and that the proposed change is within the scope of that authority? 64

How do you determine a budget entry is needed? (example: quarterly projections, unable to process a transaction)

65

Does your department internally monitor budget-to-actual performance in any way? Please explain.

66

What are the key transaction cycles or reconciliations used to initiate or generate journal entries?

67

Are there budget authorities that you cite specific to your department? Please cite AAO, Code, or Charter section.

VIII

DEBT

68

Is your department directly responsible for paying debt or bondholders? (most likely through a trustee or financial institution)

69

If yes, who are the key employees responsible for debt accounting?

70

Are there any other significant debt-like or debt-related transactions in your department (e.g. capital leases or indirect payments of debt through another department)?

Yes

Explanation

IX

FIXED ASSETS

71

Who are the key employees responsible for fixed asset accounting and/or capitalization of assets?

72

Is your department a FAACS department? Online or offline?

X

INVENTORY

73

Who are the key employees responsible for inventory accounting?

74

Do you perform regular physical inventory counts?

XI

TRUSTEE ACCOUNTS

75

Does your department have custody over or expend funds which are not on deposit with the Treasury (other than petty cash or revolving funds)? If you have trustee accounts, do you have trustee accounts for the repayment of debt and required by bond agreements?

76

Yes

No

No

Explanation

Yes

No

Explanation

Yes

No

Explanation

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77

If you have trustee accounts, do you have accounts to be used for expenditures other than debt payment (e.g., project expenditures)?

78

If yes, what are the funding sources for these accounts? What agreements require the funds to be held outside the treasury?

XII

CLAIMS

79

Does your department make claims?

80

Who are the key employees responsible for initiating and approving claims?

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Yes

No

Explanation

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2 | BUDGETING & APPROPRIATIONS 2.1 | Overview This section provides an overview of the City’s budgeting and appropriations process, and its practical implications for accounting and financial reporting.

2.2 | Budgeting* In the City & County of San Francisco, the Board of Supervisors and then the Mayor are responsible for approving the budget, which dictates spending by City government. Through the budget, the Board of Supervisors decides the City’s spending priorities for the next fiscal year by setting aside money for programs, projects, or services. The Mayor’s Office and City departments are then responsible for administering programs within the specific funding decisions contained in the budget. San Francisco Administrative Code, Chapter 3: Budget Procedures sets forth the parameters for the budgeting process. Two components to the City & County’s budget are controlled differently: 



Operating budget—adopted annually, the operating budget is a detailed estimate of how much the City needs to spend in its fiscal year to meet its ongoing financial obligations and provide programs and services. It establishes a spending cap that management may not exceed without special authorization. Capital budget—because capital construction normally takes place over more than one fiscal period, capital budgets are generally adopted on a project-length basis. The capital budget is money set aside for buying or building fixed assets such as buildings, equipment, vehicles, water and sewer facilities, and land. Refer to San Francisco Administrative Code, Chapter 3, Section 3.20—Capital Expenditure Plan for more information.

2.3 | Appropriations* The Budget and Appropriation Ordinance (Budget Ordinance) document is the final City & County budget as approved by the Board of Supervisors. It reflects the City’s budget at the beginning of the fiscal year on July 1. The Budget Ordinance is recorded in the general ledger through the use of budgetary accounts in order to facilitate control over revenues and expenditures during the year.

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2.3.1 | Automatic Appropriations 2.3.2 | Supplemental Appropriations 2.3.3 | “De-Appropriation” of Capital Projects-

2.4 | Cost Allocation*

2.5 | Surplus Transfers This section addresses the policy and procedures of allowable expenditure budget transfers as established and approved by the voters and/or the legislative body of the City & County of San Francisco. These guidelines are issued according to the applicable provisions of the San Francisco Administrative Code and Budget and Appropriation Ordinance (Budget Ordinance). The governing provision for surplus transfer is Section 3.18 of the Administrative Code, which states: The Controller, upon request of the Mayor, other officials, boards, or commissions of the City & County, may transfer any unused balance or portion thereof from previously appropriated funds to augment existing appropriations as long as the transfer is within the same fund and governmental unit. The Controller shall notify the Mayor and the Board of Supervisors of any transfer of funds made pursuant to this section which exceeds ten percent (10%) of the original appropriation to which the transfer is made. No such transfer of funds shall be made to an appropriation which was previously reduced by action of either the Mayor or Board of supervisors in their review of the budget for the current or prior fiscal year.

2.5.1 | Controller’s Office Surplus Transfer Guidelines City departments may need to request expenditure budget transfers under certain circumstances. It may be necessary to transfer funds from one activity or project to another to reflect realignment of priorities, duties, or reorganization. Transfers among major objects of expenditure within a department also may be needed to adjust budget estimates to meet actual operating realities. The guidelines on surplus transfer include:

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 Cumulative transfer requests to the Controller’s Office should not exceed ten percent (10%) of the original appropriation. Requests exceeding the threshold must be properly justified and approved by the Controller. The 10% threshold applies to the sub-fund/project/character (depending on the Budget Ordinance appropriation control level) to which that appropriation is being transferred. For annual funds, the 10% calculation is based on the current fiscal year original appropriation and any Board-approved supplemental appropriation within budgetary control level. For continuing funds such as capital projects, the 10% calculation is based on the total multi-year original appropriation and any Board-approved supplemental appropriation amounts (i.e., the total of original and supplemental appropriation for each fiscal year from year 1 through the current fiscal year). For projects funded by multiple funding sources, the 10% threshold is based on the total Board-approved appropriation of all funding sources. If multiple transfers were made during the year, the individual transfer as well as the cumulative transfer must not exceed the 10% threshold.  Transfers must not be made to an appropriation reduced by action of either the Mayor or Board of Supervisors. If the Mayor or Board reduction was made to a specific sub-object, appropriations cannot be transferred to other sub-objects within the character. This, however, does not apply to reductions to work order sub-objects (081XX). Refer to Section 2.5.6 Surplus Transfers FAQs for more information. Exceptions to this guideline must be approved by the authority that reduced the appropriation, i.e., Mayor’s Budget Office or Board of Supervisors.  During the period of the interim appropriation ordinance and interim salary ordinance, no transfers shall be permitted without approval of the Controller, the Mayor’s Office, and the Board of Supervisors.  Appropriations carried forward from prior year(s) cannot be used for surplus transfer. Carryforward appropriations are not surplus and must be used for the purpose originally budgeted and approved for carryforward.  The following types of surplus transfer require additional approval from the Mayor’s Office and notification to the Board of Supervisors:  

Transfers involving salaries Transfers involving new equipment budget

 As dictated by Admin. Code 3.18, transfers should be within the same fund and governmental unit. Transfers such as between annual and continuing funds are not allowed and exception requests must be approved by the Mayor’s Office.

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 Transfers from professional services contract to salaries require additional approval from the Human Resources Director, the Mayor’s Office, and the Controller’s Office Budget and Analysis Division.  Transferring department budgets for services of other City departments to other spending categories requires approval from the requesting or performing department.

2.5.2 | How Departments Request Surplus Transfer The City department that is seeking to complete a surplus transfer will complete the following steps:  Analyze unanticipated needs, plan funding, and consolidate requests whenever possible.  Verify that the adjustment is a surplus transfer and not a reclassification/realignment. Transfers of expenditure appropriation among items specified in the appropriation ordinance are considered surplus transfers. For example, movement of funds between characters in operating accounts and between projects is a surplus transfer. Transfers between sub-objects within the same object and/or character of an operating fund are reclassifications or realignments. For example, expenditure overruns in data processing supplies offset by a surplus balance in other office supplies is allowed, as the two sub-objects fall under the same character of expenditure. Refer to Table 2-1 for more information. TABLE 2-1. WHEN TO USE DOCUMENT TYPE “SU” FOR TRANSFERS/REALLOCATION OF FUNDS

SURPLUS BUDGET TRANFERS (Document Type SU)

RECLASSIFICATION / REALIGNMENT (Document Type JE or BA, or others)

Transfers between Budget and Appropriation Ordinance level (character / project) within the same fund and governmental unit

Transfers between sub-objects and index codes in operating funds within the same Budget and Appropriation Ordinance level; transfers between characters within a project (BA or JE)

Budget allocations between projects within same fiscal entity (sub-fund)

Work order budget set-up (BW document and prefix)

Transfer of appropriated professional service contracts to salaries per Section 10.2 Administrative Provisions of the Budget Ordinance

Contingency set-up (JE) Grant budget reallocations (GE) Release of reserves (BA) Direct charge between departments within the same fiscal entity (sub-fund) and project (JE)

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SURPLUS BUDGET TRANFERS (Document Type SU)

RECLASSIFICATION / REALIGNMENT (Document Type JE or BA, or others) Budget realignment of technical changes between characters (BA) System appropriation carry-forward reallocations or reallocations from unallocated master projects to sub-projects (JE) Reallocations from UNA or General City departments (BA) Transfers between different fiscal entities (CAFR reporting levels) are done through transfer in and out process using document types RA and RT

 Complete the Surplus Expenditure Budget Transfer Request online at http://conforms.sfgov.org/. A screenshot of the online form is shown below in Figure 2-1. Follow the guidelines in Table 2-2 closely when completing the request. State the reason it was not in the original budget and verify that the funds are truly a surplus. Attach supporting documents and/or provide additional explanation as needed.

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FIGURE 2-1. SURPLUS EXPENDITURE BUDGET TRANSFER REQUEST

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TABLE 2-2. GUIDELINES TO COMPLETE THE SURPLUS TRANSFER REQUEST FORM

DATA

INPUT REQUIREMENT

Date

Date of Request

Department

Initiating Department; select from the dropdown list

Transfer From Sub-fund

Enter Fund Type/Fund/Sub-fund; e.g., 1GAGFAAA from which funds are being transferred.

Transfer From Project

If project-related surplus transfer, enter Budget Ordinance level project code within the same fund and governmental unit from which funds are being transferred.

Transfer From Index Code

Enter index code that points to the Budget Ordinance level cost center from which funds are being transferred.

Transfer From Sub-object

Enter a specific sub-object under the character from which funds are being transferred out.

Transfer From Amount

Enter amount being transferred from the source account.

Transfer To Sub-fund

Enter Fund Type/Fund/Sub-fund; e.g., 1GAGFAAA to which funds are being transferred.

Transfer To Project

If project-related surplus transfer, enter Budget Ordinance level project code within the same fund and governmental unit to which funds are being transferred.

Transfer To Index Code

Enter index code that points to the Budget Ordinance level cost center to which funds are being transferred.

Transfer To Sub-object

Enter a specific sub-object under the character to which funds are being transferred in.

Transfer To Amount

Enter amount being transferred to the receiving account.

Reason Transfer Needed

Detailed and specific justification of need is required to support the transfer request. Description such as “transfer from non-personal services to materials and supplies” is neither detailed nor descriptive. Justification should also address the reason why it is not included in the budget submission, or why it cannot wait until the next budget year.

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DATA

INPUT REQUIREMENT

Reason Surplus Funds Available

For example, “funds initially budgeted in XXX for the purpose of xxx, due to xxx, as a result, xxx.” Demonstrate how the “surplus” is achieved or that the “unused balance” is truly a surplus that will last until fiscal year-end. Identify the original need and its funding amount and explain why the need no longer exists.

Certification

(1) Certify that the transfer is in accordance with the provisions of Section 3.18 of the Administrative Code. (2) Give details to show that the transfer amount is within the 10% threshold of the original appropriation to which the transfer is made. (3) If multiple transfers were made at different times of the year, make an additional certification that the cumulative transfers do not exceed the 10% threshold of the original appropriation. (4) Certify that presently no supplemental appropriation is anticipated in these sub-objects. (5) Demonstrate or certify that the “new” need is not for an appropriation reduced by action of either the Mayor or Board of Supervisors in the current or prior fiscal year. If the department is inaccurate in any of the above certifications, the surplus transfer request will be rejected. Using the online form, departments can choose to insert the Certification Template.

 Submit the completed online request for approvals. The required authorization includes approvals from the Department Head/CFO or designee, Controller’s Office AOSD Fund Accountants, and AOSD Director. Controller, Mayor’s Budget Office and Board of Supervisor approval may also be required if the transfer involves the situations and/or exceptions described in Section 2.5.1 Controller’s Office Surplus Transfer Guidelines. Approvers can approve, reject, or disapprove the online request. If rejected, the request will be sent back to the initiator for revision. If disapproved, the request is denied.  If and when the surplus transfer request is completely approved, the department submits a surplus transfer journal entry in the financial system. For step-by-step illustrations on how the surplus transfer entries are completed, refer to Section 16 - How-To & Screenshots.

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2.5.3 | Controller’s Office Review of Surplus Transfers Upon receipt of Surplus Transfer Request Form (Figure 2-1), the Controller will complete the following review steps.  Verify Department head or authorized signatory signature against signature card on file with the Controller’s Office.  Verify Mayor’s approval for requests related to: Labor New Equipment budget Exceptions such as transfer between annual and continuing fund sources, e.g., between AAA and ACP.  Verify completeness of information and reasonableness of justification.  Verify funding availability and appropriateness, e.g., budget carried forward from the previous fiscal year cannot be the funding source of a surplus transfer.  Verify department certification on transfer is within the 10% threshold.  Verify department certifications on transfer is not adding back to appropriation previously reduced by Board or Mayor.  Verify the accurate use of the accounting codes, e.g., index codes, sub-objects.  Return to department if request is being rejected or requires substantial changes  If approved, notify the department to submit the FAMIS entry  Review FAMIS entry for accuracy of data based on approved surplus transfer request. The data elements (index code, sub-object, project code) must match the data on the surplus transfer request in both transfer to and transfer from lines. Approve or reject based on review.

2.5.4 | Reporting of Surplus Transfers At fiscal year-end, the Controller shall notify the Mayor and the Board of Supervisors of any transfer of funds made pursuant to Section 3.18 of the San Francisco Administrative Code which exceeds 10% of the original appropriation to which the transfer is made. If multiple transfers were made at different times of the year, the individual transfer as well as the cumulative transfers exceeding the 10% threshold will be reported. The Controller’s Office also recommends departments to track surplus transfer requests using the tracking sheet as shown in Figure 2-2.

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FIGURE 2-2. CONTROLLER'S SURPLUS TRANSFER TRACKING SHEET SUMMARY OF SURPLUS TRANSFER REQUESTS DEPARTMENT:

XXXXXX XXXXXXX

FISCAL YEAR: SUBFUND: PROJECT:

XXXX-XXXX

TRANSFER FROM: OBJECT: INDEX CODE ORIGINAL BUDGET TRANSFER AMT 001 021 040 060 081

PRIOR TRANSFER(S) YTD TOTAL

YTD %

YTD TOTAL

YTD %

Doc. No.

TOTALS TRANSFER TO: OBJECT: 001 021 040 060 081

INDEX CODE ORIGINAL BUDGET TRANSFER AMT

TOTALS

2.5.5 | Related Administrative Provisions of the Budget Ordinance The following are important considerations specified in the Budget Ordinance. Section 4 – Administrative Provisions of the Budget Ordinance (Interim Budget Provisions) No new position may be filled in the interim period with the exception of those positions which in the discretion of the Controller are critical for the operation of existing programs or for projects previously approved by the Board of Supervisors or are required for emergency operations or where such positions would result in a net increase in revenues or where such positions are required to comply with law. New positions shall be defined as those positions that are enumerated in the Mayor's budget for the current fiscal year but were not enumerated in the appropriation and salary ordinances for the prior fiscal year, as amended, through June 30 of the prior fiscal year. In the event the Mayor has approved the reclassification of a position in the department's budget for the current fiscal year, the Controller shall process a temporary or “TX" requisition at the request of the Page 44

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department and subject to approval of the Human Resources Director. Such action will allow for the continued employment of the incumbent in his or her former position pending action by the Board of Supervisors on the proposed reclassifications. If the Budget Committee of the Board of Supervisors recommends a budget that reinstates positions that were deleted in the Mayor’s Budget, the Controller and the Director of Human Resources shall have the authority to continue to employ and pay the salaries of the reinstated positions until final passage of the budget by the Board of Supervisors, and approval of the budget by the Mayor. Section 7.2 – Administrative Provisions of the Budget Ordinance (Equipment Defined) Funds for the purchase of items of equipment having a significant value of over $5,000 and a useful life of three years and over shall only be purchased from appropriations specifically provided for equipment or lease-purchased equipment, including equipment from capital projects. Departments may purchase additional or replacement equipment from previous equipment or lease-purchase appropriations, or from citywide equipment and other non-salary appropriations, with approval of the Mayor’s Office and the Controller. Section 9 – Administrative Provisions of the Budget Ordinance (Interdepartmental Services) The Controller is hereby authorized and directed to prescribe the method to be used in making payments for interdepartmental services in accordance with the provisions of Section 3.105 of the Charter, and to provide for the establishment of interdepartmental reserves which may be required to pay for future obligations which result from current performances. Whenever in the judgment of the Controller, the amounts which have been set aside for such purposes are no longer required or are in excess of the amount which is then currently estimated to be required, the Controller shall transfer the amount no longer required to the fund balance of the particular fund of which the reserve is a part. Provided further that no expenditure shall be made for personnel services, rent, equipment and capital outlay purposes from any interdepartmental reserve or work order fund without specific appropriation by the Board of Supervisors. The amount detailed in departmental budgets for services of other City departments cannot be transferred to other spending categories without prior agreement from both the requesting and performing departments. The Controller, pursuant to the provisions of Charter Section 3.105, shall review and may adjust charges or fees for services that may be authorized by the Board of Supervisors for the administration of the Computer Store. Such fees are hereby appropriated for that purpose. Section 10.1 – Administrative Provisions of the Budget Ordinance (Position, Funds, and Transfers for Specific Purposes) (j) For purposes of defining terms in Administrative Code Section 3.18, the Controller is authorized to process transfers where such transfers are required to administer the budget through the following

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certification process: In cases where a character of expenditure or project expenditure is reduced during the Board of Supervisors phase of the budget process, the Chair of the Budget Committee may certify that such a reduction does not reflect a deliberate policy reduction adopted by the Board. The Mayor’s Budget Director may similarly provide such a certification regarding reductions during the Mayor’s phase of the budget process. Section 10.2 – Administrative Provisions of the Budget Ordinance (Professional Services Contracts) Funds appropriated for professional service contracts may be transferred to the account for salaries on the recommendation of the Department Head for the specific purpose of using City personnel in lieu of private contractors with the approval of the Human Resources Director and the Mayor and the certification by the Controller that such transfer of funds would not increase the cost of government.

2.5.6 | Surplus Transfers Frequently Asked Questions (FAQs) Q: What is meant by “for an appropriation reduced by action of either the Mayor or Board of Supervisors in the current or prior fiscal year”? A: The term “reduced” refers to reduction of submitted budget amount from the department by: (1) reduction during the Mayor’s phase review or, (2) reduction in the Finance Committee review or, (3) reduction during the Board of Supervisors phase review. This does not apply to changes made only during the “technical phase” of the budget process.

Q: If the Mayor’s or Board of Supervisor’s reduction was made to a specific work order sub-object 081XX, can transfers be made to other sub-objects in Character 081 (i.e., work order budget for other performing departments)? A: Yes. The budget control for work orders is at sub-object level both in the Budget Ordinance and in FAMIS.

Q: Can a department transfer funds between a 2S fund type and a 1G fund Type? A: No. Only transfers between Budget Ordinance level (i.e., character/project) within the same fund and governmental unit, e.g., 1GAGF to 1GAGF, 2SXXX to 2SXXX, etc.

Q: How is the 10% threshold calculated?

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A: The 10% threshold is based on the total cumulative budget enacted by the Board and the Mayor through the Budget Ordinance and supplemental appropriations. It is calculated on the amount in the funding source that is being transferred to.

Q: Can transfers exceeding the 10% threshold be submitted for approval? A: Yes, although such requests need stronger justification and will be reviewed and approved directly by the Controller.

Q: Can I use appropriations carried forward from prior year(s) for surplus transfer requests? A: No. Appropriations carried forward from prior year(s) are not surplus and need to be used for the purpose originally budgeted and approved for carryforward.

Q: We have a fixed two-year budget. Do transfers within the budget process count towards the 10% threshold of transfers? A: Yes, these are surplus transfers that are counted toward the threshold for each fiscal year.

Q: What specific documents can be used to support the transfer amount needed? A: Some examples of detailed justification would include quotes, estimates on planned procurement or draft MOU.

Q: Can add-backs and district allocations by the Board of Supervisors be transferred to other funding sources? A: Add-backs and district allocations must be used for the purposes that the Board specified and, therefore, should stay in the funding source originally approved by the Board. Budget can only be transferred when the scope is the same, e.g., a transfer from Character 038 to Character 081 is allowed as long as the work order performing department is using the budget for the same purposes.

Q: What are the common reasons for surplus transfer requests being declined? A: Reasons include:

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     

Partial or inaccurate certification on the transfer request form Insufficient or lack of details on the reason for the transfer Insufficient justification that surplus funds are available for the transfer Transfers of carried-forward funds Funds requested to be transferred not sufficient or on reserve Transfers may cause inaccurate accounting, e.g., work authorization vs. work order for capital related funds.

2.6 | Reserves* 2.6.1 | Release of Reserves

2.7 | Budget Corrections* 2.7.1 | Budget Correction vs. Surplus Transfer

2.8 | Midyear Actions* 2.8.1 | Budget Cuts

2.9 | Repor ting* 2.9.1 | Calculation of Fund Balance 2.9.2 | Negative Fund Balance

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3 | CONTRACTS & ENCUMBRANCES 3.1 | Overview This section provides the Office of Contract Administration’s contracting guidelines pursuant to San Francisco Administrative Code, Chapter 6 and Chapter 21, and sets out guidelines for the encumbrance process. Contracting rules and regulations are an important part of having an accountable, transparent, and ethical government procurement process. Section 3.2 provides guidelines for contracting in compliance with Administrative Code, Chapter 6; Section 3.3 provides guidelines for Administrative Code, Chapter 21. The encumbrance of funds is an important and usually last step in any ordering or contracting process. Encumbrance is a formal commitment of funds, recorded against a department’s budget in the financial system. An encumbrance is required before an order or contract is issued, and there are very, very few exceptions. Refer to Charter Section 3.105 and Administrative Code Section 10.06 for encumbrance requirements.

3.2 | Contracting Rules & Regulations, Admin. Code Chapter 6* This section provides guidelines that departments must follow in order to comply with San Francisco Administrative Code, Chapter 6.

3.2.1 | General Contracting Procedures San Francisco Administrative Code, Chapter 6 governs outside temporary professional design, consultant or construction management services and construction services. Refer to Section 17.5 Admin. Code Chapter 6 for full text of Chapter 6. All other contracts are subject to the requirements of Administrative Code, Chapter 21. Departments may contract for construction and consulting services under the following circumstances:  

The services to be provided include special qualifications that are not available from Civil Service classifications. The work to be performed would temporarily increase the department's workload beyond available resources and would substantially interfere with routine or ongoing projects. The Civil Service Commission has rules that identify when a professional service may be contracted while classifications exist to perform the work.

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 

The services can be practically performed by private contractor(s) for a lower cost than similar work performed by City employees (Charter Section 10.104(5)). This type of contract was formerly known as a Prop J contract and is subject to the approval of the Board of Supervisors. Professional Services contracts in accordance with the requirements cited in Administrative Code, Section 6.40. Construction services in accordance with the requirements cited in Administrative Code Section 6.20(A) above and Administrative Code Section 6.20(B); Administrative Code Section 6.60; Administrative Code Section 6.61; Administrative Code Section 6.62; Administrative Code Section 6.63; Administrative Code Section 6.64; and Administrative Code Section 6.65.

3.2.2 | Consultant Contract Requirements Guide The following table lists criteria with which consultants must comply and the portion of the Administrative Code (or other ordinance) that specifies relevant requirements. TABLE 3-1. CONSULTANT CONTRACT REQUIREMENTS

ITEM

ADMIN. CODE SECTION(S)

Authorized City Contracting Departments

6.2 & 21.05

Minimum Competitive Amount- RFP/RFQ

6.40

CMD Compliance

6.5(A) & (B) & 14B

Legal Advertisement

14B.7(A)(3) & 14B.13(A)(3) & 21.2

Distribution & review of proposals (CMD review)

6.5(B)

Rejection or Cancellation of RFPs

6.41(B)

Award of Contract

6.41lC)

OTHER ORDINANCE

Contract Processing Number of Agreements Executed

6.3(D) & 21.18

Certification of Contract (Encumbrances)

6.3(C) &

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ADMIN. CODE SECTION(S)

ITEM

OTHER ORDINANCE

6.41(C) Notice To Proceed 6.42(E) & 14B.13(A)(11) & (12)

Modifications

Charter 9.118

3.2.3 | Formal Construction Contract Requirements Guide The following table lists criteria with which construction contracts must comply and the portion of the Administrative Code (or other ordinance) that specifies relevant requirements. TABLE 3-2. FORMAL CONSTRUCTION CONTRACT REQUIREMENTS

ITEM

ADMIN. CODE SECTION(S)

Authorized City Public Works Contracting Departments

6.2

Threshold Amount—Requires Formal Bid

6.1(M)

OTHER ORDINANCE

Preparing Bid Documents & Review by Contract Prep Cost Estimates

6.20(C)

CMD Compliance

6.5(A) & (B) & 14B

Legal Advertisement

6.21(A)(1) & 14.13(A)(3)

Addendum issued 72 hrs. prior to bid opening Fees for Plans & Specifications

PCC 4104.5 6.21(A)(5)

Public Bid Opening

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ITEM

ADMIN. CODE SECTION(S)

OTHER ORDINANCE

Bid Securities

6.21(A)(4)

Distribution & review of bids (CMD review)

6.5(B)

Bid Protest

6.21(D)

Rejection of Bids

6.21(C)

Negotiation of Bid if only one or none received

6.23(C)(1) & (2) & (3) & (4)

Time for Award

6.6(A) & 6.20(E)

Award of Contract

6.1(B)(1) & (2)

Contract Processing & Execution of Contracts

6.3(D)

Certification of Contract (Encumbrances)

6.3(C)

Charter 3.105

Change Orders

6.3(D) & 6.22(H) & 14B.13(A)(11) & (12)

Charter 9.118

Exemptions From and Alternatives to Competitive Bidding - Design/Build

6.61 & 14B.19

Exemptions From and Alternatives to Competitive Bidding - Job Order Contracts

6.62

Exemptions From and Alternatives to Competitive Bidding -Integrated Project Delivery

6.68 & 14B.19

Notice To Proceed

3.2.4 | Formal Construction Contract Processing Timeline The following table lists actions with which formal construction contracts must comply.

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TABLE 3-3. FORMAL CONSTRUCTION CONTRACTING TIMELINES

ACTION

REQUIREMENTS

MINIMUM MAXIMUM DAYS DAYS

Advertising For Bids

Publication in newspaper of general circulation

1

1

Addendum

Issued 72 hours before Bid Opening or delayed by at least 72 hours

3

Bid Opening

Calendar days advertised before Bid Opening

10

CMD 14B

Recommended for Good Faith Efforts (GFE) requirements

10

CMD 12B Compliance

After bid opening, must file with CMD if not compliant

14

Debarment Affidavit

After opening, must submit for all subs & suppliers bidding >$25,000

14

Bid Withdrawal

Written notice demonstrating clerical error (working days)

5

Contracting Department Review

Review claim of error & issue written findings

Bid Protest

Timely receipt (working days)

5

Response to Protest

Reply from protested bidder after receiving protest

5

Review & Findings

CMD, City Attorney & contracting department review & issues findings

CMD Review

Complete review of bids for discounts & goals, issue written findings

Award Notice

Contracting department issues award notice

Contracting Department

Verifies funding

15

60

6

90

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ACTION Review

REQUIREMENTS

MINIMUM MAXIMUM DAYS DAYS

Check Contractor's License for current & active status or Joint Venture license per Business & Professions Code Section7029.1 Check for CMD recommendation of award Check 12B Compliance in the financial system or contact CMD Check for 1st Source Hiring Submittal with bid & send to 1st Source Hiring Administrator Prepare Award of Formal Construction Contract Prepare contract agreement, bonds, & insurance documents

Contractor Response to Award

Return executed agreements, bonds insurance & subcontractors' licenses, business tax & worker's comp insurance information

Contracting Department Review

Review executed agreement, bonds, for notarized signatures Review bonds & insurance for correct amounts & coverage & verifies Bond & Insurance Companies admitted to do business in California & company financial rating Check all subcontractors' licenses, business taxes & worker's comp insurance

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ACTION

REQUIREMENTS

MINIMUM MAXIMUM DAYS DAYS

Check 1st Source Hiring submittals after award & forward to 1st Source Hiring Administrator Routing for City Execution

Contracting Department Head City Attorney as to form City Administrator

Posting Contract

Enter contract into contract management system for electronic approval (posting/certification) if applicable

Notice to Proceed (NTP)

Sends contractor NTP & executed Contract Documents

3.2.5 | Informal Construction Contract Requirements Guide The following table lists criteria with which informal construction contracts must comply and the portion of the Administrative Code (or other ordinance) that specifies relevant requirements. TABLE 3-4. INFORMAL CONSTRUCTION CONTRACT REQUIREMENTS

ADMIN. CODE SECTION(S)

ITEM Authorized City Public Works Contracting Departments

6.2

Threshold Amount- Informal Bid

6.1(M)

Micro-LBE Set-Aside Program

14B.7(K)

OTHER ORDINANCE

Preparing Bid Documents & Review by Contract Prep Cost Estimates

6.20(C)

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ITEM

ADMIN. CODE SECTION(S)

CMD Compliance

6.5(A) & (B) & 14B

Legal Advertisement

6.21(B)

Addendum issued 72 hrs. prior to bid opening Informal Construction Bidders

OTHER ORDINANCE

PCC 4104.5 6.20(B)

Public Bid Opening Bid Securities

6.21(A)(4)

Distribution & review of bids (CMD review)

6.5(B)

Bid Protest Rejection of Bids

6.21(C)

Negotiation of Bid if only one or none received

6.23(C)(1) & (2) & (3) & (4)

Time for Award

6.6(A) & 6.20(E)

Award of Contract

6.3(A)

Contract Processing & Execution of Contracts

6.3(D)

Certification of Contract (Encumbrances)

6.3(C)

Charter 3.105

6.3(D) & 6.22(H) & 14B.13(A)( 11) & (12)

Charter 9.118

Notice To Proceed Change Orders

3.2.6 | Informal Construction Contract Processing Timeline The following table lists actions with which informal construction contracts must comply.

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TABLE 3-5. INFORMAL CONSTRUCTION CONTRACTING TIMELINES

ACTION

REQUIREMENTS

MINIMUM MAXIMUM DAYS DAYS

Advertising For Bids

3-Day Notice Publication on Purchaser's website

3

3

Addendum

Issued 72 hours before Bid Opening or delayed by at least 72 hours

3

Bid Opening

Informal quotes may be publicly opened

3

CMD 14B

Recommended for Good Faith Efforts (GFE) requirements

CMD 12B Compliance

After bid opening, must file with CMD if not compliant

14

Debarment Affidavit

After opening, must submit for all subs & suppliers bidding >$25,000

14

Bid Withdrawal

Written claim of clerical error

Contracting Department Review

Review claim of error & issue written findings

Bid Protest

Timely receipt

Response to Protest

Reply from protested bidder after receiving protest

Review & Findings

CMD, City Attorney & contracting department review & issues findings

CMD Review

Complete review of bids for discounts & goals, issue written findings

60

Award Notice

Contracting department issues award notice

90

Contracting Department Review

Verifies funding Check Contractor's License for current & active status or Joint Venture license per Business & Professions Code Section 7029.1

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ACTION

REQUIREMENTS

MINIMUM MAXIMUM DAYS DAYS

Check for CMD recommendation of award Check 12B Compliance in the financial system or contact CMD Check for 1st Source Hiring Submittal with bid & send to 1st Source Hiring Administrator

N/A

N/A

Prepare Award of Formal Construction Contract Prepare contract agreement, bonds, & insurance documents Contractor Response to Award

Return executed agreements, bonds insurance & subcontractors' licenses, business tax & worker's comp insurance information

Contracting Department Review

Review executed agreement, bonds, for notarized signatures

10

Review bonds & insurance for correct amounts & coverage & verifies Bond & Insurance Companies admitted to do business in California & company financial rating Check all subcontractors' licenses, business taxes & worker's comp insurance 1st Source Hiring Routing for City Execution

Contracting Department Head City Attorney as to form City Administrator

Posting Contract

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Enter contract into contract management system for electronic approval

N/A

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ACTION

REQUIREMENTS

MINIMUM MAXIMUM DAYS DAYS

(posting/certification) if applicable Notice to Proceed (NTP)

Sends contractor NTP & executed Contract Documents

Refer to Section 4.4.1Prompt Payment to Vendors for more information on City’s prompt payment guidelines.

3.3 | Contracting Rules & Regulations, Admin. Code Chapter 21* The Office of Contract Administration (OCA) promulgates rules and regulations pursuant to Chapter 21 of the San Francisco Administrative Code. Each contracting department shall cooperate to the fullest extent with OCA in the acquisition of commodities and services. Refer to the OCA website at http://sfgsa.org/modules/showdocument.aspx?documentid=702 for complete and most updated procurement rules and regulations.

3.3.1 | Scope Chapter 21 governs the acquisition of commodities and services. Chapter 21 does not apply to contracts for public works or improvements or to contracts for the purchase, sale or lease of any interest in real property. Although Chapter 21 sets forth detailed procedures for procurement, there are sections in Chapter 21 that require further guidelines by the Purchaser. This section sets forth the rules and regulations for the following sections in Chapter 21:           

21.03(a): General Authority of the Purchaser of Supplies: Approval of Purchases 21.03(e)(3): Dollar Limit for Optional Equipment in Vehicles 21.03(e)(5): Definition of Specialized Vehicles 21.03(j): Information Technology (IT) Purchases 21.05(b): Procurement of Professional Services 21.06(c): Other Electronic Transactions 21.3(b): Competitive Sealed Bidding: Bid Opening 21.3(d): Correction, Withdrawal, or Rejection of Bids: Cancellation of Awards 21.3(g): Additional Purchases 21.3(i): Bid Protests 21.5(a): Other Purchases: Commodities and Services Less Than $50,000 Page 59

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    

21.5(b): Sole Source 21.5(c): Perishable Foods 21.5(d): Proprietary Articles 21.5(e): Pilot Project 21.6: Multiple Low Offers

3.3.2 | Definitions Definitions set forth in Chapter 21, Section 21.02 Acquisition of Commodities and Services, are incorporated as follows:     



 

  

Bid shall mean a bid, quotation, or other offer, other than a Proposal, from a person or entity to sell a commodity or service to the City at a specified price. Bidder shall mean any person or entity which submits a bid. City shall mean the City & County of San Francisco. COIT shall mean the Committee on Information Technology of the City & County of San Francisco. Commodity shall mean products, including materials, equipment and supplies, purchased by the City. “Commodity” shall specifically exclude legal and litigation related contracts or contracts entered into pursuant to settlement of legal proceedings, and employee benefits, including, without limitation, health plans, retirement or deferred compensation benefits, insurance and flexible accounts, provided by or through the City's Human Resources Department or the Retirement Board. Technology Marketplace shall mean the City-wide, multiple award term contract for the procurement of certain Commodities and Services, which is administered by DT for the benefit of City departments, awarded pursuant to the “Request for Proposal for Computer Hardware, Software, Peripherals and Appropriate Network, Consulting, Maintenance, Training and Support Services,” and any successor contracts thereto. Contractor shall mean any corporation, partnership, individual, sole proprietorship, joint venture or other legal entity which enters into a contract to sell commodities or services to the City. Contracting Officer shall mean the City employee who is authorized to execute a contract, which may be either the Department Head or a person designated in writing by the Department Head, board or commission as having the authority to sign contracts for the department. A designation of authority to sign contracts on behalf of a department may specify authority to sign a single contract, specified classes of contracts, or all contracts entered into by a department. DT shall mean the Department of Telecommunications. Local Business Enterprise (LBE) shall mean a business that is certified as an LBE under Section 14B.3. LBEs are either Small-LBEs or Micro-LBEs, and are also either MBEs, WBEs, or OBEs. Electronic shall mean electrical, digital, magnetic, optical, electromagnetic or other similar technology for conveying documents or authorizations, excluding facsimile.

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 

 



 

  

 

General Services shall mean those services that are not Professional Services. Examples of General Services include: janitorial, security guard, pest control, parking lot attendants and landscaping services. OCA shall mean Office of Contract Administration. Offer shall mean a Bid or Proposal submitted to the City in response to an Invitation for Bids (IFB) or a Request for Proposals (RFP). “Offer” may include a response to a Request for Qualifications (RFQ) if no further ranking prior to Contractor selection is contemplated by the procurement process. Offeror shall mean a person or entity that submits an Offer to the City to provide commodities or services. Professional Services shall mean those services which require extended analysis, the exercise of discretion and independent judgment in their performance, and/or the application of an advanced, specialized type of knowledge, expertise, or training customarily acquired either by a prolonged course of study or equivalent experience in the field. Examples of professional service providers include licensed professionals such as architects, engineers, and accountants, and nonlicensed professionals such as software developers and financial and other consultants. Proposal shall mean a response to a RFP issued by the City for commodities or services, or a response to a RFQ if no further ranking prior to contractor selection is contemplated by the procurement process. Proposer shall mean a person or entity that submits a Proposal in response to a RFP issued by the City. Purchase Order shall mean an authorization document designated as such by the Purchaser for the procurement of commodities or services, whether issued in a paper or electronic format, including blanket purchase orders for purchases involving multiple payments. Purchaser shall mean the Purchaser of Supplies of the City & County of San Francisco, or his or her designee(s). Quotation shall mean a bid for commodities or services which is acquired without the use of advertising to solicit bids. Responsible shall mean a responsible bidder or supplier is one who: (1) meets the qualifying criteria required for a particular bid, including without limitation the expertise, experience, record of prior timely performance, license, resources, bonding and insurance capability necessary to perform the work under the contract, and (2) at all times deals in good faith with the City & County and shall submit bids, estimates, invoices claims, requests for change orders, requests for contract modifications or requests of any kind on a good faith and honest manner. Responsive shall mean a responsive bidder or supplier is one that complies with the requirements of the subject Advertisement for Bids without condition or qualification. Services shall mean Professional Services and General Services. “Services” shall specifically exclude agreements making a grant of City funds to private entities for the purpose of providing a benefit to the public, which may include incidental purchases of commodities; legal and

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litigation related services or contracts entered into pursuant to settlement of legal proceedings; and services related to employee benefits, including, without limitation, health plans, retirement or deferred compensation benefits, insurance and flexible accounts, provided by or through the City's Human Resources Department or the Retirement Board. Solicitation shall mean an IFB, Request for Quotations, RFQ, or RFP issued by the City for the purpose of soliciting bids, quotations, or proposals to perform a City contract.

3.3.3 | Reg. 21.03(a): General Authority of the Purchaser of Supplies: Approval of Purchases Administrative Code Section 21.03(a) empowers the Purchaser to delegate signature authority within the Purchasing Division of OCA for contracts as provided in Section 21.03. The delegation levels and limits can be found in Purchasing’s Procurement Manual Section 2.05. Only the Purchaser and the delegated personnel in Purchasing are authorized to purchase the commodities or services required by City departments and offices of the City, except as otherwise stated in the Charter and Municipal Code of San Francisco. In addition to the above, the Purchaser has the authority to delegate signature authority to departments (“Delegated Departmental Purchasing”) up to the dollar amount stated in regulation 21.5(a). (Currently $10,000 including tax and shipping.) In order to continue to use Delegated Departmental Purchasing authority, the following requirements must be met: 1. Departments must submit a roster of employees in the department who are authorized to purchase goods and services using delegated purchasing authority. 2. The roster must list employee name, Civil Service classification, address and telephone number. OCA may restrict the delegated authority to certain Civil Service classifications as appropriate, upon a review of the information submitted. 3. All designated employees are required to attend a Purchasing training class. The roster must indicate the date training was completed. 4. All employees who exercise delegated Purchasing signature authority must adhere to the Principles and Standards of Ethical Purchasing Conduct promulgated by the OCA and must sign a statement attesting thereto. 5. All designated employees shall file Form 700, Statement of Economic Interests annually as required by Article III, Chapter 1, of the San Francisco Campaign and Governmental Conduct Code. The following items may not be purchased using delegated Purchasing authority unless specifically exempted and allowed by the Purchaser:   

Unbudgeted equipment Commodities and services on Master or Multi-Year contracts Commodities and services on City Blanket Purchase Orders (Term Contracts)

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     

Equipment for lease purchase Tropical hardwoods and products Video Display Terminals (VDT) and related products Computer equipment and supplies Telecommunication equipment and wiring Cars, trucks, and vehicles

Order splitting and using non-compliant vendors are not allowed under any circumstances. Departments are required to follow and adhere to all other City laws, regulations, rules, ordinances, or any commission requirements of the department. Departments are encouraged to obtain bids when cost savings could be achieved in doing so, and should use “good faith efforts” in using LBEs and apply bid discounts as certified by the Contract Monitoring Division. Department purchases are generally subject to all the procurement provisions of the Charter, Administrative Code, and City ordinances. The department use of this authority will be audited annually by the Controller and OCA. The delegation of purchasing authority may be rescinded at any time if a department does not meet the above requirements, or has been found to be in violation of any of the Purchasing procedures or rules and regulations cited above. Departments have the option to use Delegated Departmental Purchasing authority or may continue to send their requirements to Purchasing.

3.3.4 | Reg. 21.03(e)(3): Dollar Limit for Optional Equipment in Vehicles If a department requests optional equipment that is not part of the Purchaser’s group of options and that would cost $1,000 and less, it shall be the Purchaser’s policy that the department must justify in writing to the Purchaser that the optional equipment is necessary in the course of the regular operation of the vehicle by the officer and/or employee using the vehicle. If the requested item costs in excess of $1,000, the department must satisfy the rules set forth in the Administrative Code, Section 21.03e(3)(A) or Section 21.03e(3)(B) as follows: 



Itemize the equipment in the description of the vehicle itself when the vehicle purchase is reviewed as part of the City’s annual budget process, and obtain the Board’s approval of the vehicle as equipped; or Obtain the approval of the Mayor’s Budget Office before submitting a requisition to the Purchaser.

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3.3.5 | Reg. 21.03(e)(5): Definition of Specialized Vehicles Specialized Vehicles are hereby defined as “vehicles other than passenger vehicles as described in Administrative Code Section 21.03(e)(1).” Passenger vehicles, as listed under this code, include passenger cars, passenger vans, sport utility vehicles, cargo vans and pickup trucks up to and including one ton in payload.

3.3.6 | Reg. 21.03(j): Information Technology (IT) Purchases All contracts for the acquisition of Information Technology (IT) commodities or services shall be made by the Purchaser, under the general direction of the San Francisco Committee on Information Technology (COIT). The Purchasing Policies and Procedures on IT purchases are available on the intranet at http://intranet/ under OCA then Technology Store. IT Purchasing Policies and Procedures are also available from the Information Technology Procurement Group in OCA at (415) 554-6743.

3.3.7 | Reg. 21.05(b): Procurement of Professional Services All departments must attach the P-500 or P-501 Checklist to the Professional Service Contract (P-500 or P-501) when the contracts are routed to the City Attorney’s Office and to OCA. OCA updates the Checklists and the model contracts periodically as new laws or requirements are mandated. Departments must use the most updated Checklists and model contracts posted on the intranet at http://intranet/ under Forms. P-500 and P-501 are downloadable on the City’s Intranet Document Center under Office of Contract Administration (OCA) | Model Contracts: http://mission.sfgov.org/doccenter/ByDept.aspx?S=0&T=Office%20of%20Contract%20Administration %20(OCA)%20|%20Model%20Contracts&K=70132

3.3.8 | Reg. 21.06(c): Other Electronic Transactions The Purchaser supports the use of technology to reduce the cost of procuring commodities and services and to streamline the procurement process. All departments must obtain Purchasing approval prior to implementing any system that uses technology or electronic methods to procure commodities or services. The Purchaser may allow appropriate business-to-business systems that meet City-wide information technology standards as promulgated by COIT and DT. All electronic technology systems must also be approved by COIT and DT. The Purchaser may require independent verification that the applications meet City-wide standards.

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The use of electronic methods to procure commodities or services does not excuse the department from meeting Administrative Code requirements that would normally be in effect if the procurement were made by traditional methods. The department must continue to adhere to Administrative Code requirements with any technology solution or electronic procurement that is implemented, including but not limited to Chapter 12B (Nondiscrimination in Contracts), Chapter 14B (Local Business Enterprise Utilization), Chapter 12G (Prohibition on Use of Public Funds for Political Activity by Recipients of City Contracts, Grants, and Loans), Chapter 12P (Minimum Compensation Ordinance (MCO)), Chapter 12Q (Health Care Accountability Ordinance (HCAO)), Chapter 21 (Acquisition of Commodities and Services), and Chapter 83 (First Source Hiring Program).

3.3.9 | Reg. 21.3(b): Competitive Sealed Bidding: Bid Opening For commodities and general services in excess of $50,000, pursuant to Administrative Code Section 21.3(b), the Contracting Officer shall publicly open bids, which were received on or before the submittal deadline, at the time and place designated in the IFB in the presence of all Bidders and interested parties who attend. Additionally, it shall be the Purchaser’s regulation that all bids must be dated and time stamped upon receipt. Bids that are received after the submittal deadline shall be marked as “Late” and shall not be opened at the bid opening and shall not be considered for award. The Contracting Officer shall record the following information at the bid opening:      

Date/time of opening Bid number (if available) Bid title Bidder names Other bid document requirements as appropriate (i.e. Bid Security, 14A, date and time bid received, etc.) Name of employees who opened bids.

3.3.10 | Reg. 21.3(d): Correction, Withdrawal, or Rejection of Bids; Cancellation of Awards Correction or withdrawal of inadvertently erroneous bids before or after award, or cancellation of awards or contracts based on such bid mistakes, under Administrative Code Section 21.3(d), shall be permitted in accordance with the following regulations: General The Contracting Officer shall maintain complete and sufficient written records of bid corrections, withdrawals, or rejections and cancellations of award to ensure that there is no abuse of the bidding

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process. All such written records shall be retained in the bid file. The Purchaser may reject any and all bids at any time prior to award. Every bid subject to award shall be carefully examined to ensure compliance with the written specifications and confirm submission of all required documents. Any bid that materially deviates from the bid document shall be rejected. Correction of a bid before bid opening The Contracting Officer shall allow any bidder to amend its bid before the submission deadline by submitting an amended bid on or before the bid submission deadline. Correction to a bid before award The Contracting Officer may waive any informality, irregularity, immaterial defect or technicality, in any bid received. A bid variation that has either no effect, or only a trivial effect, on price, quantity, quality or delivery is immaterial. Failure to furnish the requested number of copies of bid, corrections of typographical errors and grammatical mistakes, the omission of or mistakes in unit price extension, transposition errors, and mathematical mistakes are common examples of trivial or immaterial bid variations. Any bid variation that affects price, quantity, quality or delivery in any manner that is more than trivial, is material and cannot be waived. Withdrawal of a bid before award The City may allow the withdrawal of a bid prior to award upon written request of the bidder. The written request must include the circumstances and the reasons for the request. The City must evaluate the bidder’s reasons for withdrawal, the requirements of the bid, and the impact of such withdrawal to the City. Withdrawal of a bid, if properly justified, should not unreasonably be denied. Correction of a bid after contract award The Contracting Officer may allow post award bid correction by a contract modification if correcting the mistake is in the best interests of the City and does not change the essential requirements of the bid specifications, or compromise the integrity of the initial bidding process. Cancellation of the award or contract at the request of the bidder based on bid mistakes If a contractor requests the cancellation of the contract after award, the contractor must submit a written justification with the reasons and circumstances for cancellation. The City may review the request and make a decision in the best interests of the City.

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3.3.11

| Reg. 21.3(g): Additional Purchases

It shall be the Purchaser’s regulation for Administrative Code Section 21.3(g) that additional purchases of the same or like commodities or general services provided under the original contract are allowed under the following circumstances: Same Items 1. Additional purchases at the award price or a lower price may be added by mutual agreement of the parties. 2. All requests to make additional purchases must be submitted by City departments in writing to Purchasing for approval. 3. All additional purchases shall be memorialized in a written contract modification or a purchase order. The new purchase order must reference a previous competitive bid and cite Administrative Code Section 21.3(g) as the authority. 4. Additional purchases must be made within one year after original award. New Items (Term Contracts) 1. Additional items may be added to a term contract by mutual agreement of the parties. 2. Aggregated cost of all items added to the contract during the contract term shall not exceed 20% of the total estimated value (cost) of the original contract or a maximum accumulative dollar amount of $50,000, whichever is less. 3. All requests to add additional items to the contract must be submitted by City departments in writing to Purchasing. All requests must include complete specifications, estimated quantities for the remainder of the contract period and a price quotation provided by supplier, for each item. Price must be competitive and will be reviewed by Purchasing. 4. All additional items added to the contract shall be approved through issuance of a contract modification. 5. In the event the aggregated cost of the contract increases by more than 20% of the total estimated value of the original contract, or the increase totals more than $50,000, the excess of these limits shall be bid in accordance with Standard Purchasing Procedures. The resulting bid award shall be added to the contract (or separate contracts), through a contract modification and include Contractor’s name and information, complete item description (brand name and number, if applicable), and delivery and pricing information. 6. The contract term for the additional items added to the contract after the initial award shall be the remaining term of the existing contract and any extension thereof.

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3.3.12

| Reg. 21.3(i): Bid Protests

Bid protests of contracts awarded under Section 21.3 of the Administrative Code for purchases of commodities or general services in excess of $50,000, shall be submitted and responded to in accordance with the following requirements: General Requirements All protests shall be in writing, dated, and state in detail each and every ground asserted for the protest. Each protest must cite the law, rule, local ordinance, procedure or bid provision on which the protest is based. To expedite the handling of protests, the envelope (or facsimile sheet if the invitation for bids allows protest by facsimile) containing the protest shall be marked “PROTEST.” Failure to file a protest within three (3) working days shall waive all rights to protest. Protests shall be made to the Contracting Officer. The Contracting Officer shall notify the protester in writing of the decision regarding the protest. Protest of Bid Requirements Protests based on the bid specifications or requirements must be received by the Contracting Officer requesting the bids no less than three (3) working days prior to the deadline for submission of bids. Bidders who fail to protest by the deadline shall waive all rights to protest the bid based on specifications or requirements. Protest of Non-responsive and Non-responsible Bidders If the Contracting Officer determines that the apparent lowest bidder is either non-responsive or nonresponsible, the Contracting Officer shall reject the bid. The Contracting Officer shall notify the bidder in writing that the bid has been rejected, and state the basis for the rejection. The bidder may protest the Contracting Officer’s decision. The protest must be in writing and received by the Contracting Officer within three (3) working days of the issuance of the Notice of Non-responsiveness and/or Nonresponsibility. If a bid and a subsequent protest are rejected for non-responsibility, the Contracting Officer must inform the bidder that it shall have an opportunity for a hearing on the issue of nonresponsibility if requested. There is no appeal on the denial of a protest based on a non-responsive bid. Protest of Award A bidder may protest the Contracting Officer’s award of a contract to an apparent lowest responsive and responsible bidder. The protest must be in writing and received by the Contracting Officer within three (3) working days of issuance of a notice of intent to award the contract. The Contracting Officer will review the protest and respond in a timely manner.

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3.3.13 | Reg. 21.5(a): Other Purchases: Commodities & Services Less Than $50,000 In reference to Administrative Code Section 21.5(a), the following are regulations for the acquisition of commodities, general services and professional services where the total amount of the transaction is less than $50,000. Department heads and their designees who have complied with Regulation 21.03(a) and have been delegated by the Purchaser may purchase commodities and general services up to $10,000 (including tax and shipping). Commodities

$0 - $10,000 – no bidding is required. However, departments are encouraged to solicit written bids or written price quotations especially from LBEs and select the lowest responsive and responsible bidder.

For procurement of commodities over $10,000, departments must submit a requisition to OCA. Purchasing approval is required to authorize purchases; and transactions for these amounts are covered by regulations delegating signature authority to Purchasing staff. Formal competitive bidding is required for any amount over $50,000, unless otherwise exempted under Chapter 21. General Services General services are those services that are not professional services. Examples of general services per Administrative Code Section 21.02(k) include: janitorial, security guard, pest control, parking lot attendants and landscaping services.

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$0 - $10,000 – no bidding is required. However, departments are encouraged to solicit written bids or written price quotations especially from LBEs and select the lowest responsive and responsible bidder. Over $10,000 but less than $600,000 – Purchasing conducts informal bidding in accordance with Purchasing and Contract Monitoring Division requirements. $600,000 or more – Purchasing conducts formal bidding in accordance with Purchasing and Contract Monitoring Division requirements.

Professional Services Professional services are those services which require extended analysis, the exercise of discretion and independent judgment in their performance, and/or the application of an advanced, specialized type of knowledge, expertise, or training customarily acquired either by a prolonged course of study or equivalent experience in the field. Examples of professional service providers per Administrative Code Section 21.02(n) include architects, engineers, software developers, attorneys, consultants, physicians and dentists.

$0 - $10,000 – no solicitation is required. However, departments are encouraged to solicit written bids or written price quotations especially from LBEs and select the lowest responsive and responsible bidder. Over $10,000 but less than $110,000 – informal solicitation is required. Departments are to follow the informal bidding rules established by the Contract Monitoring Division under Section IV.D of its rules and regulations. $110,000 or more – a formal solicitation is required. Departments are to follow the formal bidding rules established by the Contract Monitoring Division as set forth in the definition of “Good Faith Efforts” of a contract awarding authority (see Administrative Code Chapter 14B.7).

3.3.14

| Reg. 21.5(b): Sole Source

Administrative Code Section 21.5(b) provides that commodities or services available only from a sole source shall be procured in accordance with the Purchaser’s regulations. It shall be the Purchaser’s regulations that if a department needs a commodity or service that is unique and known to be provided by only one vendor/contractor, then only one price quotation is solicited from the single vendor/contractor. The requesting department must submit documentation to Purchasing justifying the

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transaction as a sole source. From time to time, Purchasing may conduct a formal bid to determine the continuing validity of the sole source determination. Sufficient Documentation In submitting Sole Source Waiver Requests, use the following Figure 3-1 as an example: FIGURE 3-1. SAMPLE SOLE SOURCE WAIVER REQUEST FORM

(Sample only, please use the most updated form from the Intranet, under Forms.) Sole Source Waiver Request Administrative Code Section 21.5(b) provides that commodities or services available only from a sole source shall be procured in accordance with Purchaser’s regulations. Purchaser’s regulations provide that, “If a department needs a commodity or service which is unique and which is known to be provided by only one vendor, then only one price quotation is solicited from the single vendor. The requesting department must submit documentation to the Purchaser justifying the transaction as a sole source. From time to time, the Purchaser may conduct a formal bid to determine the continuing validity of the sole source determination.” (Procurement Instruction 12.06, Exhibit A, Section IX.D, dated April 28, 1989) Directions: Use this form to justify a sole source transaction. The department requestor must complete the information below and attach a written memo with appropriate supporting documentation to justify this request. The memo must provide specific and comprehensive information that explains why the requested transaction should be considered a sole source. Departments are encouraged to consult with the Human Rights Commission and the City Attorney prior to submitting this request. Department: _____________________________________ Date Submitted:_______________________ Contact: ________________________________________ Phone: ______________________________ Vendor Name: ___________________________________ Vendor # ____________________________ Type of Commodity _____ Professional Service _____ Non-Professional Service______ Contract: Other __________________________________________________________ Amount: $ _______________________________________ ADPICS Doc #: ______________________ Describe the product or service: ____________________________________________________________________________________ ____________________________________________________________________________________ Has the Human Rights Commission granted a sole source waiver on this transaction? _________________ If yes, when was the sole source granted? _________________ Please attach a copy of the HRC Waiver. Check the appropriate statement. Attach a memo and documentation to address the questions following each statement. _____ Goods or services are available from only one source. Explain why this is the only product or service that will meet the City’s needs. Why is this the only vendor or contractor that can provide the services or products? What steps were taken to verify that the goods or services are not available from another source? Explain what efforts were made to obtain the best possible price. Why do you feel the price to be fair and reasonable? How was this vendor chosen? How long has the vendor been providing goods or services for your department? Page 71

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_____ Only one prospective vendor is willing to enter into a contract with the City. Explain why no other vendors are willing to contract with the City. If there are compliance issues, what have you done to get other possible sources to become compliant? Have you contacted HRC? Have you received a waiver from HRC? _____ Item has design and/or performance features that are essential to the department, and no other source satisfies the City’s requirements. Explain why the design/performance features are essential. Have you contacted other suppliers to evaluate items/services with similar features and capabilities? If no, explain why not. If yes, list the suppliers and explain why their goods or services do not meet the department’s needs. _____ Licensed or patented good or service. Provide proof that the license or patent limits the availability of the product or service to only one source. _____ Other: ________________________________________________________________________ INSTRUCTIONS: The Sole Source request must be approved before the department makes a commitment to the vendor, and before funds are encumbered. If the Sole Source request is denied, the department will be advised to conduct a competitive process to select the vendor/contractor. If the Sole Source request is to extend an existing professional service contract, attach a copy of the original contract and any prior sole source determinations made by HRC or Purchasing. When processing professional service contracts and modifications for signature, attach the approved sole source waiver form to the contract documents. This form is required for every transaction, contract, or contract modification that the department wishes to be treated as a sole source. For additional information call the Purchaser assigned to your department. The Department Head must sign this request before it is sent to OCA-Purchasing. This Sole Source request is being submitted by: Department Head Signature:_______________________________ Date: ________________________ Name of Department: ___________________________________________________________________________________ OCA Review and Approval: Sole Source Approved: ______ Sole Source Denied: ________ Reason for Determination ____________________________________________________________________________________ ____________________________________________________________________________________ OCA Staff: ___________________________________________________ Date: __________________ OCA Staff: ___________________________________________________ Date: __________________ OCA Director: _________________________________________________ Date:__________________ The requesting department must provide a written memorandum and supporting documentation to justify the request. The memorandum must provide specific and comprehensive information that explains why the

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Sole Source Waiver should be approved. Departments are encouraged to consult with the Contract Monitoring Division and the City Attorney’s Office prior to submitting the Waiver. The Sole Source Waiver request form identifies four acceptable justifications for sole source contracting. In most cases, the department’s justification for making a waiver request should fall within these parameters. If not, additional space has been provided for departments to submit other justification. Among the questions and concerns that must be addressed are as follows: 









Goods or Services are available from only one source Explain why this is the only product or service that will meet the City’s needs. Why is this the only vendor or contractor that can provide the products or services? What steps were taken to verify that the goods or services are not available from another source? Explain what efforts were made to obtain the best possible price. Why do you consider the price to be fair and reasonable? How was the vendor chosen? How long has the vendor been providing goods or services to your department? Only one prospective vendor is willing to enter into a contract with the City Explain why no other vendors are willing to contract with the City. If there are compliance issues, what have you done to get other possible sources to become compliant? Have you received a waiver from CMD? Item has design and/or performance features that are essential to the department and no other source satisfies the City’s requirements Explain why the design/performance features are essential. Have you contacted other vendors/contractors to evaluate items/services with similar features and capabilities? If not, explain why not. If yes, list the suppliers and explain why their goods or services do not meet the department’s needs. Licensed or patented good or service Provide proof that the license or patent limits the availability of the product or service to only one source. Other – Provide a justification that would substantiate a Sole Source Waiver for any other reason.

Finally, the requestor and Department Head, or his or her designee, must be a signatory to the request. Their signature certifies that they have reviewed the specific Sole Source Waiver request and agree with the requestor’s justification.

3.3.15

| Reg. 21.5(c): Perishable Foods

Administrative Code Section 21.5(c) provides that perishable foods shall be procured in accordance with the Purchaser’s regulations. It shall be the Purchaser’s regulations that when purchasing perishable foods, the Contracting Officer shall attempt to comply with competitive bidding requirements of this Chapter. However, when the situation arises where it is impossible or highly impractical to obtain competitive pricing because of the nature of perishable foods (i.e., freshness and spoilage of perishable items) the Page 73

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Purchaser may procure the items in the most expeditious manner. The Purchaser shall require the requesting department to provide a written justification of the perishable nature of the items and why competitive bidding should be waived. A copy of the justification shall be kept on file with the transaction.

3.3.16

| Reg. 21.5(d): Proprietary Articles

Administrative Code Section 21.5(d) provides that proprietary articles shall be procured in accordance with the Purchaser’s regulations. It shall be the Purchaser’s regulations that purchasing uses the terms “proprietary” and “no substitute” to mean purchases that are made where no alternate brand or model will be considered or accepted. The item must be the one described in the current Proprietary List. Although an item may be considered proprietary, it may still be subject to competitive bidding if there is more than one source of supply for that item. If the item is put out to bid, alternate brands and models need not be considered. Purchasing periodically accepts bids for alternate brands to monitor the appropriateness of continuing to consider certain purchases proprietary. All proprietary purchases must be justified with documentation from the requesting department and must be approved by the Purchaser within his/her approval limits. The documentation must clearly state why only one make or model will meet the department’s needs. Below is a list of approved proprietary purchases and their corresponding descriptions. Purchasing may revise the list from time to time as situation changes. TABLE 3-6. PROPRIETARY LIST 7-03

PROPRIETARY (PROP) #

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DESCRIPTIONS

1

Charts, globes and maps

2

Books, magazines, pamphlets and periodicals

3

Specialized equipment, materials and supplies for instructional purposes. Specialized educational tests and testing services

4

Fine arts; music; plays; works of art; films; audio and video cassettes; etc.

5

Medicines and drugs

6

Medical, surgical and dental equipment; instruments; prosthetic devices, special supplies

10

Animals

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PROPRIETARY (PROP) # 12

3.3.17

DESCRIPTIONS Repairs for equipment including service and parts when repairs must be done by the manufacturer, the installer of equipment or system, or when repairs by others would void the warranty.

| Reg. 21.5(e): Pilot Project

Administrative Code Section 21.5(d) provides that contracts involving a pilot project with a term not to exceed two (2) years shall be procured in accordance with the Purchaser’s regulations. Some business problems offer unique challenges where the use of competitive bidding requirements of this Chapter may not be appropriate. Therefore, a different procurement method is allowed for a pilot project. It shall be the Purchaser’s regulations that when procurement is done through a pilot project, either the Purchaser may initiate or a department may initiate by making a request to the Purchaser specifying the problem to be solved and the reason why traditional bidding method is not being used. The request must also specify how competition, fairness, and compliance with other OCA requirements for bidding will be achieved. Purchaser will evaluate the request and shall either approve or deny the request. At the end of the pilot term, within 90 days, the requesting department must submit a report stating the results of the project with recommendations for future procurement. If the pilot includes the creation of any work that may be copyrighted or patented, the Purchaser, in cooperation with the requesting department, shall determine if it is advantageous to obtain the rights of ownership or rights to use the work. Any further procurement beyond the pilot project phase shall be subject to all applicable competitive procurement requirements.

3.3.18

| Reg. 21.6: Multiple Low Offers

Pursuant to Administrative Code Section 21.6, if two (2) or more bids received are for the same amount or unit price and such bids are the lowest bids from responsive and responsible bidders, then the Contracting Officer may award a contract to either of the lowest responsive and responsible bidders. It shall be the Purchaser’s regulations that to resolve tie bids, the following criteria shall be applied in sequence until a tie bid is resolved: 1. If there is any doubt as to quality, performance or functionality, a specified item receives consideration over an alternative. 2. A San Francisco bidder receives consideration over an out-of-town bidder. 3. Delivery time – Any significant difference, e.g., three (3) days vs. three (3) weeks.

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4. Tie bid items should be aggregated with the items that are being awarded to one of the bidders. For example, if a bidder is low on several items and is in a tie on one item, do not award the tied item to another vendor if the result will add an additional vendor to the contract. 5. A California bidder receives consideration over an out-of-state bidder. 6. The Contracting Officer and the user department may divide the award subject to the mutual agreement of the tied bidders. 7. As a final resort, the Contracting Officer may roll a die. The tied bidders must be notified and invited to attend the tiebreaker event. The highest rolled number will indicate the successful bidder. A second representative of the awarding department must be present to witness the event. Adequate documentation of the award must be maintained in the file.

3.4 | Becoming a City Vendor This section provides the Controller’s Office Vendor File Support Unit general guidelines to vendors on how to become a City Vendor. This section also serves as a guide for City Departments on the procedures and information required to set up vendors in the City Vendor file. Besides the City Vendors, the Vendor File Support Unit also sets up Bid Vendor and Payment Vendors upon request from the OCA Purchasers and the City Departments. In addition to setting up City Vendors who do business with the City, the Controller Vendor File Support Unit is also responsible for setting up other types of vendors in the City Vendor File for bid purposes, to receive payments, refunds and reimbursements. The following Table lists the different types of vendors being maintained in the City Vendor File. TABLE 3-7. VENDOR TYPES IN THE CITY VENDOR FILE

VENDOR TYPE & BRIEF DESCRIPTION

REQUIRED DOCUMENTS TO SET UP A NEW VENDOR

Regular vendor is a vendor who wishes to do business with the City including vendors who provide Professional Services, Constructions, Materials and Supplies

The IRS form W-9 - “Request for Taxpayer Number Identification and Verification”

Bid Vendor is a vendor who has submitted a bid package to the OCA Purchaser. To receive an award the vendor will be required to complete the New Vendor Number Request application and the IRS W9 form

Bid Sheet (first page of the Bid Package)

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INITIATOR Vendor

The New Vendor Number Request Application OCA Purchaser

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VENDOR TYPE & BRIEF DESCRIPTION

REQUIRED DOCUMENTS TO SET UP A NEW VENDOR

INITIATOR

Payment Only Vendor is the recipient of payment(s) for special programs and services performed, including but not limited to rebates for Solar, payments for housing subsidies, and serving as a Court Reporter. The vendor/recipient can be a regular Vendor or a City Employee.

The payment vendor request includes the payment reason

City Department

Property Tax Interest Refunds Vendors are property owners who are owed $600 or more in property tax interest refunds

Report of Property Tax Owner Name and information

“E” Vendors are City Employees who are the recipients of reimbursements from City Departments for specific City approved reasons

“E” Vendor request with one of the valid reimbursement reasons

Revolving Fund Account Vendors are accounts owned by the City Department to pay for minor, non-recurring goods and services that are needed immediately

Revolving Fund Account Request Controller Cash List which contains a list of the Disbursement Unit revolving fund accounts and their associated department and bank information

Purchasing Card Account Vendors are Purchasing Card issued to the Departments for their employees to use for emergency purchases. Each card is associated with a bank account

Purchasing Card Vendor Email Request with the Department and Bank information, including the 3 character Department Code

The IRS form W-9 - “Request for Taxpayer Number Identification and Verification

IRS W-9

Office of the Treasurer & Tax Collector/Controller Cash Disbursement Unit City Department

Controller’s Purchasing Card Administration Unit

IRS W-9 form of the US Bank National Association

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3.4.1 | Roles and Responsibilities 3.4.1.1

| CITY VENDORS

Vendors who wish to do business with the City to provide goods and services are responsible for completing various required and supplemental forms, if the requirements for submitting the forms apply to the vendor. The required forms are: 1)

Vendor Profile Application (includes New Vendor Number Request form (Figure 3-2) and IRS Form W-9 (Figure 3-3) (submitted to the Vendor File Support Unit)

2)

P-25 - Business Tax Declaration (submitted to Office of the Treasurer and Tax Collector) (Figure 3-4)

3)

CMD 12B-101 Declaration of Nondiscrimination in Contracts and Benefits (Figure 3-5) [submitted to Contract Monitoring Division (CMD)].

The supplemental forms include: 1)

Minimum Compensation Ordinance (MCO) Declaration (Figure 3-6)

2)

Health Care Accountability Ordinance (HCAO) Declaration (Figure 3-7)

3)

Insurance Requirements (Figure 3-8)

4)

Payment (Labor and Material) Bond (Figure 3-9)

5)

Performance Bond (Figure 3-10)

6)

Local Business Enterprise (LBE) Program Application (submitted to CMD) (Figure 3-11)

The Figures on the following pages are samples of these required and supplemental forms.

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FIGURE 3-2. VENDOR PROFILE APPLICATION & NEW VENDOR NUMBER REQUEST

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FIGURE 3-3. IRS FORM W-9

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FIGURE 3-4. P-25 BUSINESS TAX DECLARATION FORM

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FIGURE 3-5. CMD 12B-101 DECLARATION

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FIGURE 3-6. MCO DECLARATION

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FIGURE 3-7. HCAO DECLARATION

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FIGURE 3-8. INSURANCE REQUIREMENTS

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FIGURE 3-9. PAYMENT (LABOR & MATERIAL) BOND

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FIGURE 3-10. PERFORMANCE BOND

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FIGURE 3-11. LBE PROGRAM APPLICATION

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The Vendor File Support Unit will return the Vendor Profile Application (Figure 3-2) to the vendor if it is not signed or not completed according to the instructions provided on the forms. The vendor must resolve the issue and resubmit the forms timely to the Vendor File Support Unit for it to complete its processing and issue a Vendor Number to the requester. Vendors are also responsible for completing the vendor supplemental forms if the requirements for submitting the forms apply to the vendor. Refer to the City & County of San Francisco Office of Contract Administrator website for further information on how vendors become eligible to do business with the City and the vendor forms: http://sfgov.org/oca/qualify-do-business. 3.4.1.1.1 | Controller’s Office Vendor File Support Unit The Vendor File Support Unit is responsible for processing the request to set up new vendors and vendors’ applications. The Unit’s other responsibilities include: 1.

Review the required forms and verify the application is completed according to the instructions provided on the forms.

2.

Communicate with vendors and requesting City Department(s) to request additional information and clarifications on their applications, if needed.

3.

Assign a unique vendor number to each new vendor and ensure there are no duplicate vendor records in the City Vendor File.

4.

Notify the vendor and the requesting City Department(s) with the new vendor number after the vendor has been set up in the City Vendor File.

5.

Maintain and update vendor profile and status information when information has changed.

6.

Coordinate with all City Departments in processing new Vendor applications, including but not limited to OCA Purchasing, Office of the Treasurer & Tax Collector, Contract Monitoring Division, Controller Cash Disbursement Unit, Controller Purchasing Card Administration, and City Attorney.

7.

Forward the P-25 Business Tax Declaration (Figure 3-4) to the Office of the Treasurer & Tax Collector, and the CMD -12B-101 (Figure 3-5) to the Contract Monitoring Division if the forms are submitted by the vendor to the Vendor File Support Unit along with its application.

8.

Respond to inquiries from vendors and City Departments on the status of their application or on how to become a City Vendor.

9.

Provide training to City Department users on how to navigate the online Vendor screens and their functions.

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3.4.1.2

| CONTRACT MONITORING DIVISION (CMD)

The Contract Monitoring Division (CMD) implements and enforces the San Francisco Administrative Code Chapter 12B Equal Benefits Ordinance and Chapter 14B Local Business Enterprise Ordinance adopted by the Mayor and the Board of Supervisors to protect the public interest in equality throughout the City & County of San Francisco’s government contracting process. To become a City Vendor, the vendor is required to complete and submit the CMD 12B-101 Declaration (Figure 3-5) to CMD for processing. If Vendor File Support Unit receives the CMD 12B-101 Declaration (Figure 3-5) along with the Vendor Profile Application (Figure 3-2) from the vendor, the CMD 12B-101 will be forwarded to CMD after the vendor record is set up successfully in the City Vendor File. CMD communicates directly with the vendor during the certification process, and updates the City Vendor File with the compliance status when the certification process is complete. Refer to the Contract Monitoring Division website for further information on the Equal Benefits Program: http://sfgov.org/cmd/12b-equal-benefits-program. 3.4.1.3

| OFFICE OF THE TREASURER & TAX COLLECTOR

San Francisco’s Business and Tax Regulations Code requires that every person engaging in business within the City, regardless of whether such person is subject to taxation, must register within 15 days after commencing business within the City. To become a City Vendor, the vendor is required to complete and submit the P-25 - Business Tax Declaration (Figure 3-4) to the Office of the Treasurer & Tax Collector for processing. If Vendor File Support Unit receives the P-25 Business Tax Declaration along with the Vendor Profile Application from the vendor, it will forward the P-25 to the Office of the Treasurer & Tax Collector after the vendor record is set up successfully in the City Vendor File. Business Tax communicates directly with the vendor during the certification process, and updates the City Vendor File with the Business Tax Certification Number and Expiration Date when the certification is complete.

3.4.2 | Vendor Compliance Status Vendors must have a valid Business Tax status and be compliant with Chapter 12B to enter into contract or receive payment from the City. The exceptions to Chapter 12B compliance include:

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1. The City spent less than $5,000 with the vendor during each of the previous fiscal years and the purchase (or series of purchases) being considered will not exceed $5,000 during any given fiscal year. 2. The vendor is the sole source for the purchase. Note that departments must file Sole Source Waiver forms with CMD. The forms are available on the City’s Intranet Document Center under Contract Monitoring Division at http://mission.sfgov.org/DocCenter/ByDept.aspx?S=0&T=Contract%20Monitoring%20Division% 20|%20All%20Documents&K=All70001. a. For Chapter 12B transactions only, see if the Form 104 - Chapter 12B Blanket Sole Source Form (Figure 3-12) can be used. Use it if the transaction falls exactly into one of the exemptions listed on the form and is under $250,000. Send CMD the completed, signed form before the Date of Contract (when the money was legally promised to a specific vendor). Also attach a copy of Form 104 (Figure 3-12) to the contract or request for payment.

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FIGURE 3-12. CMD FORM 104 (CHAPTER 12B BLANKET SOLE SOURCE FORM)

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b. If Form 104 (Figure 3-12) is not appropriate because the transaction does not match any of the exemptions on the form or exceeds the $250,000 limit, submit Form 201 - Chapters 12B and 14B Waiver Request Form (Figure 3-13) to CMD. Attach a justification that explains:   

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The purpose of the transaction Why the transaction meets the type of waiver being requested The Department’s efforts to get the vendor to comply.

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FIGURE 3-13. CMD FORM 201 (CHAPTERS 12B AND 14B WAIVER REQUEST FORM)

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Departments can look up vendor Business Tax and CMD compliance status in FAMIS Screen 9560. FIGURE 3-14. FAMIS SCREEN 9560 VENDOR CLASS/STATUS

A compliant vendor should at least have these three items displayed in Screen 9560: 1. BUS TAX with an expiration date in the future (or BUS DND or BUS NP or BUS GOV or BUS EX) 2. HBC YES 3. HBN YES For detailed explanations on Vendor Status Codes, FAMIS Purchasing Vendor Status Information, or related issues, refer to the following link for training materials: http://mission.sfgov.org/DocCenter/DispDetail.aspx?DocNo=154&S=0&P=ByDept.aspx&T=Office%20 of%20Contract%20Administration%20(OCA)%20|%20Training%20Materials&K=70127.

3.4.3 | Security and Internal Controls Security The Controller Security Administrator is responsible for setting up department users who are authorized to access to the City Vendor File. Only a limited number of individuals in the Controller’s Office have update capability, including Vendor File Support, Business Tax, and Cash Disbursement Units.

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The Security Coordinator of a department is responsible for completing the Controller’s Office FAMIS Security Request Form and the Controller’s Purchasing (ADPICS) Request Form to request access for department users. These forms must also be signed by the Department Head/CEO before they are submitted to the Controller Security Administrator. The forms can be found online at: http://sfcontroller.org/index.aspx?page=203. Permission to view City Vendor File information is granted at the user level, screen level (Vendor Header, Detail, Address, Status) and also at the Field level (for example the SSN/FEIN field). Only Vendor File Support Unit staff has permission to view and update the SSN. For all other users, the system blocks the SSN by displaying asterisks “*” in the SSN Field. FEIN is not blocked and can be viewed by any users who have access to the Vendor Header screen. Internal Controls At year-end the Controller’s Cash Disbursement Unit generates a report identifying those vendors whose 1099 indicators are not set up correctly in the City Vendor File. The report is forwarded to the Vendor File Support Unit for its review and to update the 1099 indicator in the vendor records for these vendors. On a continuous basis, the Controller Vendor File Support Unit requests vendors to review their existing profile information and notify the City if any information has changed. The City Vendor File is maintained by the Controller Vendor File Support Unit. Other City Departments, including but not limited to the Office of the Treasurer & Tax Collector and the City’s Contract Monitoring Division, also maintain Vendor data specific to their Departments’ Vendor Certification program. CMD and Business Tax provide interface files to update vendors’ 12B and Business Tax Compliance information in the City Vendor File.

3.5 | Technology Marketplace All contracts for the acquisition of Information Technology (IT) commodities or services shall be made by the Purchaser, under the general direction of the San Francisco Committee on Information Technology (COIT). Departments shall use the Technology Marketplace for acquiring:  

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Computer and IT-related goods; i.e., technology-related hardware or software products. IT professional services after the department has exhausted every reasonable effort to first obtain these services by engaging internal staff or through work-ordering staff from another City department(s). IFPTE Local 21 will review all IT professional services requests.

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3.5.1 | Overview and Contracting Tiers Through an RFP process, the City has established the Technology Marketplace, a pre-qualified pool of technology contractors that provide IT goods and services. Departments shall request quotes from Technology Marketplace contractors within the relevant cost tier (Tier 1, 2, or 3). Below are the contracting tiers established under the Technology Marketplace:  



Tier 1: Contracts greater than $10 million. Provides professional and specialized services, technology products, equipment, and maintenance and training services Tier 2: Contracts less than $2.5 million. Provides technology products, consulting, maintenance and training services Tier 3: Micro-LBE set-asides for contracts less than $100,000 or $400,000. Provides computer equipment (cap of $100,000) for computer services and maintenance (cap of $400,000)

Don’t mix contracting tiers when requesting quotes. For a detailed list of the contractors for all three tiers, refer to the Technology Marketplace User Guide at http://sfgsa.org/Modules/ShowDocument.aspx?documentID=12568

3.5.2 | Hardware, Software and Maintenance To utilize the Technology Marketplace, the department requests a quote from a Technology Marketplace contractor. The contractor prepares the quote, using Form 1 (Figure 3-16) for Hardware and Software agreements, or Form 2 (Figure 3-17) for Maintenance Agreements, and submits the form to the department for review and acceptance. The department ensures that the correct form is used and all required fields are completed. Incomplete forms will be returned. The forms are downloadable at http://sfgsa.org/index.aspx?page=6777. Below is the process flow for ordering IT hardware, software, and maintenance.

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FIGURE 3-15. PROCESS FLOW – ORDERING IT HARDWARE, SOFTWARE & MAINTENANCE

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FIGURE 3-16. TECHNOLOGY MARKETPLACE QUOTE APPROVAL FORM 1

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FIGURE 3-17. TECHNOLOGY MARKETPLACE QUOTE APPROVAL FORM 2

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Delivery/Invoicing/Payment Address Fill in all fields for delivery, invoice and payment address information, even if they are identical. Correct the address in the financial system if it is different. Competitive Bidding For orders $10,000 and below: competitive bidding isn’t required. However, it is recommended that departments solicit more than one quote within a selected Tier (Tiers 1, 2, or 3) to maximize competition. For orders over $10,000: submit a requisition and Office of Contract Administration (OCA) will manage the competitive solicitation process for departments by using the new WebProcure e-procurement system. Pricing Available on the OCA website at http://sfgsa.org/index.aspx?page=384 Used Products Purchasing used products through the Technology Marketplace is expressly prohibited. In rare situations, refurbished products may be considered. In extremely rare instances, reconditioned or used products are available. Cancellations Cancellations must be requested through OCA prior to delivery for non-special or non-standard hardware and software products. Deliveries All products shall be:  

Delivered inside the building free of charge and should designate “FOB Destination” Delivered within 10 City business days after contractor receives the purchase order, unless the product is not available from manufacturer/ distributor

If there is a delay in delivery, contractors are required to notify ordering departments within 72 hours. Returns Departments will be credited in full without any restocking fees for all unopened products from Cisco, Dell, HP, and IBM within 30 calendar days of delivery. For all other products, contractors may pass restocking fees from third party suppliers. Administrative costs & handling fees are not allowed.

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Warranties Authorized contractors must offer or facilitate warranty services for products sold through the Technology Marketplace, and pass title of product(s) purchased to the City within 48 business hours. Pre-payments No prepayments are allowed in advance or for orders not delivered in full for hardware and software agreements. Pre-payment maybe allowed in some cases for software maintenance services only. Departments should fully understand compliance requirements in such cases. Packing Slips All deliveries should be accompanied by a packing slip that shows the purchase order number, a complete list of items delivered, and the department name and contact person. Follow department procedures for accounts payable and internal controls. Keep all packing slips for department files and provide a copy of the packing slip with the invoice and submit for subsequent processing per your department procedures. Some departments must complete a Materials Received Report (“MRR”) for each order. Substitutions Substitutions are not allowed without approval from the ordering department. Maintenance Note terms of maintenance on the quote form and in the NFAMIS requisition. Maintenance of any kind must be ordered separately from a hardware/software order, unless it is included with the original purchase. For exceptions, contact OCA staff.

3.5.3 | Professional Services Professional services may include project management, software development, network installation, system design, training, and other services related to the identification and deployment of technology needs. Below is the process flow for ordering professional services.

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FIGURE 3-18. PROCESS FLOW – ORDERING PROFESSIONAL SERVICES

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Upfront Planning Seek professional services after your department has: (a) clearly defined the requirements and scope of a project, (b) determined deliverables and schedule, and (c) determined that the services are not available either through your staff or any other City department (including DT on a work-order basis). If a Technology Marketplace contractor is contacted for a quote, the quote should include a request for training and a plan for the contractor to transition the project to City staff that will maintain and support the project on an ongoing basis. Local 21 Departments are required to justify their decision as to why the project requires the use of an outside contractor by completing Local 21’s web form (available at http://www.ifpte21.org/sfitchapter/psc_info_request.shtml) for union review. Submit this form at the same time as Form 3 (Figure 3-19) (downloadable at http://sfgsa.org/index.aspx?page=6777) is submitted with supporting documentation for DT CIO review. 1. Contact Local 21 at 415-864-2100 to discuss your project as early as possible (current contact is Pam Covington, [email protected]). Local 21 will generally review within ten (10) business days. 2. If Local 21 has no objections, it will notify OCA through e-mail. 3. If Local 21 objects to the request for services, it will attempt to resolve the issue directly with your department. If agreement can’t be reached, the department shall submit the request to the Civil Service Commission for determination.

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FIGURE 3-19. TECHNOLOGY MARKETPLACE QUOTE APPROVAL FORM 3

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Competitive Bidding For orders $10,000 and below: competitive bidding is not required. However, it is recommended that departments solicit quotes from all of the Tier 1 or Tier 3 Technology Marketplace contractors to maximize competition. For orders over $10,000: departments will manage the competitive bidding process. Pricing Available on the OCA website at http://sfgsa.org/index.aspx?page=384 Progress Payments Progress payments are recommended for the receipt of specific deliverables for large or complex projects that may be long in duration; e.g., six months. These payments should be carefully scheduled based on the size of the deliverable performed, and include a final payment upon completion and acceptance of the project. Retention It is recommended that departments retain 10% of every invoice for professional service projects over $100,000. This retention will be recognized at the end of every invoice received from the contractor until final acceptance. Upon final acceptance of the project, the contractor will submit a final invoice, which includes the total retention remaining on the project. Order Cancellations Departments may cancel an order for professional services at any time, but will likely be required to pay for any services or products received prior to cancelling the order. Contracts other than Technology Marketplace The contracts between the City and the Technology Marketplace contractors are the governing contract for any goods or services acquired through the Marketplace. Departments should not execute a separate contract or amendment with a contractor for professional services. If contractors request that you sign or initial the Statement or Scope of Work (SOW), the SOW may not add, change or delete any of the Technology Marketplace contract terms and conditions. Bonds High dollar value projects that are complex, long-term, or high-risk, may merit a performance bond or labor and materials bond. Bonds should be considered on a project-by-project basis weighing such factors as added expense, risk, and the protection offered by various bonding options after consulting with the Risk Manager, City Attorney or OCA.

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Sample Project Checklist While each professional service request is different, below is a sample checklist that can be used. For any questions, contact OCA. TABLE 3-8. SAMPLE PROFESSIONAL SERVICE PROJECT CHECKLIST

CHECK K☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐ ☐

ACTION ITEM Meet with Department staff affected by this project. Complete a preliminary SOW with project requirements and schedule. Review the project requirements with DT. Discuss project requirement with Marketplace contractor(s). Request quote and supporting documentation from Marketplace contractor(s) Review the quote for content accuracy and form. Complete Form 3. Have Form 3 signed by the Department IT Manager and/or Department Head. Prepare all required supporting documentation. Submit the project to the DT CIO and Local 21 for review. No objections raised by Local 21 or issues resolved. No objections raised by DT CIO or issues resolved. Prepare milestones to payments schedule. If required, Marketplace contractor submits a bond. If required, prepare a cost benefit analysis. If required, prepare a risk analysis If required, submit a detailed list of subcontractors with contact information, names of staff working on project and payment schedule from Marketplace contractor to subcontractor. If required, submit a copy of the agreement between the subcontractor(s) and the Marketplace contractor. If required, notify the Marketplace contractor that the 10% retention policy will be in effect for this project.

3.5.4 | Tier 3: Micro-LBE Set Aside Tier 3 (see Section 3.5.1 - Overview and Contracting Tiers for more information on the three tiers and the contractors awarded) Micro-LBE set aside contracts are limited to orders totaling $100,000 for products and $400,000 for General and Maintenance Services. Page 119

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Tier 3 contract maximums are calculated based on contracts across City departments. For example, departments submit the following orders against Contractor X’s EQ108 - Products contract: Order 1 by the Port is for $5,000, Order 2 by Rec & Park is for $75,000; Order 3 by SFPD is for $19,000; and, Order 4 by DT is for $8,000. The first three orders total $99,000 and will be accepted. However, DT’s order is in excess of the Tier 3 $100,000 contract cap and will not be accepted. DT has the option of decreasing its order to $1,000 or less to utilize this contract, or purchasing from another contractor. The City has awarded Tier 3 Micro-LBE set-aside contracts in the following thresholds:  

Product-only contracts up to $100,000 General services contracts up to $400,000

Note: It is highly recommended that all Tier 3 Micro-LBE contractors are contacted first to provide quotes. If none of the Tier 3 contractors can provide a quote, then contact Tier 2 contractors, followed by Tier 1 contractors. Below is the process flow for ordering IT products and services through Micro-LBE set-aside contracts.

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FIGURE 3-20. PROCESS FLOW – ORDERING THROUGH MICRO-LBE SET-ASIDE CONTRACTS

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3.5.5 | Exceptions and Restrictions in Using Technology Marketplace Marrying Sub-contractors Departments can’t pre-select a sub-contractor for a particular project and insist that one of the Technology Marketplace contractors use that sub-contractor. It is Marketplace contractors’ responsibility to quote the best possible solution (including a sub-contractor) for your requirement. Software Enterprise Agreements The following software Enterprise Agreements are administered by Department of Technology (DT). For assistance, please contact DT at: [email protected]:     

Adobe Acrobat Professional VMware – All VMware software products and training credits Microsoft EA Products Microsoft Office 365 Subscription Services CommVault Simpana Products

Grant-Funded Purchases Grants may have special provisions that conflict with the terms and conditions of Technology Marketplace contracts. Sole Source Transactions Do not use Technology Marketplace contracts for proprietary goods or services that are only available from a single source. Projects $2.5 Million and Over The department will be required to issue an RFP outside of the Technology Marketplace for awards above this threshold.

3.5.6 | Technology Store Fee The 1.9% Technology Store fee is an inter-departmental service recovery offsetting General Fund support for the Office of Contract Administration. The Controller’s Office is responsible for processing this fee for the City. Office of the City Administrator updates eligible vendors on a quarterly basis. The Table below provides a list of vendors who are eligible for COIT fees as of fall 2015.

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TABLE 3-9. VENDORS SUBJECT TO TECHNOLOGY STORE FEE

PURCHASING AUTHORITY

CONTRACTOR

VENDOR ID

DESCRIPTION OF CONTRACT TIER

TC95271

Central Computers, Inc.

90356

Technology Marketplace Tier 1A Generalist – Products & Services

TC95272

ComputerLand of Silicon Valley

67883

Technology Marketplace Tier 1A Generalist – Products & Services

TC95273

En Pointe Technology Sales, Inc.

58893

Technology Marketplace Tier 1A Generalist – Products & Services

TC95274

Technology Integration Group – Pending

36116

Technology Marketplace Tier 1A Generalist – Products & Services

TC95275

World Wide Technology, Inc.

84759

Technology Marketplace Tier 1A Generalist – Products & Services

TC95276

Xtech JV

64607

Technology Marketplace Tier 1A Generalist – Products & Services

TC95277

InterVision Systems Technologies, Inc.

92062

Technology Marketplace Tier 1B Specialist – Products & Services

TC95278

Robert Half Technology

77671

Technology Marketplace Tier 1B Specialist – Services

TC95279

Stellar Services, Inc.

81118

Technology Marketplace Tier 1B Specialist – Services

TC95280

Ameritech Computer Services, Inc. (LBE)

62025

Technology Marketplace Tier 2A Generalist – Products & Services

TC95281

Bridge Micro (LBE)

46149

Technology Marketplace Tier 2A Generalist – Products & Services

TC95282

Dynamic Systems, Inc.

87885

Technology Marketplace Tier 2A Generalist – Products & Services

TC95283

SNS-SF, LLC JV (JV with LBE)

94626

Technology Marketplace Tier 2A Generalist – Products & Services

TC95284

AcademyX, Inc. (LBE)

74033

Technology Marketplace Tier 2B Generalist

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PURCHASING AUTHORITY

CONTRACTOR

VENDOR ID

DESCRIPTION OF CONTRACT TIER – Training Services

TC95285

C M Pros (LBE)

54631

Technology Marketplace Tier 2B Generalist – Training Services

TC95286

SoftNet Solutions

82782

Technology Marketplace Tier 2B Generalist – Products

TC95287

Beta Nineties Computer, 24602 Inc.

Technology Marketplace Tier 3 Micro-LBE Set Aside EQ108

TC95293

Diamond Technology, Inc.

66020

Technology Marketplace Tier 3 Micro-LBE Set Aside EQ108

TC95289

Toptek Micro Center, Inc.

18565

Technology Marketplace Tier 3 Micro-LBE Set Aside EQ108

TC95290

Beta Nineties Computer, 24602 Inc.

Technology Marketplace Tier 3 Micro-LBE Set-Aside GS093

TC95291

Epic Machines, Inc.

93494

Technology Marketplace Tier 3 Micro-LBE Set-Aside GS093

TC95292

Beta Nineties Computer, 24602 Inc.

Technology Marketplace Tier 3 Micro-LBE Set-Aside GS109

TC95293

Delta Computer Solutions, Inc.

40358

Technology Marketplace Tier 3 Micro-LBE Set-Aside GS109

TC95294

Diamond Technology, Inc.

66020

Technology Marketplace Tier 3 Micro-LBE Set-Aside GS109

TC95295

Farallon Geographics, Inc.

62527

Technology Marketplace Tier 3 Micro-LBE Set-Aside GS109

TC95296

Xterra, Inc.

82551

Technology Marketplace Tier 3 Micro-LBE Set-Aside GS109

TC95297

Delta Computer Solutions, Inc.

40358

Technology Marketplace Tier 3 Micro-LBE Set-Aside GS132

TC95298

Diamond Technology,

66020

Technology Marketplace Tier 3 Micro-LBE

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PURCHASING AUTHORITY

CONTRACTOR

VENDOR ID

Inc. TC95299

Farallon Geographics, Inc.

DESCRIPTION OF CONTRACT TIER Set-Aside GS132

62527

Technology Marketplace Tier 3 Micro-LBE Set-Aside GS132

3.6 | Blanket Purchase Order, Purchase Order & Direct Voucher* The City Charter (Section 3.105) and Administrative Code (Section 10.06) require that departments encumber funds before goods or services are provided:

No officer or employee shall bind the City & County to expend money unless there is a written contract or other instrument and unless the Controller shall certify that sufficient unencumbered balances are available in the proper fund to meet the payments under such contract or other obligation as these become due.

A Purchase Order is the prerequisite to the certification and encumbrance of funds. Departments must not receive goods or services, or provide payments to a vendor, until the Purchase Order has been entered into the City’s financial system. Departments must always enter Purchase Order information into the financial system, which then results in the Controller’s Office certification that funds are available for a purchase, contract, or other obligation. The posting of an encumbrance transaction in FAMIS commits the funds for the purpose certified until the obligation is fulfilled, canceled, or discharged.

3.6.1 | Encumbrances* Encumbrances are the recognition of commitments that will subsequently become expenditures when goods and services are received. Encumbrances are posted for documents such as purchase estimates, purchase orders, and contracts. 3.6.1.1

| HOW ENCUMBRANCES AFFECT APPROPRIATIONS

Encumbrances help manage available appropriation, allotment, and budget balances more effectively. When an encumbrance is posted to a department’s financial records, the amount of money available for

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spending by the department is reduced by the amount of the encumbrance. By recording the estimated cost of purchase orders and contracts as encumbrances, managers are aware of the future impact of previous financial decisions. The bulleted items and corresponding Table below show how expenditures and encumbrances affect appropriation balances.    

Encumbrances reduce an appropriation balance Expenditures not previously encumbered reduce an appropriation balance Decreasing an encumbrance increases an appropriation balance Expenditures previously encumbered do not affect the appropriation balance.

FIGURE 3-21. SAMPLE OF HOW EXPENDITURES & ENCUMBRANCES AFFECT APPROPRIATION BALANCES

BEGINNING APPROPRIATION Establish original appropriation

EXPENDITURES

10,000 6,000

Post expenditure (not encumbered)

1,000

Decrease encumbrance Post expenditure (encumbered) $10,000

APPROPRIATION BALANCE 10,000

Post encumbrance

Summary

ENCUMBRANCE

4,000 3,000

-1,000

4,000

2,000

-2,000

4,000

$3,000

$3,000

$4,000

3.6.2 | Purchase Orders* A Purchase Order can result from a requisition only process, or a requisition and bid process. When the requisition is entered into FAMIS Purchasing, funds are pre-encumbered. Approved department requisitions in FAMIS Purchasing become Purchase Orders, liquidating the requisition and creating the financial system encumbrance. Certification of available funds for all purchases, contracts, and other obligations is done by posting an encumbrance transaction in the financial system. Purchases of goods and services, including professional service contracts, are generally recorded in Advanced Purchase Inventory Control System (ADPICS) using a Purchase Order, which posts an encumbrance in the financial Page 126

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system. Construction and real estate contracts are generally recorded directly in FAMIS using an “EN” encumbrance document. The Purchase Order is sent to the vendor and, after the order has been fulfilled, the department reviews and approves the vendor invoice for payment. Departments must follow the steps below to ensure that the Purchase Order process has been completed appropriately:  If necessary, the department has completed a requisition process1  The requisition request has been entered into FAMIS Purchasing and pre-encumbered funds  If necessary, the department has completed a bid process2 in support of the requisition  The requisition has been approved in FAMIS Purchasing or ADPICS, triggering the Purchase Order and interface with FAMIS Accounting  The Purchase Order liquidates the requisition, creates the encumbrance, and certifies the availability of funds  The Purchase Order is approved, signed, and sent to the vendor  The vendor fulfills the order with the department and sends the invoice  The department reviews, approves, and posts the invoice and voucher in FAMIS Purchasing  The voucher is interfaced into FAMIS Accounting, which generates a check to be mailed to the vendor

3.6.3 | Blanket Purchase Order* Department or City Blanket Purchase Orders (BPOs) are a method to obtain approval for future purchases from a vendor for a specific time period and dollar limit. BPOs are also used to track Professional Service Contracts that span multiple fiscal years. BPOs do not encumber funds. Before placing orders or issuing contracts, departments must record an encumbrance against the BPO, which is done in ADPICS using a Purchase Order release.

Requisitions are not used for the following types of purchases: 1) construction services; 2) professional services; 3) leasing or rental of equipment; 4) travel and training expenses and reimbursements; 5) conference and registration fees; 6) employeerelated expenses; 7) organization memberships, dues, and subscriptions; 8) postage. 2 Bidding is not required on items: 1) covered under the conditions of a “term contract”; 2) with a total price of $10,000 or less; 3) with no other source; 4) that are certain perishable foods; 5) that are proprietary articles; 6) subject to contract awarded by the State of California; 7) that are reciprocal buying agreements with other public agencies in the State of California. 1

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Departments must follow the steps below to ensure that the BPO process has been completed appropriately:  The department has identified the appropriate BPO authority and has obtained favorable terms from vendors3  The department has obtained a detailed description of the product or service to be purchased through the BPO  The department records an encumbrance against the BPO using ADPICS Purchase Order release  The Purchase Order is approved, signed, and sent to the vendor  The vendor fulfills the order with the department and sends the invoice  The department reviews, approves, and posts the invoice and voucher in FAMIS Purchasing  The voucher is interfaced into FAMIS Accounting, which generates a check to be mailed to the vendor

3.6.4 | Direct Voucher / Payment without Encumbrance* A direct voucher is an exception to the City’s standard procurement practices and Administrative Code. A direct voucher is a payment request without a prior encumbrance or when an encumbrance is no longer valid. Each request, regardless of the dollar amount, is reviewed by OCA and the Controller’s Office. The OCA evaluates the department’s response to four questions: 1. 2. 3. 4.

What happened to cause the need for a direct voucher? If no error occurred, then why wasn’t there an encumbrance and who authorized this situation? Why is the price reasonable or how do we know it is a good deal for the City? What steps are being taken to ensure that this doesn’t happen again?

Departments provide the answers to these four questions in ADPICS under the Notepad of the request (Screen 9100). The Controller’s Office contacts the department to determine the following issues regarding the direct voucher request:  

Authority: is the department able to purchase the item sought? Violation type: what procurement or contracting rule was broken?

Favorable terms for the BPO include discount pricing off retail prices; prompt payment discount; free on board (FOB) freight terms specify Destination Point. 3

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  





Eligibility of costs or expenditures: was the expense eligible under the funding source? (e.g., the bond, grant, MOU, agreement, etc., allows it?) Appropriateness of cost: is it necessary and reasonable? Timing: when was the cost incurred? When should the encumbrance have been recorded? Example: cost was incurred in 2011 but brought to Controller in 2015. Not reasonable. 12-18 months is reasonable. Context of the request: does the department making the direct payment request have a track record of routinely failing to comply with accounting rules, or there has been no good faith effort in the past to address issues? Is the request originating from a new manager who may not understand the City’s procurement rules, or from a manager who has previously not complied with Chapter 21? Preventive measures: has the department explained how it will improve its processes to avoid the need for direct payment in future similar instances? How will it ensure that its program staff will follow the procurement rules going forward?

Departments should contact the Controller’s Office for training and support so as to reduce the need for direct vouchers. Departments that routinely submit requests for direct vouchers may lose this privilege.

3.7 | Sugar -Sweetened Beverage Funding Ban San Francisco Administrative Code, Chapter 101 restricts the purchase, sale, or distribution of sugarsweetened beverages by or for the City. Below is the legislation: 3.7.1.1

| SEC. 101.1. TITLE.

The title of this Chapter 101 shall be the Sugar-Sweetened Beverage Funding Ban Ordinance. 3.7.1.2

| SEC. 101.2. DEFINITIONS.

For purposes of this Chapter 101, "Base Product" means the same as Powder. "Beverage Dispensing Machine" means an automated device that mixes Concentrate with one or more other ingredients and dispenses the resulting mixture into an open container as a ready-to-drink beverage. "Caloric Substance" means a substance that adds calories to the diet of a person who consumes that substance. "Caloric Sweetener" means any Caloric Substance suitable for human consumption that humans perceive as sweet and includes, but is not limited to, sucrose, fructose, high fructose corn syrup, glucose and other sugars. "City" means the City and County of San Francisco. Page 129

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"Concentrate" means a Syrup, Powder, or Base Product that is used for mixing, compounding, or making Sugar-Sweetened Beverages in a Beverage Dispensing Machine. Notwithstanding the foregoing sentence, "Concentrate" does not include the following: (a) Any product that is designed to be used primarily to prepare coffee or tea. (b) Any product that is sold and is intended to be used for the purpose of an individual consumer mixing, compounding, or making a Sugar-Sweetened Beverage. (c) Any product sold for consumption by infants, which is commonly referred to as "infant formula," or any product whose purpose is infant rehydration. (d) Medical Food. (e) Any product designed as supplemental, meal replacement, or sole-source nutrition that includes proteins, carbohydrates, and multiple vitamins and minerals. "Contract" means any agreement between the City and a person to provide or procure labor, materials, equipment, supplies, or services to, for, or on behalf of the City for a price to be paid out of monies deposited in the City Treasury or out of trust monies under the control of or collected by the City, but excluding agreements for a cumulative amount of $5,000 or less per vendor in each fiscal year. "Grant" means any agreement between the City and a nonprofit entity to provide services to the public or a portion of the public, whether the agreement is funded by the City or by Federal or State grant funds. "Medical Food" means medical food as defined in Section 109971 of the California Health and Safety Code, including amendments to that Section. "Milk" means natural liquid milk, natural milk concentrate, or dehydrated natural milk (whether or not reconstituted), regardless of animal source or butterfat content. For purposes of this definition, "Milk" includes flavored milk containing no more than 40 grams of total sugar (naturally-occurring and from added Caloric Sweetener) per 12 ounces. "Natural Fruit Juice" means the original liquid resulting from the pressing of fruit, the liquid resulting from the complete reconstitution of natural fruit juice concentrate, or the liquid resulting from the complete restoration of water to dehydrated natural fruit juice. "Natural Vegetable Juice" means the original liquid resulting from the pressing of vegetables, the liquid resulting from the complete reconstitution of natural vegetable juice concentrate, or the liquid resulting from the complete restoration of water to dehydrated natural vegetable juice. "Nonalcoholic Beverage" means any beverage that is not subject to tax under Part 14 (commencing with Section 32001) of the California Revenue and Taxation Code. "Person" means any natural person, corporation, sole proprietorship, partnership, association, joint venture, limited liability company, or other legal entity. "Powder" means a solid or liquid mixture of ingredients with added Caloric Sweetener used in making, mixing, or compounding Sugar-Sweetened Beverages by mixing the Powder with any one or more other ingredients, including, without limitation, water, ice, Syrup, Simple Syrup, fruits, vegetables, fruit juice, vegetable juice, or carbonation or other gas. "Simple Syrup" means a mixture of sugar and water.

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"Sugar-Sweetened Beverage" means any Nonalcoholic Beverage sold for human consumption that has one or more added Caloric Sweeteners and contains more than 25 calories per 12 ounces of beverage. Notwithstanding the foregoing sentence, "Sugar-Sweetened Beverage" does not include any of the following: (a) Milk. (b) Milk alternatives, including but not limited to non-dairy creamers or beverages primarily consisting of plant-based ingredients (such as soy, rice, or almond milk products), regardless of sugar content. (c) Any beverage that contains solely 100 percent Natural Fruit Juice, Natural Vegetable Juice, or combined Natural Fruit Juice and Natural Vegetable Juice. (d) Any product sold for consumption by infants, which is commonly referred to as "infant formula," or any product whose purpose is infant rehydration. (e) Medical Food. (f) Any product designed as supplemental, meal replacement, or sole-source nutrition that includes proteins, carbohydrates, and multiple vitamins and minerals. (g) Any product sold in liquid form designed for use as an oral nutritional therapy for persons who may have a limited ability to absorb or metabolize dietary nutrients from traditional food or beverages. (h) Any product sold in liquid form designed for use for weight reduction. "Syrup" means the liquid mixture of ingredients used in making, mixing, or compounding SugarSweetened Beverages using one or more ingredients, including, without limitation, water, ice, a Base Product, Powder, Simple Syrup, fruits, vegetables, fruit juice, vegetable juice, or carbonation or other gas. 3.7.1.3

| SEC. 101.3. BARRING CITY DEPARTMENTS FROM USING CITY FUNDS TO PURCHASE SUGAR-SWEETENED BEVERAGES.

No City officer, department, or agency (collectively, "department") shall use City funds to purchase Sugar-Sweetened Beverages in any form, except as specifically exempted from or allowed under this Chapter 101. 3.7.1.4

| SEC. 101.4. BARRING THE SALE, PROVISION, OR DISTRIBUTION OF SUGARSWEETENED BEVERAGES UNDER A CITY CONTRACT OR GRANT.

No person shall sell, provide, or otherwise distribute Sugar-Sweetened Beverages, in any form, as part of its performance of a City Contract or Grant. 3.7.1.5

| SEC. 101.5. WAIVERS AND EXCLUSIONS.

(a) A City officer, department, or agency (collectively, "department"), with the approval of the Purchaser, may waive the requirements of Sections 101.3 and 101.4 in full or in part if the department determines that strict application of the requirement would not be feasible, would create an undue hardship or practical difficulty, or that similar circumstances otherwise warrant granting of the waiver. The department's decision to grant a waiver shall be in writing.

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(b) The provisions of Sections 101.3, 101.4, or both, shall not apply where the department makes a written finding that the application or inclusion of such provisions would violate or be inconsistent with the terms or conditions of a grant, subvention or contract with an agency of the State of California or the United States or the instructions of an authorized representative of any such agency with respect to any such grant, subvention or contract. (c) The provisions of Sections 101.3 shall not apply to the purchase by the Department of Public Health of Sugar-Sweetened Beverages for its patients, to be used in cases where a medical professional has determined that providing such beverages is part of the appropriate course of treatment for the patient. The provisions of Sections 101.4 shall not apply to the sale, provision, or other distribution of Sugar-Sweetened Beverages to patients as part of the performance of a Contract with or a Grant from the Department of Public Health in cases where a medical professional has determined that supplying such beverages is part of the appropriate course of treatment for the patient. (d) Nothing in this Chapter 101 shall be construed to impair a contract, lease, management agreement or other agreement to which the City is a party on the effective date of this Chapter. (e) Departments shall annually report all waivers granted under subsection (a) and determinations of non-applicability made under subsections (b) and (c) to the City Administrator, and include the reason for each waiver. 3.7.1.6

| SEC. 101.6. ENFORCEMENT AND PENALTIES.

(a) Any person that sells, provides, or otherwise distributes Sugar-Sweetened Beverages in violation of Section 101.4 may be subject to administrative fines imposed by the City Administrator in the amount of (1) Up to $500 for the first violation; (2) Up to $750 for a second violation within a twelve-month period; and, (3) Up to $1,000 for a third and subsequent violations within a twelve-month period. (b) Except as provided in subsection (a), setting forth the amount of administrative fines, Administrative Code Chapter 100, "Procedures Governing the Imposition of Administrative Fines," as may be amended from time to time, is hereby incorporated in its entirety and shall govern the imposition, enforcement, collection, and review of administrative citations issued by the Director to enforce this Chapter 101 or any administrative regulation adopted under this Chapter. (c) Any person that sells, provides, or otherwise distributes Sugar-Sweetened Beverages in violation of Section 101.4 shall be deemed to have committed a material breach of the Contract or Grant and, after a noticed hearing, the person or entity may be barred for two years from receiving any City contract, grant agreement, or loan agreement. 3.7.1.7

| SEC. 101.7. ADMINISTRATIVE REGULATIONS.

The City Administrator, or at the City Administrator's discretion, the Purchaser, may adopt rules, regulations, or guidelines for the implementation of this Chapter 101.

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3.8 | Contracting Frequently Asked Questions (FAQs) Q: What is the threshold for commodities and general services bidding? A: Per Administrative Code Chapter 21, the bidding threshold (or Minimum Competitive Amount) has been calculated by the Controller’s Office to be $110,000 for commodities and $600,000 for general services.

Q: What is the professional service solicitation threshold? A: Per Administrative Code Chapter 21, the bidding threshold (or Minimum Competitive Amount) has been calculated by the Controller’s Office to be $110,000 for professional services.

Q: What is the distinction between general services vs. professional services? A: The definition of professional services and general services can be found in Administrative Code Chapter 21, Section 21.02, Definitions, subsections (i) for general services and (m) for professional services. “General Services” shall mean those services that are not Professional Services, including but not limited to janitorial, security guard, pest control, parking lot management, and landscaping services. “Professional Services” shall mean those services which require extended analysis, the exercise of discretion and independent judgment in their performance, and/or the application of an advanced, specialized type of knowledge, expertise, or training customarily acquired either by a prolonged course of study or equivalent experience in the field. Professional service providers include, but not limited to, licensed professionals such as architects, engineers, and accountants, and non-licensed professionals such as software developers and financial consultants.

Q: What is “Prop Q”? A: Prop Q, also known as Delegated Departmental Purchasing, is a purchasing mechanism for commodities and services under $10,000. Prop Q cannot be used for information technology (IT) purchases, professional services, construction, term contract items, lease-purchase transactions, or vehicles/heavy equipment. There is a Prop Q training video at http://youtu.be/BMKR1ui1H9M . All employees who exercise Prop Q purchasing authority are required to attend a Prop Q training every three years. Please contact OCA for the details.

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Q: What is the definition of “order splitting”? A: Order splitting is the procurement of the same item through separate requests within two to three weeks. Consideration is given to orders using different funding codes or delivery address (a proxy for different expense centers).

Q: What is OMP purchasing authority? A: OMP is the abbreviation for “open market purchase”. This authority is used for department blanket purchase orders, which is limited to $1,000 per day and is used for low-dollar purchases of a specified list of items with specified prices, and when the volumes to be purchased are uncertain. An example of this type of purchase would be the purchase of nails.

Q: What is NP purchasing authority? A: NP is the abbreviation for “non-purchasing”. This authority is used for non-purchasing Purchase Orders, which means they do not go through Purchasing for approval. Such orders include training, subscriptions, and rent.

Q: How am I supposed to procure training services? A: To encumber funds for training, a department should first determine if training is a standard offering by a vendor, or a customized training for the department. Standard training using material created by vendors (such as Excel spreadsheet training) can be procured with a Purchase Order. The Purchase Order should be created using NP as the Purchasing Authority. However, customized training that will be specifically tailored and newly developed for a department requires solicitation, and the vendor needs to sign a P-500 Agreement.

Q: What is a direct voucher? A: A direct voucher is an exception to the City’s standard procurement practices, and is a payment request without a prior encumbrance or when an encumbrance is no longer valid. Each request is reviewed by OCA on its own merits but, generally, at least four questions must be answered: 1) What happened to cause the need for a direct voucher? 2) If no error occurred, then why wasn’t there an encumbrance and who authorized this situation? 3) Why is the price reasonable or how do we know it is a good deal for the City? 4) What steps are being taken to ensure that this doesn’t happen again?

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Departments provide the answers to these four questions in ADPICS under the Notepad of the request (Screen 9100).

Q: How does my department procure a software maintenance agreement? A: Software maintenance agreements use the P-540 agreement template, and department blankets are created to record the agreement.

Q: What is an OCA sole source? A: Administrative Code Chapter 21.5(b) provides for purchases available only from one source. The form to request a sole source waiver is available on the Intranet and must be signed by the Department Head and accompanied by a justification memo that answers the questions on the form.

Q: Has the OCA changed or updated its rules in recent years? A: The rules and regulations pertaining to Administrative Code Chapter 21 were last revised in June 2005.

Q: What is the definition of a “vendor”? A: A vendor is a person or a firm selling goods or services.

Q: What is a “compliant” or “qualified” vendor? A: A compliant or qualified vendor is one that conforms to the requirements to do business with the City & County of San Francisco. Departments must use vendors that are compliant or qualified. Refer to San Francisco Administrative Code, Chapter 21-Acquisition of Commodities and Services. /engine/go.php?file=default.htm&vid=amlegal:sanfrancisco_ca

Q: Can I pay a City employee as a vendor?

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A: As a general rule:

No active City employee should serve the City as an independent contractor

An active City employee who provides service to the City should do so under an arrangement other than independent contracting. Departments should pay employees for all employment services and fringe benefits through the City’s payroll system. Employees should not be compensated through vendor payments; rather, all pay to an active employee should be part of taxable employment compensation. Refer to Section 4.6.3 No 1099 Payments to City Employees for more information.

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4 | EXPENDITURES 4.1 | Overview This section describes City policy regarding basic internal control steps, payment processing for goods and services, and reimbursement to employees. Departments are encouraged to use this section to develop more detailed procedures for their specific expenditures. These guidelines are issued according to the applicable provisions of the San Francisco City Charter, San Francisco Administrative Code, California Civil Code, and Internal Revenue Service (IRS) publications.        

San Francisco Charter Section 3.105 – Controller; City Services Auditor San Francisco Administrative Code Section 10.06 – Encumbrances San Francisco Administrative Code Section 10.07 – Disbursements San Francisco Administrative Code Section 10.08-2 – Penalties California Civil Code Sections 3196 through 3205 California Civil Code Sections 9000 through 9566 IRS Publication 463 (2014), Travel, Entertainment, Gift, and Car Expenses IRS Instructions for Form 1099-MISC

This section addresses payment processing, not the City’s ordering, contracting, purchasing or bidding process. The City has extensive rules, regulations, and policies in those areas. Refer to Section 3 Contracts & Encumbrances or contact the Office of Contract Administration and your department’s purchasing and contracting staff about those policies and related requirements. See the following for some information: http://sfgsa.org/index.aspx?page=359

4.2 | Invoices This section discusses the types and formats of invoices that departments can accept from external parties. It also describes the steps that must be completed to properly review and approve invoices.

4.2.1 | Forms of Invoicing (Electronic vs. Hard Copy) Historically, most vendors have submitted their invoices in paper form. In recent years, many departments have received requests from vendors to process electronic invoices via e-mail, fax, or other format. Departments that want to accept electronic invoices from vendors or contractors must maintain department policies and procedures for receiving, tracking, and processing electronic invoices. This should include an explanation of the internal controls established by the department to ensure adequate tracking of Page 137

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invoices and avoidance of duplicate billing/payment. Department electronic invoices must be reviewed and approved by the Controller’s Office. The following controls must be maintained for accepting electronic invoices: 1. Vendors must submit a letter to the department authorizing electronic invoicing prior to submission of electronic invoices. The letter must indicate which form of electronic invoicing the vendor will use (e-mail, fax, or internal contracting systems). Vendors must clearly state that no other method of invoicing will be used. Once the letter is received and approved by the department, vendors may begin invoicing electronically. 2. The department must maintain a list of all vendors authorized to electronically invoice. 3. The department should designate a single point of contact (e.g., a designated e-mail account) for electronic invoices to be centralized. 4. The department should designate a single point of contact for vendors to make inquiries and receive responses regarding the status of invoices and payments. 5. Vendors must assign unique invoice numbers to electronic invoices to avoid duplicate invoice numbers. 6. Departments have the option of keeping a hard copy of the invoice for authorization and record retention, or maintaining the invoices in the automated system as long as information can be accessed on demand.

4.2.2 | Information on Invoices Invoices submitted by vendors to departments must contain certain required data elements. In order to be considered acceptable, vendor invoices must include, but are not limited to, the following elements:           

Vendor name Unique invoice number Invoice date Description of the item(s) billed Service period for services "Shipped to" or “delivered to” address Vendor remittance address Mode of shipment Sales tax Discount terms (if any) Total amount due

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Purchase order number generated by the City’s financial system

The following elements are highly recommended:  

Order date for materials and supplies Shipping date for materials and supplies

4.3 | Approval of Invoices This section outlines major steps or control points generally found in a good invoice payment process. Departments must document and implement department-level policies and procedures that incorporate these City-wide policies, reflect good internal controls (such as segregation of duties), and are specific to the operational and organizational risks in their environments. For guidelines on contract invoice approval, refer to Section 4.4.2 - Construction/Contract Payment. 1. Properly Receive an Invoice  Write the initials or name of the person, or stamp the division, receiving the invoice  Mark the invoice with the “date received” (e.g., use a date stamp). Refer to Section 4.4.1.1 Prompt Payment Definitions. Note: If there is an invoice dispute, notification must be made to the vendor specifying reasons and corrective actions within seven (7) calendar days of the date of invoice receipt 2. Confirm Receipt of Item(s) Listed on the Invoice  Match the invoice to evidence of receipt of goods or services. Examples include: a. Goods – packing slip or copy of the invoice signed and dated by staff who received the goods on the date of delivery b. Professional services – status or milestone report; product being delivered c. Maintenance Service – service call documentation or copy of the invoice signed and dated by staff who received the service on the date of service d. Construction – refer to contract for documentation required for progress and final payments, this may include documentation related to sub-contractors  If departments have different definitions for evidence of receipt, the definitions must be documented, and reviewed and approved by the Controller's Office. 3. Obtain Approval for Payment  Submit the invoice to the authorized staff member for review. Note: Payment documents must be reviewed and approved by a staff member other than the payment initiator and the purchase requestor. “Payment initiator” refers to the staff who

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initiates payments in the City’s financial system. “Purchase requestor” refers to the staff who makes the purchase request.  Obtain approval for payment by authorized staff member. Note: Department polices must identify “who can approve for what”. Invoices must be signed and dated. Signatures in electronic forms (e.g., PDF) are acceptable. E-mails with language indicating that an invoice has been approved cannot replace required approval signatures.  Obtain review and approval of the invoice by secondary approver, if required. Note: Department polices must address the circumstances when a second approver is needed. This may be a certain dollar levels, certain funding sources, etc. 4. Accounting Review of Invoice The following steps are completed by department accounting staff when an invoice is submitted for payment:  Confirm invoice is an original. If the original invoice is missing, the duplicate invoice must be signed by the Department Head or approved designee with: 1) an explanation of why the original invoice is unavailable, and 2) a statement certifying that no payment has been made on the original invoice. The signature card of the approved designee certified by the Department Head must be on file with the Controller’s Office.  Review the invoice for completeness and accuracy. Confirm the invoice has not already been paid.  Ensure that invoices have been validated against accompanying ordering and receipt documents, as follows: a. Amounts and prices on invoice match ordering and receipt documents b. Invoice and associated documents are dated and signed by authorized staff (see “3. Obtain Approval for Payment”, above) c. Vendor compliance is verified d. Vendor insurance coverage is current e. Vendor payment address is accurate, and matches ordering documents f. Contract retention/liens are recorded, if contract related g. Prior payments are reflected, as needed h. Proper sales tax rates are used If sales tax is missing or incorrect, additional journal entries are required. Refer to Section 4.5 Sales & Use Tax. i. If discounts are available, expedite processing to realize discounts. Discount terms should be clearly stated in the procurement contract. If not specified, the department should always take discount as specified on the vendor invoice. The discount term

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starts on the date of invoice receipt (refer to Section 4.4.1.1 - Prompt Payment Definitions), not the invoice date stated on the invoice. It is departments’ responsibility to ensure the discount is actually taken j. Cost center for payment is identified. 5. Process Payment Document in the Financial System  The person preparing and entering payments into the financial system cannot approve the final payment in the system.  After data entry into the financial system, invoice and supporting documents must be systematically filed and retained for audit purposes. The Controller’s Office will review and approve journal entries submitted in the financial system within five (5) business days.

4.4 | Payment Considerations This section describes special payment circumstances, including:       

Prompt Payments Construction/Contract Payments One-Time Payments Advance Payments Late Payments Payment Disbursements Payment Cancellation.

4.4.1 | Prompt Payment to Vendors The City’s Prompt Payment Program is based on Chapter 14B.7(L) of the City’s Administrative Code, which states that, “The City shall pay Local Business Enterprises certified by the Human Rights Commission (LBEs) within 30 days of the date on which the City receives an invoice for work performed for and accepted by the City.” To provide consistency of payment policies and procedures, the Controller’s Office has directed that the Prompt Payment Program shall include non-LBE vendors. In addition, per the Mayor’s Executive Directive on Payment Policies for Construction Contracts (August 2007), “all City Departments shall make every effort to pay vendors within fifteen (15) business days after receipt of an undisputed invoice for work performed.” Departments may develop different payment policies and procedures from those in this section to foster prompt payment, including use of additional accelerated payment methods.

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Departments should not work with a vendor without an authorized contract or purchase order. In general, no services should be provided and no goods should be delivered before a contract is authorized by the City. Until a contract purchase order or the blanket purchase order is executed by the City, the City has no legal obligation to pay the order.

4.4.1.1

PROMPT PAYMENT DEFINITIONS

The following timeframes must be met in order to comply with the City’s prompt payment guidelines. TABLE 4-1. PROMPT PAYMENT DEFINITIONS

TERM Date of Invoice Receipt

Date of Invoice Acceptance

DEFINITION Whichever event is later:  Date the vendor’s payment request (invoice) received by the City: a. Mailed invoice reached the City premises b. Electronic invoice received in the City e-mail account, fax machine, and etc. c. Payment request initiated in a City e-payment subsystem  Payment date specified in the contract or purchase order (not to preclude vendor early performance), or  Date materials or services are delivered to the City. Departments may have their own definition of Invoice Receipt Date. However, the definition must be reviewed and approved by the Controller's Office. Date the invoice is deemed “accepted” by the City for payment, meaning all approvals required by the City have been received. If there is an invoice dispute, the City must notify the vendor specifying reasons and corrective actions within seven (7) calendar days of the Date of Invoice Receipt. Invoice Dispute Notifications by e-mail to vendors is acceptable. As part of an invoice dispute, a Stop Notice lien must be filed with the Controller’s Office. An Invoice Dispute Notification stops the prompt payment clock until the dispute is resolved.

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PROMPT PAYMENT CLOCK DAY ZERO

By DAY SEVEN, invoice must be submitted to Accounting for payment or Invoice Dispute Notification must go out to the vendor

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TERM

Payment Due Date

Payment Date

DEFINITION

If a corrected invoice must be submitted, the prompt payment clock re-starts on the date the corrected invoice is received by the City. Within 30 calendar days of the Date of Invoice Receipt.

PROMPT PAYMENT CLOCK

By DAY 30, payment must be made

Per the Mayor’s Payment Policies for Construction Contracts Executive Directive, City Departments shall make every effort to pay vendors within fifteen (15) business days. When the due date falls on a Saturday, Sunday, or legal holiday and City offices are closed, the City may make payment on the following working day. The check date. If payment is made by electronic fund transfer, it is the bank settlement date.

The following screen shots provide examples of how the various key dates appear in the City’s financial system, FAMIS. Important date fields are shown in red in the following figures below:  



INVOICE DATE: invoice date indicated on vendor invoice. DTE IVC REC: date invoice received by the City (refer to Table 4-1. Prompt Payment Definitions for detailed definition); for disputed invoices, date the corrected invoice received by the City. For multiple invoices processed in the same payment document, use the invoice with the earliest receipt date for DTE IVC REC. DUE DATE: the payment date calculated by the system based on the DISC TERMS and the DTE IVC REC inputted by the user. Note: Due to the once-a-week check-writing process, the system may assign a check date different from the DUE DATE for paper checks. Please do not manually change the DUE DATE to the date before the voucher post date.

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FIGURE 4-1. INVOICE RECEIPT DATE ILLUSTRATION 1 PCHL1500 V5.1 CITY AND COUNTY OF SAN FRANCISCO--NFAMIS 03/25/2015 LINK TO: INVOICE HEADER ENTRY 4:13 PM INVOICE SEQ : DOC TYPE : IV INVOICE ALL : N (Y/N) INVOICE NO/DESC : / ACTION INDICATOR : N INTF TYPE : IV VOUCHER NO : INVOICE DATE : DTE IVC REC: PURCHASE ORDER NO : NOTE PAD : DEPT : PO DOC BALANCE : CR BAL : PROPERTY ID : IVC AMT: NET: VENDOR ID/SUFFIX : DBA NAME : HDR CR AMT : ADDRESS : MATCH TYPE: STATUS : CITY: ST: ZIP: CTRY: DISTRIBUTION METHOD: D SINGLE CHECK: N LETTERS SENT: FREIGHT : LIQ DAMAGES : OTHER CHARGES : F.O.B. POINT: DISC TERMS : REJECT CODE : SFX INDEX SUBOBJ USERCODE PROJCT PRJDTL GRANT GRNTDTL

FIGURE 4-2. INVOICE RECEIPT DATE ILLUSTRATION 2 PCHL1410 V5.1 LINK TO:

CITY AND COUNTY OF SAN FRANCISCO--NFAMIS VOUCHER HEADER ENTRY

VOUCHER NUMBER ACTION INDICATOR STATUS DEPARTMENT AMOUNT VOUCHERED PURCHASE ORDER NO MATCH TYPE VENDOR ID/SUFFIX DBA NAME ADDRESS

: DOC TYPE : VC : N SINGLE CHECK: N INTF TYPE: : CHECK NUMBER: NOTE: : CON01 CONTROLLERS MANAGEME DOC : PART/FINAL: P (P/F) : CHANGE NO : : CONTRACT ID : : : IVC NET AMT :

CITY: : : : MASTER ACCOUNTING INFORMATION SFX INDEX SUBOBJ USERCODE INVOICE NO/DESC FREIGHT

ST: /

ZIP :

03/25/2015 4:17 PM DUE DATE: EFF DATE: CHANGE SEQ : REF NO: CREATE: UPDATE: POST: CREDIT IND : : SEQ: UNPOST INV : CTRY:

N

: : DIST METHOD: EXCEPTION PROCESS: N PROJCT PRJDTL GRANT GRNTDTL

If there is a dispute regarding one or more aspects of a vendor invoice, the department must file all supporting documents with the payment document and/or update the Notepad in FAMIS, as shown in the following example. Page 144

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FIGURE 4-3. NOTEPAD ENTRY FOR DISPUTED INVOICE PCHL9100 LINK TO:

CITY AND COUNTY OF SAN FRANCISCO--NFAMIS ELECTRONIC NOTE PAD

VOUCHER HEADER

03/25/2015 4:27 PM PAGE 01 OF 01

1410

ORIGINAL INVOICE RECEIPT DATE: REASON FOR DISPUTE (E.G. AMOUNT, WRONG ITEM, WRONG ADDRESS, ETC.): DATE DISPUTE FIRST COMMUNICATED TO VENDOR: DATE ORIGINAL INVOICE RETURNED TO VENDOR: DATE CORRECTED INVOICE RECEIVED:

4.4.1.2

| PROMPT PAYMENT IMPLEMENTATION GUIDELINES

The following section describes steps City departments can implement to help ensure prompt payments to vendors. Establish a “One-Stop Shop” for Receiving and Tracking Payment Requests Departments should:     

Create a single point of contact/unit for vendors to submit invoices. Create a single point of contact/unit for vendors to make inquiries and receive responses regarding the status of invoices and payments. Specify the name, mailing address, phone number, and e-mail address of the unit in all City department communications to vendors regarding payment. Have a back-up protocol to ensure continuity and timeliness of operations during vacations and other leaves. Record invoices and vouchers in financial systems as early in the process as possible and accurately document the date that each invoice is first received. In FAMIS, the Notepad function may be used to document additional information about approvals, required corrective actions, and vendor communications prior to Voucher posting. Be aware that Notepad entries cannot be used for reporting purposes.

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Record the Date of Invoice Receipt and the Date of Invoice Acceptance to track the progress of invoices through necessary approvals.

Track the Duration from Date of Invoice Receipt to Payment Date Departments must record invoices as soon as they are received. Departments should track the number of days, for audit purposes, from the Date of Invoice Receipt, to Date of Invoice Acceptance, to Payment Date. Departments must evaluate the number of payments delayed by performance or other disputes to determine how to decrease the likelihood of future disputes. Communicate Corrective Actions in a Timely Manner Notify vendors within seven (7) calendar days from the Date of Invoice Receipt, or sooner as practicable, if an invoice cannot be accepted by the City due to defects or improprieties in the goods or services, errors or omissions in the invoice, contractual performance obligations, or City requirements compliance status. An invoice may also be denied because a Stop Notice has been filed with the Controller’s Office, thus disputing the vendor’s entitlement to the requested funds. Clearly describe to the vendor the corrective action(s) required, including whether the invoice must be corrected and re-submitted to re-start a payment request process, and document the vendor notification date and reason for notification in the Notepad. 4.4.1.3

| EASY METHODS TO ACCELERATE PAYMENTS

Vendors must be paid within 30 days of the date on which the City receives an invoice for work performed and accepted by the City. If a dispute prevents a department from meeting this requirement, that dispute must be documented. The fastest and easiest way for departments to accelerate payments is to accept electronic payment requests and promote electronic payments, as described below. Electronic Payments via Paymode-X Electronic payments such as Paymode-X program are free, secure, Internet-based services. Departments can encourage vendors to sign up with Paymode-X to get electronic payments (ACH - Automated Clearing House) that are paid out of the City’s existing disbursement account and sent electronically to the vendors’ bank accounts at any financial institution. Departments can describe to their vendors the numerous benefits of Paymode-X electronic payment, including:   

There is no charge to the vendor for this service. Paymode-X is secure, Internet-based, and requires no software purchase and no modification to existing accounts receivable system. It takes about 10 minutes to enroll.

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Electronic payments are automatically made to vendors’ accounts, with no need to cash physical checks.

The approval process normally takes approximately 2-3 weeks from the time the vendor enrolls in Paymode-X. Once the vendor is set up in Paymode-X, the system will notify the Controller’s Vendor Support Unit by flagging the vendor for ACH payments in the financial system. When the vendor is flagged, all payments thereafter will be through Paymode-X and will appear in FAMIS as “ACHPAY” in the “Bank No.” field with “Document Type: AHSFYYNNNNNN” for the payment document. Electronic payments display remittance information, currently printed on our checks, to our vendors, contractors and suppliers. If vendors are requesting electronic payments, send them the following links to sign up: http://www.sfgov.org/ach OR www.bankofamerica.com/paymode/city_countyofsanfrancisco. For more information on Paymode-X, contact the Controller’s Office at [email protected] Partial Payments Not Allowed If the invoice has disputed items or amounts, the invoice should be returned to the vendor for correction. Partial payments on invoices are not allowed. Refer to Section 4.7 Payments-Related FAQs for detailed examples. Partial payment on contract payment is discussed in Section 4.4.2 Construction/Contract Payment. Access Online Vendor Payment information Vendor payment information is searchable online through SFOpenBook under “Spending & Revenue” at http://openbook.sfgov.org/.

4.4.2 | Construction/Contract Payment* The following section describes guidelines for departments that make payments on construction projects and to contractors. For guidelines on construction contracting, refer to Section 3.2 - Contracting Rules & Regulations, Chapter 6. 4.4.2.1

| CONTRACT RETENTION & LIENS

Refer to Section 10 - Fixed Assets. 4.4.2.2

| STOP NOTICE

A “Stop Notice” provides a legal remedy to sub-contractors against a prime contractor for non-payment of goods and/or services provided or performed to support delivery of an existing contract with the City. A Stop Notice informs the Controller that a dispute over payments exists between a prime and a sub-

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contractor. When a Stop Notice is received, the Controller withholds the disputed amount until a resolution between the prime and sub-contractor is finalized. Stop Notices are regulated by California Civil Code Sections 3196 through 3205 and 9000 through 9566 (Title 3. Public Work of Improvement). The following links provide access to the relevant regulations:  

http://www.leginfo.ca.gov/.html/civ_table_of_contents.html http://www.ca.regstoday.com/law/civ/ca.regstoday.com/laws/civ/calawciv_DIVISION3_PART4_TITLE15_CHAPTER4.aspx#5 The following high-level process flow diagram provides an overview of what occurs to resolve a Stop Notice.

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FIGURE 4-4. STOP NOTICE WORKFLOW

City executes an agreement with an external contractor / vendor

Contactor / vendor hires a sub-consultant / subcontractor

Sub-consultant / sub-contractor alleges nonpayment by the contractor and issues a Stop Notice to the Controller

Controller’s Office obtains accounting system Encumbrance # from department and blocks encumbrance in the system; department records Stop Notice in system (125% of amount withheld)

Controller’s Office notifies contractor (with cc: to subcontractor and department) regarding Stop Notice

Prime and sub-contractor resolve issue; release the Stop Notice with Controller

Controller’s Office unblocks the encumbrance in accounting system and notifies department to release funds; withheld funds are released to prime contractor

Stop Notices are usually mailed to the Controller’s Office, but a sub-contractor can also file a Stop Notice in person with the Controller’s Office Claims and Disbursement Unit (Disbursement Unit). Upon receipt of a signed Stop Notice, the Disbursement Unit e-mails the Stop Notice to the accounting unit of the contracting department identified on the Stop Notice. The department, upon receipt of the e-mail, must clearly identify the project and the FAMIS Encumbrance number(s) (“EN”, or “PO”). Note that subcontractors must file a 20-day Preliminary Notice before starting work for a prime contractor. If a subcontractor failed to file one, prime contractors may challenge the sub-contractor’s Stop Notice.

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The Disbursement Unit then sends a notification letter to the prime contractor against whom the subcontractor is filing a Stop Notice. The sub-contractor and the accounting personnel of the contracting department are copied of the notification letter, as follows: 





If the encumbrance balance (remaining balance + retainage) shown in the financial system is enough to cover the amount of the Stop Notice plus 25%, the Disbursement Unit will send the prime contractor the Standard Notification Letter. The sub-contractor and the accounting personnel of the contracting department are copied on the notification letter. If the encumbrance balance (remaining balance + retainage) shown in the financial system is not enough to cover the amount of the Stop Notice plus 25%, the Disbursement Unit will send the prime contractor the Non-sufficient Funds Notification Letter. The sub-contractor and the accounting personnel of the contracting department are copied of the notification letter. If a sub-contractor subsequently files an Amended Stop Notice to modify the Stop Notice they originally filed, the Disbursement Unit will send the prime contractor the Amendment Notification Letter. The sub-contractor and the accounting personnel of the contracting department are copied of the notification letter.

A prime contractor can serve the city with an Affidavit to dispute the validity or the amount of the Stop Notice filed by the sub-contractor. An Affidavit is a written declaration under oath, made without notice to the adverse party. It must include a written declaration clause signed by the prime contractor that includes the date and place of signing and a statement under penalty of perjury that its contents are true and correct (e.g., “The statement set forth in this letter are true and correct and are made under penalty of perjury this xx (date) of xx (month), xxxx (year) in San Francisco”). Upon receipt of the Affidavit from the prime contractor, the Disbursement Unit will send a letter by certified mail to the sub-contractor notifying that the prime contractor has served the City an Affidavit refuting the Stop Notice; a copy of the letter will also be sent to the prime contractor; and another copy of the letter will be e-mailed to the accounting unit of the contracting department. The sub-contractor can serve the City with a Counter-Affidavit contesting or refuting the Affidavit filed by the prime contractor. The sub-contractor has 20 days (from the date of the letter sent by the prime contractor) to serve the City the Counter-Affidavit. It must include a written declaration clause signed by the sub-contractor that includes the date and place of signing and a statement under penalty of perjury that its contents are true and correct (e.g., “The statement set forth in this letter are true and correct and are made under penalty of perjury this xx (date) of xx (month), xxxx (year) in San Francisco”). In addition, the sub-contractor must supply copies of invoices to support the claims in the Counter-Affidavit. Upon receipt of the Counter-Affidavit from the sub-contractor, the Disbursement Unit will send a letter to the prime contractor notifying that the sub-contractor has served the City a Counter-Affidavit refuting the Affidavit; a copy of the letter will be sent to the sub-contractor; and another copy of the letter will be emailed to the accounting unit of the contracting department.

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4.4.2.3

| RELEASES

If Counter-Affidavit is received from the sub-contractor, and a request is received from the prime contractor to release funds, the accounting unit of the contracting department should contact the City Attorney’s Office (David R. Hobstetter at 554-3981) for instructions. Follow City Attorney’s instructions for any further actions. Unlike filing a Stop Notice where original signatures are not required, all releases of a Stop Notice from a sub-contractor must have an original signature. There are five types of releases, described below. Unconditional Release   

This release satisfies the sub-contractor’s monetary complaint (Stop Notice) The amount indicated on an Unconditional Release must be “$0” Upon receipt of an original Unconditional Release, the Disbursement Unit will e-mail a copy to the contracting department and unblock the EN or PO in the financial system.

Partial Release  

This release partially (up to the released amount) satisfies the sub-contractor’s monetary complaint (Stop Notice) Upon receipt of an original Partial Release, the Disbursement Unit will e-mail a copy to the contracting department and unblock partially (up to the amount released in the Partial Release) of the EN or PO in the financial system.

Release of Stop Notice  



This release satisfies the sub-contractor’s monetary complaint (Stop Notice) If the amount to be released, as indicated on the Release of Stop Notice, equals to the amount of the Stop Notice, the Disbursement Unit will e-mail a copy to the contracting department and unblock the EN or PO in the financial system If the amount to be released, indicated on the Release of Stop Notice, is less than the amount of the Stop Notice, it is considered a Partial Release. The Disbursement Unit follows the Partial Release instructions.

Bond Release   

The prime contractor bought the bond to release the Stop Notice. The bonding company will pay the sub-contractor if at a later time the Court ruled in favor of the sub-contractor A Bond Release must have original seal of the bonding company with original signature The release bond and the performance bond must have different underwriters. The Disbursement Unit will contact the contracting department to find out the underwriter of the performance bond

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 

The amount indicated on the Bond Release must equal to the amount of the Stop Notice. If it is less, the Disbursement Unit will contact the prime contractor to revise the amount If all above conditions are met (original seal, original signature, different underwriters, equal amount), the Disbursement Unit will e-mail a copy to the contracting department and unblock the EN or PO in the financial system.

Note that each Stop Notice and release incident may be different. Consult with the City Attorney’s Office for instructions.

4.4.3 | One-Time Payment These guidelines are issued under the Controller’s authority under:  

San Francisco Charter, Article III, Sec. 3.105; and San Francisco Administrative Code Chapter 10, Article I, Sec. 10.07

The one-time payment process in the City’s financial system is only for authorized non-recurring and non1099 reportable payments to one-time vendors. Refer to Section 4.6.2 1099 Reportable Payments below for more information about what is and is not 1099-reportable. Allowable non-1099 reportable one-time vendor payments include: 

     



Non-1099 reportable Claims and Judgments as well as Litigation expenses – use sub-object 05311 for settlement of claims generally processed by the City Attorney and other responsible departments Tow Claim Judgments and Refunds of improper tow charges – use sub-object 05311, generally processed by the Police Department and Parking and Traffic Refunds of security deposits from liability or deferred credit account (e.g., GL 241, 249 for Port’s refund of customer deposits, Treasure Island’s refund of event security deposits) Payments against Agency Obligations (GL 219) (e.g., payment from Trial Court Trust Account; District Attorney’s Bad Check program, Juvenile Probation restitutions) Aid Assistance payments (characters 036/037) – processed by Human Services Agency and not subject to 1099 reporting if paid directly to clients, including SSI retro payments to clients Working Families Credit payments – non-1099 reportable tax credit, use sub-object 03910 Elections’ poll workers (sub-object 02710) and polling places (sub-object 03051) payments with the assumption that the annual payments to any one individual will not exceed the $600 limit in one tax year Other examples include: reissue of ERS Retirement Allowances (sub-object 05511), reissue of payroll checks, Building Inspection Code Enforcement Rehabilitation Fund Underground Utility Program (sub-object 03599).

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4.4.3.1

| RULE FOR ONE-TIME PAYMENT PROCESSING

Typical use of the “OT document type” for one-time payment involves one-time, non-recurring payments to vendors and expenses that are paid out of liability accounts, agency obligations, special programs or funds. One-time payments are for paying vendors (not employees) for non-recurring, non-1099 reportable expenses. One-time payments are not for employee reimbursements, and should not be used for purchase of materials and supplies, or services. Departments must maintain proper controls and/or verification procedures to ensure accurate 1099 reporting. Documented misuse of one-time vendor payment may be grounds for possible suspension of security access to document type OT. 4.4.3.2

| ONE-TIME PAYMENT EXCEPTIONS

One-time payments should not be used for 1099-reportable expenditures. The following are limited exceptions to 1099-reportable one-time payments, on condition that departments submit W-9 information to the Vendor File Support Unit at the time of payment. Departments should forward the W-9 to Vendor File Support after the one-time vendor number is generated in the financial system. Even when a 1099reportable payment may be below the $600 reportable limit, W-9 information is still required. Departments are also required to provide certification in the FAMIS Notepad to justify the use of onetime vendor payments and to certify that W-9 information has been provided. Note that 1099reportable payments should not be made from revolving funds. 





Aid Assistance payments – Human Service Agency maintains W-9 information for non-client payees and submits W-9 information to Controller’s Vendor File Support Unit for update or set up of vendor numbers. Payments to non-client payees must use the sub-object flagged for 1099reportable. Additionally, the department should use the correct sub-object to ensure proper recording in 1099; e.g., box 3 or type 07 for non-employee compensation, vs. sub-object 03652 (type 01), which will be reported in box 1 for rents/leases. Claims and Judgments, Litigation Expenses (legal fees, rents, etc.) – 1099 reportable o Judgments—Legal Fees should be recorded to sub-object 05323 (type 07), which will be reported in box 7 on the 1099-M o Litigation Expenses—Legal Fees included in gross proceeds should be recorded to subobject 05312 (type 11), which will be reported in box 14 on the 1099-M o General Litigation Expenses should be recorded to sub-object 05321 (type 07), also reported in box 7 on the 1099-M (e.g., District Attorney’s witness lost wages payments) o For rent/lease expenses paid to non-clients engaged in the business of rentals and housing as a result of litigation, sub-object 05324 (type 1) should be used, which will be reported in box 1 on the 1099-M (e.g., District Attorney’s relocation expenses). 1099-reportable Public Defender’s payments to expert witnesses (keeping necessary confidentiality should not preclude compliance with IRS regulations and W-9 information is still necessary) – use sub-object 02699 Other Fees (type 07). Do not make these payments from the revolving fund.

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 

Water Department toilet rebates (sub-object 03820). The Public Defender’s Office makes payments from its Capital Cases Revolving Fund, and may continue to do so while in compliance with the IRS 1099 tax reporting requirements. For purposes of confidentiality, however, Public Defender will restrict information to the minimum needed to meet the IRS 1099 reporting requirements.

4.4.3.3

| SYSTEM INTERFACES OF OT PAYMENTS

When using system interfaces for OT payments that are 1099-reportable, completed payee W-9s must be submitted to the Vendor File Support Group at the time of interface. 4.4.3.4

| UNACCEPTABLE ONE-TIME PAYMENTS

The following types of payments should never be processed as a one-time payment:    

Revenue refunds, which should be processed as “RR” or “RD” Revenue Refund document types in the financial system Payments to employees including employee reimbursements Contractual services Purchases of materials and supplies.

4.4.3.5

| EXISTING CONTROLS TO ASSIST DEPARTMENTS WITH ONE-TIME PAYMENTS

The following systems and processes are in place to help prevent unacceptable one-time payments being entered by departments: 

   

Vendor numbers and expense sub-objects are flagged as either 1099 reportable or non-1099 reportable. Departments should ensure use of the correct set-up for vendor numbers and subobjects. Look up 1099 information on FAMIS screens 9510 and 5200 Periodic matching of the vendor payments file with the employees file to: a) report to Payroll the additional income to the employee, and b) inactivate the employee’s vendor number Quarterly review of payments using 1099-reportable sub-objects to vendors without W-9 tax identification information Regular vendor numbers (excluding employees) require W-9 tax identification information at the time of set-up by Vendor File Support Group Interfaces of one-time payments require W-9 before payment, especially if payments are 1099reportable and exceed $600.

In summary, departments should keep in mind the following guidelines when using one-time payments:

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 



Departments should set up regular vendor numbers and encumber funds to the extent possible. One-time payments are only for limited use for non-1099 reportable and non-recurring vendor payments. City departments should ensure that vendors provide W-9 information before payments are made. Exception: In order to accommodate system interfaces and confidential expenses, special arrangements could be made in advance for the department to submit W-9 tax information to the Controller’s Office to update the vendor records accordingly. Vendors and expense sub-objects must be flagged accordingly when making 1099-reportable payments. It is the department’s responsibility to ensure that taxable payments will be recorded and reported to the IRS correctly. Thus, it is highly important that departments use one-time payment only for critical needs and according to the special processing procedures to satisfy the Controller’s requirements for proper use, review, and monitoring of one-time payment transactions.

4.4.4 | Advance Payment An advance payment is the part of a contractually due amount that is paid to vendors in advance for goods or services. Departments must obtain approval from the Controller's Office before entering into a contract or making a purchase involving advance payment. Advance payment is not allowed except for the situations described in the following two sections. 4.4.4.1

| ADVANCE PAYMENT TO GRANT SUB-RECIPIENTS (COMMUNITY BASED ORGANZATIONS)

The Controller’s Office issues the following advance payment guidelines as authorized by the City Charter, Article I, Section 3.105: Advances or pre-payments to community-based, non-profit organizations are allowable in order to meet contractor cash flow needs in certain circumstances. Departments must have approved contracts with the vendor, and contracts must explicitly allow pre-payments. The contracts must explicitly define and allow pre-payments to contract providers, who have been awarded the contracts according to the City’s procurement and contracting rules and regulations. If the original contract does not allow advance payment, then it needs to be amended to include pre-payment provision. In the event the funder does not allow advance payment, the City department should not enter into such agreement with the contractor or sub-recipient. Any City agency’s agreement allowing pre-payment to a vendor should be based on the department’s assessment of the organization’s financial situation, proven track record of providing services, justified needs for advances, as well as compliance with City’s purchasing and contracting rules and regulations. Periodic reconciliation, service tracking, and control procedures must be clearly defined in the contract, as they are critical to the effectiveness of this arrangement to prevent overpayment, misuse

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or loss of City funds. The following procedures are necessary to ensure uniform implementation of agreements to provide advances or pre-payments to contract providers. Advances or Pre-payments to Providers In order for advance payments to be allowable, departments should:  





Select service providers according to the City’s purchasing and contracting guidelines Ensure that the proposed pre-payment agreement does not violate funding agencies’ or City’s rules or regulations, and that it does not create a difficult cash management situation for the department Develop required text to be inserted in contracts that will outline maximum pre-payment amounts (dollar or percentage), permitted frequency, required repayment timelines, and method for tracking pre-payment balances on claim forms or other reconciliation documents Add appropriate language to the contract to identify any special payment arrangement or agreement that does not fall within the standard or boilerplate provisions or rules of purchasing or contracting regulations.

Internal Controls Regarding Use & Collection of Advances or Pre-payments Departments should ensure internal controls over appropriate use and collection of advances or prepayments as follows:  

   

Require written request and justification from vendor to request pre-payment for services Develop policy that states the criteria under which providers are eligible for advances or prepayments. Include allowable reasons for approving requests, and any additional requirements based on the department’s assessment of satisfactory contract performance to date Require review and approval of advance and pre-payment requests by responsible managers, and approval from the Department Head or highest financial officer in the department Effectively monitor pre-payment activity and balances to safeguard against misuse or loss of City funds Ensure segregation of duties among contracting, program management, accounts payable, and accounts receivable functions within the department Ensure funds are available before contract issuance, and encumber funds in the financial system as soon as the purchase order is issued. When submitting a pre-payment request transaction, clearly describe it as a pre-payment against the purchase order and with appropriate Notepad comments to certify that pre-payment is explicitly allowed in the contract.

Processing Advance Payments in the Financial System Follow these steps to ensure that advance payments/pre-payments are correctly entered into the financial system:

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 







Process voucher of a purchase order or encumbrance payment. DO NOT use direct payment document (DV, PR, OT) to process advances to contract providers. Process voucher (VC) in FAMIS Purchasing if advances are being paid against a purchase order. Both documents should clearly describe the payment as advances on the description field and/or on the Notepad. Process invoice as an encumbrance payment (EP) if advances are being processed against a FAMIS Accounting encumbrance. The document should clearly describe the payment as advances on the description field and/or on the Notepad. Apply repayment of advances against subsequent invoices according to repayment agreement between the City department and contract provider. Process the net reconciled amount using applicable transaction code and/or document in FAMIS Accounting or FAMIS Purchasing. Pre-payments are considered expenses at the time of payment, e.g., a reduction to the encumbrance. Ensure that the time of payment, service period, and fiscal month posted in FAMIS are consistent and accurate.

For illustrations on processing (VC) voucher or encumbrance payment (EP), refer to Section 16 - How-to & Screenshots. For more information on transaction codes, refer to Section 17.2 - FAMIS Transaction Codes. Preventative Measures Against Overpayment In order to ensure that organizations are not overpaid, departments must:  

 

 

Review invoices in detail to ensure payment only for actual and authorized services rendered for the period indicated Maintain accurate records of advances that match the balance in FAMIS vendor history. Departments should use tracking applications (e.g., spreadsheets, contract management system, invoicing system) and perform a reconciliation process to monitor advances and rendered services Monitor closely the vendor payment history to ensure that the advances are being repaid as deduction from subsequent invoices and to safeguard against overpayment Process final payment only when advances have been fully repaid; all services have been rendered and properly invoiced, documented, and authorized; and detailed review has confirmed the accuracy of the contract’s remaining balance. This is especially important at fiscal year-end to ensure expenses are booked in the proper reporting period Have a contingency plan to recover funds and act immediately in the event an overpayment is identified, to prevent further loss of City funds Contract providers must be made aware of legal consequences and possible loss of City business if negligence and fraudulent billings result in overpayment.

In summary, when considering advances or pre-payments to contract providers, departments must develop policies and procedures to ensure accurate and timely reconciliation of payments. Departments must have approved contracts with the vendor, and contracts must explicitly allow pre-payments. If the

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original contract does not allow advance payment, then it needs to be amended to include a prepayment provision. Contract provisions should also include terms that state the maximum pre-payment amount, permitted pre-payment frequency, required repayment timelines, and required method for tracking pre-payment balances on claim forms or other reconciliation documents. Any deviations from these policies require the Controller’s pre-approval. In general, the prerequisites and conditions described in these guidelines should be met for contract providers to be considered for pre-payment. Departments must also have in place service tracking and internal control procedures to monitor and reconcile the advance payments, with the goal that such arrangements do not negatively impact the City’s financial resources. For accounting-related questions, contact the Controller’s Fund Accounting Supervisor(s) assigned to your department. 4.4.4.2

| OTHER ALLOWED ADVANCE PAYMENT

As stated by San Francisco Administrative Code Chapter 21, Section 30 (e): A Contracting Officer is authorized to make payment for software license fees and software support, equipment maintenance and associated escrow and finance fees in advance of receiving services under a contract. Advance payment is allowed for the following items:      

Training and conference registration Membership dues Subscriptions Licenses Rent under a contract Software maintenance service under a contract.

4.4.5 | Late Payment The City & County of San Francisco does not pay any fees incurred following a late payment unless the late payment is authorized by the Controller’s Office.

4.4.6 | Credit Memorandum A credit memo may be issued by a vendor because the City returned goods to the vendor, or there is a pricing dispute, or a marketing allowance, or other reasons under which the City will not pay the vendor the full amount of the invoice.

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4.4.6.1

| PROCESSING A CREDIT MEMORANDUM IN THE FINANCIAL SYSTEM

If the City has not yet paid the vendor, the City can use the credit memo as a partial offset to its invoice-based payment to the vendor. Departments can net the credit memo with the invoice and input the netted amount in the financial system as the amount being paid. Make sure to enter the credit memo number in the “Invoice Number” field. If there is not enough space, make sure to include the credit memo number in the Notepad. If the City has already paid the full amount of the invoice, the City has the option of 1. Using the credit memo to offset a future payment to the vendor: Credit memoranda can be processed in FAMIS Accounting through a journal entry against payments made in both FAMIS Accounting and FAMIS Purchasing. Refer to Section 16 - How-to & Screenshots for illustrations on processing credit memo journal entries. OR 2. Using the credit memo as the basis for demanding a payment refund in exchange for the credit memo.

4.4.7 | Payment Disbursement In general, payments to external vendors are distributed via postal mail or, for those vendors that are enrolled in Paymode-X service, electronic funds transfer (or ACH). In addition: 

 

 



The Controller’s Office encourages departments to have contractors and vendors enroll in the City’s electronic payment plan – Paymode-X, which is free, ensures faster payment, and saves the time and cost needed to produce and distribute checks. Checks are printed ONCE every week on Wednesday night for payment due dates through Friday with Thursday check dates. The weekly check or the daily ACH payment to any vendor reflects the total amount paid to this particular vendor throughout the City during the period covered. For special circumstances when vendors require single checks, submit the request to your Controller’s Office Fund Accountant. Non-payroll checks will be distributed by mail through the US Postal Service ONCE every week on Friday. A number of these hand-sorted, non-payroll checks include employees’ travel and training reimbursement checks. Department staff should exercise extra diligence in verifying employee addresses when processing employees’ reimbursement check requests; in general, home addresses are not permitted for this purpose and the work location address should be used. Any adds/changes to vendor addresses should continue to be submitted to the Controller’s Office Vendor File Support.

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For those extraordinary circumstances that require special check handling/pick-up, fax a request to the Controller’s Disbursement Office using the Check Pickup Request Form (Figure 4-5).

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FIGURE 4-5. CHECK PICKUP REQUEST FORM

CONTROLLER'S OFFICE ROOM 396-CITY HALL FAX: 554-7578

DEPARTMENTAL CHECK RELEASES

DEPARTMENT:

Document#

DATE:

Vendor#

Check#

Check Date

REQUEST AUTHORIZED BY:

CHECKS RECEIVED BY:

Signature:

Signature:

Print Name:

Print Name:

Amount

Reason for In-House

CHECKS Release By:

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4.4.8 | Payment Cancellation This section provides guidance on how to handle instances where the department might need to cancel payment to an outside vendor. Canceling a Payment Request Before Check is Issued For FAMIS Purchasing payments, cancel the Voucher in Screen 8500; for FAMIS Accounting payments, cancel the Direct Payment Request (PR or RM) through journal entry using Transaction Code 240. For illustrations on payment cancellation processing, refer to Section 16 - How-to & Screenshots. For more information on transaction codes, refer to Section 17.2 - FAMIS Transaction Codes. Canceling a Payment After Check is Issued but Not Yet Mailed If the check has been issued but not mailed out, call the Controller’s Disbursement Unit at 554-7545 to intercept the check before it goes into the mail. Request the Controller’s Office Fund Accountant to cancel the check. If Incorrect Check is Mailed to Vendor Call the vendor and request that the check be returned. Void the check when it is received back and contact the Controller’s Office Fund Accountant to cancel the check. If the check is not returned, call Controller’s Office Disbursement Unit to stop payment as described below. Requesting a Stop Payment Fax the Controller’s Disbursement Unit at 554-7578 with the stop payment request on a check that has been issued. The fax should contain detailed check information and the reason for the stop payment. The Disbursement Unit will forward a request to the Treasurer’s Office. It takes at least two (2) days to process. Once the stop payment is processed, Disbursement will request the Controller’s Office Fund Accountant to cancel the check in the financial system. The department can then submit a new payment request. Lost Warrant (Check) Call the Controller’s Disbursement Unit at 554-7545 to request the Lost Warrant Affidavit form, shown in the Figure below, and complete as follows:   

Department completes Section 1 with original signatures Vendor completes Section 2 Return the completed form to Disbursement Unit.

Disbursement Unit processes the form and sends a stop payment request to the Treasurer’s Office. Once the stop payment is processed, Disbursement Unit will request the Controller’s Office Fund Accountant to cancel the check in the financial system. The Disbursement Unit will then process a replacement check. Page 162

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FIGURE 4-6. LOST WARRANT AFFIDAVIT FORM Government Code Section 29851 STATE OF CALIFORNIA CITY AND COUNTY OF SAN FRANCISCO REQUEST FOR REPLACEMENT OF LOST OR DESTROYED WARRANT/AFFIDAVIT (1) (2) (3)

Department for whom payment was issued completes and signs the warrant information under SECTION I. Payee executes the affidavit section below under SECTION II. Submit this completed form to (must be the original signature; photocopy will not be accepted): CITY & COUNTY OF SAN FRANCISCO CONTROLLER'S OFFICE, CLAIMS AND DISBURSEMENT UNIT 1 DR. CARLTON B. GOODLETT PLACE, ROOM 396 SAN FRANCISCO, CA 94102-4694

SECTION I.

LOST/DESTROYED WARRANT INFORMATION

WARRANT NUMBER:_________________________DATE____________AMOUNT_____________ PAYEE:___________________________________________________________________________ SSN OR TAX ID:____________________________________________________________________ ADDRESS:_________________________________________________________________________ (Street No., City, State, Zip Code) ISSUING DEPARTMENT:_____________________________________________________________ PRINT NAME & SIGN:__________________________________________TEL#_________________ (Department's Authorized Signature) SECTION II. (1)

AFFIDAVIT FOR LOST OR DESTROYED WARRANT I, the undersigned, being first duly sworn, depose and say: That City and County of San Francisco Controller's warrant described above was [ ] LOST [ ] DESTROYED [ ] STALE DATED on ______________, 20___, under the following circumstances: _________________ ____________________________________________________________________________ ____________________________________________________________________________ That affiant is entitled to possession, and hereby requests replacement of such warrant as the [ ] [ ] [ ]

(2) (3) (4)

Original Payee Endorsee (must show Proof of Right to Possession) Custodian (must submit Letter of Authorization)

I certify that I have not requested nor received any replacement warrant for this payment. I certify that I have not deposited this check and that I am liable for all expenses and fees incurred to recover stolen funds if the check has been deposited. I certify under penalty of perjury that the foregoing is true and correct.

PAYEE'S SIGNATURE:______________________________________________DATE__________________ PAYEE'S NAME (Print Legibly)_______________________________________________________________ PRESENT ADDRESS___________________________________________________TEL#_______________

Check Revalidation

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The Disbursement Unit receives requests from City departments or vendors to revalidate checks that have been outstanding for more than 90 days, but less than one year. The Unit only revalidates payroll, vendor, and manual checks for an additional 90 day period; revalidation requests for retirement, general assistance, or sheriff checks need to be referred back to the appropriate department since information on check posting in FAMIS and bank clearance is not posted at the individual check level. Note that the original payee must be the person to present the check for revalidation.

4.5 | Sales & Use Taxes The California Board of Equalization (BOE) promulgates guidelines for the administration of Sales and Use Tax Programs. Here is a link to the BOE website: http://www.boe.ca.gov/sutax/sutprograms.htm.

The BOE regularly changes its rules and regulations regarding the state’s Sales and Use Tax Programs and it is the department’s responsibility to ensure that it has checked the BOE website in order to be compliant.

All City departments should establish the policies and procedures necessary to ensure their in-state, outof-state, online, or mail order purchases accurately account for sales tax or use tax. The purpose of this section is to provide general guidance to City departments on when and how to accrue sales or use tax in the City’s financial system. It is important that departments observe these guidelines to ensure that they are charged the proper rate of tax for the area where they use, store, or consume the merchandise, and that the City does not incur penalties in periodic State Sales and Use Tax audits as a result of non-payment of tax.

4.5.1 | Definition of Sales Tax and Use Tax The California “sales tax” is imposed on all California retailers. Sales tax is tax collected by the retailer in California and the retailer is responsible for reporting and paying the tax to the State. California law requires tax on in-state purchases, and also requires tax on items purchased out-of-state for use in California. When an out-of-state or online retailer doesn’t collect the tax for an item delivered to California, the purchaser may owe “use tax”, which is simply a tax on the use, storage, or consumption of personal property in California. Use tax liabilities are often created by Internet or mail order purchases with outof-state retailers not required to collect the tax. The use tax, which was created in July 1935, is a companion to California’s sales tax that is designed to level the playing field between in-state retailers who are required to collect tax, and some out-of-state retailers who are not. Generally, use tax also

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applies to foreign purchases of tangible personal property brought into California for storage, use, or other consumption. The State’s sales tax and use tax are “mutually exclusive”, which means either one or the other applies to a single transaction, but not both. The sales and use tax rates are the same within the same area or jurisdiction. Refer to the rates table link: http://www.boe.ca.gov/cgi-bin/rates.cgi Certain products and/or services are tax-exempt. Items that are exempt from sales tax are exempt from use tax as well. Inquire with the BOE or department’s purchaser to ensure appropriate accrual and/or payment of sales and use tax. 4.5.1.1

| PURCHASES FROM CALIFORNIA RETAILERS

California sales tax is imposed on all California retailers. Retailers making sales in the State of California are required to report and remit the sales tax to the BOE. When the retailer collects the sales tax, the retailer is liable to remit the tax due. When purchasing from California retailers, departments must review invoices to make sure sales tax is charged and the rate is correct. When the retailer fails to collect tax on taxable merchandise, departments must accrue the sales tax liability (in the Agency Fund 7ASTATAX) and not pay it to the retailer. 4.5.1.2

| PURCHASES FROM OUT-OF-STATE VENDORS

When out-of-state vendors are engaged in business in California, they register with the BOE to obtain a seller’s permit that allows them to collect use tax from their California customers. Departments must review invoices from out-of-state companies to determine if they were charged California use tax. When an out-of-state vendor does not include California sales/use tax on the invoice when an item is taxable, departments must accrue use tax liability (in the Agency Fund 7ASTATAX) and not pay it to out-of-state vendors without sellers’ permit numbers printed on their invoices. 4.5.1.3

| VERIFY IF SALES TAX OR USE TAX IS APPROPRIATE FOR THE AREA

Departments must verify that they are charged the proper rate of tax for the area where they use, store, or consume the merchandise. The rate of use tax is determined where the property will be used, stored, or consumed, regardless of where the sale takes place. Tax rates may vary from cities and counties in California where the materials are put into use, most notably, Moccasin, as shown in the Table below. More information on California City & County Sales & Use Tax Rates can be found online at http://www.boe.ca.gov/sutax/pam71.htm. TABLE 4-2. EXAMPLES OF VARIATIONS IN TAX RATES

CITY Moccasin San Francisco

TAX RATE 7.500% 8.750%

COUNTY Tuolumne San Francisco Page 165

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For example: If a City department purchased merchandise from a vendor in San Francisco, which has a 8.75% sales tax, but the goods will be used, stored, or consumed in San Mateo, which has a sales tax rate of 9.25%, then the department needs to accrue the additional 0.50% sales tax in the Agency Fund and not pay it to the vendor. 4.5.1.4

| ACCRUING SALES TAX OR USE TAX LIABILITIES

If insufficient sales tax is specified on an invoice, departments must accrue sales tax in the financial system through journal entries (JE or RE) regardless of the dollar amount involved. The “materiality” test does not apply to sales tax accrual. For illustrations on processing sales tax accrual entries, refer to Section 16 - How-to & Screenshots. Please record the accrual using:   

General Ledger 219 (Other Obligations – Agency Fund) Subsidiary ledger COZ017 (State/Local/District Use Tax) Department-specific index code under Agency Fund 7ASTATAX in the format XXX7ASTATAX, the first three (3) characters representing the department code. This is the unique index code to identify the department accruing the sales tax or use tax in the Agency Fund. The Table below lists the Agency Fund index codes for all departments.

TABLE 4-3. SALES/USE TAX INDEX CODES TABLE

DEPARTMENT Academy of Science Adult Probation Airport Commission Art Commission Asian Arts Museum Assessor Board of Supervisors Building Inspection Commission Child Support Services Child, Youth & Family Children and Families Commission City Attorney City Planning (Planning Commission) Civil Service Commission Controller District Attorney Economic & Workforce Development Elections Commission Emergency Management

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3-CHAR DEPT CODE SCI ADP AIR ART AAM ASR BOS DBI CSS CHF CFC CAT CPC CSC CON DAT ECN REG ECD

FAMIS ORG CODE SCIAA ADPAA AIRAA ARTAA AAMAA ASRAA BOSAA DBIAA CSS01 CHFAA CFC01 CATAA CPCAA CSCAA CONAA DATAA ECNAA REGAA ECD03

INDEX CODE SCI7ASTATAX ADP7ASTATAX AIR7ASTATAX ART7ASTATAX AAM7ASTATAX ASR7ASTATAX BOS7ASTATAX DBI7ASTATAX CSS7ASTATAX CHF7ASTATAX CFC7ASTATAX CAT7ASTATAX CPC7ASTATAX CSC7ASTATAX CON7ASTATAX DAT7ASTATAX ECN7ASTATAX REG7ASTATAX ECD7ASTATAX

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DEPARTMENT Environment Commission Ethics Commission Fine Arts Museum Fire Department General - Unallocated General City General Services Agency (GSA) - Admin GSA - Animal Care & Control GSA - City Administrator GSA - Consumer Assurance GSA - Convention Facilities GSA - Department of Public Works GSA - Department of Technology GSA - Medical Examiner GSA - Office of Contract Administration GSA - Real Estate Division Health Service System Human Resources Human Rights Commission Human Services Agency Juvenile Probation Law Library Mayor's Office MTA - Parking & Traffic MTA - Public Transportation Municipal Transportation Agency (MTA) Permit Appeals (Appeals Board) Police Commission Port Commission Public Defender Public Health (DPH) - Community Health Services DPH - Community Mental Health DPH - Laguna Honda Hospital DPH - SF General Hospital Public Library Public Utilities Commission (PUC) - Admin PUC - Hetch Hetchy PUC - Waste Water PUC - Water

3-CHAR DEPT CODE ENV ETH FAM FIR UNA GEN ADM ANC CAO AGW CFM DPW TIS CME OCA RES HSS HRD HRC DSS JUV LLB MYR PTC MTA DPT PAB POL PRT PDR DPH

ENV01 ETHAA FAMAA FIR99 UNAAA GENAA ADM01 ADM18 CAOAA ADM17 ADM19 DPWAA TISAA ADM20 ADM0901 ADM14 HSSAA HRDAA HRCAA DSSAMCM JUVAA LLBAA MYRAA MTAAAXX MTAAAXX MTAAAXX PABAA POLAA PRTAA PDRAA DPHPHADEX

ENV7ASTATAX ETH7ASTATAX FAM7ASTATAX FIR7ASTATAX UNA7ASTATAX GEN7ASTATAX ADM7ASTATAX ANC7ASTATAX CAO7ASTATAX AGW7ASTATAX CFM7ASTATAX DPW7ASTATAX TIS7ASTATAX CME7ASTATAX OCA7ASTATAX RES7ASTATAX HSS7ASTATAX HRD7ASTATAX HRC7ASTATAX DSS7ASTATAX JUV7ASTATAX LLB7ASTATAX MYR7ASTATAX PTC7ASTATAX MTA7ASTATAX DPT7ASTATAX PAB7ASTATAX POL7ASTATAX PRT7ASTATAX PDR7ASTATAX HCH7ASTATAX

DPH DPH DPH LIB PUC PUC PUC PUC

DPHMHAD DPHLHAA DPHGHAA LIBAA PUCAA HHPAA CWPAA WTRAA

HMH7ASTATAX HLH7ASTATAX HGH7ASTATAX LIB7ASTATAX PUC7ASTATAX HHP7ASTATAX CWP7ASTATAX WTR7ASTATAX

FAMIS ORG CODE

INDEX CODE

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DEPARTMENT Rec & Park Rent Arbitration Board Retirement System SF City & County Transportation Authority SFCCD SFUSD Sheriff's Department Status of Women Commission Treasurer/Tax Collector Trial Court - Superior/Municipal Court War Memorial

3-CHAR DEPT CODE REC RNT RET CTA CCD USD SHF WOM TTX CRT WAR

FAMIS ORG CODE RECAA RNTAA RETAA CTAAA CCDAA USDAA SHFAA WOMAA TTX0100 CRTAA WARAA

INDEX CODE REC7ASTATAX RNT7ASTATAX RET7ASTATAX CTA7ASTATAX CCD7ASTATAX USD7ASTATAX SHF7ASTATAX WOM7ASTATAX TTX7ASTATAX CRT7ASTATAX WAR7ASTATAX

4.6 | IRS 1099 Miscellaneous (MISC) Repor ting Rules The Controller’s Office files IRS 1099 forms in three categories: 1099-G, 1099-INT, and 1099-MISC. The Controller’s Office must file Form 1099-MISC (Miscellaneous Income) for each person, non-employee and individual contractor or sole proprietor, to whom we have paid during the tax year:   

At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest At least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments Gross proceeds to an attorney.

Payments to a corporation are generally not 1099-reportable, with the exception of medical and legal services. Departments should refer to the IRS for guidelines on what is and is not 1099-reportable. Related links are listed below:    

1099 General Instructions: http://www.irs.gov/pub/irs-pdf/i1099gi.pdf Instructions for Form 1099-MISC: http://www.irs.gov/pub/irs-pdf/i1099msc.pdf Instructions for Form 1099-INT: http://www.irs.gov/pub/irs-pdf/i1099int.pdf Instructions for Form 1099-G: http://www.irs.gov/instructions/i1099g/ar01.html

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The IRS regularly changes its rules and regulations regarding 1099 reporting and filing requirements and it is the department’s responsibility to ensure that it has checked the IRS website in order to be compliant.

4.6.1 | Requirement of Encumbrances, Vendor Numbers, and Sub-objects Miscellaneous payments to individuals still require that City departments encumber funds, establish a regular vendor number in the financial system, and enter accounting transactions using appropriate subobject codes in the financial system. 4.6.1.1

| ENCUMBRANCES

Encumbrances are the recognition of commitments that will subsequently become expenditures when goods and services are received. Encumbrances are posted for documents such as purchase estimates, purchase orders, and contracts. Encumber funds whenever possible and do not use a one-time document. 4.6.1.2

| VENDOR NUMBERS

The Controller’s Office is responsible for issuing IRS 1099 forms for the following three categories:   

1099-G for the Public Utilities Commission’s “GoSolarSF” program, to participants who were reimbursed for eligible expenses greater than $600 1099-INT to anyone who received interest income 1099-MISC to anyone who received reportable income greater than $600, or for certain other types of payments.

Because the $600 threshold is critical to properly issuing Form 1099, departments must ensure that they receive an IRS Form W-9 prior to paying any vendor that will receive either a one-time payment or cumulative payments greater than $600 (excluding refunds). Having correct information on the W-9 is essential; for example the W-9 data specifies the entity’s federal tax classification and address. Departments must review the W-9 to ensure that the information is complete and looks correct. Departments must submit completed W-9 forms providing tax identification information to the Vendor File Support Group in order to set up a regular vendor number in the financial system. 4.6.1.3

| SUB-OBJECT CODES

When making payments that are considered taxable income to the recipients, departments must ensure to use a 1099-reportable expenditure sub-object. Departments must also make sure that the vendor is Page 169

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flagged as 1099-reportable. It remains departments’ responsibility to maintain and apply appropriate accounting procedures to ensure accurate 1099 reporting to the IRS. Issuance of Form 1099 by the Controller’s Office is based on what sub-object codes are entered into FAMIS for either the CK (check) or AH (automated clearing house) value. Departments should ensure that they perform the following steps in order to ensure the payments are correctly entered in the financial system:  Check FAMIS Screen 5200 and look for “1099 Type” to verify how to enter the correct codes  If FAMIS Screen 5200 is unclear, contact the Controller’s Office for the correct entry in the financial system  Never enter Char 021 sub-object codes for Char 040 expenses, and vice versa  Ensure you pay attention to the 1099 Box that the expense belongs to. The following Section provides more information on 1099 reportable payments and their posting in the financial system.

4.6.2 | 1099 Reportable Payments The following Table lists examples of what is and is not 1099-reportable.

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TABLE 4-4. 1099-REPORTABLE AND NON-REPORTABLE PAYMENTS

1099-REPORTABLE

1099 NON-REPORTABLE

Payments to individuals

Payments to corporations (with exceptions—medical and healthcare providers, and attorneys may receive 1099 reportable income)

Cell phone (fair market value) if it is given as an incentive or award

Cell phone if it is given for business use

Office of Labor Standards Enforcement (OLSE) back wages from San Francisco employers/contractors violating Minimum Compensation Ordinance (MCO) and Health Care Accountability Ordinance (HCAO) who have not withheld payroll taxes

OLSE back wages from San Francisco employers/contractors violating MCO and HCAO who have withheld payroll taxes

Payments for professional services

Payments for materials and supplies

The following Table lists how 1099-reportable payments should be posted in the financial system. TABLE 4-5. 1099 POSTING IN FAMIS TYPE OF PAYMENT

Not 1099 Reportable

 

DESCRIPTION

1099 BOX #

FAMIS SCREEN 5200 “1099 TYPE”

Payments to corporations (with exceptions) Payments for materials and supplies

N/A

00

SAMPLE SUB-OBJECT

04699 – Food 04921 – Data Processing Supplies 04931 – Forms

Rents

Other income

1



Office space Parking lot space Welfare rental assistance (to landlords) Equipment



Prizes and awards that are

3

  

01

03011 – Property Rent 03121 – Vehicle Rental 03652 – Rent Assistance On Behalf of Clients

03

02304 – Flex

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TYPE OF PAYMENT

DESCRIPTION

 



Medical & health care payment







Nonemployee compensation



 

Gross proceeds

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1099 BOX #

FAMIS SCREEN 5200 “1099 TYPE”

not for services performed Various damage payments that are not considered wages Excess mileage reimbursement over 14 cents per mile for volunteer drivers Compensation to residents for moving out of their home for redevelopment Report payments made to individuals, partnerships, and corporations Medical payments include doctor fees, drug testing, lab fees, and physical therapy Some medical corporations (governments, non-profits) are exempted

Reimbursements/Settlements 05313 – Punitive Judgement/Taxable Compensatory Damages 05314 – Judgements Penalty

6

06

02781 – Physicians 02787 – Registry - Nurses 02789 – Other Medical Services

7 Payment for services of an individual who is not a City employee. The service can include advertising, auto repair, construction, custodian, maintenance, landscaping, photographers, printing service, and professional service (consulting, accounting) Attorney fees to individuals, partnerships, and corporations Payments reported in this 1099 box is subject to selfemployment tax Gross proceeds are the payments made to an

SAMPLE SUB-OBJECT

14

07

02701 – Architectural Services 02702 – Engineering Services 02799 – Other Professional Services

11

05312 – Judgements -

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TYPE OF PAYMENT

DESCRIPTION

paid to an attorney



1099 BOX #

attorney as part of a legal settlement or court order. If the attorney fees cannot be determined, report all of gross proceeds in box 14 Gross proceeds may be issued in the names of the attorney and the client

FAMIS SCREEN 5200 “1099 TYPE”

SAMPLE SUB-OBJECT

Legal Fees

4.6.3 | No 1099 Payments to City Employees As a general rule:

No active City employee should serve the City as an independent contractor without prior approval.

An active City employee who provides service to the City should do so under an arrangement other than independent contracting. Departments should pay employees for all employment services and fringe benefits through the City’s payroll system. Employees should not be compensated through vendor payments; rather, all pay to an active employee should be part of taxable employment compensation. Examples include:  

Any employee taxable fringe benefits, including assignment allowance Professional services from workers employed by other departments, e.g., interpreter services. Arrange a work order with the appointing department to pay the employee through payroll.

An active City employee must have all City income reported on IRS Form W-2, never on an IRS Form 1099. Departments should ensure that all income paid to City employees are taxed and reported to the IRS by paying all compensation to employees through the payroll process. If a department is in doubt about whether payments to employees should be included in wages, it should consult with the City Attorney’s Office Tax Team. For accounting-related questions, refer to the Controller’s Fund Accountant assigned to your departments.

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If a department needs to hire an active City employee for additional employment or services, it should contact the assigned Controller’s Fund Accountant for approval prior to hiring to ensure that the City is in compliance with the relevant IRS regulations on payroll tax withholding and reporting.

4.7 | Payments-Related Frequently Asked Questions Q: Are partial payments allowed on an invoice? A: In general, partial payments are not allowed. 



If a portion of the invoice is correct but another portion of the invoice is in dispute, send the invoice back to the vendor and ask the vendor to resubmit the invoice for only the undisputed portion. This way, the undisputed portion will be paid timely while questions regarding the other amount can be resolved. If a vendor submits an invoice for 12 months of service but only requires payment for the first six (6) months to begin service, and expects to receive the second installment payment without sending another invoice, send the invoice back to the vendor and request that an invoice be reissued for only the first six months.

Q: What if the amount shown on the invoice is described as “estimates” or “quotes”? A: Send the invoice back to the vendor and ask for a revised invoice that clearly states that the amount invoiced is for the actual good(s) or service(s) received.

Q: What is considered a “disputed invoice”? A: Anything that the department doesn’t agree with on an invoice results in a disputed invoice. It can be the amount due, item(s) delivered, or wrong address. In any case involving a disputed invoice, departments are highly recommended to return the invoice to the vendor and document the return.

Q: What date do we enter in the financial system as the “invoice receipt date”? A: This is the date the invoice is received by the City. Refer to Section 4.4.1.1 Prompt Payment Definition for the definition of the invoice receipt date. For a disputed invoice, the invoice receipt date is the date when the corrected invoice is received by the City.

Q: Can the City make ACH payments to foreign vendors? Page 174

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A: Paymode-X can only make ACH payments to U.S. domestic bank accounts. If the foreign vendor has bank accounts in the U.S., the City can make ACH payments to the vendor. Otherwise, only paper checks can be issued to the foreign vendor.

Q: Should a one-time vendor submit a W-9 form? A: Yes. Generally, one-time payments should not be used for 1099-reportable expenditures. For limited exceptions to 1099-reportable one-time payments (Section 4.4.3.2 One-Time Payment Exceptions), vendors must submit W-9 information at the time of payment. Departments should forward the W-9 to Vendor File Support immediately after the one-time vendor number is generated in the financial system. Even when a 1099-reportable payment may be below the $600 reportable limit, W-9 information is still required.

Q: How do I know if the expenditure related to a sub-object is 1099 reportable? A: You can go to FAMIS Screen 5200 and look at the “1099 Type” field for each sub-object. The 2-digt number displayed in the field indicates whether the expenditure is 1099 reportable and, if yes, which 1099-MISC Box it belongs to: 00 = Not 1099 reportable 01 = 1099-MISC Box 1 – Rents 03 = 1099-MISC Box 3 – Other income 06 = 1099-MISC Box 6 – Medical and health care payment 07 = 1099-MISC Box 7 – Nonemployee compensation 11 = 1099-MISC Box 14 – Gross proceeds paid to an attorney Refer to Section 4.6.2 1099 Reportable Payments for more information.

Q: How do I know if the vendor is a 1099 vendor? A: You can go to FAMIS Screen 9510 and look at the “1099 Reportable” field for each vendor number. If it shows “Y”, payments to the vendor are 1099 reportable; if it shows “N”, the vendor is not a 1099 vendor. For more information on 1099 reportable payments, refer to Section 4.6.2 - 1099 Reportable Payments.

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4.8 | Employee Travel & Business Expenses 4.8.1 | Business Travel Reimbursement Guidelines This section sets forth the policies and procedures that dictate how City officers and employees will plan, conduct, and seek reimbursement for travel expenses incurred while conducting official business. Departments may promulgate travel reimbursement policies and procedures specific for their own needs that are more stringent than the Controller’s. Department-specific travel reimbursement policies and procedures must be submitted to the Controller for review and approval. 4.8.1.1

| REGULATIONS & DEFINITIONS FOR TRAVEL REIMBURSEMENT

The United States Internal Revenue Service (IRS) Publication 463, Publication 15-B (Employer’s Guide to Fringe Benefits) and 1099 publications describes employer’s travel allowance and reimbursement guidelines and practices that are permissible by law. In addition to IRS regulations, employee travel reimbursement policies are determined by: 



Memorandum of Understanding (MOU) language between the City and various bargaining units. Union-related travel / training expenses are governed by the specific language of the memorandum of understanding / contract and will serve as the policy and procedure Grant, special projects, and bond-related projects—funding source restrictions will determine what is allowable in terms of reimbursement. Reimbursements must comply with grant agreements and bond covenants.

City officers and employees should understand that they are conducting official business and representing the public interest while traveling. City officers and employees will only incur travel costs that are reasonable and necessary. To that end, employees will use the least expensive mode of travel whenever and wherever possible. To constitute “official business of City & County of San Francisco”, the activities of an officer or employee of the City & County of San Francisco must clearly demonstrate that there is a valid City & County interest to be served or gained through the travel; and there is:   

Relevance to City & County operations or the individual’s role in such operations; and/or The promotion or development of City & County programs, methods or administration; and/or Compliance with instructions or authorization of the Mayor or Board of Supervisors.

4.8.1.2

| PRE-APPROVAL

All requests for business travel require approval in advance by the Department Head or an Authorized Travel Signatory. The Figure below provides an overview of how pre-approval signatures must be obtained before travel occurs. Page 176

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FIGURE 4-7. AUTHORIZED TRAVEL SIGNATORIES FOR TRAVEL PRE-APPROVAL

Employee needs preapproval for travel on official business

If travel is funded by the union, follow MOU rules

OR

If the travel is within both the department’s and City’s travel policy—receive preapprovals as established by department policy

If travel is funded by the City, ensure that the travel expense has been budgeted, THEN DETERMINE….

If the travel has exceptions to department’s policy but is within the City’s travel policy—receive pre-approvals from supervisor/manager AND department head (or designee)

If the travel has exceptions to both the department’s and City’s travel policy—receive pre-approvals from supervisor/manager, AND department head (or designee) AND Controller

For any travel funded by the City, the department should only allow travel that is clearly anticipated in the approved budget. Employees and officials are responsible for cancellation of lodging and transportation if travel is cancelled or postponed, to ensure that the City will not be liable for any costs. If the travel has been properly budgeted, the traveler must receive the signature from the appropriate pre-approver(s), as follows: 





If the travel fully complies with both the department’s and Controller’s travel policy, the traveler must receive written pre-approval only from the Authorized Travel Signatory specified in the department policy. If the travel has exceptions to the department’s travel policy but complies with the Controller’s policy, the traveler must receive written pre-approval from both the direct supervisor/manager and the Department Head (or designee). If the travel has exceptions to both the departments’ and Controller’s travel policy, the traveler must receive written pre-approval from: 1) the direct supervisor/manager; 2) the Department Head (or designee); and 3) the Controller or his/her designee.

A Travel Authorization Form must be completed and signed by the employee and approved by the Department Head or Travel Signatory. Information required on the authorization form include: Page 177

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  

Date(s) of travel and location Business purpose of travel/training/conference Estimated expenses including registration fee, cost of air ticket, other transportation costs (e.g., taxi, shuttle, or car rental), and lodging. Fully itemized detail in accordance with the guidelines in this document must be provided for estimated expenses.

If an expense that is not listed on the Travel Authorization Form is actually incurred, it will only be reimbursed if the following conditions are met:    

The expense was reasonable A written justification is provided The business need can be identified Approval for the exception has been obtained from the Department Head or Authorized Travel Signatory.

4.8.1.3

| GUIDELINES FOR SUBMISSION AND REVIEW OF TRAVEL REIMBURSEMENTS

Completed expense reimbursement requests must be fully supported by receipts and forwarded to the Department’s Accounting/Finance Division no more than 30 days after expenditure. Reimbursements with incomplete or insufficient documentation will be denied. Reimbursement request must be processed in the City's financial system (FAMIS Accounting) no more than 90 days after the date of occurrence. Best practice is that travel reimbursement occurs in the same fiscal year in which the expense was incurred. Employee Responsibilities When Filing a Reimbursement When filing an employee reimbursement, the employee is:  



Responsible for forwarding completed forms to their Department Accounting/Finance Division no more than 30 days from return of travel, or 10 days if an advance was issued. Required to specify the business purpose or need of the expense to be made by the employee instead of through the normal purchasing process. The business purpose should be descriptive enough to clearly answer any questions regarding the necessity of the expense. Required to submit all supporting documentation including, but not limited to, approved Travel Expense Voucher; air, or other itinerary, conference/meeting/workshop schedule and agenda; original itemized receipts and proof of payment; and any necessary pre-approvals and/or justifications.

An employee’s proof of payment may include, but not be limited to, a cancelled check, bank statement, credit card statement, or original receipt that shows distinct information that the payment was received. However, compliance departments can enforce a more stringent proof of payment policy.

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Department Accounting/Finance Division Responsibilities When Reviewing a Reimbursement When reviewing employee reimbursements, the Department’s Accounting/Finance Divisions are responsible for:         4.8.1.4

Ensuring expenditures are reasonable, necessary, and for official business purpose. Reviewing and auditing for compliance with Controller’s and Purchasing policies. Requesting additional documentation, information, justification from employee as needed. Deducting unallowable expenses. For project or grant funded business expenses; reviewing to ensure the request is in compliance with project/grant requirements. Verifying authorized approver. Ensuring all appropriate/required supporting documentation submitted and maintained in department files. Approving/denying and processing reimbursements in a timely manner. Reimbursement must be completed and posted in the City’s financial system within 90 days. | TRAVEL ADVANCES

If permitted by department travel procedures, an officer or employee who must travel on City business may request a travel advance to cover the direct costs of travel. When a travel advance is needed for authorized business travel, the advance requires approval by the Department Head or Authorized Travel Signatory. The approved request along with documentation for expenditure estimates supporting the advance amount should be forwarded to the Department’s Accounting/Finance Division for processing. When travel advances are issued:  





 

The minimum advance amount is $1,000. Advances can be issued for lodging, conference registration fees, and transportation expenses. Travel advances are not allowed for airfare as employees can purchase air tickets through a City approved vendor. Checks are issued to employees approximately ten business days prior to travel. Departments should process the TA travel advance document in the financial system in order to allow sufficient time for check issuance. Advances must be cleared in the City’s financial system (FAMIS) within ten (10) business days of return from a travel. Each Department’s Accounting/Finance Division is responsible for monitoring advances and following up with employees to ensure advances are cleared timely. If an advance is not liquidated timely, the employee will have a payroll offset and will not be eligible for travel advances for a minimum of two (2) years from the date of the offset. Employees with an outstanding advance cannot receive another travel advance.

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Departments who have more than one payroll offset in a six (6) month period or do not demonstrate due diligence in the process will have travel advances frozen.

4.8.1.5

| TRAVEL ADVANCE AND OFFSET PROCESSING

This section describes the process of requesting and liquidating travel advances as well as implementing offsets against employees for failure to liquidate said travel advances. The Budget and Appropriation Ordinance - Section 15. Travel Reimbursement and Cell Phone Stipends states:

The Controller may advance the sums necessary for traveling expenses, but proper account and return must be made of said sums so advanced by the person receiving the same within ten (10) days after said person returns to duty in the City and County of San Francisco, and failure on the part of the person involved to make such accounting shall be sufficient cause for the Controller to withhold from such person’s pay check or checks in a sum equivalent to the amount to be accounted.

An offset is a procedure used by the Controller’s Office to recover monies owed to the City and County of San Francisco. Offsets are governed by the San Francisco Administrative Code, Section 10.27, et. seq. It states, in part, that “The Controller may, in his or her discretion, offset any amount owed to the City and County of San Francisco by a person or entity against any amount owed by the City and County to such person or entity….” Requesting and Liquidating Travel Advances in FAMIS For details on processing travel advance issuance, settlement (liquidation), and correction in the financial system, refer to Section 16 - How-to & Screenshots. Offset Process Against Employees for Failure to Liquidate Travel Advances Departments may request offsets through the Office of the Controller against employees’ payroll if travel advances are not liquidated after sixty (60) calendar days (must be greater than $50). Refer to instructions provided on the Controller’s guidelines: “Employee Claims and Offsets” at: http://sfcontroller.org/Modules/ShowDocument.aspx?documentid=2162. Travel advance privilege will be removed from employees with payroll offsets for a minimum of two years from the date of offset and can only be reinstated with Controller’s approval.

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Payroll offset for failure to liquidate a travel advance is always in the form of a lump sum deduction from the employee’s pay warrant once the offset has been declared unless there is some sort of financial hardship. Department’s authorized staff initiates the request to apply an offset against the employee by submitting the form shown in the following Exhibit. FIGURE 4-8. REQUEST FOR EMPLOYEE OFFSET

Complete a Request for Employee Offset (Figure 4-8) with all the required information. Next, the employee and the offset requestor must sign the CCSF Payroll Request for Employee Offset Repayment Agreement, which is shown in the Figure below.

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FIGURE 4-9. PAYROLL REQUEST FOR EMPLOYEE OFFSET REPAYMENT AGREEMENT

The original request for offset and the payroll request forms are submitted to the Controller’s Executive Office while a copy is sent to the employee along with a Declaration of Offset Due to an Unliquidated Travel Advance letter (shown in the Figure below) informing the employee of the reason and the effective

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payroll date of the offset. Copies are also sent to the department’s accounting unit and Controller’s Payroll Division. FIGURE 4-10. DECLARATION OF OFFSET DUE TO AN UNLIQUIDATED TRAVEL ADVANCE LETTER

Offsets are processed by the Controller’s Office immediately upon request. The person being offset is generally given a limited amount of time to respond to the request for offset in order to reach some sort of agreement for repayment or settlement. If, at the end of this time period, no agreement has been reached, the Controller may declare an offset and determine the method for repayment. Under the provisions of S.F. Administrative Code, Sec.10.27-7, a person being offset is entitled to a hearing at his/her request.

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 

Employee’s and/or department’s response must be submitted in a timely manner to allow cancellation of the payroll offset if warranted and Payroll has not implemented it yet. If the employee fully settles the travel advance after the payroll offset has taken effect and the liquidation has been reviewed and approved, the City will issue a check to the employee to replace the payroll offset.

4.8.1.6

| VEHICLE USE

Travelers on official business may request reimbursement for use of vehicles. “Vehicles” include:   

A City vehicle An officer’s or employee’s privately owned automobile A rental car.

When multiple employees are attending the same business activity (e.g., out of town meeting, conference, etc.), employees are strongly encouraged to carpool. Employees are personally responsible for traffic citations incurred while on official business and will not be reimbursed for traffic violations or other penalties for infractions of any law. In all instances, the most direct and cost effective route must be taken. In order to obtain reimbursement for vehicle use, the following information is required to be included on the employee Travel Expense Voucher:  

 

Business purpose for use of vehicle. Starting point (e.g., worksite or home, whichever is the closer of the two) and the destination. Note: If the employee travels during his or her scheduled day off, the home should be used as the starting point. Vehicle make, model and license #. If using City issued vehicle, provide vehicle number. Odometer reading, beginning and ending; or a printout from an automated mapping program (example: Google Maps) showing the route and mileage.

Use of Personal Vehicle In accordance with Section 10.28-1 of the San Francisco Administrative Code, the mileage rate for payments to officers and employees for use of privately owned automobiles in connection with any official duty or service shall be at the rate established by the Controller.

The Controller’s Office adopts the IRS standard mileage rate for business use of an automobile; refer to the IRS website for the most current reimbursement rate.

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In addition, the Controller’s travel reimbursement policy with regards to use of a personal vehicle is as follows:     

Mileage is reimbursed when using personal vehicle; fuel is not reimbursed. Tolls are reimbursed when using a personal vehicle. To request reimbursement for tolls, provide a receipt or FastTrak statement showing the toll amount. Parking is reimbursed when using a personal vehicle. To request reimbursement for garage parking, provide a receipt showing the parking fee paid. Personal expenses such as private vehicle repair and maintenance are not reimbursable. When using personal vehicle for official business, all passengers in the vehicle must be on official business of the City & County.

Use of City Vehicle The Controller’s travel reimbursement policy with regards to use of a City vehicle is as follows: 

  

When using a City vehicle, fuel should be obtained from Central Shops. When impractical to do so, fuel purchased at a commercial location is reimbursed with written justification and original receipt(s). Mileage is not reimbursed. Tolls are reimbursed when using a City vehicle. To request reimbursement for tolls, provide a receipt or FastTrak statement showing the toll amount. Parking is reimbursed when using a City vehicle. To request reimbursement for parking, provide a receipt showing the parking fee paid. All passengers traveling in a City vehicle must be on official business of the City & County.

Use of Rental Car The Controller’s travel reimbursement policy with regards to use of a rental car is as follows: 

 



Cost of rental car used for official business is reimbursable if it was pre-approved by the Department Head or Authorized Travel Signatory. The pre-approval is required to be documented in writing, (e.g., department approval form, or e-mail approval) and must include: a) the car rental amount and estimate of other related expenses such as parking and fuel, and b) justification why other forms of transportation are not appropriate, why a rental car is necessary, and how a rental car is the most economical and efficient/practical. All passengers traveling in a rental vehicle must be on official business of the City & County. Car rental is limited to standard compact size vehicle. Midsize vehicle is reimbursable if use is for three people or more, justification provided, and pre-approved in writing by the Department Head or Authorized Travel Signatory. Pre-paid fuel for re-filling the gas tank on the rental car is not reimbursable. Employees must submit fuel receipt for actual usage.

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As the City is self-insured, auto insurance is not reimbursable.

4.8.1.7

| TRANSPORTATION

All requests for reimbursement for long-distance transportation must be well documented. A cost estimate from a City travel vendor serves as the maximum reimbursable amount for transportation, whether air or another mode of travel is used. The Figure below provides an overview of how employees can justify the most reasonable and cost-effective mode of transportation. FIGURE 4-11. DETERMINING ALLOWABLE TRANSPORTATION COST

Departments will be expected to obtain the lowest published routine fare for travel by the most efficient, direct and economical mode of transportation required by the occasion. Departments may book their air or rail travel with travel agencies approved by Purchasing or on-line directly with the airline. Departments will be charged in financial system for the airfare if booking is made with the City’s travel

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agencies. Alternatively, if employees make their own arrangements, they will have to pay first and request reimbursement. Use of Air Travel The Controller’s travel reimbursement policy with regards to air travel is as follows: 

 

 



Employees have the option of purchasing air tickets from a City approved vendor or on-line directly. If employees choose to purchase air travel on-line directly, they must document and demonstrate this option is the most economical by obtaining a comparative quote from a City vendor for the travel dates. Airfare should be booked for economy/coach class only. Business or First class is not reimbursable. Upgrades are not reimbursable. Air ticket must be purchased in advance to take advantage of the most economical fares available. Same day or near travel day ticket purchases are not reimbursable unless approved by the Department Head and properly justified. Air travel itinerary is required to be submitted with travel claim documentation. If airline charges for checked luggage, reimburse the cost of first checked bag only. Additional baggage check-in costs will be reimbursed with justification explaining the business need for extra luggage. Reimbursement requests for airfare purchased using a traveler’s personal frequent flier program miles or gift cards are not allowed.

Flying vs. Long-Distance Driving In situations where employees would normally travel by air, but an employee chooses to drive instead, reimbursement will be the lower of the two options, driving or flying. At the time of the travel authorization, employee must obtain a quote from an approved City vendor documenting the cost of air ticket for the travel dates. Maximum reimbursement will be up to the quoted cost of the air ticket.

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TABLE 4-6. FLYING VS. LONG-DISTANCE DRIVING EXAMPLE

To attend training in Los Angeles, CA, the employee drives instead of flying. In all cases, reimbursement will be the lower of the two options:

MODE OF TRANSPORTATION

EXPENSES REIMBURSED

(a) Employee drives personal car

(a) Mileage, up to the cost of air ticket quote.

(b) Employee drives city vehicle

(b) Fuel expenses, up to cost of air ticket quote, when impractical to obtain fuel from Central Shops.

(c) Employee drives rental car

(c) Cost of car rental and gas expenses, up to the cost of air ticket quote.

If an alternative mode of transportation is selected, the allowable cost shall be the lower of the actual cost of alternative modes of transportation, or the lowest economy/coach class airfare available for the date and time selected, as identified by a City travel vendor. Transportation between Work/Home and Bay Area Airport The Controller’s travel reimbursement policy with regards to transportation between work/home site and a Bay Area regional airport is as follows:   



The Controller strongly recommends that employees travel to/from regional airports using public transportation or shuttle. If using taxi, maximum reimbursement for travel to/from regional airports is $50 each way, including tip, up to $100 total for the related travel. If using personal car: a) Mileage is reimbursed up to $15 each way, maximum $30 total for the related travel. The only exception to mileage limit is for PUC Moccasin employees driving into local airports. b) Parking is limited to long-term parking only, maximum of $18 per day, as per the SFO longterm daily rate effective 6/15/12. Maximum parking is up to $120 total for the travel. Employee discount tickets that allow you to park in the short term garages for $13 per day are available at City Hall or at the Airport. More information is available at: http://www.flysfo.com/to-from/parking When using personal vehicle, employee will not be reimbursed for any damages that may occur.

Transportation between Airport and Hotel/Conference Site The Controller’s travel reimbursement policy with regards to transportation between an airport and a hotel/conference site is as follows: Page 188

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  

Recommended options are public transportation, shuttle, or taxi. Car rental is reimbursable if the requirements stated in the Use of Vehicles section are met. For overnight travel in which employee uses personal, City, or rental vehicle, maximum reimbursement for overnight hotel parking is limited to the lowest available rate.

Combining Personal Travel with Official Business Employees may combine personal travel with business travel when pre-approved in writing by the Authorized Travel Signatory. The City & County is responsible only for the official business portion of the trip. When travel on business is extended for personal reasons before, in between, and/or after official business travel, no personal expenses can be included on the Travel Expense Voucher claim form. Employees must obtain a quote from an approved City vendor showing the cost of the roundtrip ticket for most economical and direct travel to/from the business destination for the dates of official business. This quote will be used for comparison and reimbursement purposes. Employees must pay for the personal portion of the airfare expense. When combining personal travel with official business travel, there is no reimbursement for lodging, meal per diem, or any other expense incurred before/in between/after the conference/ official business starts /concludes. 4.8.1.8

| MEALS & LODGING REIMBURSEMENT VIA PER DIEM

The most economical and practical accommodations available, considering the purpose of the meeting, and other relevant factors, will be reimbursed. For travel within the United States, the maximum reimbursement is the federal per diem GSA (General Services Administration) rate for lodging. Federal domestic and foreign lodging, maximum travel per diem allowances, meals and incidental expense breakdown are available from the following website from the U.S. General Services Administration: http://www.gsa.gov To stay within the maximum rates, conference discount rates and “government rates” should be used whenever possible. As an example, the Figure below provides an overview of how employees can justify conference lodging expenses.

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FIGURE 4-12. RESERVING ALLOWABLE CONFERENCE LODGING

If conference-lodging rates exceed the federal rate, actual expenses will be reimbursed when documentation of the conference lodging rate and a receipt are provided. In rare circumstances, with appropriate pre-approval and justification of business need, employees may be reimbursed beyond the federal per diem rate. An itemized hotel bill is always required for reimbursement to be made. Reimbursement should be for single room rate. Conference Hotel The Controller’s travel reimbursement policy with regards to lodging at the conference hotel is as follows: 

If conference hotel lodging rates exceed the federal rate, actual expenses will be reimbursed when documentation of the conference lodging rate and a receipt are provided.

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 

 

Hotels recommended by the conference or overflow hotels with a conference rate will be reimbursed when documentation of the conference lodging rate and a receipt are provided. If a hotel is listed as recommended/overflow hotel but does not have a documented conference rate, reimbursement will be for actual expenses, with a maximum reimbursement up to the conference hotel rate only. If there are multiple conference hotels with a range of rates, the maximum reimbursement for the overflow hotel is up to the highest rate among the published conference hotels. The employee must bear in mind the reasonableness of the overflow hotel rate when selecting accommodations. For hotels not listed in the conference material, reimbursement will be for actual expenses, with maximum up to the conference hotel rate or the GSA rate, whichever is lower. Required documentation of the conference lodging rate includes copy of conference registration information showing location, dates of conference, conference hotel(s), and single room rate. Documentation of the conference hotel rate must be provided.

Lodging in Excess of Federal per diem Rate In situations where an employee is unable to find lodging at GSA rate or business circumstances require an employee to stay in a hotel that exceeds the federal per diem rate (e.g., lodging during special events), reimbursement will be allowed if all of the following requirements are met.  



Written pre-approval by the Department Head or Authorized Travel Signatory, and the Controller’s or his/her designee. Justification of business need and demonstration of most economical and practical (e.g., the only lodging within federal per diem rate is located a long distance from the meeting site and would require a car rental or costly taxi ride, which in total exceeds the cost of the higher lodging rate). Itemized hotel bill must show employee obtained the “Government Rate” and rate is reasonable, not to exceed one and half times the federal per diem rate.

If these requirements are not met, the reimbursement will be reduced up to 1.5 times the federal per diem rate. Conference City not on the Continental U.S. per diem Listing If a city is not listed, check to ensure that the county within which it is located is also not listed. On the GSA website there is a link to the National Association of Counties’ City-County Search (http://www.naco.org/counties/pages/citysearch.aspx), which can help determine the county in which a destination is located.  

If the city is not listed, but the county is, then the per diem rate is the rate for that entire county. If the city and the county are not listed, then that area is considered to be a Standard Continental U.S. (CONUS) location which is currently $83 for lodging and $46 for meals and incidental expenses.

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Lodging for Travel within Local Commuting Area For the City & County of San Francisco, the nine (9) Bay Area counties of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma constitute the local commuting area. Lodging for travel within the local commuting area requires written pre-approval by the Department Head or Authorized Travel Signatory. Department is required to maintain documentation of the preapproval and the justification of business need with the employee travel claim document. Meals and Adoption of the federal Meal & Incidental Expenses (M&IE) Rate Meals and incidentals are reimbursed according to the guidelines below if the travel is overnight and is pre-approved as an exception by the Department Head or is provided for in the employee’s Memorandum of Understanding (MOU). The federal rate for meal and incidental expenses (M&IE) will be paid without itemization of expenses or receipts. If an officer or employee chooses to request specific reimbursement for meals, original itemized receipts are required. For employee travel, the maximum meal reimbursement is up to the federal per diem rate. Each city in the federal rate guide has a dollar value for the full day depending on the relative cost of meals in that jurisdiction. Once you obtain the total dollar value, you can refer to the following Table to determine the rates for each meal and incidentals. TABLE 4-7. FEDERAL DOMESTIC MEAL & INCIDENTAL EXPENSE (M&IE) RATES

M&IE RATE (FULL DAY)

$ 51

$ 54

$ 59

$ 64

$ 69

$ 74

Continental $ 11 Breakfast/Breakfast

$ 12

$ 13

$ 15

$ 16

$ 17

Lunch

$ 12

$ 13

$ 15

$ 16

$ 17

$ 18

Dinner

$ 23

$ 24

$ 26

$ 28

$ 31

$ 34

Incidentals

$ 5

$ 5

$ 5

$ 5

$ 5

$ 5

Note: Per diem rates as of October 2015 The first and last day of travel per diem is reimbursed at 75% of the regular GSA rate. The Table below lists the GSA’s per diem amount employees receive on the dates of their departure (first travel day) and return (last travel day).

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TABLE 4-8. FEDERAL DEPARTURE AND RETURN DAY M&IE RATES

M&IE RATE (FULL DAY) per diem

FIRST & LAST DAY OF TRAVEL per diem

$51

$38.25

$54

$40.50

$59

$44.25

$64

$48.00

$69

$51.75

$74

$55.50

Note: Per diem rates as of October 2015 For meals provided: 



For conferences, if one or more meals are included as part of a conference registration fee, you should only charge the remaining meals and incidental expense rate from the above chart. A copy of the conference schedule and any other conference information must be attached to the travel claim documentation. For other events, you cannot claim per diem in lieu of the meals provided.

Travel in the local commuting area does not qualify for the per diem reimbursement, e.g. attending conferences, meetings, trainings, etc. The only exception for allowing meal per diem is when employee was pre-approved by Department Head or Authorized Travel Signatory for overnight travel/lodging within the nine Bay Area counties. There is no meal per diem for day trips or same day travel (e.g., for conference, training, meeting, etc.). 4.8.1.9

| OTHER EXPENSES REIMBURSED VIA ACTUAL COSTS

Other expenses associated with and incurred in the performance of City & County business while in travel status, deemed necessary and reasonable by the Controller, are reimbursable. These include ground transportation (to or between the officer or employee’s work site and airport, bus station, train depot and the meeting or lodging site and return), parking fees, bridge tolls, necessary business telephone charges, copying charges, business-related Internet access, and travel VISA expenses for international business travel. These expenses are to be reviewed by the department’s Authorized Travel Signatory and only approved if deemed reasonable and proper.

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Unless otherwise stated in the MOU, original receipts are required for all other travel and official expenses related to official City & County business. The only exceptions are BART, MUNI, parking meter, and public telephone costs, which are reimbursable without receipts. Reimbursements will not exceed the necessary and reasonable amount as determined by the Controller. If there is any question about these provisions, please obtain authorization from the Controller in advance of the travel to ensure that reimbursement above these rates will be allowed. Travel Change or Cancellation Fee The Controller’s travel reimbursement policy with regards to change or cancellation fees is as follows: 



Travel agencies or airlines charge up to $150 for itinerary changes and cancellation fee when an employee changes or cancels a flight reservation. If this situation arises, the employee must submit written justification explaining the reason/business need for the itinerary change or cancellation, including approval from the department’s Authorized Travel Signatory in order for change/cancellation fee to be reimbursed. For a cancelled air ticket, the amount paid is credited to the employee’s name. (a) If air ticket was booked through a City travel agency, the department is responsible for monitoring use of the credit and ensuring use for authorized official business travel only. (b) If booked on-line directly by employee, the City will reimburse for the cancellation fee if justified business reason for cancellation is provided and approved by the department’s Authorized Travel Signatory. The City will not reimburse for the cancelled air ticket.

Business Calls, Fax, and Internet The Controller’s travel reimbursement policy with regards to miscellaneous communication-related expenses is as follows:   

Employees will be reimbursed for reasonable usage with original receipt. Business purpose and justification of need required to be documented. Identify all business Internet charges, business calls, faxes, etc. on the hotel bill.

Exceptions These regulations shall apply to all expenditures in the performance of official City & County business except:  

Departments that have developed their own travel policies that have been approved by the Controller. Cost of extradition of prisoners by sworn peace officers which are subject to regulations imposed by the State.

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 



Travel costs incurred by judges and employees of Superior and Municipal Courts. However, such travel will be subject to rules and regulations adopted by the Courts and approved by the Controller. Any travel or related expenses incurred that are subject to reimbursement from federal or state grants when such grants specifically provide for reimbursement under applicable federal and state regulation and is more restrictive than the City & County guidelines. Any travel or related expenditures for a department, board or commission, or subunit thereof, which may be specifically exempted by action of the Board of Supervisors by ordinance. Any particular travel expense or reimbursement rate for represented officers or employees that is specifically addressed in a ratified Memorandum-of-Understanding (MOU) agreement or arbitration award with a recognized employee organization. P.O.S.T. (Peace Officers Standards & Training) reimbursement policy is applied for affected employees.

4.8.1.10

| NON-ALLOWABLE AND NON-REIMBURSABLE COSTS

The following items will not be reimbursed unless highly unusual circumstances have occurred and written pre-approval was obtained from the Department Head or Authorized Travel Signatory. TABLE 4-9. NON-ALLOWABLE & NON-REIMBURSABLE COSTS

TYPE Travel/Transportation

EXAMPLES Unjustified car rental and/or upgrade from standard compact size vehicle. Auto/flight/travel insurance. Air travel ticket higher than coach/economy class. Parking/moving violation tickets or other penalties for infractions of any law, repair of automobiles and towing charges. Passport application fees. Unjustified cancelled travel tickets and change/cancellation costs.

Lodging

Unjustified lodging in excess of federal per diem rate. Lodging other than “standard” room rate. Upgrades are not reimbursable. Payment for accommodation with friends/relatives.

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TYPE

EXAMPLES Unjustified lodging during training/meetings within the nine Bay Area counties. Hotel movies. Unjustified Internet access.

Meals

Reimbursement for meals unless travel is overnight and preapproved as an exception by the Department Head or provided for in employee MOU. Meal expenses in lieu of event provided meals. Alcoholic beverages.

Other Expenses

Boarding cost of pets and children during business travel. Excessive phone calls from hotels when traveling. Personal laundry/dry clean for trips less than 7 days. Significantly large tips. Upgrades

4.8.2 | Travel Reimbursement Frequently Asked Questions Q: What is the policy regarding using City approved vendors vs employee booking air travel directly? A: Employees have the option of purchasing air tickets from a City approved vendor or on-line directly. If employees choose to purchase air travel on-line directly, they must document and demonstrate this option is the most economical by obtaining a comparative quote from a City vendor for the travel dates.

Q: Can I book air travel for other than coach/economy class? A: No. Airfare should be coach/economy class only. Business class is not reimbursable. Upgrades are not reimbursable. Employees who desire an upgrade in order to enjoy greater legroom or for other reasons, must pay for the cost of the upgrade out-of-pocket.

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Q: If an airline charges for checked luggage, what is the policy for reimbursing baggage check-in expenses? What documentation is required? A: The City will reimburse the cost of first checked bag only. Additional baggage check-in costs will be reimbursed with justification explaining the business need for extra luggage. Original receipt required for reimbursement.

Q: What expenditures are reimbursed when I drive personal vehicle, city vehicle, or rental car? A: Please refer to the Table below: TABLE 4-10. NON-ALLOWABLE & NON-REIMBURSABLE COSTS

MODE OF TRANSPORTATION

EXPENSES REIMBURSED

(a) Employee drives personal car

(a) Mileage

(b) Employee drives city vehicle

(b) Fuel expenses (with justification why employee was unable to obtain fuel from Central Shops)

(c) Employee drives rental car

(c) Cost of car rental and gas expenses

See “Transportation” section for additional information and requirements.

Q: Does my lodging receipt need to be itemized? A: Yes, hotel lodging receipt must be itemized listing all expenses (room, tax, phone calls, etc.) separately. The receipt must also have a zero balance showing the payment was made. If a hotel bill with zero balance is not available, submit the itemized hotel bill along with a copy of credit card statement showing payment was made.

Q: Are room upgrades reimbursable? A: No. Lodging reimbursement is for “standard” rooms only.

Q: Is there a limit to the cost for overnight parking at a hotel? A: No, but the parking should use the lowest cost available, such as self-parking instead of valet.

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Q: If the conference hotel is not available (e.g., fully booked), can I stay at one of the conference provided list of recommended hotels or over flow hotels? A: Yes, conference recommended hotels or overflow hotels with a conference rate will be reimbursed when documentation of the conference lodging rate and a receipt are provided. Reimbursement should be for single room rate.

Q: For domestic travel, what if a city is not listed on the CONUS Per Diem website? A: If a city is not listed, check to ensure that the county within which it is located is also not listed. On the GSA website there is a link to the National Association of Counties which can help determine the county a destination is located in. If the city is not listed, but the county is, then the per diem rate is the rate for that entire county. If the city and the county are not listed, then that area is considered to be a Standard CONUS location which is currently $83 for lodging.

Q: Can the City pay an employee’s family/friends for lodging or other expenses when employee stays with family/friend during business travel? A: No.

Q: When employees stay with family/friends during business travel and therefore do not incur lodging expense to the City, can employees be reimbursed for buying family/friends thank you flowers, or meal etc. A: No.

Q: Can I claim meal per diem if allowed in my labor agreement MOU? A: Yes, provided the meal per diem follows the MOU rules and regulations.

Q: Can I claim meal per diem if I found the event meals unhealthy or insufficient? A: Generally no; exceptions can be given if written justification is provided and approved by the Department Head/Authorized Travel Signatory and the Controller or his/her designee.

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Q: Can I claim meal per diem if I was not available for the event provided meal? A: Generally no; exceptions can be given if written justification is provided and approved by the Department Head/Authorized Travel Signatory and the Controller or his/her designee.

Q: Can I claim meal per diem if the event only provided hors d’oeuvres / appetizers during a reception, and not a complete meal? A: The per diem can be requested only if the employee certifies in writing that only drinks and hors d’oeuvres / appetizers were provided.

Q: When traveling between cities, and the employee has a meal during transit through an airport, what per diem rate should be used? A: Use the destination city’s per diem rate.

Q: Is alcohol and/or corkage expense reimbursable? A: No, alcohol/corkage reimbursement is not allowed. As per Department of Human Resources Employee Handbook, employees may not manufacture, distribute, dispense, possess, or use alcohol or illegal drugs in workplace.

Q: Is meal per diem allowed for same day travel? A: No, unless contained in the employee’s MOU stipulated benefits.

Q: Can the employee be reimbursed for meals if the travel is for required training? A: Yes, as long as the travel is overnight and the Department Head has pre-approved the exception.

Q: Can the employee be reimbursed for meals if the travel is grant funded? A: Per the federal grant guidelines (2CFR215) the City cannot disproportionally spend funds for the same activities that are reimbursed at a lesser rate for non-grant-funded activities. Therefore, grant funds may not be used to provide meal per diem unless provided for under the employee’s MOU or has been pre-approved by the Department Head as an exception. Page 199

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Q: If my travel is grant funded and the grant will reimburse for expenses (e.g., lodging expense beyond the maximum federal per diem rate), can I be reimbursed? A: Yes, departments should certify that the grant will fully reimburse and maintain appropriate supporting documentation.

Q: What is the City’s policy for reimbursing Internet, fax and phone calls for business? A: Employees will be reimbursed for reasonable usage. Business purpose and justification of need must be documented and original receipts provided. Identify all business calls, faxes, etc. on the hotel bill.

Q: What does incidental expense per diem include? A: It includes: transportation between places of lodging or business and places where meals are taken, if suitable meals cannot be obtained within walking distance of the conference/training site or hotel; fees and tips given to porters, baggage carriers, bellhops, hotel maids and stewards; and mailing costs associated with filing travel vouchers.

Q: Is the $5 incidental per diem given on travel days? A: Yes, incidental per diem is allowed for travel as long as the trip is overnight and pre-approved as an exception by the Department Head.

Q: What is the guideline for giving tips? A: For tips not covered by the GSA incidentals per diem, the amount should generally be 15%.

Q: For international travel, what if a particular location in foreign country is not listed for per diem? A: Any location not listed for per diem under a country takes the "Other" rate GSA administers and publishes for that country. An unlisted suburb of a listed location takes the "Other" rate, not that of the location of which it is a suburb.

Q: When on foreign travel for official business, what does the M&IE incidental cover? Page 200

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A: Separate amounts are established for lodging and meals plus incidental travel expenses (M&IE). The maximum lodging amount is intended to substantially cover the cost of lodging at adequate, suitable and moderately-priced facilities. The M&IE portion is intended to substantially cover the cost of meals and incidental travel expenses such as laundry and dry cleaning.

Q: For international business travel, are passports and visas reimbursable expenses? A: Visas are reimbursed with original receipt. Passport expenses are not reimbursable.

Q: What documentation do I need to provide for currency conversion when foreign/ international travel for official business? A: International travel expenses must be converted to U.S. dollars. Conversion rate should be calculated for the date the expense was incurred. Include proof of the currency exchange rate. Proof can be in the form of (1) receipts obtained by the employee during travel or (2) a copy of the employee's credit card statement showing the travel expense or (3) a print out from the OANDA.com website or other conversion website using the date shown on the receipt(s).

Q: What is the policy for expenditures incurred by persons who are not City employees? A: In order for expenses (e.g., lodging, meals) to be allowable for persons other than the officer or employee, the Department Head must certify that such expenditures are for a public purpose and necessary for the conduct of City & County business. Expenses must conform to the guidelines and conditions as established for City employees. If there is any confusion on the applicability of this, please obtain prior written approval of the Controller.

Q: If an employee pays for conference registration in advance, can he or she be reimbursed before the conference date? A: No, all employee reimbursements should be approved after the conference has completed. If the department wishes to take advantage of available discounts, a check from the financial system should be issued.

Q: Am I required to provide printouts from an online map service such as Google Maps or Mapquest to be reimbursed for mileage?

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A: No, you may provide either an odometer reading, indicating beginning and ending mileage, or a printout from an automated mapping program (e.g., Google Maps) showing the route and mileage.

4.8.3 | Non-Travel Expense Reimbursement Guidelines This section provides the City’s rules to departments on what expenses will be allowed for employee reimbursements for expenditures other than travel and training. As a general rule:

Officers or employees may be reimbursed for reasonable work-related costs, minor and non-recurring goods up to $200 from any single vendor, with proper approval from Department Head or authorized designee. The only exceptions to the $200 maximum are subscription, membership, license, and certification expenses.

4.8.3.1

| PRE-AUTHORIZATION

All requests for employee reimbursement require approval in advance by the Department Head or an authorized designee. An employee reimbursement authorization form must be completed by the employee and signed approved by the Department Head or authorized designee. Information required on the authorization form includes:   

Date(s) of expense Description of the expenditure Business purpose or need for purchase

Departments should develop detailed internal procedures for their employee reimbursement preapproval process. 4.8.3.2

| GUIDELINES FOR SUBMISSION AND REVIEW OF EMPLOYEE REIMBURSEMENTS

Completed expense reimbursement requests must be fully supported by receipts and forwarded to the department’s Accounting/Finance Division no more than 30 days after expenditure. Reimbursements with incomplete or insufficient documentation will be denied. Reimbursement requests must be processed in the City's financial system (FAMIS Accounting) no more than 90 days after the date of occurrence. When Filing a Reimbursement, the Employee Is: 

Responsible for forwarding completed forms to the department Accounting/Finance Division no more than 30 days after the expense.

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Required to specify the business purpose or need of the expense to be made by the employee instead of through the normal purchasing process. The business purpose should be descriptive enough to clearly answer any questions regarding the necessity of the expense. Required to submit all supporting documentation including, but not limited to, approved Travel Expense Voucher; air, or other itinerary, conference/meeting/workshop schedule and agenda; original itemized receipts and proof of payment; and any necessary pre-approvals and/or justifications.

An employee’s proof of payment may include, but not be limited to, a cancelled check, bank statement, credit card statement, or original receipt that shows distinct information that the payment was received. However, compliance departments can enforce a more stringent proof of payment policy. When Reviewing Employee Reimbursements, Department Accounting/Finance Divisions Must:         4.8.3.3

Ensure expenditures are reasonable, necessary, and for official business purposes. Review and audit the request for compliance with Controller’s and Purchasing policies. Request additional documentation, information, justification from employee(s) as needed. Deduct unallowable expenses. For project- or grant-funded business expenses; review to ensure the request is in compliance with project/grant requirements. Verify authorized approver(s). Ensure all appropriate/required supporting documentation has been submitted and maintained in department files. Approve/deny and process reimbursements in a timely manner. Reimbursement must be completed and posted in the City’s financial system within 90 days. | CLARIFICATIONS/EXCEPTIONS

Subscriptions, Memberships, Licenses, and Certifications Pre-approval by a Department Head/Authorized Travel Signatory is required before an employee’s purchase of subscriptions, memberships, licenses, and certifications can be reimbursed. These expenses may exceed the $200 threshold as long as the pre-approval has been granted and the purchase does not violate any of the Unallowable Items criteria listed below in Section 4.8.3.4 Unallowable Items. Credit Card as the Only Accepted Payment Method In certain instances, a vendor may only accept a credit card for payment. Pre-approval by a Department Head/Authorized Travel Signatory is required before an employee can use his/her private credit card to purchase business expenses. Such a credit card purchase may exceed the $200 threshold as long as the pre-approval has been granted and the purchase does not violate any of the Unallowable Items criteria listed below in Section 4.8.3.4 Unallowable Items.

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Local Field Expenses—Vehicles Local field expenses are expenditures for business conducted within the nine (9) Bay Area counties and is not related to travel or training. Vehicle use for employees on official business is reimbursable where public transportation is not practical or possible (for example: parking, mileage and bridge tolls for a meeting in Oakland). The following information should be included on the employee reimbursement voucher:    

Business purpose for use of vehicle. Starting point (e.g., worksite or home, whichever is the closer of the two) and the destination. Vehicle make, model and license #. If using City-issued vehicle, provide vehicle number. Odometer reading, beginning and ending.

Personal Vehicle In accordance with Section 10.28-1 of the San Francisco Administrative Code, the mileage rate for payments to officers and employees for use of privately owned automobiles in connection with any official duty or service shall be at the rate established by the Controller. The Controller adopts the IRS standard mileage rate for business use of an automobile; refer to the IRS’s website to obtain the most updated rate.    

Mileage is reimbursed when using a personal vehicle; fuel is not reimbursed. Personal expenses, such as private vehicle repair and maintenance, are not reimbursable. Parking violations, moving violations, and towing charges are not reimbursable under any circumstances. When using a personal vehicle for official business, all passengers in the vehicle must be on official business.

City Vehicle When using a City vehicle, fuel should be obtained from Central Shops. When impractical to do so, fuel purchased at a commercial location is reimbursed with written justification and original receipt(s). Mileage is not reimbursed. All passengers traveling in a City vehicle must be on official business. Parking & Other Incidentals  

Parking within City limits will be reimbursed when a written explanation of why public transportation could not be used is provided. Parking meters and pay phones will be reimbursed without receipt.

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Food Departments must maintain their own written policy regarding the purchase of food and refreshments. The Controller’s Office must review and approve this policy before minor food and refreshment purchases by employees can be reimbursed. The written policy should cover all instances where food and drinks might be purchased by, and then reimbursed to, the employee. 4.8.3.4

| UNALLOWABLE ITEMS

The following expenses incurred by employees are not reimbursable by the City:       

Toll citations, parking violations, traffic fines, and other citations associated with vehicle use Equipment purchase, rentals, and/or maintenance Recurring, regularly used commodities and services Non-work related expenses Professional and/or general services provided by vendors Commodities or services that can and should be purchased through encumbrances. Bottled water (per Executive Directive 07-05 Permanent Phase-Out of Bottled Water Purchases by San Francisco City and County Government http://www.sfenvironment.org/sites/default/files/policy/sfe_zw_mayors_directive_ban_bottled_ water.pdf).

Executive Directive 07-05 (Permanent Phase-Out of Bottled Water Purchases by San Francisco City and County Government) states: By virtue of the power and authority vested in me by Section 3.100 of the San Francisco Charter to provide administration and oversight of all departments and governmental units in the Executive Branch of the City and County of San Francisco, I hereby issue this Executive Directive to become effective immediately: 



Beginning July 1, 2007, there will be a prohibition from any city department or agency purchasing single serving bottles of water using city funds, unless an employee contract specifies usage. This prohibition will apply to city contractors and city funded and/or sponsored events. There will be no waivers from this prohibition. By September 30, 2007, all city departments and agencies occupying either city or rental properties will have completed an audit to determine the viability of switching from bottled water dispensers to bottle-less water dispensers that utilize Hetch Hetchy supplied water. City departments will work with the San Francisco Public Utilities Commission (SFPUC), Department of Real Estate (DRE) and the City Purchaser to conduct the audit. Staff from the SFPUC will contact you shortly to begin the audit for your department.

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By December 1, 2007 all city departments and agencies occupying either city or rental properties will have installed bottle-less water dispensers that utilize Hetch Hetchy supplied water. Waivers will only be granted by the SFPUC based on legitimate engineering, health and fiscal concerns.

4.8.4 | Continuous Monitoring on Employee Reimbursement To ensure compliance with the City’s travel and employee reimbursement policies, the Controller’s Office sends quarterly employee reimbursement reports to all City Department Heads for their review. The report includes travel, training, and miscellaneous employee reimbursements. Department Heads must review and sign to confirm that reimbursements are legitimate, required documentation is on file at the department, and expenditures are in accordance with the policies set forth in Section 4.8 - Employee Travel & Business Expense. The signatures must be from the Department Head and cannot be delegated. The Controller’s Office will also periodically request supporting documentation in order to audit selected transactions.

4.9 | Payment Mechanisms 4.9.1 | Revolving Funds This section sets forth the legal authorities for the establishment and use of revolving funds, identifies mandated responsibilities and accountability of departments, and sets forth the general procedures to follow for administration and reimbursement of revolving funds. 4.9.1.1

| AUTHORITY

The guidelines are issued according to the provisions of the San Francisco Administrative Code Chapter 10, Article XV, Sections 10.125-10.169. Revolving funds are established by ordinance of the Board of Supervisors to pay for minor, non-recurring, goods and services that are needed to immediately and cannot be conveniently paid by the issuance of a check. The Administrative Code further provides that: Petty cash purchases and disbursements shall be for purposes and within funds available in the appropriations from which said revolving fund claims are to be reimbursed; and shall be in conformity with applicable rules prescribed by the Purchaser of Supplies and the Controller.

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The Administrative Code entrusts the Controller’s Office with the responsibility to administer, manage, and monitor use of cash revolving funds; and to audit the cash revolving funds, assessing the appropriateness of authorized amounts and recommending changes to authorized amounts of such funds. To perform its oversight function effectively, the Controller:  

Establishes rules and regulations, accounting requirements, and processing instructions, and Performs detailed reviews and audits to ensure that departments comply with legal provisions, policies, and procedures governing the cash revolving funds.

4.9.1.2

| PROCEDURES FOR ESTABLISHMENT & ADMINISTRATION OF REVOLVING FUNDS

These procedures provide proper guidance to departments on the requirements, mandated responsibilities, and accountability to follow for the establishment, use, reimbursement, and management of revolving funds. This section establishes the Controller’s rules and regulations to ensure compliance with legal provisions for administration of revolving funds. Establishment of Revolving Fund Cash revolving funds for departments are hereby continued, or established in such amounts as have been or may be specifically appropriated or made available to each to be used in connection with the operations for the respective departments for making cash change, for making petty cash purchases, and for disbursements which cannot be conveniently made by warrants drawn by the Controller upon the treasury of the City & County. Such petty cash purchases and disbursements shall be for purposes and within funds available in the appropriations from which said revolving funds claims are to be reimbursed; and shall be in conformity with applicable rules and regulations prescribed by the Purchaser of Supplies and the Controller (Administrative Code, Section 10.125). To establish the revolving fund:   



Department submits request for revolving fund for review and approval of the Controller’s Office Director of Accounting Operations. Department obtains approval from Board of Supervisors through a board ordinance to add the revolving fund to the Administrative Code. Department submits approved request to the Controller’s Office Accounting Operations to establish the revolving fund in FAMIS with the subsidiary code. Include documentation of board resolution and ordinance that established the revolving fund, purpose of the fund, listing of fund custodians, procedures for security of warrants or cash, and fund replenishment. Also arrange for the Department Head or designated personnel to be the payee. Treasurer’s Office coordinates with the Controller’s Office and department to establish the revolving fund bank account.

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Department’s Management & Administration of Revolving Fund The Department Head, board, or commission, with concurrence of the Controller may authorize such subdivisions in any revolving funds as will affect the most efficient operation thereof; provided, however, that all amounts for other than cash change and petty cash purposes shall be maintained in banks or a bank designated by the Treasurer. Withdrawals from such banks shall be made by checks signed by a representative or by representatives designated by the Department Head, board, or commission. A duplicate copy of the monthly statement shall be sent directly from the bank to the Treasurer (Administrative Code, Section 10.128). The duly appointed and acting head of the respective department for which a revolving fund has been provided shall be responsible for the full amount of the revolving fund for his or her department (Administrative Code, Section 10.129). Custodian, Safeguard, and Control of the Revolving Fund The Administrative Code provides that “a Department Head, board, or commission, with concurrence of the Controller, may authorize such subdivisions in any revolving funds as will affect the most efficient operation thereof.” Departments may disburse the cash in revolving funds to multiple locations. A listing of the subdivisions by location and custodians should be provided to the Controller’s Office Fund Accountants and Auditors. Custodians should comply with the following procedures:  Checkbook and cash assets should always be securely stored in a locked cabinet or safe.  The following functions related to disbursements of revolving fund money should be segregated among several different employees. At a minimum, (a) and (c) below must be assigned to separate individuals: (a) Custodianship of revolving fund checks (b) Signature authority (c) Reconciliation (receipt of bank statements and cashed checks) (d) Only the revolving fund custodian (and back-up) should have access to the revolving fund assets and cash. Bank Reconciliation & Outstanding Checks The following are record-keeping and reconciliation functions that are required for bank accounts and checks associated with revolving funds:  Monthly bank reconciliation of revolving fund account is conducted by someone other than the fund custodian.

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 Revolving fund amount should agree with FAMIS Subsidiary Account balance (General Ledger 151) and the amount authorized by the Administrative Code. Reimbursement will not be made by the Controller if reconciliations are in arrears.  Ensure up-to-date posting to checkbook register (stub). Checks issued and outstanding for six (6) months should be written off and the amount of the check should be deducted from the next replenishment to reconcile the revolving fund bank account and the department account.  Retain copies of paid checks, department approval forms, and invoices for at least three (3) fiscal years from the date of the expense.  Void checks should be marked as “VOID” and retained.  Bank statements and cancelled checks should be received and reviewed by someone other than the fund custodian. Disbursement of Funds In general, food for employees, gifts, travel and training expenses, subscriptions, membership fees, conference and registration fees, equipment purchase or rentals, maintenance, and regularly used commodities and services should not be paid through a revolving fund. Special circumstances or exceptions require pre-approval of the Controller. Authorized revolving fund expenditures include but are not limited to:   

Small purchases of non-recurring goods and services of $200 or less from any single vendor. Revolving funds should not be used for the routine purchase of goods and services. Reimbursement to employees for minor out-of-pocket authorized expense less than $50. Other payments for items which cannot be conveniently made by checks drawn by the Controller.

Disbursement procedures are as follows:  Receipts must be original. If the receipt is not original, it must be certified by the Department Head or designated personnel.  Receipts must have authorization signature of the Chief Financial Officer or designated personnel.  The custodian must be provided with the index code, sub-object, and a short description of the purpose of the expense using appropriate reimbursement form.  The custodian should double check the amount before paying and require “received by” signature and date on the reimbursement form.  All documents supporting the reimbursement must be kept in the safe until the next replenishment.

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The Department Head, board, or commission shall cause a full, true and correct account to be kept of all money received for or disbursed from each revolving fund (Administrative Code, Section 10.130). The supporting vouchers for any disbursement which has been disapproved by the Controller as in his or her opinion not being authorized by law, or the rules and regulations as provided for this article, shall be returned to the Department Head involved with a demand, upon such Department Head, to repay to the related revolving fund, within 30 days of the demand aforesaid, the amount of the disapproved disbursement. If the amount of the disapproved disbursement has not been repaid, the Controller shall withhold the amount thereof from any sums due and payable to the Department Head; and in writing notify the City Attorney of the full particulars of the case with a request that the City Attorney take such action as may be necessary (Administrative Code, Section 10.131). Replenishment of Revolving Fund Revolving funds are generally set at the minimum amount necessary for departments. The standard established by the Controller’s Office for the frequency of replenishment of revolving funds is four times a year or every three months. The Controller’s Office has not established any limit to the number of replenishments permitted for revolving funds. Generally, an indicator that replenishment is needed is when the revolving fund is reduced to a low cash level that could only be sustained for approximately ten (10) days. The fund custodian must verify that department request forms are complete, properly approved, and appropriate supporting documentation is attached. The fund custodian should review all requests to ensure they meet City guidelines before disbursements, such as:      

Goods or services purchased are appropriate and authorized. Payee should be the revolving fund Department Head or designated personnel. Authorized request forms are used, completed, approved, and supported by original invoices or receipts, or certified copies signed by Department Head or designated personnel. FAMIS document must match original document submitted to the Controller. Unpaid sales tax, if applicable, is identified and properly accrued. Funds are budgeted and available.

Requests for replenishments are prepared by the department’s revolving fund custodian, reviewed and signed by the department accountant, and submitted to the Controller’s Office periodically. The request for replenishment is entered into FAMIS but the original replenishment voucher with supporting documents is required to be submitted to the Controller’s Fund Accountant for review. Revolving fund expenditures are subject to audit and disallowance by the Controller. Requests for replenishment require original receipts, authorization by appropriate personnel, and explanation of business purpose of incurred expenses. Replenishments procedures are as follows:

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 Revolving fund custodian to reconcile the revolving fund, to ensure that cash on hand plus the total of all receipts add up to the revolving fund amount.  Prepare the “Revolving Fund Voucher”, shown below. FIGURE 4-13. REVOLVING FUND VOUCHER FORM & INSTRUCTIONS

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 Attach supporting documentation to the form, and obtain supervisor’s approval signature.  Submit to department accountant for input into the financial system. Submit physical documents (original voucher payment request with supporting receipts and reimbursement forms) to

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Controller’s Office once the accounting entry has been processed and approved at the department level. Controller’s Office—Oversight, Review & Audit of Revolving Fund The Controller’s Office will:   





Administer, monitor use, and authorize exceptions to revolving funds. Perform periodic audits of the revolving funds as part of its responsibility to monitor use of revolving funds. Assess the necessity for revolving funds and recommend the elimination of those with insufficient activities during a fiscal year, and the reduction of the authorized amounts for underutilized revolving funds. Establish requirements for management and reimbursement of revolving funds to ensure compliance with legal provisions and to identify mandated responsibilities and accountability of Department Heads and their employees. Perform pre-audit of revolving fund replenishment requests to ensure compliance with City rules and regulations on proper use of revolving funds.

The check for the reimbursement of revolving fund expenditures is issued by the Controller based on a Revolving Fund Voucher and supporting documentation submitted by the department. Prior to authorizing the issuance of the check, the Controller’s Fund Accountants pre-audit the following:  A. Approval of the Department Head or authorized representative – indicating the propriety, validity and legality of the expenditures from revolving funds: 1) Propriety: Goods or services are appropriate for the department. 2) Validity: Expenses are incurred by authorized city employees within the period for which funds are budgeted. 3) Legality: Funds are budgeted and available.  B. The Revolving Fund Voucher attachment is complete: 1) Payee: Department head for the account of the (Department’s Name) Revolving Fund 2) Required Approvals: See Item A above. 3) Purpose of requested payment: Replenishment of revolving fund for expenditures incurred for the period from __________ to _____________. 4) The FAMIS accounting data elements indicating the funds, sub-funds and accounts to be charged. Please be guided by the “Departmental Accounting System Manual” for detailed instruction when preparing the Voucher. 5) Funds are available in department appropriations.  C. The Revolving Fund Voucher is supported by: 1) A completed Form 318, Controller’s Revolving Fund Reimbursement Form. This form is

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prepared and signed by the Custodian as a full, true and accurate accounting of the fund. Please see Figure 4-13 for detailed instructions for completion of Form 318. 2) A copy of the department authorization for the expenditure. 3) The original invoice(s) which contains a description of the nature of every item of expenditure listed on Form 318. A “cash register tape”-type of invoice or non-original invoice is acceptable only if the item is identified by the following: a. By the employee making the purchase, and b. Certified by the Department Head, and c. Countersigned by designated personnel in the Controller’s Office. The Controller waives the requirement for original invoices or receipts signed by clients of the Human Services Department. The Human Services Cash Revolving Fund “...provides funds for immediate need checks for welfare orders, and for the replacement of mutilated checks.” (Administrative Code, Section 10.157). However, the Department Head must certify that following documents are on file with Human Services Cashier’s Division. 4) Non-original invoices are accepted only when certified as original by the Department Head or designated personnel. 5) Original records signed by recipients who received cash. 6) Approval of the department’s officer authorizing payment.  D. The department’s accountant will refer to the Sales & Use Tax Guidelines and insure that appropriate sales and/or use taxes are paid by: 1) Identifying use tax amounts not billed by out-of-state vendors when goods were purchased. 2) Preparing a journal entry to charge the department for the amount of sales or use tax and accrue the liability under an Agency Fund for payment to the State monthly by the Controller’s Office. 3) Some departments remit use tax payments to the State monthly.  E. Authorized revolving fund expenditures include: 1) Purchases of emergency goods or services of $200 or less from any one vendor. 2) Reimbursing employees for minor out of pocket expenses when properly supported by documentation and department authorization. 3) Other payments for items as authorized in the ordinance authorizing creation of the fund and which cannot be conveniently made by checks drawn by the Controller upon the treasury of the City & County. Revolving Fund Overage or Shortage Fund shortages are the responsibility of the Department Head who is personally liable for all shortages. Should the fund have an overage, the custodian issues a revolving fund check to the department that should be deposited as a credit to other non-operating revenue.

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Changes to the Revolving Fund Balance or Closing the Revolving Fund Revolving funds, with the exception of change funds, are recommended to be closed by the Controller when replenishment is not needed every quarter, unless otherwise justified and approved by the Controller. It is the responsibility of the department to request Administrative Code changes to the revolving fund for Board approval and resolution. The revolving fund cash balance will be adjusted through entries made in FAMIS and according to the related amendments to the Administrative Code by Board authorization. When closing a revolving fund, departments should ensure that bank accounts will also be closed through the Treasurer’s Office.

4.9.2 | Wire Transfers These section addresses the policy and procedures of paying financial obligations through electronic wire transfers and explains how out-going wire transfers should be recorded in the financial system. These guidelines are issued according to the applicable provisions of the San Francisco City Charter, Administrative Code, and Annual Appropriation Ordinance. 4.9.2.1

| OVERVIEW

Occasionally, City departments are required to pay financial obligations through electronic fund transfers (EFTs) such as federal wire or Automated Clearing House (ACH). These payments can be for various reasons to various entities such as vendors, US Treasury, State Treasurer, escrow agents, and others. EFTs are authorized on a need basis only, e.g. requirement spelled out in the contract. Departments must obtain authorizations from Office of the Controller and the Treasurer. Departments requesting EFTs of any amount should send the notification to the Treasurer’s Office at least 72 hours before the wire is due. For large EFT payments that are over $1 million, the department must provide the Treasurer’s Office with sufficient lead time so that the Treasurer can ensure that funds are available on the wire’s due date. 4.9.2.2

| PROCEDURES FOR WIRE TRANSFERS & ACH

Recording of EFTs Departments need to process the wire transfer or ACH document in FAMIS, complete the Treasurer’s EFT template request, and e-mail it to the Treasurer’s Office to set the wire transfers or ACH process in motion. EFTs require several steps in order to record the activity in FAMIS. Departments should allow a minimum of three business days for processing. There are three primary steps: 1. Department Voucher Request 2. Advance Notification to Treasurer’s Office

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3. Treasurer’s Office Prepares Journal Entry 1. Department Voucher Request EFT requests can only be processed in FAMIS, and not ADPICS, using one of the following document types: payment request (PR), encumbrance payment (EP), or one-time payment request (OT). The journal entry (JE) document type is used for necessary adjustments referencing the original document in the Document Reference field and a complete Notepad explanation. Each EFT payment transaction requires Controller’s approval, and the Notepad must provide explanation or purpose of payment (e.g. who, when, why, breakdown of need, and other relevant information). For illustrations on processing EFT payment transactions, refer to Section 16 - How-to & Screenshots. 2. Advance Notification to City Treasurer Once the FAMIS document is approved by the Controller’s Office, at least 72 hours prior to the date of transfer the Department notifies the Treasurer’s Investment Office via e-mail ([email protected] or [email protected]) that an EFT payment is necessary (more time may be needed if the transfer is non-recurring or infrequent, and if the amount is greater than $1 million). In order to be processed, the department’s e-mail request must attach a completed Treasurer’s EFT request template with complete instructions, other special instructions required, and the following information: FAMIS document number, name of payee, amount of transfer, and due date. The Treasurer’s Office will not process the EFT request without an approved and posted voucher. The Table below provides the Treasurer’s EFT request template. TABLE 4-11. TREASURER'S EFT REQUEST TEMPLATE REQUIRED INFORMATION

ACH UNIT MODEL: 1) REQUESTING DEPARTMENT 2) REQUESTING DEPT. CONTACT NAME & PHONE # 3) DATE OF EFT REQUEST 4) DATE EFT IS DUE 5) REASON FOR PAYMENT REQUEST 6) FAMIS DOCUMENT NUMBER 7) EFT AMOUNT

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ACH/WIRE TEMPLATE:

EXPLANATION OF REQUIRED INFORMATION

For Treasury staff only: key in the model/template name assigned to this particular vendor Your department's name Your name & phone no. Date when this EFT is requested Date when this EFT is required to be in vendor's account Reason for payment e.g., Purchase of Cable Car Document # in FAMIS that shows this payment request Dollar amount

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REQUIRED INFORMATION

ENTER CORRESPONDING INFORMATION FOR RED INKED/NUMBERED ITEMS

8) ACH PAYMENT AUTHORIZATION FROM PAYEE IS IN PLACE

9) BENEFICIARY BANK’S ACH ABA ROUNTING #

10) BENEFICIARY BANK’S FEDWIRE ABA ROUTING # 11) BENEFICIARY BANK 12) BENEFICIARY BANK'S CONTACT 13) BENEFICIARY'S ACCOUNT NAME 14) BENEFICIARY'S ACCOUNT NUMBER 15) FOR FURTHER CREDIT TO 16) BENEFICIARY CO. CONTACT NAME & PHONE 17) PAYMENT FOR 18) GLA NUMBER CONTROLLER’S STAFF APPROVING FAMIS DOC# EFT INITIATED BY EFT APPROVED BY EFT SETTLEMENT DATE EFT REFERENCE NUMBER EFT INTERNAL REFERENCE NUMBER

EXPLANATION OF REQUIRED INFORMATION

Written authorization by payee to allow CCSF to send ACH credits to payee’s account and, if applicable, reverse them via ACH debit. Please answer Yes or No. 9 digit bank code for ACH. If payee doesn’t accept ACH payments please state so on this line and provide FEDWIRE ABA # instead in the next row (Item 10). 9 digit bank code for FEDWIRE. The receiving bank where this payment is being sent Receiving bank's contact name & number, if available. Payee or account holder's name Payee's bank account number Other account number to be credited, if applicable Payee's contact information, if available Invoice or Contract # being paid If applicable For Treasury staff input only. For Treasury staff input only. For Treasury staff input only. For Treasury staff input only. For Treasury staff input only. For Treasury staff input only.

3. Treasurer’s Office Prepares Journal Entry The Treasurer’s Office processes the EFT through the partnering bank’s wire and ACH systems. After the bank has made the transfer, the Treasurer’s Office prepares a journal entry with FAMIS Document Type WL using Transaction Code 262 to liquidate the voucher and debit vouchers payable and credit cash. FAMIS voucher number, bank number, and confirmation number must be coded in the document reference, bank number, and treasurer number fields on the transaction. If the Treasurer’s Office wishes to reverse an incorrect journal entry using Transaction Code 262, it will use Transaction Code 266 in another journal entry referencing the original EFT voucher. This entry cancels

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the EFT and reinstates the EFT voucher payable. For more information on transaction codes, refer to Section 17.2 - FAMIS Transaction Codes. Cancellation of Wire Transfers & ACH Cancellation of a wire transfer or ACH is allowed only if the Treasurer’s Office has not processed the transfer. In a situation where cancellation is still possible, the department must prepare a journal entry using an appropriate Transaction Code listed below to cancel the payment voucher. For more information on transaction codes, refer to Section 17.2 - FAMIS Transaction Codes. TABLE 4-12. CANCELLATION TRANSACTION CODES

ORIGINAL TRANSACTION CODE 232

CANCELLATION TRANSACTION CODE 255 Manual cancellation of a wire transfer supported by subsidiary (GL#211, 216, 219)

236/238/239/242/245 240* Manual cancellation of a V/P-direct expenditures 243

244 Manual cancellation of a wire transfer supported by subsidiary (GL#153, 252)

247

254 Manual cancellation of a V/P charged to GL account w/subsidiary wire transfer (not GL211, 216, 219)

249

244 Manual Cancellation Of a V/P-Non-Expense Expenditures Supported By Subsidiary

251

248 Manual cancellation of a V/P –Revenue Refund

317

254 Manual cancellation of a V/P for wire payroll withholding (not GL211, 216, 219)

*Transaction code 240 cancels payment voucher but does not re-establish encumbrance. If the encumbrance needs to be re-established, an additional entry to encumber is required. Other Requirements for EFT Payments   

Services being paid are supported by original invoice or properly certified copy thereof, completed within the period of the contract, and covered by up-to-date insurance. Request for payment is authorized by responsible project managers after review and acceptance of completeness and condition of the services or work done. Payment request is properly adjusted according to provisions in the contract such as retentions, liquidated damages, or liens.

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   

  



Payment request subject to liens requires proper coordination with the Controller’s Claims and Disbursement Unit. Payment to a vendor other than the primary contractor is properly justified and/or covered by the provisions of the contract, or special agreements. Payment requests must be within the total amount of the contract. If final payment is determined to exceed the amount of the contract, the contract must be properly modified according to rules and regulations covering contract modifications. Failure to adjust the contract for the excess according to City policies and guidelines requires adequate justification and certification as to availability of funds and propriety and validity of the additional charges before such payment can be authorized. Payments must be properly coded as partial or final to avoid subsequent need to re-encumber or request direct payment. Payment under such situation must be properly justified. Services funded by special funds such as grants must be in full compliance of and allowable under the grant’s funding requirements. Approval of the payment request is certification that it is proper, valid, and legal. Any officer who approves, or allows unauthorized or illegal obligations is liable to the City and subject to penalties. More information regarding payment processing can be found on the Controller’s Intranet Page at: http://famis.sfgov.org/Controllerspolicies. Questions can be directed to the Controller’s Office fund accounting team assigned to the department or Treasurer’s Banking Services Division at 5544509 or 554-5205.

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5 | PROCUREMENT CARD (P-CARD) 5.1 | Overview The City Procurement Card (P-Card) is a charge card designed to enable designated City employees to make authorized purchases under two circumstances:  

During declared emergencies and natural disasters For employee reimbursement items.

The P-Card can only be used for official City business and must be surrendered upon termination of employment for any reason or upon demand by City. All P-Card participants are required to use the Access Online system provided by U.S. Bank in order to complete monthly billing statement reconciliation.

5.1.1 | Program Definitions Access Online System is the U.S. Bank online system for tracking, approving and reconciling credit card transactions. Approving Official is the individual designated by the department to request cards for staff, approve Cardholder purchases and verify that purchases are made for official City business. Billing Officials are accounting staff in the departments who perform accounting entries and transactions. Cardholders are current City employees with procurement authority to use the P-Card for business purchases. Department Coordinator oversees the P-Card Program at the department level. P-Card Administrator is the Controller, or his or her designee.

5.1.2 | General Information Eligible Employees Application for use of P-Card must be approved by the Department Coordinator. Termination of employment with a City department and/or abuse of the P-Card will result in cancellation of the P-Card. Submit card enrollment and cancellation online at http://conforms.sfgov.org. See Section 5.4 - Form Automation for more information. Page 220

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Bona fide Suppliers Only P-Card suppliers shall be established, reputable, reliable vendors with appropriate business licenses, certifications, permits, etc., and not those of a questionable status. Do not make P-Card purchases from sources including, but not limited to:       

EBay (auctions) (www.ebay.com) Swap meet vendors Street market vendors Adult book stores Pawn shops Craigslist (www.craigslist.org) Your relatives, neighbors, friends, etc.

Ethical Use of Public Funds Since P-Card purchases represent public funds, Cardholders and their Approving Officials (e.g., Department Heads) must be continually reminded that their purchases reflect the City’s interest and reputation for ethical and prudent dealings. Each transaction must be one that the Cardholder and Approving Official could easily explain or defend as a prudent use of public funds. Written policies cannot be established to cover every event of P-Card use. All program participants must use their best judgment using a City P-Card. In those instances where a reasonable person might question the use of a P-Card, the Cardholder should refrain from making the purchase without first consulting the P-Card Administrator. Use of the P-Card for Personal Purchases Strictly Prohibited Under no circumstances is a Cardholder permitted to use the P-Card for personal purchases, even if the Cardholder intends to subsequently reimburse the City. Using the P-Card for personal purchases may result in a disciplinary action. Cardholders are required to attend mandatory training and accept the Cardholder Acknowledgement Disclosure during the online card enrollment process prior to the issuance of the P-Card for City use.

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FIGURE 5-1. CARDHOLDER ACKNOWLEDGEMENT DISCLOSURE

PURCHASING CARD (P-CARD) CARDHOLDER ACKNOWLEDGEMENT DISCLOSURE FORM

The undersigned employee submits to this affidavit: 1.

I received a copy of the City and County of San Francisco P-Card Policies and Procedures Manual and agree to abide by the provisions and requirements included in the manual when using the U.S. Bank Visa Purchasing Card.

2.

I agree to abide by all City and County of San Francisco procurement and payment rules and regulations and will not split purchases or use the purchasing card in a manner that circumvents related City and County of San Francisco rules and regulations.

3.

The card is issued in my name. I will not allow any other person to use the card. I am considered responsible for any and all charges against the card.

4.

I received P-Card program training from my agency/department that covered the provisions and requirements included in the City and County of San Francisco P-Card Policies and Procedures Manual.

5.

I understand that the U.S. Bank Visa Purchasing Card is for City official use only and must not be used for personal purchases. Intentional use of the card for other than official City purposes will result in immediate cancellation of my purchasing card, and possible referral to the District Attorney. I may be personally liable the City for the amount of the purchase.

6.

If my authorization or employment is terminated, or I transfer to a new position within the City and County of San Francisco, I will return my card to my approving official immediately.

7.

If the P-Card is lost or stolen, I will immediately notify U.S. Bank by telephone and confirm the telephone call to U.S. Bank by email to the Program Administrator at [email protected] I will also immediately notify my supervisor.

8.

As the P-Card is City and County of San Francisco property, I understand that I may be periodically audited to comply with internal control procedures designed to protect City and County of San Francisco assets. This may include being asked to produce the card to validate its existence and account number. I may also be asked to produce receipts and statements to audit its use.

By signing this document, I am acknowledging that I have received and read it; however, I am not forfeiting any

Use of P-Card inrights. Case of Declared Emergency and Natural Disaster of my legal

Name: credit limit of $1,000. When enrolling for an emergency P-Card, departments P-CardsCardholder have a default can propose the emergency credit limit. Upon approval of the P-Card Administrator, the emergency Cardholder Signature: credit limit will be kept on file and activated only during a disaster. Refer to Section 5.4 Form Automation for the detailed procedures. Department Head Signature: _____________________________________________________________

DisasterAgency/Department: P-Cards will not replace the City’s existing Emergency Purchasing Procedures, but supplement the procedures. Date: Purchases in excess of $1,000 may require the cardholder to follow normal City bidding procedures. In addition, departments should always be prepared and have emergency supplies in place and/or in regular procurement contracts. P-Card cannot be used to purchase professional services. Office of the Controller Use Only Approval:

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Refer to: 1.

San Francisco Administrative Code Section 21.15 for Emergency Procurement Procedures

2.

Section 6.60 for Emergency Repairs, Work and Contracts

3.

Office of Contract Administration (OCA) Guide to Ordering Goods and Services, Chapter 700: Emergency Purchasing Procedures.

Use of P-Card for Non-Emergency Purchases With approval from the P-Card Administrator, departments may issue P-Cards to selected employees for purchase of travel, training, and other employee reimbursement items. Refer to the Controller’s Office policies and procedures for travel, training and employee reimbursement in Section 4.8 Employee Travel & Business Expenses. A Travel Expense Form must be completed and submitted for use of the P-Card for travel, training, and other employee reimbursement items.

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FIGURE 5-2. TRAVEL EXPENSE FORM Form: 319.xls CITY AND COUNTY OF SAN FRANCISCO

TRAVEL EXPENSE FORM TRANSMIT ORIGINAL COPY TO CONTROLLER (WITH REQUIRED RECEIPTS ATTACHED)

DEPT:

DATE:

DIVISION:

TRIP TO:

PURPOSE:

TRIP DATE: ___________________________________ RECEIPTS REQUIRED

DATE DESCRIPTION

REGISTRATION FEE

PER DIEM

AIRFARE/ AUTO

HOTEL

TOTAL

OTHERS

MEALS -

TOTALS

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

AMOUNT DATE: DATE:

PR#

LAST 4 DIGIT OF P-CARD: ADVANCE DOCUMENT NO.: TT#

PAID BY P-CARD

PR# REFUND AMOUNT DUE

ADVANCED [ [

] ]

CR#

CERTIFICATION is hereby m ade that expenditures claim ed hereon are true and correct, and w ere incurred according to law and in connection w ith official business of the City and County of San Francisco. DEPT. HEAD APPROVAL:

EMPLOYEE SIGNATURE:

Print Dept. Head Nam e:

Print Em ployee Nam e:

COMPLETE SECTION BELOW FOR DEPARTMENT ACCOUNTING INFORMATION:

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PROJECT OR GRANT:

PRJ OR GRNT DTL:

INDEX CODE:

SUBOBJECT:

LEGALITY VERIFIED:

ORDINANCE NO.

RESOLUTION NO.

APPROVED FOR PAYMENT:

BD. OR COMMISSION RES. NO.:

AUTHORITY:

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FIGURE 5-3. FIELD EXPENSE FORM Form 300.xls CITY AND COUNTY OF SAN FRANCISCO

SHEET NO.

FIELD EXPENSE FORM Dept:

Date:

, 20___

Reimbursement is requested for field expense on official business for month of:

PURPOSE

RT Y/N

ODOMETER READINGS

MILES

PARKING METER

CARFARE

OTHER TELE(Receipt PHONE Required)

INSTRUCTIONS: Enter Odometer Reading at start and end of continuous driving on City business and extend mileage. Receipt or explanation required for "Other" expense.

Use additional Sheets as needed, numbering each sheet, totaling and certifying on last sheet for month. For Round Trip, check "RT" column.

DATE

TRAVEL (From -To)

, 20___

Subtotal Parking Meter, Carfare, Telephone & Other

$

-

$

-

$

-

Total of last four colum ns above Make and Model Car

License Num ber

Total Miles

0

Rate Per Mile

THE UNDERSIGNED HEREBY CERTIFIES that the above is a true statem ent of travel m ileage and expense incurred in official business of the City and County of San Francisco. LAST 4 DIGIT OF P-CARD:

PR#

-

$

-

$0.575

-

TOTAL

$

-

$

-

PAID BY P-CARD TOTAL DUE TO EMPLOYEE

Signature of Departm ent Head

$

Expense incurred by (signature of em ployee)

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5.1.3

| City Program Administration

The Office of the Controller administers the P-Card Program with U.S. Bank. In this capacity, Office of the Controller personnel serve as resources for all program users in the area of policy development and implementation, day-to-day administration, compliance, and training. The City P-Card Administrator is the Controller, or his or her designee. Responsibilities of the P-Card Administrator include:  

           

Develop the City’s P-Card Policies & Procedures Manual. Review the policy and procedures at least annually to ensure that it keeps up with “best practices” in the purchasing card industry and that it allows participants in the program to utilize the P-Card to its utmost advantage in the procurement process within sufficient control guidelines. Serve as a central point of contact on all issues of policy and procedures. This position is the official liaison between the Bank and all P-Card participants. Communicate all P-Card Program policy and procedural changes to the users. Develop and maintain City-wide P-Card forms including automated online forms. Set up department accounts and maintain account profile changes for Department Coordinators, Approving Officials, Cardholders and Billing Officials. Monitor Cardholder employment status. Establish and make approved changes to dollar limits for all P-Cards. Review monthly and quarterly U.S. Bank reports for compliance and any discrepancies with policies and procedures. Facilitate training for all participants in the Program. Establish and maintain records for all training provided. Develop and maintain City training materials and handouts. Establish department and City-wide reporting of the data and card usage, as well as determine trends in spending and suppliers used. Perform audit reviews of the program participants to ensure compliance with P-Card Policy and P-Card Procedures. Maintain records in accordance to the records retention schedule.

Process Improvements and Audits The P-Card Administrator audits the Program through periodic reviews and the annual Post Audit, and reviews department P-Card procedures during the audits. Training The P-Card Administrator will develop and deliver training on the P-Card Program to all Department Coordinators, Approving Officials, Billing Officials and Cardholders during the initial roll-out phase of the program. U.S. Bank is responsible for the implementation and initial training on the Access Online system. The P-Card Administrator will provide additional training as needed. Page 226

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5.1.4

| Department Roles and Responsibilities

Enrollment Requirement The department can enroll employees in the P-Card program by using the automated form online at http://conforms.sfgov.org. The enrollment must be: 1. Initiated by the Department Coordinator or his/her designee 2. Approved by the Cardholder 3. Approved by the Department Head or the CFO. Department Coordinator Responsibilities The Department Coordinator is appointed by the Department Head to administer the P-Card Program within their respective department. Contact information of the Department Coordinator must be submitted to the P-Card Administrator. The responsibilities of the Department Coordinator include:   

     

Attend the mandatory training provided by the P-Card Administrator. Be proficient with the P-Card Policies & Procedures Manual, and ensure compliance within the department. Develop department procedures including internal control measures to prevent and detect misuse or fraudulent use of the P-Card. These procedures cannot be less restrictive than the City P-Card Policies & Procedures Manual. Immediately report any misuse by the P-Card participants to the P-Card Administrator. Submit online P-Card forms for new cards, replacements, account changes and card cancellations. Notify the P-Card Administrator within three (3) working days when an employee leaves the department’s employment so that the card may be deactivated. Be proficient with the Access Online system and utilize the reports available for department PCard use and performance. Ensure all P-Card participants attend the mandatory training provided by either the P-Card Administrator or the department. Ensure program compliance related to internal controls, City procurement policies, and records retention requirements.

Approving Official’s Responsibilities Approving Officials approve Cardholder purchases, and verify that purchases are made for official City business. Approving Officials must have a thorough knowledge of the job responsibilities of the Cardholder in order to determine if purchases are reasonable. Other responsibilities of Approving Officials include:

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      

 

Attend mandatory training provided by the P-Card Administrator or the department. Be proficient with the P-Card Policies & Procedures Manual. Maintain knowledge of the P-Card Program and department procedures on the use of P-Card issued by the Department Coordinator. Notify the Department Coordinator when the Cardholder resigns, transfers, or is terminated from employment. Ensure P-Cards under their authority are properly utilized. Immediately inform the Department Coordinator if Cardholder has misused the card for personal use. Collect the P-Card from the Cardholder and return it to the Department Coordinator. Ensure that reconciled statements, associated receipts, credit slips, and Travel/Field Expense Forms (Figure 5-2 and Figure 5-3) are complete for each Cardholder account. Sign off on the reconciled statements and Travel/Field Expense Forms. Review and certify the reconciled Cardholder Statements of Account, and ensure that receipts and documents are in order. Ensure that each Cardholder Statement of Account is accounted for and forward them to the Billing Official within seven (7) calendar days of statement date.

Cardholder Responsibilities All Cardholders are de facto purchasing agents for City. Accordingly, Cardholders must have a minimum understanding of the public purchasing rules and regulations. Cardholders are appointed by their Approving Officials to make authorized purchases 1) under Declared Emergencies and Natural Disasters; and 2) for Employee Reimbursement items. Cardholder responsibilities include:         

Attend mandatory P-Card training provided by the P-Card Administrator or the department. Be proficient with the P-Card Policies & Procedures Manual. Maintain knowledge of the P-Card Program and department internal procedures on the use of PCard issued by the Department Coordinator. Accept the Cardholder Acknowledgement Disclosure (Figure 5-1) during the online card enrollment process. Activate card following the procedures provided during the training. Maintain security of the account number and credit card, expiration date, and security code at all times. Know their respective Single Transaction and Cycle Credit Limit, or 30-Day Monthly Transaction Limit. Ensure all purchases are allowable purchases according to the City P-Card Program and department procedures. Obtain best value for the City when making purchases with the P-Card.

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     



Obtain an itemized receipt at the point of purchase and verify it for accuracy. Complete and sign the Travel/Field Expense Form. Reconcile all the transactions and forward them to the Approving Official for approval. Call Bank Customer Service to report lost or stolen cards and any fraud activities immediately, and notify the Approving Official. If there are any disputed charges on the statement that could not be resolved with the merchant, contact the Bank within 60 calendar days of the transaction date. Submit the reconciled statement, purchasing documentation, and all associated receipts to the Approving Official within three (3) calendar days from the statement date to ensure timely payment and recording of charges in the financial management system. Inform Department Coordinator of any account profile changes, like changes to last name, business address, or telephone number, etc.

Cardholder shall not do any of the following:    

Use the P-Card for personal use Allow family members to use the card Allow other staff members to use the card Make unauthorized purchases.

Upon transfer, resignation, or termination, the Cardholder shall return the P-Card to the Department Coordinator. Billing Official Responsibilities Upon receiving and reviewing an Account Statement, receipts, and reconciliation report, the Billing Official shall make the monthly P-Card payment to U.S. Bank using the department-specific vendor number and charge the expenditures to proper cost centers, sub-objects and General Ledger accounts. Below is an example of the vendor numbers for US Bank in the financial system. TABLE 5-1. SAMPLE VENDOR NUMBERS FOR P-CARD DEPARTMENTS

DEPARTMENT

FAMIS VENDOR ID NUMBER

AIR

P00001

CAT

P00002

DEM

P00003

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DEPARTMENT

FAMIS VENDOR ID NUMBER

HSA

P00004

PUC

P00005

TIS

P00006

Billing Official Responsibilities include:    



    

Attend the mandatory training provided by the P-Card Administrator or the department. Be proficient with the P-Card Policies & Procedures Manual. Maintain knowledge of the P-Card Program and department internal procedures on the use of PCard issued by the Department Coordinator. Review the transactions reported by the Cardholders and approved by the Approving Officials. Such review include, but is not limited to: o Ensure all itemized receipts are attached o Ensure the completed Travel/Field Expense Form (Figure 5-2 and Figure 5-3) is attached o Check if usage of the P-Card was in compliance with the P-Card Policy and any applicable City policies (e.g., Business Travel Reimbursement Guidelines) o Review the P-Card monthly reconciliation prepared by the Cardholder and approved by the Approving Official. Make monthly P-Card payments to U.S. Bank at least two (2) business days before the due date on the statement. Note that payments will be sent to U.S. Bank through ACH, and it takes two (2) business days for ACH payments to clear. Use document type PR or RM for the payment journal entry in FAMIS using the vendor number specific to the department. Post P-Card expenditures to proper cost centers and sub-objects. Reconcile Account Statement total with payments posted to the department’s cost center, and conduct research to resolve any discrepancies. Determine whether proper sales tax has been paid and accrue any use tax. Refer to Section 4.5 - Sales & Use Taxes for more details. Provide assistance for any document request from the P-Card Administrator. Maintain records in compliance with records retention requirements.

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5.2 | Use of the Card This section defines the appropriate and inappropriate uses of the P-Card. All purchases made with the P-Card must be for official City business. Department policies governing use of the card can be more, but not less, restrictive than the City P-Card Policy. Only the employee whose name appears on the face of the P-Card is authorized to initiate transactions with the card. Use of the P-Card by any other person is considered misuse of the card, even if the purchase is for legitimate City business.

5.2.1

| Allowable Purchases

There are two types of allowable P-Card purchase: 1. Emergency purchases during Declared Emergencies and Natural Disasters. Refer to San Francisco Administrative Code Section 21.15 and Section 6.60 for emergency procurement procedures and who can declare emergencies. 2. Purchases related to travel, training, and other employee reimbursement items as allowed in the Controller’s Office Employee Reimbursement Guidelines. Any monthly transaction over the credit limit must have prior written approval from the P-Card Administrator, by updating the P-Card Enrollment Form. Declared Emergencies and Natural Disasters The P-Card Administrator has the authority to raise the Monthly Transaction Limit to an amount deemed necessary to mitigate any declared emergencies as defined in the Administrative Code, or natural disasters. The Purchaser grants authority to forego standard procurement requirements for needs arising from unforeseen causes. Refer to San Francisco Administrative Code, Section 21.15 for Emergency Purchasing Procedures. The physical Disaster/Emergency P-Cards must be safeguarded by the Cardholders. The Disaster/Emergency P-Cards will have a default credit limit of $1,000. For emergency P-Cards, departments can propose the emergency credit limit. Upon approval of the P-Card Administrator, the emergency credit limit will be kept on file. When an emergency is declared, the department needs to contact the Program Administrator to have the approved emergency credit limit activated. For disaster recovery from federal Emergency Management Agency (FEMA), please refer to FEMA Public Assistance information at http://www.fema.gov/public-assistance-local-state-tribal-and-non-profit. Required Compliance for Allowable Purchases Use of P-Card must comply with applicable City policies and laws regarding the particular purchase.

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Cardholders shall comply with policies and laws applicable to the type of purchase for which the P-Card is being used. For example, when using the P-Card for travel purposes, the use of the P-Card must comply with all applicable policies, including but not limited to the guidelines defined in Section 4.8 Employee Travel & Business Expenses. Travel-related purchases must be within federal reimbursement rates for hotels and meals and must be in compliance with Facilities and Fleet Car Rental Policies, etc. Note that misuse of P-Cards may lead to employee disciplinary actions.

5.2.2

| Prohibited Purchases

Certain types of purchases are strictly prohibited by the P-Card policy and no exceptions will be granted. These purchases include, but are not limited to:                   

Personal purchases of any kind (personal purchases are defined as purchases of goods or services intended for non-work related use or use other than for official business) Donations or gifts to a charity, a gift to an entity, or a political contribution. Fuel for personal cars since the personal vehicle expenses will be compensated through mileage reimbursement Gift cards, stored value cards, calling cards, pre-paid cards or similar products Entertainment, including in-room movies Alcoholic beverages Tobacco products Weapons, and related accessories, side arms and bullets even if these are for training purposes FasTrak toll tags or transponders for employees’ personal vehicle Individual sized bottled water for non-emergency situations Services provided by a non-California vendor Professional services Goods and services available on a current City-wide contract Travel expense, lodging, or meals for persons providing services without compensation Fixed Asset Computers Fixed Asset equipment Hazardous Materials/ Removal of Hazardous Materials Chemicals Existing invoices for after-the-fact purchases.

Late Payment Fee/Interest Untimely payment to U.S. Bank will result in late payment fees and interests. The payment is due within fourteen (14) calendar days from the statement date. Departments will be responsible for any late fees or interests incurred.

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5.3 | Program Compliance Card Management 1.

New Card    

2.

Department Coordinator enrolls cards online at http://conforms.sfgov.org. Refer to Section 5.4 Form Automation for more details. Upon complete approval of the card, P-Card Administrator sets up the cardholder account in Online Access and requests the physical card from U.S. Bank. Card will be mailed to the P-Card Administrator. P-Card Administrator informs departments for card pick up. Cards are stored in a locked drawer or the safe before pick up. Once picked up, P-Card Administrator updates eMerge employee records with “P-Card” as one of the City assets held by the Cardholder. Cardholder Employment Status Change



   3.

When a Cardholder transfers to a different City department or terminates his/her employment with the City, Department Coordinator notifies P-Card Administrator within three (3) business days by submitting the P-Card Modification Request online at http://conforms.sfgov.org. Refer to Section 5.4 | Form Automation for more details. Upon complete approval of the request, P-Card Administrator deactivates Cardholder account in Access Online. P-Card Administrator contacts U.S. Bank to confirm account deactivation. P-Card Administrator also monitors Cardholder employment status through weekly eMerge reports. Credit Limit Change

    4.

Department Coordinator submits the P-Card Modification Request online at http://conforms.sfgov.org with changed credit limit and reason for the change. Department Coordinator submits any supporting documents to justify the credit limit change to PCard Administrator. P-Card Administrator reviews the request, and may submit the request to the Controller and OCA for further review. Upon complete approval, P-Card Administrator changes the credit limit in Access Online. Card Replacement



If a P-Card is lost or stolen, the Cardholder must call U.S. Bank and inform Department Coordinator immediately.

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   

Department Coordinator submits the P-Card Modification Request online at http://conforms.sfgov.org with the reason of the card replacement. P-Card Administrator contacts U.S. Bank and requests the physical card to be mailed to the PCard Administrator. Upon receipt of the new card, P-Card Administrator updates information including the new card number in Access Online. P-Card Administrator informs departments for card pick up, and stores in a locked drawer or the safe before pick up.

Internal Controls Internal controls must include: 

  

Appropriate separation of duties between making transactions (Cardholders), review and approval transactions for payment (Approving Officials), and payment of the monthly billing statement (Billing Official). Any exceptions must be pre-approved by the P-Card Administrator. Review and approval of purchases by someone with supervisory authority over the Cardholder and/or with authority to question purchases if needed. Appropriate limits on the number of Cardholders assigned to a supervisor or Approving Official in order to ensure adequate review of business need and documentation. Provision for periodic audits and the annual Post Audit by the P-Card Administrator. Audits must address: o Adequacy of internal policies and procedures o Adequacy of card management process o Appropriateness of Cardholder spending limits o Adequacy of review, reconciliation, and payment procedures; and o Adequacy of documentation for transactions.

Card Issuance Requirements    

Issuance is limited to one P-Card per Cardholder by department. Cardholders must be full-time and part-time City employees. Cards will not be issued to temporary workers, or independent contractors. Cards will not be issued in the name of a department or work unit to be shared by multiple employees. All training requirements as described in the P-Card Policies & Procedures Manual must be met before an employee receives the P-Card for City use.

Cardholder Spending Limits Spending limits enable management to provide Cardholders with the purchasing power to accomplish the needs of the job without exposing the City to unnecessary risk. Spending limits should be based on job Page 234

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responsibilities of the Cardholder and the need to use a P-Card to accomplish his or her duties. Cardholder spending limits must be reviewed at least annually to determine that actual usage is consistent with spending limits. Cycle Credit Limit, or Monthly Limit, is a mandatory spending limit that restricts the amount of purchases a Cardholder can make in one billing cycle (one month). The P-Card Administrator has the authority to raise the monthly limit to an amount deemed appropriate in order to improve business practices and/or when an emergency is declared. Payment of California Sales and Use Tax The Billing Official must ensure the accrual of California sales and use tax if the merchant has not charged such tax on the invoice or receipt of a P-Card purchase. Refer to Section 4.5 - Sales & Use Taxes for more details on sales and use tax accrual. Records Retention Requirements P-Card Program records shall be maintained according to the Controller’s Financial Records Retention and Destruction Policy & Schedule available at: http://sfController.org/modules/showdocument.aspx?documentid=4036. Note that disaster/cost recovery documentation is required to be kept onsite for at least three (3) years as defined by Title 44 Code of Federal Regulations and Title 19 California Code of Regulations.

5.3.1

| Contact Information

For Cardholders Contact your Department Coordinator for the following:   

New card enrollment Change of credit limit Change of employment status

Contact U.S. Bank for the following:  

Activation of P-Card [call 1-800-344-5696 (outside US call collect: 701-461-2010)] For initial online account setup, go to Access Online (http://access.usbank.com; call 1-800-3445696 for technical support)

Contact U.S. Bank at 1-800-344-5696 (outside US call collect: 701-461-2010) and your Department Coordinator for the following: 

Lost/stolen card or fraud

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Transaction/billing dispute

Note: When contacting U.S. Bank, you will be asked for information such as your business telephone number, ZIP code, last four digits of your DSW number and 16-digit account number. For Department Coordinator Contact P-Card Administrator at 415-554-5218 or 415-554-7594 or [email protected] for the following:   

Questions regarding automated forms for card enrollment and modification (see Section 5.4| Form Automation for more information on automated forms) Reporting lost/stolen card or fraud Obtain a log-in for Access Online.

5.4 | Form Automation The section provides an overview of the automated forms for P-Card enrollment and changes. For more details, refer to the training materials online at http://sfcontroller.org/index.aspx?page=437#pcard.

5.4.1

| General Guidelines and Internal Controls

The following principles must be followed for any department using automated forms for P-Card enrollment and changes: 

   



There must be appropriate separation of duties between form initiation (Department Coordinators or designees), confirmation of form submission and details (Cardholders), confirmation of authority (Department Head or CFO), and final approval of request (P-Card Administrators). Initiators (department coordinators) are pre-designated and approved by department heads to assure submittal of requests is monitored. Cardholders are required to review and accept Cardholder Acknowledgement Disclosure before workflow reaches subsequent approvers. Any requests over a pre-established threshold will require additional review and approval by the AOSD Director and/or Controller. Requests for new cardholders and/or modification requests to existing cardholders must first enter and complete the appropriate automated workflow before being submitted by the P-Card Administrators to US Bank for processing. Departments must review all requests conducted by P-Card Administrators to ensure compliance with Controller and department policies and procedures.

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5.4.2

Documentation and log of past and open requests will be generated periodically to ensure the integrity of the workflow and system.

| To Request a New Card

This section provides a step-by-step overview of how a new P-Card is requested through form automation. 1. The initiator (Department Coordinator or his/her designee) logs into http://conforms.sfgov.org/ using the City e-mail and password. 2. The initiator selects P-Card Enrollment and Agreement Form Online and will be requested to complete the form as shown in the screenshot below:

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FIGURE 5-4. ONLINE P-CARD ENROLLMENT & AGREEMENT FORM

3. Once submitted, the cardholder will receive an e-mail alert to approve the card enrollment online. The cardholder will be prompted by the automated form to accept the P-Card Cardholder Acknowledgement Disclosure as shown below:

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FIGURE 5-5. P-CARD CARDHOLDER ACKNOWLEDGMENT DISCLOSURE

4. The form will then be routed to the CFO for approval with an e-mail alert. If CFO is the cardholder, the Department Head will need to approve online instead. 5. The P-Card Administrator at the Controller’s Office will then review the new card enrollment and approve or reject, as appropriate. If the card enrollment includes an emergency credit limit proposal, the request will be routed to the AOSD Director or the Controller for approval depending on the request amount. 6. Upon complete approval of the card enrollment, an e-mail confirmation will be sent to the initiator, the cardholder, and all approvers.

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5.4.3

| To Modify, Replace, or Cancel a Card

This section provides a step-by-step overview of how to modify, replace, or cancel a P-Card using form automation. 1. The initiator (Department Coordinator or his/her designee) logs into http://conforms.sfgov.org/ using the City e-mail and password. 2. The initiator selects P-Card Change/Cancellation Form Online and will be requested to complete the form for change of credit limit or replacement/cancellation of the card. 3. Once submitted, the cardholder will receive an e-mail alert to approve the card enrollment online. 4. The form will then be routed to the CFO for approval with an e-mail alert. If CFO is the cardholder, the Department Head will need to approve online instead. 5. The P-Card Administrator at the Controller’s Office will then review the modification or replacement/cancellation and approve or reject, as appropriate. If the modification includes an emergency credit limit proposal, the request will be routed to the AOSD Director or the Controller for approval depending on the request amount. 6. Upon complete approval of the card modification or cancellation, an e-mail confirmation will be sent to the initiator, the cardholder, and all approvers.

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6 | INVENTORY The following City-wide inventory guidelines are issued according to the applicable provisions of the San Francisco City Charter, Administrative Code, and Annual Appropriation Ordinance. In the government accounting environment, inventory consists of various materials and supplies that are used by the government itself. This may consist of the usual variety of general supplies and spare parts. There are two main types of inventories: “Inventories Held for Consumption” or “Use and Inventories Held for Resale”. For the City & County of San Francisco, inventories recorded in the proprietary funds (Enterprise and Internal Service Funds) primarily consist of construction materials and maintenance supplies, as well as pharmaceutical supplies maintained by the hospitals. Generally, proprietary funds value inventory at cost or average cost and expense supply inventory as it is consumed. This is referred to as the consumption method of inventory accounting. The governmental fund types use the purchase method to account for supply inventories, which are not material. This method records items as expenditures when they are acquired. Materials and supplies for governmental funds are usually not significant enough to be reported as inventory in the financial statements. However, the internal control procedures described in this policy still apply to the governmental fund departments that run storerooms for materials and supplies. For fixed assets inventory, refer to Section 10.3.1 - Inventory of Capital Assets. Note that fixed assets inventory refers to inventory control over property and equipment over a specified cost threshold and useful life. Inventory control of fixed assets is different from that of the inventory addressed in this section.

6.1 | Policy Guidelines Departments must have adequate control over inventory purchases and management. Control areas include but are not limited to: inventory planning, purchasing, safeguarding, counting, dispensing, valuation and accounting recording, and financial reporting. Departments must establish their own inventory policies and procedures. Segregation of Duties Ensure the following duties are performed by different employees:  

Procurement of inventory; refer to Section 3 - Contracts & Encumbrances for more information Physical custody of inventory, which may also include: o Receipt of inventory Page 241

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  

o Issuance of inventory Recording inventory receipt, issuance, and adjustment transactions in the inventory management system Approval of the above transactions in the inventory management system Payment of inventory; refer to Section 4 - Expenditures for more information.

Purchase of Inventory Evaluate inventory usage to:  

Set periodic replenish values or minimum/maximum levels for all inventory items and implement them in the inventory ordering process. Monitor obsolete and slow-moving inventories to avoid purchasing too much inventory or inventory that is no longer needed.

Upon receipt of inventory, ensure that:    

Staff review, sign, and date packing slips immediately Promptly record receipt in the inventory management system Promptly record any returns in the inventory management system All items have the correct location and label in the inventory storage facilities

Pay (within 30 days of receipt of invoice) and record invoices in the accounting system promptly. For definition of invoice receipt date, refer to Section 4.4.1.1 - Prompt Payment Definitions. For guidelines on discounts, refer to Section 4.3 - Approval of Invoices. Safeguard of Inventory     

Restrict access to the inventory management system to authorized employees. Ensure access rights are immediately terminated once the employees no longer need access. Restrict inventory storage facilities to authorized employees. Limit key distribution or install electronic keys to track employee entry to storage facilities. Periodically check to ensure the storage facilities are free of fire and other hazards. For inventories with expiration dates, issue/use the inventories on a first-in-first-out basis and use up the inventories before expiration date to the extent practical.

Consumption of Inventory  

Issuance of inventory must be authorized by the operations staff and processed by the storage staff. Issuance of inventory must be promptly recorded in the inventory management system.

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Obsolescence must be properly managed and promptly recorded in the inventory management systems: o Definition of inventory obsolescence: The condition in which the actual value of inventory reflected on the balance sheet has deteriorated due to overstocking or lack of demand, rendering it unusable. Below are some examples of obsolete inventory for the City:  Fleet parts no longer in use  Expired batteries  Recalled/discontinued/expired pharmaceutical products o Obsolete or inactive inventory must be separated from operating inventory in storage. o Identifying and disposing of obsolete inventory must be conducted at least annually and be approved by both storage management and operations management. o Disposal of obsolete inventory must be communicated to accounting for reconciliation and accounting adjustment. o Obsolete inventory must be disposed of in a manner that will best serve the interests of the City. For details, refer to San Francisco Administrative Code Section 21.03(i). For fixed assets disposal, refer to Section 10.3.2 Disposal of Fixed Assets o Departments are highly recommended to source disposal through the Department of Environment's Virtual Warehouse. For more information, go to http://warehouse.sfenvironment.org/.

Physical Inventory Counts 



Conduct a physical inventory at least annually to verify their existence and the quantity on hand. o Establish physical inventory schedule and cycle for storage visits o Establish specific inventory count procedures and instructions with inventory count sheet templates o Prepare and organize storage for inventory count. Make sure that only materials and supplies to which the City has title on the date of inventory is included in the count o Inventory count staff must have adequate knowledge and experience and be independent from the storage staff. Counters should work in pairs and be monitored by supervisors. o Full counts must be scheduled at least annually, accompanied with random sample counts or cycle counts o Sample counts should include all high dollar items and randomly selected items o A department may conduct a different method in its inventory count; however, its related department inventory policy must be approved by the Controller’s Office. Ensure inventory management system records accurately reflect inventory on hand. o Inventory system records must be promptly adjusted for any discrepancies identified in the physical counts o Periodically review the inventory records for reasonableness and appropriateness of any changes to inventory unit cost, inventory valuation, and unit of measure

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 

  

o Periodically review the inventory for obsolescence and reasonableness of inventory classification Periodically analyze usage of inventories to determine the desired frequency of counts. Investigate significant discrepancies between the physical count, the inventory system records, and the accounting records; document the reasons for discrepancy, and take corrective actions to reduce future discrepancies. Any related adjustments in the inventory system and the financial system must be reviewed and approved by management. For audit purposes, retain all documentation in the accounting office and also at the location(s) of all physical inventories. For office supplies, conduct physical inventory counts only if the dollar amount of the inventory is significant. Establish performance measurement systems to hold appropriate personnel accountable for accomplishing a consistent, accurate physical count of inventory.

Accounting & Financial Reporting of Inventories   

 



Governmental funds use the purchase method to account for supply inventories, which are not material. This method records items as expenditures when they are acquired. Proprietary funds value inventory at cost or average cost and expense inventory as it is consumed. All Generally Accepted Accounting Principles (GAAP) costing methods are allowed as long as they are being consistently used throughout and between fiscal years. GAAP inventory costing methods include (see Accounting Guidelines section below for definitions of the costing methods): o First-in-first-out (FIFO) o Last-in-first-out (LIFO) o Average/Weighted Average Inventory valuation includes both the purchase price and the sales and use tax. For more information on related taxes, refer to Section 4.5 - Sales & Use Taxes. The following adjustments must be approved by management and recorded in the financial system: o For discrepancies found in physical inventory count, adjust the general ledger to reflect the actual cost of the inventories on hand. o Adjust inventory general ledger for disposal of obsolete inventories. o Adjust inventory general ledger in the financial system at least annually before the end of each fiscal year. For physical counts conducted at fiscal year-end, receipts and issuances around year end should be reconciled to include items in transit.

Written Department Inventory Policies & Procedures Establish department policies and procedures addressing at least the following areas:

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        

Segregation of duties Inventory planning Obsolete inventory monitoring Physical custody Physical count Inventory valuation Inventory recording Financial reporting Records retention.

6.2 | Accounting Guidelines Governmental funds use the purchase method to account for supply inventories, which are not material. This method records items as expenditures when they are acquired. Proprietary funds (Enterprise and Internal Service Funds) value inventory at cost or average cost and expense supply inventory as it is consumed. Inventory valuation is calculated by each department. As stated in the Policy Guidelines section above, all GAAP costing methods are allowed as long as they are consistently used throughout and between fiscal years. The definitions of the costing methods are as follows: 





FIFO: inventory usage is based upon the cost of material bought earliest in the period, while inventory on hand is based upon the cost of material bought later in the period. This results in inventory being valued close to current replacement cost. LIFO: inventory usage is based upon the cost of material bought towards the end of the period. The inventory on hand, however, is valued on the basis of the cost of materials bought earlier in the period. This results in inventory being valued close to historical cost. Average/Weighted Average: both inventory on hand and inventory usage are based upon the average cost of all units bought during the period.

For Proprietary funds, inventory purchase, usage and adjustment must be reflected in General Ledger (G/L) 157 (INVENTORIES). It is important to use the correct sub-object for inventory recording in the financial system. When using the following three sub-objects, G/L 157 will be updated: 04110

INVENTORIES-PURCHASE

04120

INVENTORIES-USAGE

04199

INVENTORIES ADJUSTMENTS

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For illustrations on recording inventory purchase, usage and adjustments in the financial system, refer to Section 16 - How-to & Screenshots. There may be variations in accounting transactions for each department. For any questions, contact your Controller’s Office Fund Accountant.

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7 | WORK ORDERS* This section describes the policies and procedures for work orders for services provided by one department to another on a cost reimbursement basis. Work order budgets must comply with the provisions of the Budget and Appropriation Ordinance (Budget Ordinance) Section 9 (Interdepartmental Services): The Controller is hereby authorized and directed to prescribe the method to be used in making payments for interdepartmental services in accordance with the provisions of Section 3.105 of the Charter, and to provide for the establishment of interdepartmental reserves which may be required to pay for future obligations which result from current performances. Whenever in the judgment of the Controller, the amounts which have been set aside for such purposes are no longer required or are in excess of the amount which is then currently estimated to be required, the Controller shall transfer the amount no longer required to the fund balance of the particular fund of which the reserve is a part. Provided further that no expenditure shall be made for personnel services, rent, equipment and capital outlay purposes from any interdepartmental reserve or work order fund without specific appropriation by the Board of Supervisors. The amount detailed in departmental budgets for services of other City departments cannot be transferred to other spending categories without prior agreement from both the requesting and performing departments. The Controller, pursuant to the provisions of Charter Section 3.105, shall review and may adjust charges or fees for services that may be authorized by the Board of Supervisors for the administration of the Computer Store. Such fees are hereby appropriated for that purpose.

7.1 | Overview Departments of the City & County of San Francisco (CCSF) may establish a memorandum of understanding (MOU) and work orders with each other for the purpose of requesting and performing interdepartmental services.  

Performing Department – the department doing the services Requesting Department – the department receiving the services

Based on the MOU, the performing department sets up a work order recovery budget and account while the requesting department sets up a work order expenditure budget and account. The performing department then encumbers the funds from the requesting department through an interdepartmental work order. The interdepartmental work order is cost recovery based. The performing department first performs the service (incurs the cost), then recovers the costs from the requesting department by billing against the work order. The billing charges the expenditures under “Services of Other Departments” of

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the requesting department and credits the “Expenditure Recovery” account of the performing department. At fiscal year-end, the interdepartmental service appropriations for annual funds are closed if services are completed. If services are not complete, they are requested to be carried forward upon agreement by both parties. Outstanding work orders supported by continuing funds will be automatically carried forward to the new fiscal year.

7.1.1 | Memorandum of Understanding (MOU) The requesting department creates a Memorandum of Understanding (MOU) describing the scope of the interdepartmental services to be provided and the basis for the cost of services. The requesting department should also define in the MOU the level of detail documentation it requires from the performing departments as proof of service provided. This must be signed by the Department Heads of both the requesting and performing departments prior to the creation of the work order. If the services of the work order are grant funded, the requesting department must inform the performing department. The performing department should only accept the work order if it can comply with the grant requirements. If positions, rates, position designations, or line item budgeted amounts are changed subsequent to the initial MOU, then an amended MOU must be signed by the Department Heads of both the requesting and performing departments. See the following Figure for a work order MOU template.

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FIGURE 7-1. WORK ORDER MOU TEMPLATE

Memorandum of Understanding For Interdepartmental Services Between the Departments: ____________________________ (the Requesting Department) And The ____________________________ (the Performing Department) For the Fiscal Year 20___ - 20___

Initial MOU

Modification #

The purpose of this document is to provide a written agreement between the requesting and performing departments for services to be provided through interdepartmental work orders. Performing departments must initiate this form and have it signed by requesting and performing Department Heads. Both departments should retain copies for audit purposes.

Performing Department services as itemized below: Service #

1. Budgeted Amounts: Service # Above

Budgeted Amt

Performing Department Index Code Subobj 086_ _

Requesting Department Index Code Subobj 081_ _

TOTAL

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MOU – Page 2 Method of Calculation of Charges: Describe the calculation for each type of service in detail.

Billing Documentation Required from Performing Department Before Approval of Charges: (Such as City personnel costs detailed, non-labor costs, other detailed documentation, etc.)

Billing Disputes: Disputes shall be resolved by the Performing Department’s Finance Director and the Requesting Department’s Finance Director as necessary.

This MOU has been entered into on the dates below.

______________________________ _______________________ __________ Requesting Department Head Print Name and Title Date Or Designee Signature

______________________________ ______________________ __________ Performing Department Head Print Name and Title Date Or Designee Signature

7.1.2 | Budget Process (Budget Established through AAO) In the City’s budget process, through AAO, work order budgets are set up on the requesting department side which provides the authorization of delivery of services by the performing department. A

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corresponding expenditure recovery account is set up on the performing department side that will be used to recover the cost of services provided when billing the incurred expenditures against the requesting department’s budget. Work orders included in the budget process are automatically encumbered after the adoption of the budget.

7.1.3 | Manual Establishment of Budget and Encumbrance For work order agreements established after the AAO budget process, a manual set-up of work orders in the financial systems is necessary. An MOU and journal entries for manual budget set-up and encumbrance of work orders must be approved by both requesting and performing departments.

7.1.4 | Spending Controls Encumbrance and appropriation spending controls are set up at the individual work order or sub-object level. The sub-object control level ensures that one work order cannot tap into another work order’s appropriation.

7.1.5 | Work Order Billings Work order billings submitted by the performing departments require the approval of the requesting departments. Billings should be made at least quarterly. Supporting documentation should be sent at the time of billings. Certain departments such as Public Works and Department of Technology use an automated billing process due to the volume of transactions.

7.1.6 | Work Order Adjustments and Modifications Work order adjustments or modifications can be made during the fiscal year. Any modifications require approval of both the requesting and performing departments. Be sure to amend any MOUs as necessary.

7.1.7 | Work Order Appropriation Carryforward At fiscal year-end, work order appropriation carryforward requests are needed for work orders supported by annual funds. The Controller’s Office sends both the requesting and performing departments a listing of outstanding work orders. Both requesting and performing departments review the listings and reach consensual agreement in determining which work orders are to be requested for carryforward. Where disputes exist regarding the carryforward, the requesting department’s response will take precedence over the performing department. Except in the case where the performing

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department certifies the service is completed and the requesting department requests a carryforward, then the work order will be closed at fiscal year-end. Upon the Controller’s Office approval of the carryforward requests, an automated process to carryforward performing and requesting departments’ appropriation to support the approved requesting work order balances will be performed. Without the approved carryforward requests in annual funds, unexpended appropriations are closed at year-end.

7.2 | Procedures for Work Orders Described below are more detailed procedures involving the technicalities of the work order cycle: 1. 2. 3. 4. 5. 6. 7.

Budgeting Encumbrance Expenditure Billing Service to Outside Agencies Adjustments Liquidation / Carryforward

7.2.1 | Budgeting 7.2.1.1

| BUDGET SET UP THROUGH AAO

A Memorandum of Understanding (MOU) is signed by both the requesting and performing department with the scope and cost of services to be performed for each item included in the interdepartmental service budgets. The interdepartmental service budgets included in the annual budget process are appropriated as a function of posting the Budget Ordinance. These automated budget interface entries display the document type “BI” in July after the Board of Supervisors has adopted the budget. The automated encumbrances for the budgeted work orders are processed in August and display the document type “WK”.  

Requesting department submits the budget request in Budget Ordinance under sub-object 081XX (XX is the performing department code) Performing department submits the request in Budget Ordinance under regular labor and nonlabor characters, and a corresponding recovery budget under sub-object 086XX (XX is the requesting department code)

Note that work order budget is controlled at sub-object level to ensure one work order does not tap into budget of another work order.

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7.2.1.2

| MANUAL BUDGET SET UP

For new and additional work orders not included in the budget process, performing departments are required to establish the budgets manually. For new work orders, a Memorandum of Understanding (MOU) is signed by both the requesting and performing department with the scope and cost of services to be performed. Refer to procedures described below for requesting and performing departments. Requesting Department Use document type JE, RE (RIMS) or BA if the appropriation is funded from the same character or same project, otherwise use document type SU if qualified as a surplus transfer. Establish budget using subobjects 081XX (XX is the 2-character Department Code) to identify the performing department. For step-by-step illustrations on requesting department work order budget setup, refer to Section 16 - How-To & Screenshots. Performing Department For new or additional work orders received or modifications to existing work orders after the budget process, the performing department submits a document type BW and prefix BW to adjust the performing department’s budget.  

Establish recovery budget using recovery sub-objects 086XX (XX is the 2-character Department Code) to identify the requesting department. Alternatively, instead of recording expenditure recovery budget, set up budget for estimated revenue. This alternative is only used when services are charged above cost, and is primarily used in enterprise funds for charges of services. Interdepartmental services in this case are not expenditures but revenues to the performing department. If your fund is in a governmental fund and you wish to charge work orders as revenues, please contact your Fund Accountant.

For step-by-step illustrations on performing department work order budget setup, refer to Section 16 How-To & Screenshots.

7.2.2 | Encumbrance Once the budget is approved by the Mayor and the Board or manually set up, an encumbrance is created in the requesting department fund against the budgeted 081XX sub-object, either through budget interface or manual entries. This is to set aside funds in the requesting department fund to ensure that the performing department will be able to recover the cost of the services provided. 7.2.2.1

| AUTOMATED WORK ORDER ENCUMBRANCES

Automated encumbrances are processed at the beginning of the fiscal year so that the amount budgeted for interdepartmental services will be encumbered and made available to the performing department.

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These amounts are automatically encumbered each year in August after the Board of Supervisors adopts the final budget. If requesting departments wish to reduce their budget for interdepartmental services, the concurrence of the performing department is needed. The automated process includes distribution of interdepartmental recovery under sub-object 08699 to department specific 086 sub-objects (e.g., 086CO). The distribution is based on 081 budget by requesting departments mapped to the performing departments cost center. WK is used for the systematic encumbrance and is only used in the AAO process. 7.2.2.2

| MANUAL WORK ORDER ENCUMBRANCES

The performing department initiates the entry to create the work order encumbrance on the basis of a Memorandum of Understanding (MOU) signed by both the requesting and performing departments. Any questions and disputes regarding the amount and work order services should be settled between the performing and the requesting departments. The approver reviews the MOU, authorization, amounts, and scope of services. To check funding, use FAMIS screen 6250-Appropriation Control Inquiry by entering the index code from the work order encumbrance document. To manually establish work order encumbrances for new work orders not included in the annual budget process, use the following document type and document prefix:  

Document Type: IS (systematic numbering scheme) Document Prefix: WN (non-project), or WP (project-related)

For details on work order encumbrance setup, refer to Section 16 - How-To & Screenshots. With MOU, budget, and encumbrance in place, the performing department provides services. The performing department incurs labor and/or non-labor expenditures, and records them in the corresponding sub-objects in (depending on departments):   

Performing department operating fund Performing department work order fund Performing department work order project

7.2.3 | Billing Work order billings record cost recovery in performing department funds under 086XX, and record expenditures in requesting department funds under 081XX.

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7.2.3.1

| MANUAL BILLING

Performing departments should bill monthly, or quarterly at a minimum, to be assured of recovery and/or to avoid any last minute rushes at year-end. The final billing at year-end should reflect any adjustments due to reconciliation or changes in actual numbers. 





To minimize the time the work order billing documents are on the approval path, bill only one department on each document. Multiple affected departments’ approvals for one document will prolong the approval process, especially if there are disputes on the billing amounts. Performing department is expected to support billing by providing documentation to the requesting department at the time of billing. Any questions and disputes regarding the amount, work order services, and documentation should be resolved between the performing and the requesting departments promptly. Work order billing is not included in the Controller’s approval path. Performing department initiates the billing entry which goes on the approval path of the requesting department. Requesting departments should process the billings within five (5) business days, either approving the billing based on satisfactory service and documentation provided, or rejecting the billing with an explanation in the Notepad for the rejection.

Performing departments bill the requesting departments using document type WS (RIMS) or WE (nonRIMS). For step-by-step illustrations on work order billing entries, refer to Section 16 - How-To & Screenshots. 7.2.3.2

| AUTOMATED INTERFACE BILLING

Two (2) departments, Public Works and Department of Technology, use their own customized automated billing systems.

7.2.4 | Services to Outside Agencies When services are requested by outside agencies such as the Unified School District, City College, and Housing Authority, no work order will be issued. Performing department should establish expenditure budget using regular expenditure sub-objects and record recovery as revenue in the appropriate fund using revenue sub-object 880XX (XX = 2-character Agency Code) Sub-object

Outside Agencies

880CC

SFCCD (San Francisco Community College District)

880HA

SF Housing Authority

880SD

SFUSD (San Francisco Unified School District)

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Use document type RA, RT or BA to record estimated revenue and create the expenditure budget. Upon completion of the work, the outside agency will issue a check and the performing department should deposit the check and record the receipt as revenue. For step-by-step illustrations on budget setup and cash receipt for services requested by outside agencies, refer to Section 16 - How-To & Screenshots.

7.2.5 | Adjustments Work order adjustments such as increases, decreases, or cancellations, etc., can be processed during the year, whereby the performing department initiates the entry which goes on to the requesting department’s approval path for processing. It is important to adjust the appropriation accordingly in addition to the encumbrances. This means that when work order encumbrances are to be reduced, the appropriation needs to be reduced as well by the same amount. Any modification to decrease the requesting department’s work order encumbrance requires a corresponding decrease to the performing department’s appropriation and recovery budget. There should be a corresponding amended MOU signed by both the requesting and performing departments to reflect the changes. 7.2.5.1

| MODIFYING WORK ORDERS

The performing department initiates the entry to create the work order modification on the basis of an MOU signed by both the requesting and performing departments. Use the following document type and document prefix:  

Document Type: IS (systematic numbering scheme) Document Prefix: WC (modifications)

Work Order Increase When work order encumbrances are to be increased, the appropriation needs to be increased accordingly.   

Requesting departments need to approve and increase work order budget to increase budget under sub-object 081XX and to decrease appropriation of the funding source. Performing departments then initiate the entry to increase work order encumbrances. The performing department must also increase appropriation of the funding source and increase the recovery budget.

For step-by-step illustrations on work order increase entries for both the requesting and the performing departments, refer to Section 16 - How-To & Screenshots. Work Order Decrease When work order encumbrances are to be reduced or cancelled, the appropriation needs to be reduced accordingly. Page 256

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  

Performing departments initiate the entry to decrease work order encumbrances. Performing departments must also decrease appropriation of the funding source and decrease the expenditure recovery budget. Requesting department should return excess funding to the source from which the original work order budget was transferred and decrease the appropriation of the funding source for the work order under sub-object 081XX.

For step-by-step illustrations on work order decrease entries for both the requesting and the performing departments, refer to Section 16 - How-To & Screenshots. 7.2.5.2

| CLEARING ERRORS AND ADJUSTMENTS

Billing Adjustments Billing adjustments require document type WS (RIMS) or WE (non-RIMS). For billings against encumbrances, be sure to indicate the original work order encumbrance document number in the Document Reference field. Refer to Section 16 - How-To & Screenshots for step-by-step illustrations on adjustments for both billings against encumbrances and billings without encumbrances. Adjustments for Billings Liquidating Encumbrances To adjust for over-liquidation, performing department should reverse expenditure and recovery and reinstate the work order encumbrance. This type of correction requires special security access. To adjust for under-liquidation, simply bill more by increasing encumbered expenditures in the requesting department’s account and increase expenditure recovery in performing department’s account. For stepby-step illustrations on work order liquidation adjustments, refer to Section 16 - How-To & Screenshots. 7.2.5.3

| COMMUNICATION BETWEEN PERFORMING AND REQUESTING DEPARTMENTS

Performing department should periodically advise requesting departments of progress and possible over-billing. When budget over-runs are certain, the budgets need to be adjusted accordingly, otherwise billing triggers posting errors of “appropriation exceeded."

7.2.6 | Liquidation / Carry forward Once the work has been completed and fully billed, the balance in the work order, if any, should be liquidated. Carry forward at end of the year is accomplished by the Controller’s Office when both the requesting and performing departments agree. At fiscal year-end, the Controller’s Office sends the requesting department a listing of outstanding recurring or annual work orders sorted by performing departments. The performing departments also receive a similar report sorted by requesting departments. Both requesting and performing departments review the listing and reach consensual agreement in determining which work orders are to be requested to be requested for carryforward to Page 257

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the new fiscal year. Outstanding work orders and corresponding appropriations supported by continuing funds will be automatically carried over to the new fiscal year. Timeline 

 









On July 1, the new fiscal year will be opened in FAMIS with prior fiscal year open work orders “rolled over” without appropriation support. This is included with the new fiscal year work order encumbrances. In August, listings of outstanding work orders will be provided by the Controller’s Office to both performing and requesting departments to agree on carryforward needs. After the Controller’s Office approval of the identified carryforwards, the work orders to be closed will be entered into “table 1090” for the encumbrance document closeout process. Appropriation balances of encumbrances not approved for carryforwards are closed. In September, upon approval of the Controller’s Office, the automated carryforwards of requesting departments appropriation to support the approved work order encumbrances will be performed (program FAMJ9820-document and appropriation carryforward). In September, automated carryforward of performing department’s appropriation to support the approved requesting work order encumbrances will be performed. The expenditure appropriation is reflected in sub-object 06A00 and calculated performing expenditure recovery appropriation 086XX for the recovery. In fiscal period 14, the requesting departments’ remaining work order encumbrances approved for carryforward and the corresponding appropriation will be reduced accordingly. In fiscal month 01 of the new year, the encumbrance and the corresponding appropriation will be reflected in FAMIS. The automated encumbrance of the new fiscal year work orders will also be reflected after the budget interface Prior year carryforward budgets under sub-object “06A00” Interdepartmental Service Expenditures must be reallocated to the same expenditure accounts budgeted in the prior year.

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8 | RECEIPTS & REVENUE The purpose of this section is to instruct City departments on how to properly process grant funds and cash receipts, and timely and correctly post the revenue into the financial system.

8.1 | Receipts This section provides guidelines to departments for receiving grant funds and cash receipts. These guidelines are issued under the authority granted to the Controller’s Office in City Charter, Article I, Section 3.105. The Administrative Code also confers authority to certain departments to realize specific types of revenue.

8.1.1 | Grants* Grants are awarded by a government department, non-profit or private entity to fund specific projects or programs. They normally have specific restrictions on spending of the grant money and require some level of compliance and reporting. The restrictions and requirements are spelled out in a grant agreement or grant contract, signed by both the grant recipient (grantee) and the granting agency (grantor). Detailed accounting policies and procedures for grants and gifts are provided in Section 12 Grants & Gifts.

8.1.2 | Cash Receipts For the purposes of this document, “cash” is any device that stores value and can be transferred between parties through a mutually agreed medium of exchange. In day-to-day business operations performed by City departments, “cash” is received in the forms of:  Coins and bills (US currency)  Credit cards  Debit cards  Checks (personal checks, cashier’s checks, money orders)  Electronic funds transfer (EFT) in the forms of wire, automated clearing house (ACH), etc. “Cash” can be received by City departments through:  In-person, over-the-counter, or point-of-sale transactions

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 Online, electronic, or interactive voice response (IVR) phone system transactions  Mailed remittances. Departments must abide by the following cash deposit and recording guidelines: 





All cash received by any officer or employee of the City for, or in connection with the business of, the City, shall be deposited with the Treasurer or a City bank account no later than the next business day after its receipt. Departments must immediately endorse upon receipt checks, money orders, and other negotiable instruments that are being physically deposited, to prevent them from being negotiated or endorsed by someone other than the department. Cash receipt transactions should be recorded in the City’s financial system on or about the same time the money is deposited, but no longer than fifteen (15) calendar days after the receipt of funds.

Departments whose operations cannot meet the above requirements must contact their Controller’s Office Fund Accountant to make other arrangements. The following sections set forth the requirements for City departments responsible for cash receipts.

8.2 | Properly Handling Cash It is the responsibility of City departments to have effective controls in place to accurately collect and safeguard cash, properly and timely deposit all cash due to the City, monitor cash balances, and record the correct amount and type of cash collected and deposited in the City’s financial system. Different departments receive various types of revenues, and each department requires specific revenue and cash management procedures.

8.2.1 | Department Documentation Departments must develop detailed, written policies and procedures that will guide staff on safeguarding cash, processing transactions, handling, reconciling, and recording collections. There should be adequate separation of duties and good internal controls in all phases of cash handling. Department policies and procedures for cash handling processes and controls should include, but not necessarily be limited to, the following areas:  Segregation of duties  Security  Tracking of cash

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 Payment collection and depositing of cash receipts  Inventory control over cash receipt books  Data security over credit and debit transactions  Reconciliation of daily collections  Training of cash handling staff 8.2.1.1

| WRITTEN CASH HANDLING PROCEDURES

Departments must develop cash handling policies and procedures for their specific operations. Procedures must reduce the risk of errors and irregularities and should incorporate good internal controls, including segregation of duties. Procedures must be documented and communicated to staff. Management should monitor compliance with these procedures and update them as needed to reflect changes in conditions. A copy must be provided to the department’s Fund Accountant at the Controller’s Office. Any exceptions to City cash handling policy must be documented and approved by the Controller’s Office. Departments’ cash handling documentation should include the following as applicable:  

 

  

General information as to sources of cash received, bank accounts, and/or investments held with trustees Cash receipts processes describing methods of receiving customer payments and how customer deposits are processed o Cash, checks, debit and credit card payments o Wire transfers (i.e., federal and state receipts) and ACH payments through third party electronic billing system, Paymode-X, or Automatic Bill Pay, etc. o Payments by mail o Interactive Voice Response System (IVR) o Online payments o Cash and checks received directly by Accounting o Lock box deposits Reconciliation of deposits Research processing o Unidentified payments received o Returned checks from bank Accounting procedures for recording collections and deposits Analytical review by staff that do not handle cash to monitor daily cash balances and trends or variances Inventory control over receipt books.

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Role-specific desk procedures should be formalized for staff who are tasked with safeguarding cash, processing transactions, and handling collections. These desk procedures should be updated periodically and staff appropriately trained in the handling of cash, based on their duties. Departments must document and maintain a list of names and titles of all staff who collect cash; record cash receipts; deposit cash; reconcile cash; have access to safes, vaults, etc.; prepare accounting entries for financial system(s); or manage revolving funds.

8.2.2 | Cash Handling Segregation of Duties Segregation of duties is an essential component of a department’s internal controls (refer to Section 1.7 Internal Controls for a full discussion of internal controls).

Segregation of duties requires that different staff have responsibility for different steps in the process. Receiving revenue, making deposits, and reconciling collections and deposits should not be done by the same staff person. The extent of controls put into any cash handling process should reflect the associated risks for misappropriation.

Departments shall develop a plan of organization that provides segregation of duties appropriate for proper safeguarding of the City’s assets. Key duties such as receiving cash, making deposits, and reviewing or auditing shall be assigned to separate individuals to minimize the risk for loss. A satisfactory internal control system depends largely on the elimination of opportunities to perpetrate and then conceal errors or irregularities. This in turn depends on the assignment of work in such a fashion that no one individual controls all phases of an activity or transaction. Segregation of duties for each part of the cash handling process also requires that all transactions and supporting documents are accurately and properly recorded in department documents and systems. Departments must enforce dual custody and segregation of duties for handling and managing cash by ensuring the proper safeguards are in place, for example:     

The supervisor should observe and verify each cashier’s cash count for end-of-day balancing Cash counts certified by two employees should occur for all deposits prepared for armored courier pickup Cash acceptance certified by two employees should occur for armored courier shipments Individuals present during cash counts and acceptances should sign directly on the cash count forms Signatures are required on reconciliation documents indicating their presence for the cash deposit reconciliation and that totals agree

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    

Employees responsible for collecting cash are prohibited from preparing bank deposits Back-up staff are identified in case of absence of key employees Only employees who need the combination to the safe should have access to the safe At least two staff should be present to open a safe Staff who prepares deposit should not be responsible for processing non-sufficient fund (NSF) checks.

The following Table provides some general guidelines for basic internal controls and methods for segregating duties for various types of cash receipts. TABLE 8-1. CASH HANDLING INTERNAL CONTROL EXAMPLES

METHOD OF PAYMENT

BASIC INTERNAL CONTROLS

Online payment receipts (e.g., ACH, automatic bill pay) and IVR receipts

Segregation of duties between processing and reconciliation

Over the counter (OTC) with point of sale system (POS) (e.g., cash, checks, debit card, credit card payments)

    

OTC without POS (e.g., cash and check only)

   

Mailed payments without POS (e.g., check)



 

System-generated receipt issued for each transaction Cashier performs end-of-day blind count on his/her drawer to reconcile cash to system Count is verified by supervisor Cash drawers are locked when not in use Segregation of duties between collection, depositing, recording, NSF processing and receipts reconciling Clerk issues pre-numbered receipt for each transaction and endorses checks Cash and checks reconciled against receipts in dual custody Safeguard proceeds securely until deposit Segregation of duties between collection, depositing, recording, and reconciling receipts Clerk prepares list/spreadsheet (preferably in dual custody) of payments and endorses checks Maintain proceeds securely until deposit Segregation of duties between collection,

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METHOD OF PAYMENT

BASIC INTERNAL CONTROLS depositing, recording, and reconciling receipts

Lockbox payment receipts (e.g., check)

8.2.2.1

Segregation of duties between processing in the financial system and reconciliation

| TRAIN CASH HANDLING STAFF

Departments must ensure employees are well trained in important cash handling functions and maintain adequate segregation of duties by:    

Implementing a detailed annual training program of cash-handling procedures. Ensuring back-up staff’s ability to perform each segregated set of cash-handling functions. Documenting all training that is provided. Exploring ways to train staff involved in collections to increase their ability to detect counterfeit currency, such as using a counterfeit pen or counterfeit detector.

8.2.3 | Security for Cash Receipts Departments need to ensure security cash receipts by:     

Securing buildings, facilities, and conveyances for incoming cash receipts Securing the custody of cash receipts Timely depositing cash Maintaining controls Performing reconciliations.

8.2.3.1

| PHYSICAL SECURITY

Departments must analyze the security needs of each cash collection point and strengthen security controls whenever necessary. This might include installing security cameras that can monitor all areas where cash is collected and handled, providing additional security guards, and securing the safe and cash registers or drawers. In addition:  

Cashier areas must be restricted to cashier personnel and other authorized persons. Access doors to area should be locked at all times. During business hours, all active cash drawers should be secured in a locked drawer at the cashier window, including lunches and breaks.

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  

The key to the cash drawer should remain in the sole custody of the cashier and should never be given to anyone else or left in the drawer when the cashier is away from the window. Unused cash drawers must remain in the vault storage during the day. Department cashiering staff must avoid counting cash in view of the public during hours of operation. To prevent this process from being observed, windows should be covered or counts should occur in locations beyond the public’s view.

Departments should arrange armored car pickup for transporting large amounts of cash and checks, or if not feasible, contact the Treasurer’s Office. This procedure will minimize risk to staff’s personal safety and decrease the risk of cash being unprotected. Point of Sale (POS) systems used by departments should regularly prompt users to change their password. Industry standards indicate passwords should be changed every 60 to 90 days and users should not be allowed to reuse old passwords. Frequently changed passwords have the benefit of preventing predictability and provide greater protection of confidential customer information. In the event that an emergency requires that the section staff evacuate from the area, all negotiable instruments must be locked and secured immediately. The key to the cash drawers will remain in the possession of the assigned cashier. All checks and any unopened mail must be placed in a secure location. After all items are locked up, the building must be evacuated immediately until further instructions from authorized personnel. 8.2.3.2

| TRACKING OF CASH

Departments need to ensure that cash is tracked from the point it enters into the department’s custody until the cash is deposited, as follows:   

 8.2.3.3

Perform and document beginning counts of the cash placed in each drawer. Implement a cash management system that allows each cashier to have their own cash drawer and can then be held responsible for any cash shortages and overages. Ensure that cash registers allow individual users to input a unique log-in code when they conduct a transaction. This will help track any shortages or overages, or misappropriation of cash so they can be properly investigated and resolved. Remind employees to log out of the POS (Point of Sale) system. | PAYMENT COLLECTION & DEPOSITING OF CASH / TIMELINESS OF RECORDING

The Office of the Treasurer and Tax Collector (TTX) has promulgated Departmental Guidelines #2014-1 (issued September 13, 2013) regarding the overall management and processing of receipts throughout the City. This section summarizes the cash handling requirements of TTX #2014-1.

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Collections & Deposits Departments must coordinate and consult with TTX to determine appropriate depository services required by departments, such as armored car service, remote deposit service, lockbox service, etc. A department may create its own policy to restrict or eliminate check acceptance in the following cases:   

There is high volume of returned checks for reasons such as non-sufficient funds (NSFs), closed account, invalid routing number, etc. Individual transactions are low dollar amounts There is no other means to recover payment after service is provided.

In addition, departments with customers who are “repeat NSF offenders” may instruct those customers to bring cash, cashier’s check, or money order, or pay in person using a credit or debit card, or send ACH or wire payments next time they attempt to make payments.

In all circumstances, funds collected directly by the department or through a third party service provider must be deposited no later than the next business day to a duly authorized City account. Departments needing an exception must get prior authorization from TTX.

The above standard applies to all City contractors and vendors. Transactions for these receipts should be recorded in the City’s financial system on or about the same time the money is deposited, but no longer than fifteen (15) business days after the receipt of funds. Checks and money orders must be drawn on banks domiciled in the United States only and cash must only be in US bills and coins. Departments should not accept payments in foreign currency (checks or cash). Departments needing an exception must get prior authorization from TTX. Accounting & Reconciliation The Treasurer’s Group of Accounts (TGOA) in FAMIS is monitored by TTX to ensure that all zero balance accounts (ZBA) have zero balances at the end of each day and are reconciled at the end of the month. For that process to take place, departments must reconcile their respective bank accounts on a monthly basis. Examples of these accounts are credit card settlement, disbursement, lockbox, depository, and department summary accounts. Many departments, especially those depositing to the City’s main depository bank account, have been given their own depository account to make the reconciliation process easier for GL 1408D2 and for the remaining departments using the 1408D2 account. Many departments have also been given a department summary level account into which all ZBAs belonging to the department will roll up at the end of the day.

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Departments must submit monthly bank reconciliation reports for each of their bank accounts via e-mail to the Controller’s Cash Reconciliation Unit ([email protected]) no later than the tenth (10th) day of the following month. Departments must address all reconciling items and correct any errors on a monthly basis. The reconciliation process entails reconciling the bank statement balance to the book balance in TGOA. Deposited items returned by the banks for reasons such as NSF, invalid routing number, or closed accounts go back to the specified account where the items were originally deposited. Departments are given access to the images of the returned deposited items so they can process those in a timely manner. Third Party Contracts for Cash Receipt Services Procurement and implementation of third party contracts that are related to cash collection services (i.e., merchant processing, gateway, payment applications, systems with a payment component, online payments, etc.) must be approved by TTX to ensure that the services procured comply with banking regulations and Payment Card Industry (PCI) Council requirements. Departments with third party contracts to process cash receipts must: 





Perform annual monitoring of their vendors’ compliance with PCI regulations, financial stability requirements, and industry ratings in the service being provided. Departments must coordinate with TTX for guidance on this effort. Perform periodic reviews of their third party vendors to ensure compliance with agreed upon procedures surrounding control processes such as segregation of functions between the third party administrator and the contracting department, dual signatory policy on checks, releasing of checks to payees, etc. Obtain a Service Organization Control (SOC) report from the third party vendor. SOC reports are internal control reports on the services provided by a service organization providing valuable information that users need to assess and address the risks associated with an outsourced service.

Each department relying on third party system/administrators must develop internal procedures describing their vendors’ participation and role in the collection or disbursement process (i.e., review/sign checks before they are released, release positive pay file, approve exceptions, etc.). In addition, departments must ask their third party administrators for a flowchart of the collection or payment processes and the mechanism and appropriate controls in place to safeguard City funds. These documents must be provided both to TTX and CON. For collection services, departments must complete the applicable Flow of Funds diagram in order for TTX to determine the parties involved and their accountability in the process. Notifications on Incoming Receipts & Payment Requests through Electronic Funds Transfers (EFTs) For the City to optimize its investment interest earnings potential, all departments are required to notify TTX as far in advance as possible (i.e., as soon as you know) or no less than three (3) business days in

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advance of incoming receipts, other than regular operating revenues, that are over $10 million. These receipts can be in the form of federal wire transfers, automated clearing house (ACH) payments, or checks. Send these notifications to [email protected] and [email protected] 8.2.3.4

| INVENTORY CONTROL OVER CASH RECEIPT BOOKS & CASH REGISTER RECEIPTS

Departments must develop an inventory control system for receipt books. Such a system would use the range of numbers preprinted on receipts in the books currently in stock to record books used and returned. When reorders are necessary, departments should request the printer place sequential numbers on the face of the books so that an inventory control system can be maintained using those numbers. In addition, departments should ensure that copies of these sequentially numbered receipts are compared to cash collected. Departments must implement policies and procedures related to customer receipt issuance at the location to systematically account for sales transactions. In particular:   

Install a cash register that generates sequenced receipts that contain transaction amount, date, time, quantity, and description. Place a sign at each transaction location that receipts are required to be provided to customers. Maintain copies of issued receipts generated for accounting, balancing, verification, and auditing purposes.

Finally, departments must establish and monitor a record retention policy for all cash receipts documentation. 8.2.3.5

| TTX’S PAYMENT CARD ACCEPTANCE AND PROCESSING POLICY

Below is the Office of the Treasurer & Tax Collector’s Payment Card Acceptance and Processing Policy for policies on credit and debit card payments. Definitions For purposes of this policy: 



Accepted Payment Cards: For Point-of-sale (over the counter) transactions, Accepted Payment Cards are those that have been approved by the City and County of San Francisco (“CCSF”) as payment cards that carry a logo of Visa, MasterCard and Discover. American Express is expected to be available in 2014. For web and Interactive Voice Recognition (IVR) transactions, Accepted Payment Cards are those that have been approved by CCSF as payment cards that carry a logo of Visa, MasterCard, American Express and Discover. Cardholder Data is any personally identifiable data associated with a cardholder. This includes cardholder’s primary account number (PAN), expiration date, name, address, social security

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  









number, PINs/PIN blocks, Card Validation Code CVC2 (MasterCard), Card Validation Value CVV2 (Visa), or Cardmember ID (Discover) (e.g., three- or four- digit value printed on the front or back of a Payment Card). Merchant is a department or a location of CCSF that accepts Payment Cards from cardholders. Merchant Account is an account established by CCSF’s Merchant Processor for the purpose of collecting revenue from sale of goods and services. Merchant Processor is a financial institution of CCSF or a company with which CCSF is contracted to issue Merchant Accounts and process Payment Card transactions for various CCSF departments and locations. As of the date of this policy, Bank of America is CCSF’s Merchant Processor for over-the-counter transactions. Paymentech is a Merchant Processor for web and IVR applications supported by FIS. “Payment Card” or “Payment Cards” refers to a range of different cards that can be presented by a cardholder to make a payment. This includes, but is not limited to, debit cards and credit cards bearing a credit card company logo. Payment Card Acceptance and Processing is defined as the use of mechanisms such as point-of-sale terminals (also, commonly referred to as “over-the-counter”, “face-to-face”, “cardholder present” methods of acceptance), interactive voice response system (IVR) or a web site to accept payment cards for payment of goods or services sold by any department of the CCSF, or for payment of taxes, fines and fees owed to the CCSF and/or the Courts. PCI Standard stands for Payment Card Industry Standard developed by the four major credit card brands (Visa, MasterCard, American Express and Discover) with a single approach to safeguarding Cardholder Data. The PCI Standard defines a series of mandatory practices for handling, transmitting and storing Cardholder Data. PCI DSS stands for Payment Card Industry Data Security Standard which is a set of requirements established by the four major credit card brands (Visa, MasterCard, American Express and Discover) to protect Cardholder Data.

Purpose The purpose of this policy is to establish guidelines for Payment Card Acceptance and Processing, gathering, transmitting and handling Cardholder Data in compliance with PCI Standard and industry’s best practices. This policy is effective August 1, 2010, and applies to all CCSF departments. CCSF views Payment Card Acceptance as a convenient and advantageous way to handle business transactions and as such, is widely used throughout CCSF. The Treasurer’s Office recognizes that some departments have unique methods of accepting Payment Cards and due to that, departments may modify this policy to suit their internal business processes and procedures. However, departments must make sure that any such modifications shall be in compliance with the PCI Standard and PCI DSS.

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Establishing a New Over-the-Counter Merchant Account For over-the-counter Payment Card acceptance, requests to open a new Merchant Account must be made by a department in writing or via email explaining the reason for the request. The request must be sent to Treasurer’s Office Banking staff. Upon review of the request, the staff will prepare and submit all documentation to the Merchant Processor, facilitate ordering of equipment, and notify the department of the assigned Merchant and bank account numbers. It is each Merchant’s responsibility to ensure Payment Card acceptance is limited to the Accepted Payment Cards. Departments are responsible for reviewing their merchant statements on a monthly basis to ensure billed fees are accurate and to be able to promptly inform Treasurer’s Office Banking staff of any incorrect or improper charges. Establishing a New Web or IVR Merchant Account For web or IVR Payment Card acceptance, requests must be made by a department in writing or via email explaining the reason for the request. The request must be sent to Treasurer’s Banking Staff who will work with the vendor in setting up the Merchant Account. It is each Merchant’s responsibility to ensure Payment Card acceptance is limited to the Accepted Payment Cards. Security & Confidentiality of Credit & Debit Card Data Cardholder Data obtained in the course of a business transaction must be handled as confidential. Storing of sensitive authentication Cardholder Data, such as magnetic strip data, PINs/PIN blocks, CVV2 (Visa), CVC 2 (MasterCard), or Cardmember ID (Discover) in any form is prohibited as it violates PCI Standard and PCI DSS and will result in penalties and fines issued to CCSF. Receiving Payment Card information via fax machine is discouraged. However, if fax communication is the only possible way to perform CCSF’s business, the faxed document must be stored in a secured location (i.e. locked cabinet), or shredded. Sending Payment Card information containing Cardholder Data to third parties via fax is prohibited. In cases where daily settlement receipts are requested by and sent to Merchant Processor via fax, they should have no visible Cardholder Data. The Cardholder Primary Account Number (PAN) must be masked on all copies of receipts including those kept by the Merchant or issued to the customer (the first six and last four digits are the maximum number of digits to be displayed). If a department must store hard copies of receipts containing a full PAN, they must adhere to the strict requirement of PCI DSS and store such information in a secured location (i.e., locked cabinet). However, if the PAN is stored electronically (including data on portable digital media, backup media, in logs), it must be rendered unreadable anywhere it is stored by using any of the following approaches:  

One-way hashes based on strong cryptography Truncation

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 

Index tokens and pads (pads must be securely stored) Strong cryptography with associated key-management processes and procedures

A detailed description of any of the above methods can be found in PCI DSS: Understanding the Intent of the Requirements policy issued by PCI Security Standard Council LLC. Departments must keep Cardholder Data storage to a minimum and develop data retention and disposal policies in accordance with the department’s operations and businesses processes. Storage and retention time should be limited to that which is required for business, legal, and/or regulatory purposes as documented in the data retention and disposal policy of the department. Departments are required to limit access to system components and Cardholder Data to only those individuals whose job demands such access. Access limitations include, but are not limited to the following:       

Restriction of access rights to privileged users that are required to perform job responsibilities Assignment of privileges based on individual personnel’s job classification and function Requirement for an authorization form signed by management that specifies required privileges Implementation of access control (i.e. dual approval) Assignment to users of a unique ID to access Cardholder Data or system components Utilization of a unique password created by users, or a two-factor authentication system (i.e., tokens, smart cards, site keys) for all in-house and remote users Render all passwords unreadable during transmission and storage on all system components using strong cryptography

When creating passwords or user ID’s, it is recommended that these guidelines be followed:             

Do not use group, shared, or generic accounts and passwords Change passwords at least every 90 days Require a minimum password length of at least seven characters Use passwords containing both numeric and alphabetic characters Require a password change that is different from the user’s last four passwords Limit repeated access attempts by locking out user ID after not more than six attempts Set lockout duration to a minimum of 30 minutes or until administrator enables the user ID. If a session has been idle for more than 15 minutes, require the user to re-enter the password to re-activate the session Verify user identity before performing password resets Control addition, deletion, and modification of user ID’s Create unique first-time passwords and require a change at the time of the first log in Immediately revoke access for any terminated users Remove/disable inactive users every 90 days

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 

Enable third-party user access only during the time period needed (i.e., maintenance, reporting, etc.) Inform department staff of password procedures and policies

Departments must ensure that any physical access to Cardholder Data or any systems that store the data is appropriately restricted. Detailed instructions on how to restrict physical access can be found in Chapter 9 of the Navigating PCI DSS guide. No department employee, contractor or agent who obtains access to Cardholder Data in the course of conducting business with CCSF may use Cardholder Data for personal reasons, sell, purchase, provide, or exchange said data in any form, but not limited to, sales receipts, mailing lists, tapes, electronic and other media obtained by reason of a card transaction to any third party. The Cardholder Data can be provided in the course of business to the Merchant Processor, Visa, MasterCard or other credit card company accepted by CCSF, or upon a request by a law enforcement agency. All requests to provide information to any party with the exception of Merchant Processor must be coordinated with the Office of the Treasurer’s Banking Services unit. Compliance Responsibility Departments shall be responsible for its compliance with PCI Standards, PCI DSS and requirements of this policy. They shall develop and implement a process for tracking and monitoring all access to network resources and Cardholder Data, and regularly test security systems and processes. These requirements are covered in detail in Chapters 10 and 11 of the Navigating PCI DSS guide. Departments shall build and maintain secure networks, including, but not limited to the following:   

Establishing firewalls and router configuration systems Restricting connections between untrusted networks and any system components in the Cardholder Data environment Prohibiting direct public access between the Internet and any system in the Cardholder Data environment

It is strongly recommended that departments install personal firewall software on any mobile and/or employee-owned computers with direct connectivity to the Internet which are used to access CCSF’s network. Departments shall not use vendor-supplied defaults when installing a system on the network (i.e., passwords, simple network management protocol (SNMP) community strings, etc.) Upon Request of the Office of the Treasurer, departments shall complete an annual PCI-DSS SelfAssessment Questionnaire (SAQ) and any other security scans or reviews deemed necessary by the Office of the Treasurer.

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Each department’s ability to accept Payment Cards is conditioned on its compliance with the requirements of this section. If a department fails compliance, it shall be responsible for correcting deficiencies and such instances should be reported to the Office of the Treasurer, stating the reason for the deficiencies and the final results of the department’s attempt to bring it into compliance. The PCI DSS requires that service providers accessing Cardholder Data comply with the PCI DSS. Departments must contractually require all third parties with access to Cardholder Data to adhere to PCI Standards and PCI DSS requirements. At a minimum, the agreement with third parties should address:  

 

That the third party is responsible for security of Cardholder Data in its possession The right to the Cardholder Data acquired in the process of conducting CCSF’s business belongs to CCSF. CCSF may share the Cardholder Data with the Payment Card brand, Merchant Processor or a law enforcement agency as allowed by law. The third party should acknowledge that such data can only be used for assisting these parties in completing a transaction, supporting a loyalty program, providing fraud control services, or for uses specifically required by law Business continuity in the event of a major disruption, disaster, or failure Termination provision that ensures the third party will continue to treat Cardholder Data as confidential

As part of its Cardholder Data retention and disposal policy, each department should develop and maintain a security breach plan in the event Cardholder Data is compromised. If a department suspects a security breach, it must immediately contact the Office of the Treasurer’s Banking Services unit. The Banking Services unit will investigate the incident and assist the compromised department in limiting the exposure of data. In addition, departments shall adhere to Visa’s “What to Do if Compromised” guidelines:     

Immediately contain and limit the exposure. Prevent further losses of data by conducting a thorough investigation of the suspected or confirmed compromise To preserve evidence, do not access or alter compromised systems (i.e., do not log on at all to the machine, turn it off, unplug cable). Instead, isolate compromised systems. Keep logs and electronic evidence and log additional actions taken If using a wireless network, change SSID on the AP and other machines that may be using this connection with the exception of any system believed to be compromised Be on “high” alert and monitor all systems with Cardholder Data

Settlement of Transactions Departments must develop an internal process for daily settlement of Payment Card transactions. As of the date of this policy, Visa allows 7 days and MasterCard allows 30 days for settling the transactions. Failure to settle within the specified period of time will require a second authorization from the

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cardholder. If the second cardholder’s authorization is not obtained, the transaction will result in lost revenue to the department. Each department must train its employees on operating the credit card equipment. Training sessions can be arranged with the Merchant Processor by contact Treasurer’s Office Banking Services staff. Chargebacks Departments will receive chargebacks notifications from Merchant Processor for over-the-counter transactions and from the vendor for web and IVR transactions. Departments must respond directly to the Merchant Processor within the “respond by” date provided in the chargeback notification and provide the requested information and appropriate documentation to demonstrate legitimacy and accurate processing of the original transaction. The Merchant Processor or vendor has sole authority to determine if the chargeback will be reversed and a credit will be issued to the department. Refunds Departments shall develop and implement a refund policy that describes circumstances under which a customer can be issued a refund. General guidelines should include the following:    

Request methods and department’s contact Information needed to issue a refund Approval level required Turnaround time

Refunds should be processed only to the Payment Card that was used in the original transaction; never in cash or checks. Sanctions Non-compliance with this policy, PCI Standards, and PCI DSS could lead to exposure of sensitive Cardholder Data. A security breach of this nature could have serious consequences for CCSF including substantial fines, legal costs, auditing costs, damage to reputation, and loss of ability to accept Payment Cards. Violation of the PCI Standards and PCI DSS requirements may result in fines as high as $100,000 per month for an individual Merchant. In addition, failure to comply with this policy may result in revocation of the department’s ability to accept Payment Cards. Sources of Additional Information 

Payment Card Industry (PCI) DSS Requirements and Security Assessment Procedures http://www.securitymetrics.com/docs/pci_dss_v1-2.pdf

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     

Payment Card Industry (PCI) DSS Navigating PCI DSS – Understanding the Intent of the Requirements - http://www.pcisecuritystandards.org/pdfs/pci_dss_saq_navigating_dss.pdf Payment Card Industry (PCI) Data Security Standard – Self-Assessment Questionnaire Instructions and Guidelines - http://www.pcisecuritystandards.org/pdfs/instructions_guidelines_v1-1.pdf Payment Card Industry Data Security Standards – http://www.pcisecuritystandards.org Visa USA Cardholder Information Security Program (CISP) – www.visa.com/cisp MasterCard Site Data Protection Program (SDP) - www.mastercard.com/sdp/ Discover Information Security and Compliance Program (DISC) http://www.discovernetwork.com/fraudsecurity/disc.html

For any questions regarding this policy, Payment Card processing, equipment, merchant products or services, please contact Treasurer’s Office Banking Staff as follows: Primary Contact: 

Eric Gatchalian – 415-554-5205 or [email protected]

Additional Payment Card Guidelines In addition, departments should ensure that:    8.2.3.6

Customers always sign the merchant’s copy of the credit card receipt if more than $25.00. Customer credit cards are returned promptly upon completion of a transaction. No department should take possession of a customer’s credit card at any time. Employees do not initiate the processing of transactions that may cause them to exceed the day’s closing time. They should complete all transactions before closing at the end of their shifts. | RECONCILE COLLECTIONS DAILY

Departments must ensure that:   

Cash, checks, and credit/debit card collections on cashier’s balance sheet at the end of the day match the cashier’s recap. Note any discrepancies on the cashier’s recap. A supervisor reviews and approves any adjustments to financial reports, and verifies that adjustments are appropriate and discrepancies are adequately explained in the report. Cash reports should be forwarded to staff with responsibilities for daily reconciliation. o Cashier Workstation Summary o Cashier Recap o Deposit Summary o Cash Summary o Check Summary o Credit Card Summary

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o Credit Card Detail o Phone Payments o Electronic Payments Reconciling the Department’s Bank General Ledger Account Departments must reconcile their book (FAMIS) balance to their bank balance on CashPro Online’s Prior Day Report (PDR). CashPro Online is a Bank of America (BofA) online portal for corporate accounts. Departments with their own BofA depository accounts can access CashPro Online for their bank balances. All cash receipts (CR) with Transaction Code 703 going into the account should reconcile to the bank sweeping entries (for zero balance accounts) coming out of the account with Transaction Code 519, with the document number starting with “BTIT” in FAMIS and in CashPro Online on a daily and monthly basis. If the department records its CR and all adjustments (e.g., bank fees for credit card accounts, NSF checks, and bank adjustments) correctly, the deposit total, net of adjustments, should equal the amount of sweeping entries with Transaction Code 519. If there is any discrepancy between the CR (TC 703) net of adjustments and bank sweeping entries with Transaction Code 519, the department will need to do some research. Run an Executive Information System (EIS) report to get a list of transactions with TC 519 for a specific month and compare to the corresponding bank sweeping entries on the bank report (CashPro Online). If there are any missing TC 519 entries when compared to the bank report, please contact the Treasurer’s Office to confirm. In addition, the department should run an EIS report to get a list of all transactions with TC 703, 321, and 702. The total daily deposits net of bank adjustments should reconcile to the TC 519 entries with the same date or amount. If there is a variance, compare its TC 703 transactions to the bank report for any missing cash receipts or other bank activity. In most cases, the following scenarios may cause the variance: 



The department recorded a deposit using TC 703 in the current month, and the bank recorded it in the following month, causing a timing issue. The Controller’s Office highly recommends that departments record its deposits to align with deposits in the bank report. The department did not book bank adjustments (bank record greater than FAMIS amount or vice versa) using TC 703 or 703R.

For Depository accounts: 

The department did not record an NSF check using TC 702.

For Credit Card Settlement accounts: 

The department did not book its bank fees using TC 321.

For more information on transaction codes, refer to Section 17.2 - FAMIS Transaction Codes.

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After all the necessary entries are posted, the balance for each bank GL account in FAMIS should be zero. As noted in TTX’s Departmental Guidelines #2014-1, all bank account reconciliations should be forwarded to the Cash Reconciliation Unit of the Controller’s Office by the tenth (10th) day of the following month.

8.3 | Properly Recording Revenue This section provides guidelines to departments for properly and consistently recording revenue. Cash receipts should be recorded in the City’s financial system on or about the same time the money is deposited, but no longer than fifteen (15) business days after the receipt of funds. Figure 8-1 provides a high-level perspective on how cash receipts are to be processed and recorded into the financial system. Departments process numerous revenue category types, including but not limited to: 



   

 

Licenses o Dog licenses (Dept. of Animal Care & Control) o Marriage licenses (Treasurer & Tax Collector) o Business licenses (Treasurer & Tax Collector) Permits o Building permits (Dept. of Building Inspection) o Landing permits (Airport) Fines, forfeitures, & penalties Rents & leases Concessions Charges for services & sales o Admissions fees (Recreation & Parks Dept.) o Class registration fees (Recreation & Parks Dept.) o Greens fees (Recreation & Parks Dept.) o Rental fees (Recreation & Parks Dept.) o Merchandise sales Gifts & donations Dividends & other revenues

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FIGURE 8-1. CASH HANDLING RECEIPT AND RECORDING

Cash received in person via over-the-counter / point-ofsale transaction

Cash received via online, electronic, ACH, or IVR system transaction

Cash received via mailed remittance payment

Receive cash while adhering to all required internal controls

Deposit cash receipts no later than the following business day, unless the Controller has approved of department’s alternate procedure

Post revenue in FAMIS within 15 business days, unless the Controller has approved of department’s alternate procedure

8.3.1 | Cash Difference / Overage This section provides information about how departments should respond to cash differences and overages in department revenue collections. Administrative Code, Section 10.82 (amended September 6, 2011) makes the Controller responsible for monitoring cash differences and overages for all departments and requires that all revenue-collecting departments record their cash differences and overages using a new sub-object code – 78905 (OVER/SHORT CASH REPORT TO BOARD OF SUPVS). Administrative Code, Section 10.82 authorizes the Controller to establish a Cash Difference and Overage fund for any

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department requiring one, authorizes the Controller to manage the fund and to increase, reduce, or discontinue it. It requires any county officer, Department Head or judicial officer to report cash differences and overages to the Controller as directed, rather than daily. It also requires the Controller to issue regulations for the administration of the fund and to report annually to the Board of Supervisors. 8.3.1.1

| REVENUE PROCESSING OVERVIEW

A cash difference or overage occurs when a department’s actual daily collection proceeds do not match the proceeds recorded on the department’s point of sale system. This may occur due to cashier error or undetected counterfeit bills. In these instances, a department must record the cash difference or overage as a reduction or increase in revenue as part of the department’s daily recording of its cash receipts transactions in the City’s financial system. Cash differences and overages will be recorded in FAMIS using Sub-object 78905 Cash Difference and Overage-Reporting. Departments should record the cash difference or overage in the appropriate revenue center index code where the cash difference occurred, and must use the Sub-object code 78905 - Cash Difference and Overage-Reporting. As in the past, departments must still complete a Cash Difference and Overage Report explaining the reason for each occurrence of a cash difference or overage. These cash difference and overage reports must be maintained at the department for audit purposes for a minimum of three years. A sample Cash Difference and Overage Report is shown below; departments can customize the layout of the report but the required elements must be incorporated.

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FIGURE 8-2. SAMPLE CASH DIFFERENCE / OVERAGE REPORT CASH DIFFERENCE/OVERAGE REPORT

This report serves as notification that an overage or shortage of revenue has occurred at the close of business. Details of the variance are as follows:

Department/Division/Section:

_____________________________

Report Date:

_____________________________

Cashier Name:

______________________________

Signature:

______________________________

Overage Shortage

Amount:

FAMIS Document No.

_____________________________

_____________________________

Explain Reason or Circumstance (use reverse side if additional space is required)

__________________________________ CASHIER UNIT SUPERVISOR

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8.3.1.2

| CASH DIFFERENCE OR OVERAGE PROCESSING DETAILS

When a department discovers that its daily collection proceeds are less than (cash shortage) or more than (cash overage) its recorded proceeds on its point of sale (POS or cash recording) system, it must:  Complete a Cash Difference and Overage Report for each occurrence (i.e., each employee) contributing to the cash difference or overage. Each report must explain the reason for the difference, must be signed by the affected employee, and reviewed/signed by the employee’s supervisor. The Department Head or designee must also approve and sign the form. If the shortage or overage is $100 or more, the form must be signed by the Department Head. Departments must maintain a file with these completed reports at their offices.  Ensure that its Cash Difference and Overage Report file is complete and ready for review by the Controller’s Office on a periodic basis.  Record the revenue transaction in FAMIS using the following transaction codes: Recording a Cash Shortage T/C 703

Record bank transaction for actual deposit (net of shortage)

T/C 718

Record revenue for total amount that should have been collected

T/C 718R

Record shortage, in department index code and sub-object 78905

Recording a Cash Overage 703

Record bank transaction for total deposit (including overage)

718

Record revenue for total amount that should have been collected

718

Record overage, in department index code and sub-object 78905

For illustrations on recording short/overage between actual collection and POS, refer to Section 16 – How to & Screenshots. Reminders Departments should not dismiss cash differences and overages as unimportant. Repeated instances of cash differences and overages by the same employees should be dealt with accordingly. For example, a department may:   

Provide in-depth cash handling training to employees with a certain number of cash differences and overages in one year. Include cash handling performance measures in employees’ annual Performance Plans. Consult with the Department of Human Resources for further instruction as necessary.

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Departments are being required to report their cash differences and overages in this manner to avoid having to “make up” or complete their deposits from a cash fund, which raises other internal control and security issues. Therefore, departments should not have cash funds that they are using as their own cash difference and overage fund.

8.3.2 | Non-Sufficient Funds (NSF) Checks This section summarizes the NSF requirements of TTX #2014-1 and the Frequently Asked Questions of the Banking Changes Year-End Workshop Jointly Presented by the Offices of the Controller and Treasurer (July 24 & 29, 2014). Upon implementation of the new bank GL accounts in April 2014, the Treasurer’s Office now requires that all departments with their own unique depository accounts, regardless of whether the depository accounts are new or old, record their own NSF returned items and adjustments in FAMIS effective May 1, 2014. As of that date, NSF items appeared in departments’ own unique depository accounts on the online bank reports (CashPro Online) and departments are able to retrieve the check images on their own. Exceptions to this rule are departments which continue to deposit to the Treasurer’s main account (previously GL 1051, now 1408D2). The Treasurer will continue to process NSF items on their behalf. Since only the Treasurer had prior access to record NSF transactions, departments must now contact the Controller’s Office FAMIS Security ([email protected] and [email protected]) to request NS document type access for the individual(s) to whom your department’s CFO designates authority. The CFO should also ensure that the designated individual (or individuals) to record TC 702 transactions has access to do so, and if not, request access at that time. Bank charges for NSF checks are not on department bank statements. The fees associated with NSF checks are part of the general bank fees (maintenance fees, fraud prevention service fees, transaction fees, etc.) that TTX compiles from the banks’ Account Analysis Statements. TTX provides this information to the Controller’s Office, which distributes those charges to departments through a journal entry on a periodic basis (semi-annually in FY 14). Prior to FY 14, those bank fees were netted against the department’s interest earnings; but now, those actual fees are directly charged to departments as expenditures. 8.3.2.1

| DEPARTMENT PROCESSING OF NSF CHECKS

San Francisco Administrative Code, Section 10.13-1 authorizes departments to levy a $50 fee for a NSF check. Departments should collect this amount and are responsible for documenting how they will implement the assessment of this fee. Although the actual NSF bank fee is lower than $50, the additional amount is meant to recover the department’s cost of processing the returned check and collection efforts associated with replacing the returned check. This is considered revenue to the department and may be recorded in whichever index code is appropriate for the department when it collects the fee.

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Even if the amount of the written check was for a small amount such as $5, $10, or anything less than $50, the department should still collect the $50 NSF fee from the customer.

It is the department’s responsibility to establish its own policy on the waiting period for the replacement check. It can be as short as five (5) days or ten (10) days. What is important is for the department to demand that the customer pay for the total amount either by cash, credit or debit card, (replacement) check, money order, or cashier’s check. However, due to limited City resources it may be difficult to determine if the replacement check, money order or cashier’s check is valid. Departments should include in their policy whether they are willing to accept checks from customers who previously bounced a check. The following sample letter can be used by departments for their NSF checks.

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FIGURE 8-3. SAMPLE NSF CHECK COLLECTION LETTER

8.3.2.2

| PROCESSING NSF FOR DEPARTMENTS WITH THEIR OWN DEPOSITORY ACCOUNT

NSF with Accounts Receivable Transaction If the NSF check is tied to an accounts receivable transaction (e.g., a returned check for a property tax payment affects the property tax bill sent out by TTX (TTX receivable)), the receivable would need to be reinstated in the City’s financial system. NSF checks not tied to receivables do not require that extra step. This section outlines the steps required to process NSFs with an account receivable.

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1. When the Check is Returned First, using TC 702, record the returned item in the department’s NSF index code (XXXNSF) (sub-object 78902 is embedded) with NS document type. While recording the transaction in FAMIS, for the Bank Number, use the bank GL account, and for the Treasury Number, use the date that the bank posted the returned item. The Notepad should include the details of the check: payee, date, check number, amount, invoice/permit # and any other information you need to track. Then, using TC 408, reverse the NSF in your department’s NSF index code and reinstate the receivable by using TC 423 (for accounts with subsidiaries) in the appropriate index code. 2. When the Replacement Check is Collected Using TC 703, record the total deposit (including the $50 NSF fee) in the appropriate index code. Use TC 714 to clear the receivable, and TC 718 to record the additional miscellaneous revenue in whichever index code is appropriate for the department. NSF without Accounts Receivable Transaction 1. When the Check is Returned Using TC 702, record the returned item in your department’s NSF index code (sub-object 78902 is embedded in this code) with NS document type. While recording the transaction in FAMIS, for the Bank Number use the bank GL account, and for the Treasury Number, use the date that the bank posted the returned item. The Notepad should include the details of the check: payee, date, check number, amount, invoice/permit # and any other information you need to track. 2. When the Replacement Check is Collected Do not reverse the NSF transaction described above until you receive the replacement check. The NSF serves as a reminder that a replacement check is outstanding. When you receive the replacement check and the $50 NSF fee, use TC 703 to record the total deposit, TC 718 to reverse the NSF in the NSF index code with CR document type, and TC 718 to record the additional miscellaneous revenue in whichever index code is appropriate for your department. 3. If the Replacement Check is Determined to be Uncollectible The department must reverse the reduction of revenue from the NSF index code and apply it to the original transaction. 

If the original receipt transaction was an increase to revenue, clear the NSF index code by using TC408 and then clear the original revenue transaction by using TC 407 in the index code used for the original receipt transaction.

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If the original receipt transaction was an abatement of expenditure, clear the NSF index code by using TC408 and then clear the original expenditure abatement transaction by using TC 405 in the index code used for the original receipt transaction

For step-by-step illustrations on NSF processing, refer to Section 16 - How-to & Screenshots. For more information on transaction codes, refer to Section 17.2 - FAMIS Transaction Codes. 8.3.2.3

| PROCESSING NSF FOR DEPARTMENTS USING CITY’S MAIN DEPOSITORY ACCOUNT

1. When the Check is Returned The Treasurer’s Office records the returned amount plus the $50 NSF fee as revenue reduction in the department’s NSF index code (XXXNSF) (sub-object 78902 is embedded), and notifies the department. It is the department’s responsibility to constantly check the balance in the NSF index code and clear the NSF items. The document type for NSF index code clearing is RA. The departments must reverse the reduction of revenue from the NSF index code by using TC 408 and sub-object 78902. In the same entry, the department must use other 400 series transaction code(s) as applicable to charge the NSF item and the $50 fee to the appropriate index code(s) and the actual sub-object(s) affected. 2. When the Replacement Check is Collected The department applies the re-payment and the $50 fee to the index code(s) and sub-object(s) affected using the applicable 700 series transaction code(s). For step-by-step illustrations on NSF processing, refer to Section 16 - How-to & Screenshots. 8.3.2.4

| INSTRUCTIONS & RECOMMENDED CONTROLS FOR PROCESSING RETURNED ITEMS

A staff person designated to process the department’s deposits should not be the same person to process returned deposited items. Returned deposited items are items that cannot be charged against the check originator’s account for reasons such as NSF, closed account, stop payment, questionable or missing signature, etc. In addition, staff making the deposits should not be the same person performing bank reconciliations. This is recommended to promote segregation of duties and implement checks and balances in the system. At least two (2) employees from each department should have online access to the bank’s returned deposited items report. This is recommended so that another staff has the ability to access the online reports for monitoring and back-up purposes. Departments must process their returned items in a timely manner as established by each department. This is to mitigate various complaints that a customer may have such as missing the payment deadline and incurring a penalty for late payment due to the department’s late notification.

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Departments may keep a subsidiary record of their returned deposited items for use in making decisions whether to take future check payments, especially from customers who previously bounced a check. Departments with their own depository bank accounts will be retrieving images and process their own items. Also refer to Section 16- How-To and Screenshots for illustrations on various types of NSF check processing in the accounting systems.

8.3.3 | Interest Revenue* UNDER REVIEW

8.3.4 | Chargebacks & Merchant Activity Reconciliation* This section is from the Frequently Asked Questions of the Banking Changes Year-End Workshop Jointly Presented by the Offices of the Controller and Treasurer (July 24 & 29, 2014). A “chargeback” (also known as a reversal) represents the amount of the original transaction that the credit card network debited from your merchant statement based on an item that was successfully disputed by the customer on his or her credit card statement. This section describes the merchant activity reconciliation that departments must perform when they provide sales and transactions with the public through credit card transactions. 8.3.4.1

| PROCESSING CHARGEBACKS

Recognizing a Chargeback Claim & Addressing Chargeback Items If you are a department that processes credit and debit card transactions, you have been assigned a Merchant Identification Number (MID) that has been set up in Bank of America Merchant Services (BAMS) ClientLine portal. You can access your MID and set up notification alerts so that it is not necessary for you to access ClientLine on a daily basis if you are monitoring your chargeback items. The notification alert setting will prompt you to look at an incoming chargeback item so that you can process it timely. You only have 20 calendar days to respond to BAMS’ retrieval request and/or provide the required documentation for a disputed charge. It is critical that you stay current on all your chargeback items. If you do not provide the required documentation within this timeframe, you will lose the claim. In very rare cases where you can foresee that you will not be able to submit everything within 20 days, make sure you contact BAMS to ask for a special extension. There is no guarantee that BAMS will provide an extension, but it is important to communicate with them.

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You can manage your chargeback items and send the required documentation electronically through the Dispute Manager task bar within BAMS’ ClientLine portal. You can also write your notes about the claim on the Notepad. If, after your research, you agree that the charge is in error and would like to accept the claim, instead of ignoring it or letting the 20 days expire, you should also access the specific item within the Dispute Manager and accept it. This is important so that the chargeback reports will only highlight the outstanding claims. Before recording your department’s CRs in FAMIS, you want to ensure that your CRs will reflect the correct amount of revenues that were collected through debit or credit cards. In doing so, you should access ClientLine and look for your MID’s total transactions that were processed for the day and compare the totals with your settlement or depository account’s Previous Day Report (PDR). This PDR can be retrieved through CashPro online. If there are discrepancies in the amounts, look at ClientLine’s merchant transaction detail and look for any possible errors in any of the transactions or for chargebacks or fees that were debited from your merchant account. If, after further research, you cannot determine the difference, call BAMS’ help desk and ask for assistance. Immediately Record the Chargeback If the department sees a chargeback or reversal in its merchant statement, the department will have to record it accordingly by reducing its revenue. Even though the department, as the merchant, is given some time to retrieve the documentation related to the charge, BAMS will debit its merchant account right away upon the receipt of the disputed charge from the credit card network. If the claim turns out to be in the department’s favor, a credit will appear in its merchant statement and, at that time, the department can record the revenue again. No Fees for Chargeback Although a department can charge a fee to customers for NSFs, it cannot charge a fee for a chargeback. A chargeback fee cannot be imposed by a merchant upon a customer or cardholder. Even though the customer loses the claim, the credit card network does not allow fees to be imposed upon a customer for disputing a charge that appeared on his or her credit card statement.

8.4 | Cash Handling and Revenue Recording FAQs Q: What happens if the department is paid with a NSF check for a large amount? Is there a process to escalate to a collection agency?

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A: The Treasurer’s Bureau of Delinquent Revenue (BDR) can assist with department collections, but there must be an MOU with BDR before services will be provided. BDR charges departments according to a predetermined work order, or a 25 percent commission on collected amounts. Please contact Margarita Rodriguez at BDR for more information at [email protected] or (415) 554-4413.

Q: If a department receives bounced checks from a customer, could the department refuse to provide services until the customer satisfies his obligation? A: Yes, the department can refuse to provide services due to nonpayment if that is the policy of the department. Note that the department does not have to limit its payments to checks; it may also choose to collect payments through debit or credit cards. Please contact the Treasurer’s Office at [email protected] for more information on accepting debit and/or credit cards.

Q: What happens when a customer over-pays? For example, at the Department of Building Inspection customers are required to pay with a cashier’s check and often the amount on the cashier’s check is more than the amount that is required for the permit. A: If the amount of over-payment is $10 or less, the department can keep the difference. If the overpayment amount is more than $10 and the customer says the department can keep the difference, have the customer sign on the Cash Difference/Overage Form (see Section 8.3.1 Cash Difference/Overage) as the acknowledgement. If the customer wants the department to issue an over-payment check, the department should first receive written confirmation from the customer for a current mailing address. When the department receives the address information, then an over-payment check can be mailed. This reduces the number of checks returned to the City.

Q: We received an ACH/wire payment but don’t know what it’s for—how do we figure out the correct recipient of the payment and the reason for the payment? A: Incoming wire transfers or ACH especially those from State and Federal typically provide very little information regarding the purpose of the payment and the intended recipient department. Go to the State website at http://www.sco.ca.gov/ard_local_apportionments.html or federal website at http://www.fiscal.treasury.gov/ to research information on the receipt. If your department relies on the Treasurer-Tax Collector’s Office (TTX) to process incoming wire transfers, notify TTX with an e-mail that an incoming receipt is expected; that way, the money will not sit in the TTX unidentified incoming wire account.

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Q: We received a lump sum payment from TTX with no detail on what the cash was for. How do we get this information? A: See above answer.

Q: What happens if the department is paid in counterfeit currency? A: If a department discovers the counterfeit currency before deposit, send the money to Bank of America for investigation. If Bank of America contacts the department to let it know about the counterfeit currency, it will keep the department informed of its investigation. Departments should record cash shortage since the bank does not give credit for the counterfeit deposit. It is the department’s responsibility to review currency to ensure it is not counterfeit.

Q: My department does not receive a large amount in cash receipts so we do not make a daily bank deposit. Is this acceptable? A: City policy is to deposit all cash receipts daily; however, if your department seeks an exemption from this policy it should document its cash handling policy and procedures and provide a detailed description of internal controls on its cash receipts. Submit your department’s cash handling policy and procedures to the Controller’s Office for review and approval.

Q: My department uses Link2Gov for online payments but there are lots of duplicate payment transactions and other errors. Who is responsible for clearing these errors—the department accounting office or the Link2Gov service provider? A: Link2Gov (FIS) is the City’s contracted vendor for online and phone payments. For online or web transactions support, please call 1-877-513-5465 or [email protected]

Q: When and how can the department write-down or write-off NSF checks? A: Please note the section in Receipts and Revenue on accounting for NSF checks. If an NSF check becomes uncollectible, the department may choose to send it to the Treasurer’s Bureau of Delinquent Revenue (see earlier question on uncollectible accounts) or it may follow its own policy to write it off.

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Q: My department has already submitted the Internal Control Questionnaire (ICQ) to the Controller’s Office. The ICQ covers our cash handling process. Do we still need to have a separate policy and procedure for cash handling? A: Yes, your department must have a written cash handling policy and procedure that is appropriate to the types and amount of cash receipts processed by the department. Forward a copy of your department’s cash handling policy and procedures to your Fund Accountant.

Q: What kind of City training is available for employees who handle cash? A: The Treasurer’s Office has provided training and will continue to provide this training. It will become online soon. Also, departments can send staff to outside training.

Q: My department needs a more secure way to move cash from our sites to the bank. Who do I contact for armored truck service? A: Contact the Treasurer’s Office at [email protected]; that office owns the contract for these services.

Q: We have contractors that manage a site (e.g., parking lot). How often do they need to deposit cash receipts with the department? A: Contractors need to wire funds to the City or deposit these receipts to a City owned bank account daily. If there is an exception to this policy in the contract between the department and the contractor, provide a copy to the Controller’s Office and the Treasurer’s Office.

Q: Will my department be able to accept payments using electronic methods, such as Google Wallet, iCash, ApplePay? A: No, not at this time.

8.5 | Revenue Transfer* The purpose of this section is to provide guidance to City departments on when and how to process revenue transfers, revenue allocations, and other revenue adjustments. These guidelines are issued by the Controller’s authority under San Francisco Charter, Article III, Section 3.105 – Controller’s responsibilities.

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8.5.1 | Definition of Revenue Transfers / Other Allocations “Revenue transfers” are the allocation of revenue from one fund (or project) to another fund (or project), or revenue adjustments between cost centers within the department or across departments and/or fiscal entities using FAMIS Document Type RA (RIMS) or RT (Non-RIMS). The revenue transfers, as described in this section, are non-grant revenue allocations for revenue budget and actual adjustments involving general ledger accounts 401 to 408 and 411 to 413. Grant-related revenue transactions are processed separately through GE (Non-RIMS) or GR (RIMS) Document Types. Refer to Section 12 Grants & Gifts for more information. “Other allocations” involve collection of revenues offset by an expenditure account within or across department fiscal entities and cost centers, or to and from other city departments, or allocations from the General Fund.

8.5.2 | Common Revenue Transfers & Other Allocations Listed below are some common examples of revenue transfers and other allocations:            

Application of revenue for an unidentified receipt Adjusting revenues for a Non-Sufficient Funds (NSF) check Accruing revenues and recording receivables Adjustment of deferred revenues Adjustment of revenues to proper accounts within the department or to other city departments Adjustment of actual and budget proceeds from sale of bonds within or across department bond and/or construction funds Transfer revenue to other departments for rental of facilities or for fees, licenses, and permits. Collection of revenue offset by expenditures account within or across department fiscal entities and cost centers, or to and from other city departments. Hotel tax allocations from the General Fund Revenue transfers and budget allocations between different funds – Operating Transfers In / Operating Transfer Out (OTI/OTO) Revenue transfers and budget allocations between different sub-funds – Intra-fund Transfer In / Intra-fund Transfer Out (ITI/ITO) Revenue transfers and budget allocations between and within projects

For illustrations on processing the above revenue transfer entries, refer to Section 16 - How-to & Screenshots.

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8.5.3 | Review and Approval Path Input and approval access to this document type is defined by security access assigned to the initiating department’s document initiators and approvers and to other designated approvers outside of the initiating department.  

First level review and approval by assigned levels within the department Final approval by Accounting Operations either at level 795 or 800 according to dollar amount limit or other approvers with access to approval department CON and approval level equal or greater than 795 or 800.

The document details must be carefully reviewed for accuracy of input codes to ensure that the appropriate accounting transactions are processed.

8.5.4 | Compliance with City Policies, Guidelines, and Regulations Departments must comply with the following criteria with regard to processing revenue transfers:  



 

  

Proper notification to and/or approval from responsible managers of the cost centers, projects, or departments are obtained before revenue adjustments are made. Redistribution of revenue accounts, especially unidentified receipts, must be processed accurately within 15 calendar days of the receipts. Revenues must be recorded within the same fiscal year when the receipts are recorded. Revenues requested for redistribution must be reviewed in detail to ensure that adjustments or reallocations are being made to the correct accounts, cost centers, projects, or departments, and that funds are actually received and available. Revenue adjustments must be properly and completely documented and supported. Revenues collected for other departments or agencies must be properly accounted for and transferred according to the agreements or provisions of the laws or ordinances covering such allocations. Transfer-in and -out appropriations and billings must be for appropriate purposes supported and authorized between transferring entities and departments. Revenues collected for specific purposes may only be appropriated for such use as allowed under applicable City ordinances, or State or Federal programs. Approval of the revenue adjustment entry is certification that it is proper, valid, and legal. Any officer who approves or allows unauthorized or illegal obligations is liable to the City and subject to penalties.

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9 | INVESTMENTS HELD WITH TRUSTEES* 9.1.1 | Fiscal Agents IN PROGRESS

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10 | FIXED ASSETS* This section provides guidelines for capitalizing fixed asset purchases and completed capital projects at year-end.

10.1 | Overview of Fixed Assets 10.1.1

| Authoritative Literature - Generally Accepted Accounting Principles

City departments must adhere to the pertinent guidelines promulgated by the Governmental Accounting Standards Board (GASB), the Government Finance Officers Association (GFOA), and the American Institute of Certified Public Accountants (AICPA). GASB has promulgated the following authoritative literature:  GASB 34 – Basic Financial Statements and Management's Discussion and Analysis  GASB 42 – Accounting & Reporting for Impairment of Capital Assets and Insurance Recoveries  GASB 51 – Accounting & Financial Reporting for Intangible Assets  FASB 34 – Capitalization of Interest Costs FASB 62 – Capitalization of Interest Cost Involving Certain Tax-Exempt Borrowings and Certain Gifts and Grants  GASB 62 – Codification of Accounting and Financial Reporting Guidance Accounting for capital assets is based on underlying accounting concepts such as recognition of expenses under accrual basis accounting, the matching principle, and cost accounting principles. The most recent Government Accounting, Auditing, and Financial Reporting (GAAFR)—also known as The Blue Book, published in 2012 by the Government Finance Officers Association (GFOA)—provides standards and best practices for state and local governments applying generally accepted accounting principles (GAAP). GAAFT complements the Hierarchy of GAAP for State & Local Governments (GASB 55). This policy reflects concepts published in GAAFR, particularly Chapter 25, Capital Assets.

10.1.2

| Regulations & Contractual Arrangements

In many cases the City & County of San Francisco must meet additional compliance requirements, whether it is due to funding agreements (e.g., debt arrangements and grant awards) or regulatory requirements (e.g., Federal Aviation Administration, Administrative Code).

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Financial Terms & Economic Substance – Each funding agreement, regulation, local law, and contract has different financial terms. In all cases, GAAP is to be applied to determine the proper accounting treatment based on the financial terms and economic substance. Compliance – Each funding agreement, regulation, local law, or contract will likely have compliance requirements that may or may not be required by GAAP and in those instances other systems or offline schedules may need to be maintained by the department.

City & County of San Francisco Administrative Code Local law or Administrative Code determines contracting, acquisition, encumbrance policies and procedures for capital asset related costs, and various other issues (e.g., accept and expend authority for grants that fund capital) that impact capital assets. 



Chapter 6 shall govern public work or improvement contracting policies and procedures, including the procurement of professional design, consulting and construction management services for public work projects. Chapter 21 governs the acquisition of Commodities and Services. Chapter 21 shall not apply to contracts for public works or improvements or to contracts for the purchase, sale or lease of any interest in real property. "Commodity" shall mean products, including materials, equipment and supplies, purchased by the City.

Contractual Arrangements There are many contractual arrangements with government agencies, investors, and third parties (e.g., debt issues, grant awards, donations with restrictions) that help to fund capital assets. Those contractual relationships may require costs tracking and reporting, which is in addition to GAAP requirements. It is the department’s responsibility to ensure all compliance requirements are met.

10.1.3

| Definitions & Thresholds

10.1.3.1

| DEFINITIONS

Capital assets as stated in the Governmental Accounting, Auditing, and Financial Reporting (GAAFR), published in 2012, includes furnishings and equipment, land, buildings, improvements other than buildings, infrastructure, construction/development in progress, and other capital assets. Accounting for these classes of assets is the scope of this policy. Fixed assets are defined as assets that are: 1. Used in operations AND 2. Have an initial useful life in excess of one year (see most recent GAAFR (published 2012), Chapter 25 Capital Assets, for complete definitions)

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This definition includes both tangible assets (e.g., furnishings and equipment, land, buildings, building improvements, vehicles, machinery) and intangible assets (e.g., software, water rights, easements). The following Table summarizes the major classes of capital assets and their corresponding category code in the City’s Fixed Assets Accounting and Control System (FAACS). FIGURE 10-1. CAPITAL ASSET TYPES AND FAACS CATEGORIES

MAJOR CLASS

FAACS CATEGORY

Furnishings & Equipment – movable items (e.g. furniture & fixtures, machinery) Buildings – includes building improvements

E B

Land (non-depreciable)

L

Improvements other than buildings – non-movable (e.g. depreciable land improvements) Construction/Development in progress

I C, D , V

(non-depreciable) Infrastructure Other capital assets including intangible assets (e.g. software, right of ways, easements).

N U, T

Infrastructure assets – Defined as “…long lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples include roads, bridges, tunnels, drainage systems, water & sewer systems, dams, lighting systems.” – GASB 34, paragraph 19. Improvements other than buildings – Permanent improvements to land that have a limited useful life as improvements other than buildings (or land improvements) Examples include fences, retaining walls, parking lots, and most landscaping. Works of art, historical treasures, library books, and zoological animals – Held for public exhibition, education, or research in furtherance of public service, rather than financial gain, are not capitalized. These items are protected, kept unencumbered, cared for and preserved by the City. It is the City’s policy to utilize proceeds from the sale of these items for the acquisition of other items for collection and display.

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10.1.3.2

| CAPITALIZATION THRESHOLDS

Standard capitalization thresholds for capitalizing assets have been established for each major class of assets, as shown in the Table below. TABLE 10-1. CAPITALIZATION THRESHOLDS

CLASS OF ASSET

THRESHOLD

Personal (moveable) and real property other than those listed below (e.g. furnishings, fixtures)

Greater than $5,000

Equipment

$5,000

Land (non-depreciable)

Capitalize all

Improvements Other Than Buildings (e.g. land improvements, fences, retaining walls, parking lots, landscaping)

$100,000

Buildings & building improvements

$100,000

Leasehold improvements

$100,000

Construction/Development -In-Progress (nondepreciable)

$100,000

Infrastructure

$100,000

Intangible (Software, easements, etc.)

$100,000

Asset Cost or Historical Cost For purposes of determining whether the value of a potential asset exceeds the above capitalization thresholds, costs should include the necessary costs incurred to place the asset in service. Costs include the invoice price plus incidental costs (i.e., insurance during transit, freight, capitalized interest, duties, title search, registration fees, and installation costs). Exceptions to this rule include interest expenses associated with deferred payments and real estate taxes paid, if any, in the acquisition of property. If something other than cash is used to pay for the asset, then the fair-market value of the non-cash payment or consideration determines the asset’s cost or acquisition value. When the value of the consideration paid can’t be determined, the asset’s fair-market value determines its cost. System of assets

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Often a group of individual components of an item such as a desktop computer can be capitalized into a single unit. For instance, if the total costs of the components “required” to make the asset useable and render it into service exceed the capitalization threshold, then the total costs are to be recorded as a capital asset. Purchases that do not meet these thresholds are to be recorded as expenses. The following Figure presents asset capitalization thresholds from other public jurisdictions. FIGURE 10-2. CAPITALIZATION THRESHOLDS FROM OTHER JURISDICTIONS Sample California Counties and Cities Capitalization Thresholds Data from FY14 CAFRs, Capital Assets section of Note 1 "Greater Than" Years Useful Life (U/L)

Land

Equipment Buildings

Building NonInternally ImproveSoftware Generated Software ments Infrastructure Intangibles Intangibles Intangibles Intangibles Donations

Counties Alameda Contra Costa Los Angeles Marin Orange Sacramento San Bernardino San Diego San Mateo Santa Clara

silent silent silent 1+ silent 4+ 1+ silent 1+ silent

$5,000 $5,000 silent silent $0 silent silent $0 silent silent

$5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000

$250,000 $100,000 $100,000 $5,000 $150,000 $5,000 $100,000 $50,000 $5,000 $150,000

$250,000 $100,000 $100,000 $5,000 $150,000 $5,000 $100,000 $50,000 $5,000 $150,000

$250,000 $25,000 $25,000 $5,000 $0 $5,000 $100,000 ($25k -50k) $5,000 $150,000

silent $100,000 silent silent $150,000 $5,000 $5,000 silent $5,000 silent

Cities

2+ 1+ 2+ 1+ 1+ silent 1+ 1+ 1+ silent 1+

$1,000 $5,000 $5,000 $5,000 $5,000 $20,000 $0 $5,000 silent silent $5,000

$1,000 $5,000 $5,000 $5,000 $5,000 $20,000 $5,000 $5,000 $10,000 $1,000 $5,000

$1,000 $5,000 $5,000 $5,000 $5,000 $20,000 $5,000 $5,000 $50,000 $20,000 $5,000

$1,000 $5,000 $5,000 $5,000 $5,000 $20,000 $5,000 $5,000 $25,000 $20,000 $5,000

$100,000 $5,000 $0 $5,000 silent $20,000 $5,000 $5,000 $100,000 $20,000 $25,000

silent $5,000 silent $5,000 silent $100,000 $5,000 $5,000 silent silent silent

Berkeley Los Angeles Modesto Oakland Riverside Sacramento San Diego San Jose Santa Barbara Santa Clara Walnut Creek

10.1.3.3

silent silent silent silent $1,000,000 silent $100,000 silent $1,000,000 silent silent silent silent silent silent $5,000 silent silent silent $100,000 silent silent silent ($50k -100k) silent silent silent silent $100,000 silent

silent silent silent silent silent silent silent silent silent silent silent

silent silent silent silent silent silent silent silent silent silent silent

silent silent silent silent silent silent silent silent silent silent silent

Other Useful Lives or Threshold s Explanation

Art

FV-DoD silent silent silent silent FV-DoD FV-DoD FV-DoD FV-DoD FV-DoD

silent silent not cap. silent silent silent silent silent silent silent

FV-DoD FV-DoD silent silent FV-DoD FV-DoD FV-DoD FV-DoD FV-DoD FV-DoD FV-DoD

silent not cap. silent $5,000 silent $100,000 Infrastructure U/L > 3 yrs. silent $5,000 If paid for by federal funds silent silent not cap? notes say Art not depreciated silent silent

3+ years computers & software $10,000 easements/ rights of way $50,000 easements/ rights of way

| USEFUL LIVES

The following Table summarizes the depreciable life span of various non-infrastructure capital assets. TABLE 10-2. SUGGESTED USEFUL LIVES FOR NON-INFRASTRUCTURE CAPITAL ASSETS

ASSET TYPE Non-Infrastructure Furniture, office equipment Computer hardware Telephone equipment Motor vehicles: Cars and light trucks

EXAMPLES Desks, tables, chairs, fax machines, photocopiers Monitors, CPU, printer

DEPRECIABLE

LIFE IN YEARS 5-7 5 10 5 Page 299

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ASSET TYPE

EXAMPLES

Buses Patrol vehicles Fire trucks LRV’s, streetcars, cable cars Intangible

City

Buildings

Airports, convention center, healthcare facilities, jails, libraries, maintenance facilities, museums, office/administration, parking garages, recreation centers Trailer offices

Buildings – Temporary Building and structure improvements: HVAC systems Building signage Environmental, health and safety Food service equipment Heavy construction equipment Shop, bldg., and field maintenance equipment Engineering, scientific equipment Firefighting equipment Police special equipment Medical equipment Traffic control equipment Radio, communications equipment Recreational/athletic equipment Outdoor equipment Custodial equipment Grounds equipment Land improvements Land improvementsground work Page 300

Air-conditioners, heating, ventilation systems

Backhoes, trucks, dozers, front-end loaders, large tractors Compressors, forklifts, generators, pumps, carpentry equipment, automotive equipment, painting equipment Lab equipment Ladder, hoses Stoplights Mobile, portable radios Fitness equipment, golf equipment, marine equipment Playground equipment, scoreboards, bleachers, radio towers Floor scrubbers, vacuums, other Mowers, tractors and attachments Parking lots, sidewalks, bus ramp, fencing, running track, flagpole Golf course, ball field, park landscaping

DEPRECIABLE

LIFE IN YEARS 8-10 5 5-10 25 Varies with type 50

20 20 15 15 15 5-20 5-10 3-15 5-15 5 10 5 5 5 5 5 5 15 15 15

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ASSET TYPE

DEPRECIABLE

EXAMPLES

LIFE IN YEARS 25

Landfill disposal systems Land

NA

Sewerage treatment plants * Water treatment system * Power plant * Pumping plant *

25 15 20 20

Refer to FAACS Screen 5105 – Class Code Table for specific useful lives by class code. The Class Code Table is more extensive than the suggested list above. Please refer to Screen 5105 if you cannot find the item you are looking for in the Table above. The following Table summarizes the depreciable life span of infrastructure capital assets. TABLE 10-3. SUGGESTED USEFUL LIVES FOR INFRASTRUCTURE CAPITAL ASSETS

INFRASTRUCTURE

DEPRECIABLE LIFE IN YEARS

Easements Roadway structures Overhead lines and poles Rails, tracks, and roadways Substations, switches, and rectifiers Stations, passenger Tunnels Sewerage treatment plants Water treatment system Power plant Pumping plant

Varies with type 30 40 40 50 30 40 25 15 20 20

Refer to FAACS Screen 5105 – Class Code Table for specific useful lives by class.

10.1.4

| Capital Asset Process Overview

Budget – Capital assets appropriations are part of the capital budget or as capital outlay (character 060) in department operating budgets. The costs should be charged to the department(s) that will ultimately own the asset(s). If the budget does not reflect ownership of the asset, then journal entries

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moving budgetary estimated revenues and appropriations may need to be recorded as well as cash transfers. As legal form should be considered, the guiding principle to determine which party owns the asset is “financial or economic substance”. Certification of Funds – The encumbrance process for purchasing goods and/or services (general, professional and construction services) against the approved budget certifies the availability of funds. To charge salaries to a capital project, proper authorization may need to be obtained by the department’s project controls staff. Capital Asset Costs – Charge capital asset related costs in the capital outlay character code (060) or in the capital project code. Placed in Service – When the asset is placed in service and all certificates of completion (e.g., safety and inspection certificates) are obtained, the asset is capitalized or recorded as a capital asset. Depreciation Expense – After the asset is placed in service depreciation begins. The straight-line depreciation method is used for depreciation over the assets estimated useful life. Additions – If additional costs are spent on extending the useful life of an asset already placed in service the costs are to be capitalized if the expenses increase the life or value of the asset by 25% of the original estimated useful life or original costs. To meet the 25% threshold of original costs, determine the present value of the additional costs using a discount rate that reflects average consumer price index (or inflation) from the original date of purchase. These rates can be found at the U.S. Bureau of Labor Statistics website (www.bls.gov). Asset Management – For the inventory of capital assets, disposal (retirements), transfers of capital assets between departments, and impairment of capital assets, see the Section 10.3 Asset Management. Reporting – Capital assets are required to be annually reported in the City’s Comprehensive Annual Financial Report (CAFR) for both the primary government and the business-type activities. Also, capital assets are reported on accrual basis financials that are separately issued by departments (e.g., enterprise departments such as MTA, Airport, PUC, and the Port). Detailed processing procedures for entering capital assets into the Fixed Assets Accounting and Control System (FAACS) are provided in the FAACS manual entitled FAACS 4.2 Hold File Fundamentals for Fixed Assets Accounting. FAACS is the fixed asset module for the Financial Accounting Management Information System (FAMIS).

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FIGURE 10-3. FIXED ASSET PROCESS OVERVIEW

10.1.5

| Construction/Development in Progress (CIP)

Construction/development in progress (CIP) costs are costs for tangible and intangible capital assets that are in progress, but have not been placed in service, as of the fiscal year-end. Generally, CIP involves larger capital projects with construction/development occurring over a period of time. When the project is placed in service, the related CIP is capitalized as a capital asset and then depreciated. Costs to include in CIP are those that directly contribute to the capital asset, including the following.   

Direct labor Soft costs (e.g. design documents, environmental impact studies, etc.) Professional services and construction contracts

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   

Installation fees Overhead costs Interest on borrowings or capitalized interest Costs to prepare the asset for its intended use

Once a construction project is placed in service, the CIP asset should be transferred out (or capitalized) by the accounting staff to the appropriate capital asset category. If your department is an off-line department, use the FAACS CIP Transfer Form, which is shown below. FIGURE 10-4. FAACS CIP TRANSFER FORM

10.1.5.1

| INTEREST CAPITALIZATION

Governments frequently incur interest costs in connection with the acquisition, construction, development, or improvement of a capital asset. Accountants view this interest costs as one of the ancillary charges necessary to place the asset into its intended location and condition for use. Therefore interest expense incurred to acquire a capital asset should be included as the cost of the asset. This only applies to capital assets reported on enterprise funds. Interest costs should never be capitalized on capital assets accounted for as part of governmental activities in the government-wide financial statements (including internal services funds, which are incorporated into governmental activities for on government wide financial statements).

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As interest capitalization is a complex area of accounting, review the authoritative literature:   

GASB 62 – Codification of Accounting and Financial Reporting Guidance Contained in PreNovember 30, 1989, FASB and AICPA Pronouncements (Paragraphs 5-22) FASB 34 – Capitalization of Interest Cost (Paragraph 8-19) FASB 62 – Capitalization of Interest Cost in Situations Involving Certain Tax-Exempt Borrowings and Certain Gift and Grants (an amendment of FASB Statement No. 34) (Paragraph 3, 4, 6, and 7).

Also, GFOA’s 2012 GAAFR, chapter on Capital Assets, provides additional guidance. Theoretically, the amount of interest cost to be capitalized as part of the cost of the capital asset is the amount that could have been avoided had that asset not been acquired. There are two categories or sources of potential capitalized interest costs:  

Debt financing – By issuing debt to finance the acquisition of a capital asset. Existing interest bearing liabilities unrelated to the capital asset – It might appear that there are not cost to capitalize if a government used available cash to acquire a capital asset. However, if there also are interest-bearing liabilities outstanding, the government theoretically could have avoided incurring interest costs by using the cash to pay off those liabilities instead. Therefore, as long as any interest-bearing liabilities are outstanding a given enterprise fund, interest capitalization is required in that fund, even if those liabilities are completed unrelated to the acquisition of the capital asset.

Amount of interest cost to be capitalized Below is the basic formula (no netting) of interest costs to be capitalized.

Average Cumulative expenses since inception.

X

Borrowing Rate (weighted average or specific to borrowings)

=

Capitalizable Interest (not to exceed total interest cost of the period)

Tax Exempt Borrowings However, if the financing is from tax-exempt debt a different approach than the formula shown above is needed. Typically, a substantial portion of the debt proceeds is temporarily reinvested during acquisition or construction, pending progress payments to contractors and suppliers. In the interval, a government

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often is able to recoup a portion of its expense by reinvesting the proceeds of the lower interest, tax exempt debt in materially higher yielding taxable securities (arbitrage). In such cases the interest revenue earned on the debt proceeds should be netted against the interest expense on tax-exempt debt. The netting of expense and related interest revenue only applies to tax-exempt debt that is externally restricted to finance the acquisition of specified qualifying assets. Capitalization Period The capitalization period normally begins at the start of pre-construction activities and ends when an asset is substantially complete and ready for use. However, in the case of tax-exempt debt financing that is externally restricted for the acquisition of specified qualifying assets, capitalization can begin when the debt is first issued, which may be even earlier.

10.1.6

| Intangible Assets

GASB 34 provided some guidance for intangible assets. GASB 51, Accounting and Financial Reporting for Intangible Assets, established additional requirements for intangible assets to reduce inconsistencies and enhance comparability with other local governments. An intangible asset is an asset that possesses all of the following characteristics:   

Lacks physical substance - An asset that may be contained IN or ON an item with physical substance, such as computer software on a compact disc, a right-of-way easement on top of land. Nonfinancial in nature - Cannot be receivables or prepayment of goods, an asset that is not in monetary form or represents neither a claim nor right to. Initial useful life that extends beyond a single reporting period.

Examples of intangible assets include internally generated software, easements, land use rights, patents, trademarks, etc. GASB 51 defines these items and provides guidance for capitalization and depreciation. 

Internally generated computer software - Computer software is a common type of intangible asset that is often internally generated. Computer software should be considered internally generated if it is developed in-house by the government's personnel or by a third-party contractor on behalf of the government. Commercially available software that is purchased or licensed by the government and modified using more than minimal incremental effort before being put into operation also should be considered internally generated for purposes of this Statement. For example, licensed financial accounting software that the government modifies to add special reporting capabilities would be considered internally generated. GASB 51, AICPA’s Statement of Position 98-1, and GFOA’s GAAFR published in 2012 provide guidance on capitalizing the various stages of software development.

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Internally generated modification of computer software - These are modifications to software already in operation and should be capitalized. GASB 51 provides guidance on what qualifies as a “modification”. For easements, land use rights (e.g. water rights, timber rights, etc.), patents, and trademarks refer to GASB 51 including the illustrative examples.

Exceptions are intangible assets acquired or created primarily for directly obtaining income or profit, assets resulting from capital lease transactions reported by lessees, and goodwill created through the combination of a government or other entity.

10.1.7

| Capital Leases

GASB 62, Codification of Accounting and Financial Reporting Guidance establishes the following guidance for capital leases. GASB codification bases its criteria for capital leases largely on FASB Statement 13. If, at its inception, a lease meets one or more of the following four criteria, the lease should be classified as a capital lease by the lessee; otherwise, it should be classified as an operating lease: 1. Transfer of Ownership - The lease transfers ownership of the property to the lessee by the end of the lease term. 2. Bargain Purchase Option - The lease contains a bargain purchase option. 3. Lease Term 75% or more of estimated useful life - The lease term is equal to 75 percent or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last 25 percent of the total estimated economic life of the leased property, including earlier years of use, this criterion should not be used for purposes of classifying the lease. 4. PV of Minimum Lease Payments is 90% of Fair Value - The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance and maintenance to be paid by the lessor, including any gain thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at the inception of the lease over any related investment tax credit retained by and expected to be realized by the lessor. However, if the beginning of the lease term falls within the last 25 percent of the total estimated economic life of the leased property, including earlier years of use, this criterion should not be used for purposes of classifying the lease. A lessor should compute the present value of the minimum lease payments using the interest rate implicit in the lease.

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10.1.8

| Contributed Assets

Contributed assets are defined as voluntary contributions of resources to a governmental entity by an unrelated person or entity. According to GASB 34, contributed assets are to be valued at the fair market value of the asset at the time of donation, plus ancillary charges, if any. According to GASB 33, recipients of contributed (donated) assets must recognize capital asset contributions as revenues and not as contributed capital. The contributed asset and related revenue are to be recognized when the assets are received. To qualify as a capital asset, the fair market value of the contributed asset must exceed the City’s capitalization thresholds. For example, the donation of land to the City will be valued at its fair market value based on a current appraisal. This land will be recognized when the City takes possession of the land.

10.1.9

| Placed In Service

If a capital asset is substantially complete, all required certificates of completion/inspection (e.g. building inspection, safety inspection) are obtained, it is placed in service for its intended use, and the organization is receiving benefit of the asset, then the costs should be capitalized as a capital asset. If a capital project has multiple capital assets and each asset is placed in service at different times then capitalize each asset individually. Apply all the criteria mentioned earlier to each asset. Departments are to develop policies to address specific their needs.

10.1.10 | Ownership & Multiple Funding For significant capital projects, sometimes multiple and complex funding agreements (e.g., debt agreement, grant agreement, tax measures) help to finance capital project costs resulting in multiple assets (or shared ownership) with different owners. For instance, DPW, MTA and PUC all work on a large construction project that will result in new streets owned by DPW, public railways owned by MTA, and new sewers lines owned by PUC. The project code structure is particularly important if the departments involved issue separate audited financial statements. The expenses are to be recorded on the department funds (the fund type, fund, and sub-fund code combination) that own the construction in progress or capital asset at fiscal year-end. There will likely be multiple combinations of fund codes (the fund type, fund, and sub-fund code combination). During the initial project set up the underlying funding and budget of estimated revenues and appropriations are to be recorded and allocated on the departments books that own the assets.

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10.2 | Depreciation Capital assets are depreciated over their useful lives when they are placed in service, unless the asset is inexhaustible (e.g., land). Therefore the costs of an asset are recognized as depreciation expense over the useful life of the asset. The straight-line method is used to depreciate assets. Inexhaustible assets are not depreciated.

10.2.1

| Straight Line Depreciation Method

Under the straight-line depreciation method, the basis of the asset is written off evenly over the useful life of the asset. The same amount of depreciation is taken each year. In general, the amount of annual depreciation is determined by dividing an asset’s depreciable cost by its estimated useful life. For example, a $12,000 copier is placed in service on March 16, 2002. It has an estimated life of five years and a salvage value of $2,000. The depreciation calculation for the straight-line method would be: Historical Cost Less: Salvage value = Adjusted basis

$12,000 $(2,000) $10,000

Divide by estimated useful life = Depreciation per year

5 yrs. $ 2,000







Asset Cost or Historical Costs – As mentioned above, this includes the actual costs, not only of the goods and services, but also the cost of freight, site preparation, architect and engineering fees, etc. Salvage Value - The salvage value of an asset is the value it is expected to have when it is no longer useful for its intended purpose. In other words, the salvage value is the amount for which an asset could be sold at the end of its useful life. Estimated Useful Life - Estimated useful life means the estimated number of months or years that an asset will be able to be used for the purpose for which it was purchased.

10.2.2 | Depreciating an Asset that was not Purchased at the Beginning of a Fiscal Year To avoid the complications of depreciating each asset from the specific date on which it was placed in service, GAAP supports guidelines that assume various assets are placed in service or disposed of at designated dates throughout the year.

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There are three methods of calculating straight-line depreciation for capital assets: 1. The recording of no depreciation in the first year of operation in the asset; 2. The recording of depreciation excluding the first month of acquisition; 3. The half-year convention where half a year’s worth of depreciation is taken in the first year that the asset is placed in service. Departments are responsible for entering the appropriate depreciation indicator code in FAACS when a capital asset is initially recorded. The Public Utilities Commission’s enterprises and the Municipal Transportation Agency have adopted the first convention in which no depreciation is recorded in the year of acquisition. The Laguna Honda Hospital has adopted the third convention in which six months of depreciation is recorded in the year of acquisition and six months of depreciation is recorded in the year of disposition. For all other departments, depreciation is recorded from the month after the date in which the asset is placed in service.

10.2.3

| Amortization of Intangible Assets

Existing guidance for depreciation of capital assets generally applies to amortizing intangible assets.  

No factors currently exist that limit the useful life of the asset Intangible assets with indefinite useful lives should not be amortized.

10.2.4

| Department’s Monitoring Procedures

Departments are responsible for reviewing their respective depreciation entries for accuracy and reasonableness on a quarterly basis. Significant fluctuations in depreciation expense from period to period should be investigated to ascertain their nature and determine the reasonableness of the amount recorded. If changes have to be made to the capital asset variables (such as life of the asset or acquisition costs), the departments are responsible for updating FAACS on a timely basis to reflect these changes and maintaining supporting documentation for those changes. If the changes are significant, a copy of the support and effects of the changes should be provided to the Controller’s Office. Refer to the FAACS Manual for procedures on adjustments made in the initial year of acquisition. If the adjustments are detected subsequent to the year of acquisition, documentation of the change should be provided to the Controller's Office because the impact of the adjustment on depreciation expense recognized in previous years should be manually computed and a journal entry should be recorded to reflect the appropriate amount of accumulated depreciation.

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10.3 | Asset Management 10.3.1

| Inventory of Capital Assets

Departments are responsible for maintaining a system of control over their capital assets and ensuring that the physical location code of each asset is accurately recorded in FAACS. 10.3.1.1

| FIXED ASSETS INVENTORY GUIDELINES

Non-Federally Funded Property A physical inventory of all non-federally funded property and equipment should be taken and reconciled to the property and equipment records at least once every year. For artifacts and library resources, a perpetual inventory shall be maintained through a recognized cataloging system. Physical inventories should be conducted by personnel having no direct responsibility (custody and receipt/issue authority) for assets subject to the inventory count. Inventory Control over Federally-Funded Equipment A physical inventory of equipment acquired with federal funding shall be taken and reconciled to the equipment records at least once every two years in accordance with Office of Management and Budget (OMB) Uniform Circular Part 200.313. 10.3.1.2

| CONDUCTING PHYSICAL INVENTORY

Background In accordance with City policy governing capital assets, departments are to conduct periodic inspections of all property and equipment within their areas of responsibility, and reconcile those inventories with the property and equipment records. This section provides some basic guidelines to be followed when conducting those inspections. Initiate Project Planning Conduct a planning meeting with all key members of the inventory team and department personnel. Issues to be discussed during the meeting include:     

Reviewing the project scope Identifying specific properties to be included from the inventory Identifying specific properties to be excluded from the inventory Establishing time frames for completion of the entire project, as well as each phase of the project Identifying and specifying elements expected to be part of the final product (e.g., special reports, asset classes and codes, and tagging procedures)

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  

Establishing specific dollar amount cut-offs for items to be excluded or grouped into specified classes of assets Specifying types of tags and identification procedures, if tagging is to be utilized Maintaining the inventory through with manual or computer applications.

Develop a Detailed Project Plan Develop a detailed project plan that incorporates the above issues and includes the following:      

  

An internal budget of hours by task and individual assigned to the inventory A detailed task list that includes all steps necessary to conduct the inventory An example of the inventory forms being used to capture the capital asset data, and instructions as to the use of the forms A detailed description of the inventory tagging process to be employed during the performance of the physical inventory Maps and plot plans of areas to be included in the inventory A listing of all available information such as blueprints, drawings and plans, existing inventory listings, space utilization studies, contractor’s cost breakdowns for construction, recent purchase orders, and anything else that may be used in establishing actual costs A list of names, phone numbers, and e-mail addresses of key personnel that will be involved in the process Any special circumstances and procedures for the inventory including infrastructure valuation Specific work hours for the performance of the inventory process.

Obtain or Prepare Inventory Tags and a Tag Control Listing Obtain or prepare inventory tags to be affixed to assets once they have been inspected to prevent double counting of assets. The tags should be individually numbered in sequential order and the tag numbers should be summarized on a comprehensive tag control listing. Inventory tags should be affixed to all capital and moveable equipment once the necessary data is recorded on the form to signify that the asset was inspected. Assign Control Tags to Inspection Teams Assign the responsibility of maintaining control over the inventory tags to one individual. Tags should be assigned to the inspection teams in blocks and the tag numbers should be recorded on the tag control listing as each team receives a block of tags.

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Identify the Parcels of Land to Include in the Inventory Obtain a listing of land (by parcel) from the Assessor’s Office, which identifies the parcel number and/or lot, block and tract. Visually inspect the listing for completeness and accuracy, and document the identification or parcel number, year acquired, and cost or value. Conduct a Physical Inspection of Buildings and Building Improvements Conduct a physical inspection of all buildings and building improvements, and document the asset identification number, year acquired or constructed, location, and cost or value. The building inventory should include a quantitative description of each structure segregating basic building construction from heating, ventilation, air conditioning, roof elevators, plumbing, lighting, floor and ceiling cover, and other components not directly attributable to the construction itself. Conduct a Physical of Improvements other than Buildings Conduct a physical inspection of all improvements other than buildings, and document the asset identification number, year acquired or constructed, location, and cost or value. Improvements other than buildings include all improvements outside a building or improvements to a parcel of land. For paving, include total quantitative and qualitative amounts for the site including beams and parking lot striping. Fencing should be inventoried by total linear feet including gates by type of fence. Playground and picnic equipment should be inventoried. Concrete work should include sidewalks and flatwork with curbs inventoried separately. Plumbing for sites should include drainage, irrigation, drinking fountains, hose bibs, and on-site sewer. Area lighting should be inventoried separately. Conduct a Physical Inspection of Moveable and Capital Equipment Conduct a physical inspection of all moveable and capital equipment ensuring to affix an inventory tag on each asset once it has been inspected to prevent double counting. The area to be inspected should be segregated into specific quadrants and inspection teams should be assigned to each individual quadrant. Each inspection team should document the asset description, quantity, manufacturer, model number, serial number, year acquired (if known), specific location of the asset such as the building and floor in which the asset is maintained, and the tag number that is affixed to the asset. Once the physical inspection of the capital and moveable equipment is completed in each quadrant, have someone tour the location to ensure that each applicable asset has been properly tagged signifying that it has been inspected. Account for Inventory Tags Used during Inspection Reconcile the used (based on the tag numbers listed on the inventory forms) and unused tags to the tag control listing to ensure that all tags can be properly accounted for. Missing tags should be investigated and located.

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10.3.1.3

| RECONCILIATION

Reconciliation and Action on the Results of the Physical Inventory In order to ensure objective reporting and reconciliation of inventory items, physical inventories should be performed by personnel having no direct responsibility (custody and receipt/issue authority) for assets subject to the inventory count. During a physical inventory, discrepancies might arise as a result of the physical inventory. Reconciliation is the process of identifying, explaining and correcting the differences occurring between the physical count and the inventory records.  



A search of the inventory lists should be made to determine whether inventory listed as unrecorded is not listed on another portion of the inventory. Unrecorded inventory should be recorded into the inventory system as soon as possible. If a significant number of unrecorded assets are discovered, the inventory officer should determine why this problem is occurring. For assets not located, a search should be conducted in an effort to locate missing assets. The search should include research on transfers to other divisions, scrapping, etc. When the asset is deemed lost, it shall be removed from the inventory and accounting records. In addition, records of this loss shall be maintained in accordance with record retention rules.

After the inventory is reconciled, the inventory officer is to certify the reconciliation with a statement and signature indicating his inventory is complete. A copy of this is to be forwarded to the Department Head as well as the Controller's Office within 30 days of the physical inventory. The department will then have 60 days to respond to the results of the inventory (if discrepancies are noted). Inventory Recounts Inventory recounts should be performed for all significant unreconciled differences to ensure that the discrepancy between the inventory of capital assets and the records does in fact exist. Both the inventory taker and the department representative are to sign the reconciliation statement indicating their consent to the results. A copy of this report is to be forwarded to the Controller's Office within 60 days. The department will then be required to fill out a Capital Asset Change Form (TO INSERT FIGURE) indicating the assets as lost, stolen, damaged (and should therefore be retired) or destroyed based on the inventory results.

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10.3.2

| Disposal of Fixed Assets

Any item that is sold, traded-in, scrapped, abandoned, or otherwise removed from service during any given reporting period is classified as a disposal. Dispositions are not budgeted, however, replacement equipment for equipment that has been disposed is budgeted and marked with an “R” for replacement equipment on the budget documents. 





Sale - When an asset is sold to another entity, a gain or loss must be recognized when the proceeds do not equal the net book value of the asset. This gain or loss is classified as other income for financial reporting purposes. Exchange or Trade-in - When an asset is exchanged or traded-in for like equipment, the difference between the cost and the accumulated depreciation (net book value) should be added to the cash outlay of the new asset. Lost or Stolen - For assets that are listed as missing (lost/stolen), the accounting personnel responsible for capital assets will prepare a capital asset report listing the missing items. The personnel will document all efforts made to locate the missing assets. This missing capital asset report listing will be reviewed by the Department Head on a periodic basis. Items will remain on the listing for a period of one year.

FAACS (Fixed Assets and Accounting Control System) shall be updated on a regular basis to reflect all asset disposals that occurred. Various methods include the following:      



 

Cannibalized: Where parts of an asset to be disposed are used in rehabilitating another capital asset. Donated: Where an item is donated usually to charity (this is typically performed by the purchasing department). Recycled: Where an item is delivered to a recycling facility. Traded-in: Where an asset is exchanged for an asset of similar nature with a manufacturer. This usually occurs when the asset is under warranty. Junked: Where an asset is literally discarded because it has not remaining life. Reverse acquired: Where an asset is reversed from FAACS and then subsequently re-input. This could be due to errors in the initial input of the asset. This is only permitted in the first year of acquisition of an asset. Sold: When an asset is to be sold, the purchasing department signs a “Surplus Turn-in” equipment form indicating receipt of the capital asset to be sold. This form is to be kept together with the asset transfer form as support. Lost/Stolen: Items that simply cannot be located. If any capital asset item is identified as stolen, the employee discovering the theft must report the theft to his/her supervisor as soon as possible. Destroyed: This usually applies to items destroyed due to such occurrences as fires, floods, or earthquakes.

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All assets that are retired/disposed of in any way require a FAACS Retired/ Disposed Assets Form (Figure 10-5) that provides justification of the change indicated (e.g., sold, donated, stolen, lost, destroyed/damaged, traded in, or written off). Approval from a Department Head is required in instances of an asset being lost, stolen, destroyed/damaged. FIGURE 10-5. FAACS RETIRED/DISPOSED ASSETS FORM

In cases where assets are disposed of prior to full depreciation, departments must work with the Controller’s Office FAACS Unit to as closely as possible reflect depreciation over the service life of the asset. Disposing Federal/Grant-Funded Assets For all dispositions involving federally funded assets, the project grants finance personnel must first ascertain if there are specific grant requirements surrounding the disposition of capital assets. Typically, in the event that an asset to be disposed of has a fair market value in excess of $5,000, the department must report the disposal to the federal agency that provided the initial funding.

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In some instances, departments may be required to remit some or all of the cash proceeds received from the disposition of assets acquired with federal funding to the federal agency involved. Refer to the individual grant agreements for specific guidance on federal requirements governing the disposition of federally funded assets. FIGURE 10-6. SAMPLE FIXED ASSET DISPOSAL PROCESS FLOW (SFMTA)* SFMTA FIXED ASSET DISPOSAL

Agency needs to dispose of an asset

Create/Submit Surplus Turn-in Form to Accounting

Asset Class Determines Workflow

Non-Vehicle

Fully depreciated?

No

Has federal funding?

Yes

Calculate Federal funding interest and seek FTA approval

Vehicle No Yes

Fully depreciated?

Yes

Asset is now inactive; write off balance if less than $5K

FTA Approval received

Asset is now inactive; forward form to City Zero Waste Associate Approve

No

Asset is now inactive; forward form to City Zero Waste Associate Calculate Federal funding interest and seek FTA approval

FTA Approval received

Asset is now inactive; forward approved form to Central Shops

10.3.3

| Transferring Fixed Assets

Transfers are defined as the physical relocation of a capital asset, either by account, department, building, floor, or room. A transfer may be a complete transfer or a partial transfer of an item. This is particularly useful for those pieces of equipment that have multiple parts such as computers, where only certain pieces are changed frequently. Desktop computer equipment shall be treated as a single unit (e.g., monitor, keyboard, tower, and any other peripheral equipment such as external disk drives). As such, the mere act of exchanging one keyboard for another does not constitute a transfer of an asset. Only in those cases in which the complete desktop computer (meeting the equipment threshold definition) is physically relocated, shall an asset transfer form be completed, and an entry made in the capital asset system.

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Intra-Department Transfer An intra-department transfer is a change in physical location of an asset while remaining within the same department. Individual City departments are responsible for tracking their capital assets and ensuring that the FAACS location codes accurately reflect the location of each asset. All transfers of capital assets are required to be documented. The FAACS Input Form (Figure 10-7) is to be used for this purpose with the explanation of the transfer. The completed form must be approved by the Department Head or designee. A copy of the approved form is kept by the property manager. An example of an intradepartmental transfer would be moving a bus from one MUNI facility to another. The departments must provide a copy of the approved form to the Controller's Office FAACS Administrator of any intradepartment transfers. FIGURE 10-7. FAACS INPUT FORM

Inter-Department Transfer An inter-department transfer is the movement of an asset between departments. Transferring an asset between departments requires that both the location and department code be updated in FAACS. All inter-department transfers must be documented using the FAACS Input Form with a complete explanation of the transfer. The form must be approved by the Department Heads or their designees for both the

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transferring and receiving departments and delivered to the Controller’s Office. These transfers will result in a transfer in and transfer out on the City-wide Comprehensive Annual Financial Report. FIGURE 10-8. INTER-DEPARTMENTAL TRANSFER PROCESS FLOW*

Approved Transfer form received

Fixed Asset Accountant updates Screen FACL 4360

Fixed Asset Supervisor reviews Screen FACL 4360 and signs off on transfer form

Transfer is complete

10.4 | Capital Assets Impairment Authoritative accounting standards define an asset impairment as “a significant and unexpected decline in the service utility of a capital asset.” Prominent events or changes in circumstances affecting capital assets include evidence of physical damage, enactment or approval of laws or regulations or other changes in environmental factors, technological changes or evidence of obsolescence, changes in the manner or duration of use of a capital asset, and construction stoppage.

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Authoritative Literature 





GASB 42 - Accounting & Reporting for Impairment of Capital Assets and Insurance Recoveries provides guidance on quantifying losses against the capital asset and how to record the related loss and partial/whole asset write-off. Insurance Recovery - An insurance recovery associated with events or changes in circumstances resulting in impairment of a capital asset should be netted with the impairment loss. Restoration or replacement of the capital asset using the insurance recovery should be reported as a separate transaction. Insurance recoveries should be disclosed if not apparent from the face of the financial statements. GASB 34 Basic Financial Statements and Management’s Discussion and Analysis - for State and Local Governments (paragraphs 41 through 46, 55, 56, 101, and 102) provides guidance for the reporting of impairments. Also, refer to paragraphs 19 through 24 of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. If not otherwise apparent from the face of the financial statements, the description, amount, and financial statement classification of impairment losses should be disclosed in the notes to the financial statements. If evidence is available to demonstrate that the impairment will be temporary, the capital asset should not be written down. Impaired capital assets that are idle should be disclosed, regardless of whether the impairment is considered permanent or temporary.

10.5 | Repor ting The City & County of San Francisco values fixed assets based on historical cost plus any other charges associated with placing the asset into service. Donated fixed assets are recorded at estimated fair market value at the date of donation. The City’s fixed assets are recorded in the Fixed Assets Accounting and Control System (FAACS), an interactive, real-time asset management system. They are accounted for in the General City’s Fixed Assets Fund (97FASFAC). Fixed assets are reported in the City’s Comprehensive Annual Financial Report (CAFR) and are reported by major classes such as Land, Construction-in-Progress, Facilities and Improvements, Machinery and Equipment, Easements and Infrastructure. Refer to the City’s CAFR reports in the following link: http://sfController.org/index.aspx?page=118. The Controller’s Office is responsible for preparing the CAFR and verifies all contents included in this report.

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10.5.1

| Government-wide Financial Statements & Accrual Basis Accounting

Depreciation expense is included in expenses on the Statement of Activities, but not on a separate line item. Capital assets that were depreciated are reported net of accumulated depreciation on the Statement of Net Position. Land and other inexhaustible assets are included with Construction in Progress as Capital Assets not being depreciated as a separate line item on the Statement of Net Position. Ending Net Position is decreased by depreciation expense and increased by capital assets. Unspent debt proceeds from capital assets related debt should be reported in the Net Position section of the Statement of Net Position as ”Restricted for capital projects”.

10.5.2 | Governmental Fund Financial Statements & Modified Accrual Basis Accounting When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds, i.e., public protection; public works, transportation and commerce, etc. and a decrease in cash. As a result, fund balance decreases by the amount of financial resources expended.

10.6 | Fixed Asset Year -End Process [DISPOSAL OF ASSETS AT YEAR-END]

10.7 | Fixed Assets Frequently Asked Questions Ownership of Asset & Funding Q: If the capital project will be divided into multiple assets and different departments will own the asset how should we structure the project code? A: The budget and actual revenues and expenses should be recorded on the department that will ultimately own the asset. This is particularly important if either department has separately issued financial statements (e.g. PUC, MTA, Airport, Port, General Hospital, Laguna Honda, etc.). As there are a few approaches consult with your Fund Accountant. One approach is to utilize the project details codes to distinguish costs charged against each department. For instance, if a capital project will result in two assets one owned by MTA and the other owned by DPW, create project detail codes such as CENTRN_MTAX, CENTRN_DPWX. Charge the costs associated with the portion MTA will own to CENTRN_MTAX and the costs associated with the portion DPW will own to CENTRN_DPWX. Quarterly or semi-annually costs are to be reviewed and allocated properly between the two project detail codes.

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Even if the exact ownership split of the asset or costs between the two departments is a bit unclear at the outset, it is recommended that this approach be implemented rather than charging all costs to a single project code and then allocating costs between two departments at the completion of the project.

Q: What if the funding for a project has not been approved, yet charges have already been incurred? A: Charging capital costs against the operating budget or to another project is not authorized by the Annual Appropriation Ordinance.

Capitalize or Expense Q: If a commission resolution, ordinance or statute states that a percentage of staff time is to be charged as overhead to a capital project, but it is unclear if the costs directly relate to the project can staff time can I charge as capital project overhead? A: US GAAP and other accounting literature determine what costs can be included in CIP and eventually capitalized as a capital asset. All overhead costs should directly contribute to the capital project itself and be supported with clear documentation.

Q: Do I capitalize an inventory item as a capital asset if it meets the capitalization threshold? A: Generally not, as inventory items are not expected to have a useful life of more than 1 year.

Q: Can training cost be capitalized? A: As stated in GAAFR Chapter 25, published 2012 the costs of a capital asset should include ancillary charges necessary to place the asset into its intended location and condition for use. The focus is on readiness of the capital asset itself, not its user(s). Accordingly, training on how to use a capital asset is not itself a capitalizable cost?

Q: Can I take advantage of bond proceeds issued for capital improvements and charge maintenance and repair costs against the capital budget? A: Normal maintenance and repair costs are not to be charged to the capital budget and are to be expensed rather than capitalized.

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Q: We have installed an HVAC system as part of the construction of a building. Should the estimated useful life of the HVAC system follow the building or a shorter useful life reflecting the estimated life of the building? A: Record shorter-lived component pieces as a separate capital asset. For instance, discrete portions such as a HVAC system will have substantially shorter estimated useful life than the building itself.

Q: Can I include employee travel for out of the country sewer site visits to another sewer plant in preparation for the upcoming Sewer Capital Improvement Plan? A: Generally not, as there needs to be written documentation and tangible evidence justifying how such a trip directly contributed to the capital asset(s) itself. There may be exceptions for unique situations.

Capital Asset Additions Q: What is considered an addition to an existing capital asset? A: See Addition in Section 10.1.4 Capital Asset Process Overview - In the context of accounting an addition is an issue of capitalizing significant costs incurred subsequent to the original placed in service date. The accounting issue is the matching principle and to determine if the costs should be recognized through depreciation. If the worked performed increases the estimated useful life at least 25% or if the costs incurred is at least 25% of the original costs of the asset then the related costs are to be capitalized. Departments can further define capital additions to address their specific needs. For instance, the Department of Public Works may further define a street addition as one that requires not only hard construction costs, but also significant design and planning.

Damaged Capital Assets Q: If a capital asset has been damaged significantly and it appears it will not last as long as originally expected, do I change the estimated useful life? A: Refer to GASB 42 - Accounting & Reporting for Impairment of Capital Assets and Insurance Recoveries. This appears to be loss impairment, in which case there will be a write down of the asset value and a loss recorded.

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Appraisals for Real Property Q: When we purchase or exchange real property is an appraisal required? A: Yes. Appraisals are required to ensure the land is being recorded at “fair market value”.

Capital Projects Tracked in FAMIS Q: How are capital projects with construction costs accumulated and tracked in FAMIS? As a project manager how can I review these costs? A: Construction projects are identified in FAMIS as “C” capital project types. FAMIS tracks all project costs on a monthly, quarterly, year-to-date, and all-years basis. It also displays budgeted costs versus actual costs to date. Project managers should review costs charged to a project on at least a monthly basis to insure that the charges are appropriate and capital in nature. They should monitor the actual costs for their projects against budgets to control project costs by phase and gauge the progress of the project against set timelines. Project managers are typically aware of a project’s completion status and prepare a project status report that lists projects and the estimated start and completion dates of each project phase. A copy of the project status report is provided to the accounting/finance personnel so that they may summarize the total costs to each project. See “Placing Constructed Assets in Service” below for completed projects.

Finance Corporation CIP Q: How are vendors paid for Finance Corporation capital projects? A: If the CIP project is financed by the Finance Corporation, the bank pays the vendor separately for the Finance Corp. Therefore, the Office of Finance, on behalf of the Finance Corp., provides the payment information to the Controller's Office to book the CIP entry into FAACS. A separate funding source and index code are used for the Finance Corp. In some cases, the department may have purchased the asset and was reimbursed by the Finance Corp. The corresponding voucher that purchased the asset should not be posted by the department into FAACS. The Finance Corp. and/or the department should notify the Controller's Office to post an alternate entry into FAACS

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Department Capital Asset Policies Q: Should departments develop specific policies and procedures to ensure an asset is placed in service before capitalizing an asset? A: Yes. Departments should to develop policies to address specific their needs within the framework of the Controller’s Capital Asset policy. For instance, constructing a water or power utility plant falls under specific federal, state, or local jurisdictions and require specific safety inspections and certificates of completion that construction of an airport terminal would not.

10.8 | Elaboration of Key Fixed Assets Terms 10.8.1

| Building (Including Improvements or Betterments)

Building Definition A building is a structure that is permanently attached to the land, has a roof, is partially or completely enclosed by walls, and is not intended to be transportable or moveable. Buildings should be recorded at either their acquisition cost or construction cost. The cost of new construction should be carefully evaluated. Usually projects consist of major components such as land, land improvements, building construction (including professional fees and permits), furniture, fixtures, and equipment. In addition, buildings include components (e.g., roof, air conditioner system, etc.) that should be recorded separately when significant because these building components have different useful lives. The value of each component needs to be determined and placed within its own category. Building Improvement Definition Building improvements are capital events that materially extend the useful life of a building or increase the value of a building, or both. A building improvement should be capitalized as a betterment and recorded as an addition of value to an existing building if the expenditure for the improvement is at the capitalization threshold, or the expenditure increases the life or value of the building by 25 percent of the original life period or cost. For a replacement to be capitalized, it must be a part of a major repair or rehabilitation project, which increases the value, and/or useful life of the building, such as the renovation of a health center. A replacement may also be capitalized if the new item/part is of significantly improved quality and higher value compared to the old item/part such as replacement of an old shingle roof with a new fireproof tile roof. Replacement or restoration to original utility level would not qualify. Determinations must be made on a case-by-case basis. Examples of building improvements:

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                         

Roofing projects Major energy conservation projects Remodeling or replacing major building components Conversion of attics, basements, etc., to usable office, clinic, or research space Structures attached to the building such as covered garages, enclosed stairwells, etc. Installation or upgrade of heating and cooling systems, including ceiling fans and attic vents Original installation/upgrade of wall or ceiling covering such as carpeting, tiles, paneling, or parquet Structural changes such as reinforcement of floors or walls, installation or replacement of beams, rafters, joists, steel grids, or other interior framing Installation or upgrade of window or door frame, upgrading of windows, built-in closets and cabinets Interior renovation associated with casings, baseboards, light fixtures, ceiling trim, etc. Exterior renovation such as installation or replacement of siding, roofing, masonry, etc. Installation or upgrade of plumbing and electrical wiring Installation or upgrade of phone or closed circuit television systems, networks, fiber optic cable, wiring required in the installation of equipment (that will remain in the building) Other costs associated with the above improvements Fencing and gates, Parking lots/driveways/parking barriers Outside sprinkler systems Recreation areas and athletic fields (including bleachers) Golf courses Paths and trails Septic systems Stadiums Swimming pools, tennis courts, basketball courts Fountains Plazas and pavilions Retaining walls

10.8.2

| Land

Land Definition Land is the surface or crust of the earth, which can be used to support structures, and may be used to grow grass, shrubs, and trees. Land is characterized as having an unlimited life (indefinite).

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Land is always capitalized as a separate capital asset in its own right, even if it is closely associates with some other capital asset. The land under a building or highway must be classified as land rather than included as part of the costs of the building or highway. The amount capitalized as land should include any land preparation costs that will have an indefinite useful life. Examples include basic site improvements (e.g. excavation, fill, grading) as well as the costs of relocating or reconstructing any property belonging to others that needs to be removed from the site (such as the costs of moving power lines). Certain legal rights are presumed to be inherent in the ownership of land, even though they sometimes exist separately (e.g. mineral rights). Legal rights associated with the land are reported as a separate asset only if they are acquired separately. Land normally is not depreciated because it has an indefinite useful life. The particular use to which land is put, however, can effectively limit its useful life (e.g., land used as a site for the disposal of toxic waste), which would require the use of depreciation accounting. If so, the land being depreciated would need to be included in some other major asset class that reported depreciable assets (other capital assets).

10.8.3

| Improvements Other than Buildings (i.e., Exhaustible Land Improvements)

Governments classify permanent (non-movable) improvements to land that have a limited useful life as improvements other than buildings (or land improvements). These are also known as exhaustible land improvements. Examples include parking lots, landscaping, and fencing, are usually exhaustible and are therefore depreciable. Depreciation of site improvements is necessary if the improvement is exhaustible. All acquisitions of land and land improvements will be capitalized. Examples of expenditures to be capitalized as land or improvements other than buildings:     

   

Purchase price or fair market value at time of gift Commissions Professional fees (title searches, architect, legal, engineering, appraisal, surveying, environmental assessments, etc.) Land excavation, fill, grading, drainage Demolition costs of existing buildings and improvements (less salvage) on land purchased with the intent to demolish and rebuild will be included in the cost of the land. (Please note that demolition costs related to assets already placed in service should be expensed). Removal, relocation, or reconstruction of property of others (railroad, telephone, and power lines) Interest on mortgages accrued at date of purchase Accrued and unpaid taxes at date of purchase Other costs incurred in acquiring the land Page 327

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Water wells (includes initial cost for drilling, the pump and its casing)

10.8.4

| Maintenance & Repairs Expense

The following are examples of expenditures NOT to capitalize as improvements to buildings. Instead, these items should be recorded as maintenance and repairs expense.         



Adding, removing and/or moving walls relating to renovation projects that are not considered major rehabilitation projects and do not increase the value of the building Improvement projects of minimal or no added life expectancy and/or value to the building Plumbing or electrical repairs Cleaning, pest extermination, or other periodic maintenance Interior decorations such as draperies, blinds, curtain rods, wallpaper, etc. Exterior decoration such as detachable awnings, uncovered porches, decorative fences Maintenance-type interior renovation such as repainting, touch-up plastering, replacement of carpet, tile, or panel sections; sink and fixture refinishing, etc. Maintenance-type exterior renovation such as repainting, replacement of deteriorated siding, roof, or masonry sections Replacement of a part or component of a building with a new part of the same type and performance capabilities, such as replacement of an old boiler with a new one of the same type and performance capabilities Any other maintenance-related expenditure which does not increase the value of the building

10.9 | Chapter 56 Developer Agreement* 10.9.1

| Overview

Chapter 56 Developer Agreements (DA) are contracts entered into by the City and a developer to expressly define a development project’s rules, regulations, commitments, and policies for a specific period of time. The purpose of DAs is to strengthen the public planning process by encouraging private participation to achieve comprehensive planning goals and reduce the economic costs of development. Current/Active DAs are on OEWD’s development website that can be found here: http://www.oewd.org/index.aspx?page=41. DAs that were active as of January 2014 included:    

Candlestick / Hunter’s Point CPMC Mission Bay Parkmerced

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 

Treasure Island Trinity Plaza

Type of DAs Each DA contains dozens, and in some cases hundreds, of requirements for the City and developers. Because each DA is negotiated on a case-by-case basis, the nature, timing, and extent of the requirements may vary greatly. DAs are typically effective for extended periods of time (10-30 years). 



Project is a private undertaking The development proposed to be undertaken by Developer on the Project site is a private development. The City has no interest in, responsibility for, or duty to third persons concerning any of said improvements. Developer shall exercise full dominion and control over the Project Site, subject only to the limitations and obligations of the Developer contained in this Agreement. Examples are CPMC project and the proposed 5M project Public private partnership or joint venture The City enters into a development agreement with any person having a legal or equitable interest in real property related to the development of such property. Examples are Park Merced and Visitation Valley projects

Mandatory DA contents Mandatory DA contents per Administrative Code Chapter 56 include:        

the duration of the agreement the permitted uses of the property the density or intensity of use the maximum height and size of proposed buildings the provisions for reservation or dedication of land for public purposes for any project proposing housing, the number, type, affordability and tenure of such housing the public benefits which would exceed those required by existing ordinances and regulations nondiscrimination and affirmative action provisions

DA benefits received by the City The City receives:  

Impact fees and exactions (standard fees, project-specific fees) Cost recoveries for departments (including Contract Monitoring Division (CMD), City Attorney, SFMTA, DPW, PUC, Rec & Park). City departments provide quarterly invoices to OEWD, due by the 20th of the month following the end of a quarter. OEWD issues a consolidated City invoice for

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all services incurred to the relevant Developer. Upon receipt of payment from the Developer, OEWD remits payment to the City department Community benefits (including public improvements/infrastructure, easements, buildings, public art, monetary payment)

10.9.1.1

| PERMIT & PROJECT TRACKING SYSTEM (PPTS)

The City maintains PPTS to house and report on DA requirements. Training sessions for City users who need access to the system will be provided [MORE HERE]. The following Figures provide screen shots of PPTS. FIGURE 10-9. PPTS SCREEN 1

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FIGURE 10-10. PPTS SCREEN 2

10.9.2

| Administrative Code – Chapter 56: Developer Agreements

10.9.2.1

| SECTION 56.1 – FINDINGS

The Board of Supervisors ("Board") concurs with the State Legislature in finding that: (a) The lack of certainty in the approval of development projects can result in a waste of resources, escalate the cost of housing and other development to the consumer, and discourage investment in and commitment to comprehensive planning and development of infrastructure and public facilities which would make maximum efficient utilization of resources at the least economic cost to the public. (b) Assurance to the applicant/developer for a development project that upon approval of the project, the applicant/developer may proceed with the project in accordance with specified policies, rules and regulations, and subject to conditions of approval, will strengthen the public planning process, encourage private participation in comprehensive planning, and reduce the economic costs of development. 10.9.2.2

| SECTION 56.2 – PURPOSE & APPLICABILITY

(a) The purpose of this Chapter is to strengthen the public planning process by encouraging private participation in the achievement of comprehensive planning goals and reducing the economic costs of development. A development agreement reduces the risks associated with development, thereby enhancing the City's ability to obtain public benefits beyond those achievable through existing ordinances and regulations. To accomplish this purpose the procedures, requirements and other provisions of this Page 331

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Chapter are necessary to promote orderly growth and development (such as, where applicable and appropriate, provision of housing, employment and small business opportunities to all segments of the community including low income persons, minorities and women), to ensure provision for adequate public services and facilities at the least economic cost to the public, and to ensure community participation in determining an equitable distribution of the benefits and costs associated with development. (b) Such agreements shall only be used for (1) affordable housing developments or (2) large multiphase and/or mixed-use developments involving public improvements, services, or facilities installations, requiring several years to complete, as defined below in Section 56.3, or a housing development with a minimum of 1,000 units, as defined below in Section 56.3; or (3) rental housing developments with on-site affordable units, as defined below in Section 56.3. 10.9.2.3

| SECTION 56.3 - DEFINITIONS

The following definitions shall apply for purposes of this Chapter: (a) "Affordable housing development" shall mean for purposes of Section 56.2(b)(1), any housing development which has a minimum of 30 percent of its units affordable to low income households, and a total of 60 percent of its units affordable to households, as defined by the U.S. Census, whose immediate household income does not exceed 120 percent of the median household income for the San Francisco Primary Metropolitan Statistical Area, with the remaining 40 percent of its units unrestricted as to affordability. For purposes of this definition of "affordable housing development," "low income" shall mean the income of households, as defined by the U.S. Census whose immediate household income does not exceed 80 percent of the median household income for the San Francisco Primary Metropolitan Statistical Area. "Median household income" for the San Francisco Primary Metropolitan Statistical Area shall be as determined by the U.S. Department of Housing and Urban Development and adjusted according to the determination of that Department and published from time to time. In the event that such income determinations are no longer published by the Department of Housing and Urban Development, median household income shall mean the median gross yearly income of a household in the City and County of San Francisco, adjusted for household size, as published periodically by the California Department of Housing and Community Development. Such affordable housing development may include neighborhood commercial facilities which are physically and financially an integral part of the affordable housing project and which will provide services to local residents. (b) "Applicant/Developer" shall mean a person or entity who has legal or equitable interest in the real property which is the subject of the proposed or executed development agreement for an "affordable housing development" or a "large multi-phase and/or mixed-use development," as those terms are defined herein, or such person's or entity's authorized agent or successor in interest; provided, however, that an entity which is subject to the requirements of City Planning Code Section 304.5 relating to institutional master plans does not qualify as an applicant for a development agreement.

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(c) "Collateral agreement" shall mean a written contract entered into by the applicant/developer and/or governmental agencies with other entities (including, but not limited to, community coalitions) for the purpose of having said entities provide for and implement social, economic, or environmental benefits or programs; provided, however, that such term does not include agreements between the applicant/developer or governmental agencies and (1) construction contractors and subcontractors, (2) construction managers, (3) material suppliers, and (4) architects, engineers, and lawyers for customary architectural, engineering or legal services. (d)

"Commission" shall mean the Planning Commission.

(e)

"Director" shall mean the Director of the Planning Department.

(f) "Housing development with a minimum of 1,000 units" shall mean a proposed residential development project which: (1) is on a site which exceeds two and one-half acres in area, (2) includes two or more buildings to be constructed on the site, and (3) includes a proposal for constructing or participating in providing, either off-site or on-site, public improvements, facilities, or services beyond those achievable through existing ordinances and regulations. (g) "Large multi-phase and/or mixed-use development" shall mean a proposed development project which: (1) is on a site which exceeds five acres in area, (2) includes two or more buildings to be constructed sequentially on the site, and (3) includes a proposal for constructing or participating in providing, either off-site or on-site, public improvements, facilities, or services beyond those achievable through existing ordinances and regulations. (h) "Material modification" shall mean any proposed amendment or modification to either a proposed development agreement approved by the Commission, or a previously executed development agreement, which amendment or modification is otherwise required by the terms of the development agreement, which changes any provision thereof regarding the following: (1) duration of the agreement; (2) permitted uses of the subject property; (3) density or intensity of the permitted uses; (4) location, height or size of any structures, buildings, or major features; (5) reservation or dedication of land; (6) any conditions, terms, restrictions and requirements relating to subsequent discretionary actions as to design, improvements, construction standards and specifications; (7) any other condition or covenant relating to the financing or phasing of the development which substantially modifies the use of the property, the phasing of the development, or the consideration exchanged between the parties as recited in the proposed development agreement; (8) the type, number, affordability level, and/or tenure of any proposed affordable housing as well as any change as to performance of such public benefits, including but not limited to timing, phasing, method of performance or parties involved; or (9) any other terms or conditions of the development agreement if the development agreement provides that amendment of said specified term or condition would be a material modification. (i) "Minor modification" shall mean any amendment or modification to the development agreement which relates to any provision not deemed to be a "material modification."

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(j) "Rental housing developments with on-site affordable units" shall mean a proposed residential development project the project sponsor of which covenants to provide on-site units to satisfy the Inclusionary Affordable Housing Program, as set forth in Planning Code Sections 415—417, as an alternative to payment of the Affordable Housing Fee. 10.9.2.4

| SECTION 56.4 – FILING OF APPLICATION; FORMS; INITIAL NOTICE & HEARING

(a) The Director may prescribe the form of the application for the preparation and implementation of development agreements. (b) The applicant must list on the application the anticipated public benefits which would exceed those required by existing ordinances and regulations. The public benefits ultimately provided by an approved development agreement may differ from those initially identified by the applicant/developer. The Director may require an applicant/developer to submit such additional information and supporting data as the Director considers necessary to process the application; provided, however, that the Director shall not require the applicant/developer to submit, as part of the application, special studies or analyses which the Director would customarily obtain through the environmental review process. (c) The Director shall endorse the application the date it is received. If the Director finds that the application is complete, the Director shall (1) accept the application for filing, (2) publish notice in the official newspaper of acceptance of said application, (3) make the application publicly available, and (4) schedule a public hearing before the Commission within 30 days following receipt of a completed application. At said public hearing, the Director shall make a recommendation with respect to the fee to be paid by the applicant/developer as set forth in Section 56.20(b). 10.9.2.5

| SECTION 56.5 – FORM OF AGREEMENT

A proposed development agreement, and any modifications or amendments thereto, must be approved as to form by the City Attorney prior to any action by the Director, Commission or Board of Supervisors. 10.9.2.6

| SECTION 56.7 – CONTENTS OF DEVELOPMENT AGREEMENT

(a) Mandatory Contents. A development agreement, by its express terms or by reference to other documents, shall specify (1) the duration of the agreement, (2), the permitted uses of the property, (3) the density or intensity of use, (4) the maximum height and size of proposed buildings, (5) the provisions for reservation or dedication of land for public purposes, (6) for any project proposing housing, the number, type, affordability and tenure of such housing, (7) the public benefits which would exceed those required by existing ordinances and regulations, and (8) nondiscrimination and affirmative action provisions as provided in subsection (c) below. (b) Permitted Contents. The development agreement may (1) include conditions, terms, restrictions, and requirements for subsequent discretionary actions, (2) provide that construction shall be commenced within a specified time and that the project or any phase thereof be completed within a specified time, (3)

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include terms and conditions relating to applicant/developer and/or City financing or necessary public facilities and subsequent reimbursement by other private party beneficiaries, (4) require compliance with specified terms or conditions of any collateral agreements pursuant to Section 56.11, and (5) include any other terms or conditions deemed appropriate in light of the facts and circumstances. (c)

Nondiscrimination/Affirmative Action Requirements. (1) Nondiscrimination Provisions of the Development Agreement. The development agreement shall include provisions obligating the applicant/developer not to discriminate on the grounds, or because of, race, color, creed, national origin, ancestry, age, sex, sexual orientation, disability or Acquired Immune Deficiency Syndrome or AIDS Related Condition (AIDS/ARC), against any employee of, or applicant for employment with the applicant/developer or against any bidder or contractor for public works or improvements, or for a franchise, concession or lease of property, or for goods or services or supplies to be purchased by applicant/developer. The development agreement shall require that a similar provision be included in all subordinate agreements let, awarded, negotiated or entered into by the applicant/developer for the purpose of implementing the development agreement. (2) Affirmative Action Program. The development agreement shall include a detailed affirmative action and employment and training program (including without limitation, programs relating to women, minority and locally-owned business enterprises), containing goals and timetables and a program for implementation of the affirmative action program. For example, programs such as the following may be included: (i) Apprenticeship where approved programs are functioning, and other on-the-job training for a non-apprenticeable occupation; (ii)

Classroom preparation for the job when not apprenticeable;

(iii)

Pre-apprenticeship education and preparation;

(iv)

Upgrading training and opportunities;

(v)

The entry of qualified women and minority journeymen into the industry; and

(vi) Encouraging the use of contractors, subcontractors and suppliers of all ethnic groups, and encouraging the full and equitable participation of minority and women business enterprises and local businesses (as defined in Section 12D of this Code and implementing regulations) in the provision of goods and services on a contractual basis. (3) Reporting and Monitoring. The development agreement shall specify a reporting and monitoring process to ensure compliance with the non-discrimination and affirmative action requirements. The reporting and monitoring process shall include, but not be limited to, requirements that:

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(i) A compliance monitor who is not an agent or employee of the applicant/developer be designated to report to the Director regarding the applicant/developer's compliance with the nondiscrimination and affirmative action requirements; (ii) The applicant/developer permit the compliance monitor or the Director or his designee reasonable access to pertinent employment and contracting records, and other pertinent data and records, as specified in the Development Agreement for the purpose of ascertaining compliance with the nondiscrimination and affirmative action provisions of the development agreement; (iii) The applicant/developer annually file a compliance report with the compliance monitor and the Director detailing performance pursuant to its affirmative action program, and the compliance monitor annually reports its findings to the Director; such reports shall be included in and subject to the periodic review procedure set forth in Sec. 56.17. 10.9.2.7

| SECTION 56.8 - NOTICE

The Director shall give notice of intention to consider adoption, amendment, modification, or termination of a development agreement for each public hearing required to be held by the Commission under this Chapter. The Clerk of the Board of Supervisors shall give such notice for each public hearing required to be held by the Board of Supervisors. Such notices shall be in addition to any other notice as may be required by law for other actions to be considered concurrently with the development agreement. (a)

Form of Notice. (1)

The time and place of the hearing;

(2) A general summary of the terms of the proposed development agreement or amendment to be considered, including a general description of the area affected, and the public benefits to be provided; and (3) Other information which the Director, or Clerk of the Board of Supervisors, considers necessary or desirable. (b)

Time and Manner of Notice. (1) Publication and Mailing. Notice of hearing shall be provided in the same manner as that required in City Planning Code Section 306.3 for amendments to that Code which would reclassify land; where mailed notice is otherwise required by law for other actions to be considered concurrently with the development agreement, notice of a public hearing before the Commission on the development agreement shall be included on the next Commission calendar to be mailed following the date of publication of notice in the official newspaper.

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(2) Notice to Local Agencies. Notice of the hearing shall also be mailed at least 10 days prior to the hearing to any local public agency expected to provide water, transit, sewage, streets, schools, or other essential facilities or services to the project, whose ability to provide those facilities and services may be significantly affected by the development agreement. (c) Failure to Receive Notice. The failure of any person to receive notice required by law does not affect the authority of the City and County of San Francisco to enter into a development agreement. 10.9.2.8

| SECTION 56.9 – RULES GOVERNING CONDUCT OF HEARING

The Commission's public hearing on the proposed development agreement shall be conducted in accordance with the procedure for the conduct of reclassification hearings as provided in Subsections (b) and (c) of Section 306.4 of the City Planning Code. Such public hearing on the proposed development agreement shall be held prior to or concurrently with the public hearing for consideration of any other Commission action deemed necessary to the approval or implementation of the proposed development agreement, unless the Commission determines, after a duly noticed public hearing pursuant to Section 56.8, that proceeding in a different manner would further the public interest; provided, however, that any required action under the California Environmental Quality Act shall not be affected by this Section. 10.9.2.9

| SECTION 56.10 – DEVELOPMENT AGREEMENT NEGOTIATION REPORT & DOCUMENTS

(a) Report. The Director shall prepare a report on development agreement negotiations between the applicant and the City and County of San Francisco (City), which report shall be distributed to the Commission and Board of Supervisors, and shall be available for public review 20 days prior to the first public hearing on the proposed development agreement. Said report shall include, for each negotiation session between the applicant and the City: (1) an attendance list; (2) a summary of the topics discussed; and (3) a notation as to any terms and conditions of the development agreement agreed upon between the applicant and the City. (b) Documents. The Director shall (1) maintain a file containing documents exchanged between the applicant/developer and the City's executive offices and departments; and (2) endeavor to obtain copies and maintain a list of all correspondence which executive offices and departments received from and sent to the public relating to the development agreement. The Director shall make said documents and the correspondence list available for public review 20 days prior to the first public hearing on the proposed development agreement. (c) Update of Report, Documents, and Correspondence List. The Director shall update the negotiation session report and the correspondence list, and continue to maintain a file of documents exchanged between the applicant/developer and the City until a development agreement is finally approved. The Director shall make the updated report, correspondence list, and documents available to the public at least five working days before each public hearing on the proposed development agreement.

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(d) Remedies. No action, inaction or recommendation regarding the proposed development agreement shall be held void or invalid or be set aside by a court by reason of any error, irregularity, informality, neglect or omission ("error") which may occur with respect to City compliance with this Section 56.10. This section is not intended to affect rights and remedies with respect to public records otherwise provided by law. 10.9.2.10 | SECTION 56.11 – COLLATERAL AGREEMENTS

(a) Filing. In order to qualify for consideration under the provisions of this section, the party to the collateral agreement seeking such consideration must: (1) submit a copy of the executed collateral agreement to the Director, (2) identify the specific terms and conditions of said collateral agreement which said party believes are necessary to achieve the public purposes sought to be achieved by the City and County through the development agreement process, and (3) provide contemporaneous notice to any other party or parties to the collateral agreement or the development agreement that a request for consideration pursuant to this section was filed. The Director shall forward copies of all collateral agreements received to the City Attorney's Office for review. (b) Recommendation of the Director Prior to the First Public Hearing on the Proposed Development Agreement. (1) The Director is obligated to consider and make a recommendation only as to those collateral agreements which satisfy the provisions of Section 56.11(a) above, and which are received by the Director within seven days after the date of publication of notice of the first hearing on the proposed development agreement. The Director shall consider those collateral agreements which are on the list provided pursuant to Section 56.11(d) below. (2) With respect to collateral agreements received pursuant to the provisions set forth above, the Director shall prepare a report to the Commission on said collateral agreements. If the Director finds that applicant compliance with certain specified terms or conditions of said collateral agreements is necessary to achieve the public purposes sought by the City through the development agreement process, then the Director shall recommend that such terms or conditions be incorporated into the proposed development agreement. If the Director recommends incorporation into the development agreement of any terms or conditions of any collateral agreements, then the Director's report shall also note whether the other party or parties to the collateral agreement or proposed development agreement objects, and the basis for that objection. (3) The provisions of this section are not intended to limit the power of the Commission or the Board to amend the proposed development agreement to incorporate terms or conditions of collateral agreements. (c)

Annual Recommendation of the Director. After execution of a development agreement,

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(1) The Director shall consider and make a recommendation as to those collateral agreements which satisfy the provisions of Section 56.11(a) above, and which are received 30 days prior to the date scheduled for periodic review, as determined pursuant to Section 56.17(a). The Director shall consider those collateral agreements which are on the list provided pursuant to Section 56.11 (d) below. (2) With respect to collateral agreements received pursuant to the provisions set forth above, the Director shall prepare a report to the Commission on said collateral agreements. The Director shall also consult with the applicant/developer concerning said collateral agreements. If the Director finds that applicant/developer compliance with certain specified terms or conditions of said collateral agreements would substantially further attainment of the public purposes which were recited as inducement for entering into the development agreement, then the Director shall recommend that the Commission propose an amendment to the development agreement to incorporate said terms and conditions. If the Director recommends proposal of an amendment to incorporate into the development agreement specified terms or conditions of any collateral agreements, then the Director's report shall also note whether the other party or parties to the collateral agreement or development agreement objects, and the basis for that objection. (d)

Applicant/Developer Disclosure of Collateral Agreements. (1) At least 21 days prior to the first hearing on the proposed development agreement, the applicant/developer shall provide the Director, for the Director's consideration, a list of all collateral agreements as defined in Section 56.3(c) that have been entered into by the applicant/developer. (2) At least 30 days prior to the date scheduled for periodic review pursuant to Section 56.17(a), the applicant/developer shall provide the Director, for the Director's consideration, an update to the list prepared pursuant to Subsection (d)(1) above, or any previous list prepared pursuant to this Subsection (d)(2), as applicable, identifying all such collateral agreements entered into subsequent to the date of the first list, or subsequent updates, as appropriate.

10.9.2.11 | SECTION 56.12 – IRREGULARITY IN PROCEEDINGS

No action, inaction or recommendation regarding the proposed development agreement or any proposed amendment shall be held void or invalid or be set aside by a court by reason of any error, irregularity, informality, neglect or omission ("error") as to any matter pertaining to the application, notice, finding, record, hearing, report, summary, recommendation, or any matters of procedure whatever unless after an examination of the entire record, the court is of the opinion that the error complained of was prejudicial and that by reason of the error the complaining party sustained and suffered substantial injury, and that a different result would have been probable if the error had not occurred or existed. There is no presumption that error is prejudicial or that injury resulted if error is shown.

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10.9.2.12 | SECTION 56.13 – DETERMINATION BY COMMISSION

(a) Public Hearing. The Commission shall hold a public hearing to consider and act on a proposed development agreement after providing notice as required under Section 56.8. (b) Recommendations to Board of Supervisors. Following the public hearing, the Commission may approve or disapprove the proposed development agreement, or may modify the proposed development agreement as it determines appropriate. The Commission shall make its final recommendation to the Board of Supervisors which shall include the Commission's determination of whether the development agreement proposed is consistent with the objectives, policies, general land uses and programs specified in the general plan and any applicable area or specific plan, and the priority policies enumerated in City Planning Code Section 101.1. The decision of the Commission shall be rendered within 90 days from the date of conclusion of the hearing; failure of the Commission to act within the prescribed time shall be deemed to constitute disapproval. 10.9.2.13 | SECTION 56.14 – DECISION BY BOARD OF SUPERVISORS

(a) Action by Board of Supervisors. The Board of Supervisors shall hold a public hearing on the proposed development agreement approved by the Commission. After the Board of Supervisors completes its public hearing, it may approve or disapprove the proposed development agreement recommended by the Commission. If the Commission disapproves the proposed development agreement, that decision shall be final unless the applicant/developer appeals the Commission's determination to the Board of Supervisors. The applicant/developer may appeal by filing a letter with the Clerk of the Board of Supervisors within 10 days following the Com-mission's disapproval of the proposed development agreement. The procedures for the Board's hearing and decision shall be the same as those set forth in City Planning Code Sections 308.1(c) and 308.1(d) with respect to an appeal of a Commission disapproval of a City Planning Code amendment initiated by application of one or more interested property owners. (b) Material Modification of the Commission's Recommended Development Agreement. The Board of Supervisors may adopt a motion proposing a material modification to a development agreement recommended by the Commission, as defined in Section 56.3 herein. In such event, the material modification must be referred back to the Commission for report and recommendation pursuant to the provisions of Subdivision (c) below. However, if the Commission previously considered and specifically rejected the proposed material modification, then such modification need not be referred back to the Commission. The Board of Supervisors may adopt any minor modification to the proposed development agreement recommended by the Commission which it determines appropriate without referring the proposal back to the Commission. (c) Consideration of Material Modification By the Commission. The Commission shall hold a public hearing and render a decision on any proposed material modification forwarded to the Commission by motion of the Board within 90 days from the date of referral of the proposed modification by the Board

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to the Commission; provided, however, if the Commission has not acted upon and returned the proposed material modification within such 90 day period, the proposal shall be deemed disapproved by the Commission unless the Board, by resolution, extends the prescribed time within which the Commission is to render its decision. (d) Effect of Commission Action on Proposed Material Modification. The Board of Supervisors shall hold public hearing to consider the Commission's action on the proposed material modification. If the Commission approves the Board's proposed material modification, the Board may adopt the modification to the agreement by majority vote. If the Commission disapproves the Board's proposed material modification, or has previously specifically rejected the proposed material modification, then the Board may adopt the material modification to the development agreement by a majority vote, unless said modification would reclassify property or would establish, abolish, or modify a setback line, in which case the modification may be adopted by the Board only by a vote of not less than of all of the members of said Board. (e) Consistency With General and Specific Plans. The Board of Supervisors may not approve the development agreement unless it receives the Commission's determination that the agreement is consistent with the Master Plan, any applicable area or specific plan and the Priority Policies enumerated in City Planning Section 101.1. (f) Approval of Development Agreement. If the Board of Supervisors approves the development agreement, it shall do so by the adoption of an ordinance. The Board of Supervisors may not vote on the development agreement ordinance on second reading unless the final version of the development agreement ordinance is available for public review at least two working days prior to the second reading. The development agreement shall take effect upon its execution by all parties following the effective date of the ordinance. 10.9.2.14 | SECTION 56.15 – AMENDMENT & TERMINATION OF AN EXECUTED DEVELOPMENT AGREEMENT BY MUTUAL CONSENT

(a) The development agreement may further define the extent to which changes in the project will require an amendment to the development agreement. (b) Either the applicant/developer or the City and County may propose an amendment to, or cancellation in whole or in part of, any development agreement. Any amendment or cancellation shall be by mutual consent of the parties, except as otherwise provided in the development agreement or in Section 56.16. (c) The procedure for proposing and adopting an amendment which constitutes (1) a material modification, (2) the termination in whole or in part of the development agreement, or (3) a minor modification which the Commission or Board has requested to review pursuant to subsection (d) below, shall be the same as the procedure for entering into an agreement in the first instance, including, but not limited to, the procedures described in Section 56.4, above.

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(d) Any proposed amendment or modification to the development agreement which would constitute a minor modification shall not require a noticed public hearing before the parties may execute an amendment to the agreement. The Director may commit to a minor modification on behalf of the City if the following conditions are satisfied: (1) The Director has reached agreement with the other party or parties to the development agreement regarding the modification; (2) The Director has: (i) notified the Commission and the Board; (ii) caused notice of the amendment to be published in the official newspaper and included on the Commission calendar; (iii) caused notice to be mailed to the parties to a collateral agreement if specific terms or conditions of said collateral agreement were incorporated into the development agreement and said terms or conditions would be modified by said minor modification; and (iv) caused notice to be mailed to persons who request to be so notified; and (3) No member of either the Board or Commission has requested an opportunity to review and consider the minor modification within 14 days following receipt of the Director's notice. Upon expiration of the 14-day period, in the event that neither entity requests a hearing, the decision of the Director shall be final. 10.9.2.15 | SECTION 56.16 – RECORDATION OF DEVELOPMENT AGREEMENTS AMENDMENT OR TERMINATION

(a) Within 10 days after the execution of the development agreement, or any amendments thereto, the Clerk of the Board of Supervisors shall have the agreement recorded with the County Recorder. (b) If the parties to the agreement or their successors in interest amend or terminate the agreement as provided herein, or if the Board of Supervisors terminates or modifies the agreement as provided herein for failure of the applicant/developer to comply in good faith with the terms or conditions of the agreement, the Clerk of the Board of Supervisors shall have notice of such action recorded with the County Recorder. 10.9.2.16 | SECTION 56.17 – PERIODIC REVIEW

(a) Time for and Initiation of Review. The Director shall conduct a review in order to ascertain whether the applicant/developer has in good faith complied with the development agreement. The review process shall commence at the beginning of the second week of January following final adoption of a development agreement, and at the same time each year thereafter for as long as the agreement is in effect. The applicant/developer shall provide the Director with such information as is necessary for purposes of the compliance review. Prior to commencing review, the Director shall provide written notification to any party to a collateral agreement which the Director is aware of pursuant to Sections 56.11(a) and (d), above. Said notice shall Page 342

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summarize the periodic review process, advising recipients of the opportunity to provide information regarding compliance with the development agreement. Upon request, the Director shall make reasonable attempts to consult with any party to a collateral agreement if specified terms and conditions of said agreement have been incorporated into the development agreement. Any report submitted to the Director by any party to a collateral agreement, if the terms or conditions of said collateral agreement have been incorporated into the development agreement, shall be transmitted to the Commission and/or Board of Supervisors. (b) Finding of Compliance by Director. If the Director finds on the basis of substantial evidence, that the applicant/developer has complied in good faith with the terms and conditions of the agreement, the Director shall notify the Commission and the Board of Supervisors of such determination, and shall at the same time cause notice of the determination to be published in the official newspaper and included on the Commission calendar. If no member of the Commission or the Board of Supervisors requests a public hearing to review the Director's determination within 14 days of receipt of the Director's notice, the Director's determination shall be final. In such event, the Director shall issue a certificate of compliance, which shall be in recordable form and may be recorded by the developer in the official records. The issuance of a certificate of compliance by the Director shall conclude the review for the applicable period. (c) Public Hearing Required. If the Director determines on the basis of substantial evidence that the applicant/developer has not complied in good faith with the terms and conditions of the development agreement, or otherwise determines that the public interest would be served by further review, or if a member of the Commission or Board of Supervisors requests further review pursuant to Subsection (b) above, the Director shall make a report to the Commission which shall conduct a public hearing on the matter. Any such public hearing must be held no sooner than 30 days, and no later than 60 days, after the Commission has received the Director's report. The Director shall provide to the applicant/developer (1) written notice of the public hearing scheduled before the Commission at least 30 days prior to the date of the hearing, and (2) a copy of the Director's report to the Commission on the date the report is issued. (d) Findings Upon Public Hearing. At the public hearing, the applicant/developer must demonstrate good faith compliance with the terms of the development agreement. The Commission shall determine upon the basis of substantial evidence whether the applicant/developer has complied in good faith with the terms of the development agreement. (e) Finding of Compliance by Commission. If the Commission, after a hearing, determines on the basis of substantial evidence that the applicant/developer has complied in good faith with the terms and conditions of the agreement during the period under review, the Commission shall instruct the Director to issue a certificate of compliance, which shall be in recordable form, may be recorded by the applicant/developer in the official records, and which shall conclude the review for that period; provided that the certificate shall not be issued until after the time has run for the Board to review the determination. Such determination shall be reported to the Board of Supervisors. Notice of such

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determination shall be transmitted to the Clerk of the Board of Supervisors within three days following the determination. The Board may adopt a motion by majority vote to review the decision of the Planning Commission within 10 days of the date after the transmittal. A public hearing shall be held within 30 days after the date that the motion was adopted by the Board. The Board shall review all evidence and testimony presented to the Planning Commission, as well as any new evidence and testimony presented at or before the public hearing. If the Board votes to overrule the determination of the Planning Commission, and refuses to approve issuance of a certificate of compliance, the Board shall adopt written findings in support of its determination within 10 days following the date of such determination. If the Board agrees with the determination of the Planning Commission, the Board shall notify the Planning Director to issue the certificate of compliance. (f) Finding of Failure of Compliance. If the Commission after a public hearing determines on the basis of substantial evidence that the applicant/developer has not complied in good faith with the terms and conditions of the agreement during the period under review, the Commission shall either (1) extend the time for compliance upon a showing of good cause; or (2) shall initiate proceedings to modify or terminate the agreement pursuant to Section 56.18. 10.9.2.17 | SECTION 56.18 – MODIFICATION OR TERMINATION

(a) If the Commission, upon a finding pursuant to Subdivision (f) of Section 56.17, determines that modification of the agreement is appropriate or that the agreement should be terminated, the Commission shall notify the applicant/developer in writing 30 days prior to any public hearing by the Board of Supervisors on the Commission's recommendations. (b) Modification or Termination. If the Commission, upon a finding pursuant to Subdivision (f) of Section 56.17, approves and recommends a modification or termination of the agreement, the Board of Supervisors shall hold a public hearing to consider and determine whether to adopt the Commission recommendation. The procedures governing Board action shall be the same as those applicable to the initial adoption of a development agreement; provided, however, that consent of the applicant/developer is not required for termination under this section. 10.9.2.18 | SECTION 56.19 – LIMITATION ON ACTIONS

(a) Any decision of the Board pursuant to this Chapter shall be final. Any court action or proceeding to attack, review, set aside, void or annul any final decision or determination by the Board shall be commenced within 90 days after (1) the date such decision or determination is final, or (2) when acting by ordinance, after the ordinance is signed by the Mayor, or is otherwise finally approved. (b) Any court action or proceeding to attack, review, set aside, void or annul any final decision or determination by (1) the Director pursuant to Section 56.15(d)(iii), or (2) the Commission pursuant to Section 56.17(e) shall be commenced within 90 days after said decision is final.

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10.9.2.19 | SECTION 56.20 - FEE

In order to defray the cost to the City and County of San Francisco of preparing, adopting, and amending a development agreement, a fee shall be charged and collected in accord with the procedures described below: (a) Cost Estimate and Application Report. The reasonable costs to the various departments of the City and County of San Francisco including, but not limited to, the Planning Department, the Department of Public Works, the Mayor's Office of Housing, the Real Estate Department and the City Attorney's Office for staff time, necessary consultant services and associated costs of materials and administration will vary according to the size and complexity of the project. Accordingly, upon receipt of an application for a development agreement, the Planning Department, after consultation with the applicant/developer, any other parties identified in the application as parties to the proposed development agreement, and the affected City and County departments, shall prepare an estimated budget of the reasonable costs to be incurred by the City and County (1) in the preparation and adoption of the proposed development agreement, and (2) in the preparation of related documents where the costs incurred are not fully funded through other City fees or funds; provided, however, that if the projected time schedule exceeds one year, then the estimated budget shall be prepared for the initial 12-month period only, and the estimated budgets for any subsequent 12-month time periods shall be prepared prior to the end of the prior 12month period. The Director shall also prepare a report for the Commission and Board describing the application, the anticipated public benefits listed in the application pursuant to Section 56.4(b), and the projected time schedule for development agreement negotiations. (b) Commission and Board of Supervisors Consideration. The Commission shall recommend to the Board of Supervisors that a fee be imposed of a specified amount after reviewing the cost estimate prepared by the Director and conducting a public hearing pursuant to Section 56.4(c). If the Board of Supervisors approves the fee amount by resolution, the fee shall be paid within 30 days after the effective date of the resolution. The fee shall be paid in a single installment or, at the discretion of the Director, in four equal installments, payable periodically over the estimated time frame for which the estimated budget has been prepared, with the first installment due within 30 days after the effective date of the fee resolution. (c) Deposit. The applicant/developer may prepay up to 50 percent of the amount of the fee (as calculated in the Director's estimated budget) into a Development Agreement Fund established for that purpose to enable the affected City Departments and agencies to begin work on the application. Such funds shall be deemed appropriated for the purposes identified in the cost estimate, and shall be credited against the final fee amount specified in the fee resolution if such resolution is ultimately adopted by the Board of Supervisors. If the Board fails to adopt such fee resolution, then the Controller shall return any prepaid funds remaining unexpended or unobligated to the applicant/developer. If the Board approves a fee amount which is less than the amount which the applicant/developer prepaid, then

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the Controller shall return that portion of the difference between the fee amount and the prepaid funds which remains unexpended or unobligated to the applicant/developer. (d) Development Agreement Fund. There is hereby created a Development Agreement Fund wherein all funds received under the provisions of this section shall be deposited. All expenditures from the Fund shall be for purposes of reviewing the application for, or proposed material modification to, a development agreement and preparing the documents necessary to the approval of the development agreement, or a material modification thereto. Up to 50 percent of the annual cost estimate is hereby deemed appropriated for such purposes if the applicant/developer chooses to prepay such amount pursuant to Subsection (c) above. All other funds are subject to the budget and fiscal powers of the Board of Supervisors. Interest earned on such amounts deposited in said Fund shall accrue to the Fund for the purposes set forth herein. Upon the execution of a development agreement, or withdrawal by an applicant/developer of its application, any unexpended or unobligated portion of the fee paid by the applicant/developer shall be returned to the applicant/developer. (e) Waiver for Affordable Housing. The Board of Supervisors may, by resolution, waive all or a portion of the fee required pursuant to this section for affordable housing developments, as that term is defined in Section 56.3, only if it finds that such waiver is necessary to achieve such affordable housing development. (f) Other Fees. Payment of fees charged under this section does not waive the fee requirements of other ordinances. The fee provisions set forth herein are not intended to address fees or funding for parties to collateral agreements. (g) Not Applicable to Rental Housing With On-Site Affordable Housing Units. The hearings and fee required pursuant to this section shall not apply to development agreements entered into with project sponsors of rental housing developments with on-site affordable housing units as that term is defined in Section 56.3(j) if the provision of on-site affordable housing units is the primary purpose of the Development Agreement.

10.9.3

| Developer Impact Fees

Cities are authorized by law to levy development impact fees – which are monetary exactions, charged by a local government to a development applicant as a condition of approval for the development project. In most cases, the law requires the fee amount be reasonably related to the cost of the infrastructure provided by the government collecting the fee. The collected fee monies are allocated to pay for, or defray the costs of, the infrastructure improvements necessitated by the new development. Development impact fees may not be levied to pay for existing infrastructure deficiencies unrelated to the impacts of new development. San Francisco Planning Code Article 4, Section 409 requires the Controller to issue a biennial Citywide Development Impact Fee Report including:

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   



All development fees collected during the prior two fiscal years, organized by development fee account; All cumulative monies collected and expended over the life of each fee; The number of projects that elected to satisfy development impact requirements through in-kind improvements; Any annual construction cost inflation adjustments to fees made using the Annual Infrastructure Construction Cost Inflation Estimate published by the Office of the City Administrator's Capital Planning Group (please note the Jobs-Housing Linkage Fee and the Inclusionary Affordable Housing Fee are not adjusted by this index); and Other information required pursuant to the California Mitigation Fee Act, Government Code Section 66001, including: fee rate and description; the beginning and ending balance of the fee account; the amount of fees collected and interest earned; an identification of each public improvement on which fees were expended and the percentage of the cost of the improvement funded with fees; an approximate construction start date; and a description of any transfers or loans made from the account.

Administrative Overview Multiple departments are involved in the administration and assessment, collection, appropriation, and reporting of development impact fees. Except for affordable housing and the Transit Impact Development Fee (TIDF), development impact fees authorized in the Planning Code are administered by the Planning Department (CPC). Affordable housing fees, including the jobs-housing linkage fee, the inclusionary affordable housing, and the SoMa Community Stabilization fee are administered by the Mayor’s Office of Housing and Community Development (MOHCD). The TIDF is administered by the San Francisco Municipal Transit Agency (MTA). School and water capacity fees are authorized outside of the Planning Code and administered by the San Francisco Unified School District (SFUSD) and the San Francisco Public Utilities Commission (SFPUC), respectively. The Department of Building Inspection (DBI) administers fee collections and refunds including calculating fee deferrals where applicable, and verifying that impact fee requirements, including in-kind agreements, are fully obligated before permits are issued. The Controller’s Office adjusts fee amounts by the annual construction cost index (AICCIE) calculated by the Capital Planning Program and approved by the Capital Planning Committee. Programming development impact fees for appropriations through the City’s budget is coordinated by the department responsible for administering the fee. For fees intended to fund affordable housing, appropriations are programmed by the Mayor’s Office of Housing and Community Development (MOHCD). Fees collected from TIDF are programmed for appropriation by the MTA. Programming for all other fees authorized in the Planning Code is coordinated by the Planning Department (CPC) through the Interagency Plan Implementation Committee (IPIC) and related Citizens Advisory Committees (CACs). Page 347

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To appropriate CPC-administered impact fees, expenditure recommendations are developed in IPIC and CAC meetings through the summer and fall. During the department phase of budget development implementing agencies load the projects into their annual budget requests, consistent with IPIC report. As with all capital expenditures, the Board’s and Mayor’s approval of the annual budget constitutes final approval of allocation of the area plan development impact fees. Departments that implement projects supported by CPC-administered development impact fee include Department of Public Works (DPW), San Francisco Municipal Transportation Agency (SFMTA), the Recreation and Park Department, the Arts Commission, the Library Commission, and the Human Service Agency (HSA), and the Department of Children, Youth and Their Families (DCYF). In addition to the Controller’s biennial reporting and annual fee indexing, IPIC publishes an annual report in January providing an update of all projects in a particular Area Plan, and describing all other activities conducted by IPIC. Finally, administering departments are required by the California Mitigation Fee Act (CA Government Code 66000) to update nexus studies enabling their respective development impact fees every five years. Fee Deferral Program Ordinance 276-10 created the fee deferral program in Building Code Section 107A.13.3. Between July 1, 2010 and July 1, 2013, developers had the option of deferring payment of any development impact or in-lieu fee collected by the Department of Building Inspection (DBI) until issuance of the certificate of first occupancy. To defer the fee, developers had to submit a deferral request to DBI and pay a Development Fee Deferral Surcharge. Depending on which fee is deferred, developers must pay 15 or 20 percent of the total amount of development fees owed before the first construction document is issued. Developers must pay deferred fees before the certificate of first construction is issued. Although the program was sunset on June 30, 2013, there is still a deferral balance of $171,697,683 at the end of FY 2013-14. Pending Legislative Changes Legislation recently passed by the Planning Commission and going before the Board of Supervisors proposes to amend the Planning Code to adopt the San Francisco Citywide Nexus Analysis (Nexus Analysis) supporting existing development fees, including fees in the Downtown and other Area Plans. The citywide nexus analysis builds upon existing adopted nexus studies to develop a consistent standardsbased methodology for most existing impact fees, thus facilitating the City’s future administration of impact fees, including meeting the five year reporting and updates.

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10.9.4

| Development Agreement-Related Transactions

10.9.4.1

| CASH RELATED TRANSACTIONS

10.9.4.2

| INVOICING FOR COST RECOVERIES

10.9.4.3

| REPORTING IN LIEU PAYMENTS

10.9.4.4

| TRACKING FUTURE DONATED CAPITA

10.9.4.5

| TRACKING & REPORTING OF CITY OBLIGATIONS/LIABILITIES

10.9.5

| Development Agreement-Related Donated Capital (Fixed Assets)

10.9.5.1

| ACCOUNTING

10.9.5.2

| FINANCIAL REPORTING

10.9.5.3

| POST AUDIT

10.9.6

| Developer Agreement FAQs

Q. What are the development project phases? A.

Q. What are the different types of DAs? A. “With Chapter 56” Developer Agreement

“Without Chapter 56” Developer Agreement

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Q. What is the workflow in developing the agreement? A.

Q. What City departments are involved? A.

Q. What are the roles & responsibilities between City departments? Who does what? A.

Q. What is standard in a development agreement and what is project-specific? A.

Q. What exhibits are mandatory and what exhibits are optional? A.

Q. How is a development project funded? A.

Q. What are the different funding sources? A.

Q. What funding does the City receive? A. The City receives:   

Impact Fees Developer Exactions Community Benefits

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In Lieu Payments

Q. What is the City responsible for? A.

Q. What risks/obligations can the City face? A.

Q. What does the developer receive and what is the developer for? A.

Q. What is the complete list of all possible obligations and risks that the City is exposed to? A. City obligations and risks in a Developer Agreement include:    

Oversight & Monitoring Accounting Financial Reporting Post Audit

Q. What is the complete list of all possible payments and community benefits the City is entitled to? A. City payments and benefits as part of a Developer Agreement include:    

Oversight & Monitoring Accounting Financial Reporting Post Audit

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11 | DEBT* 11.1 | Overview 11.2 | Reserves 11.3 | General Obligation Fund Repor ting

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12 | GRANTS & GIFTS* This section describes the policies and procedures for the accounting of grants and gifts received by the City.

12.1 | Definitions Outside resources that supplement the City’s revenues from local taxes, bond sales, investments, and fees may be received in the form of grants, subventions, gifts and donations. It is important to accurately define the resources received as each type may require different recording treatment in the financial system. Grants Grants are awarded by a government department, non-profit or private entity to fund specific projects or programs. They normally have specific restrictions on spending of the grant money and require some level of compliance and reporting. The restrictions and requirements are spelled out in a grant agreement or grant contract, signed by both the grant recipient (grantee) and the granting agency (grantor). Grantors often have the right to take back the grant resources if the specific requirements of the grant are not met. In order to receive a grant, some form of proposal or application is usually required. Often, a grant budget is included in the application and the grantee is required to adhere to this budget when approved by grantor. Grants also normally have a specific term to limit spending in a definite time period and the grant will expire at a certain date unless an extension is authorized by the grantor. Subventions Subventions are federal and state entitlement programs that automatically allocate money to the City based on assistance claims, census data, or other measures. Subventions are normally allocated to supplement City funding for particular programs every fiscal year and they are normally not carried forward to the next fiscal year’s budget. Gifts and Donations Gifts and donations are voluntary and irrevocable transfers of money, property and marketable securities from private individuals, estates, and corporations. Gifts are classified as either restricted or unrestricted. 

Unrestricted gifts are donations received by a department that may be used towards any purpose they see fit.

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Restricted gifts are donations received by department in which the donor restricts the use to a particular purpose.

A gift does not have an expiration date to limit its use and it does not have reporting requirements to the donor. Unlike a grant, where the money would be returned to the grantor if the City does not follow the guidelines set forth in the grant agreement, a gift is not required to be returned to the donor if it was not spent in the manner requested.

Bequest [TBD] Other Transfer Agreement [TBD] Criteria for Determination The following matrix is provided to assist departments in determining the nature of the external funding (i.e., grant, gift, bequest) and what accounting and internal control rules apply. [MATRIX HERE]

12.1.1

| Regulations Affecting Grants & Gifts

The following sections of the San Francisco Administrative Code regulate the administration of grants and gifts:      

Sec. 10.170. Grant – Application Procedure (as amended 9/24/97 by Ordinance no. 391-97) Sec. 10.170-1. Grant Funds – Acceptance And Expenditure (as amended 5/29/12 by Ordinance no. 97-12) Sec. 10.170-2. Accounting for Grants; Duties of Controller, Officers, Boards Or Commissions Sec. 10.170-2.5. Limitations upon Expenditure of Grant Funds Sec. 10.170-3. Acceptance of Provisions of Section 13522 of Penal Code [Provides assurances regarding peace officer recruitment and training standards required to qualify for State funds] Sec. 10.100-305. San Francisco Gift Funds (Acceptance of Gifts to City & County not to Exceed $10,000)

In addition, the Annual Appropriation Ordinance (Budget Ordinance) provides direction on the appropriation of grants.

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12.2 | Grants This section describes the routine aspects of grants financial management and accounting. The grant cycle and its relation to these policies and procedures are as follows: 

Applying for grants (not part of the scope of this document) Departments have the authority to apply for grants under $5,000,000 without seeking prior approval from the Board of Supervisors or the Controller’s Office. This section does not discuss how to research and apply for grants.



Obtaining authority to Accept and Expend grants To Accept and Expend grant funds, departments must obtain expenditure authority (appropriations) from the Board of Supervisors with exceptions.



Setting up grant in FAMIS This section discusses the technical aspects of how to record the grant and grant budget in the City’s financial system (FAMIS).



Recording modifications to the grant This chapter discusses procedures to modify grants in FAMIS.



Managing grant revenues This section discusses how and when to recognize grant revenues for consistent and accurate financial reporting.



Managing expenditures and procurements This section discusses how to manage grant expenditures for consistent and accurate financial reporting. Topics include sub-recipient monitoring as well as ensuring that all procurement is in compliance with the grant provisions and City regulations.



Analyzing and Reconciling Grants in FAMIS This section discusses the basic procedures for reconciling and analyzing grants in FAMIS.



Grant Closeout This section presents basic principles for grant closeout and how to prepare fully expended and/or inactive grants for close out.

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Complying with Requirements of External Audits This section discusses special issues associated with the annual Single Audit of federal grants, general federal grant cost eligibility guidelines, as well as introducing the Controller’s Office annual program audits procedure.

12.2.1

| Grant Budgeting

12.2.1.1

| BUDGET AND APPROPRIATION ORDINANCE (BUDGET ORDINANCE) & ANNUAL SALARY ORDINANCE (ASO)

A substantial number of the City’s grants are recurring — that is, they are granted to the City each year to fund the same programs and related FTE positions, and essentially provide a portion of the Department’s operating budget. To provide a clearer picture for the public and policy makers of the true size of a Department’s budget and staff, grants of this type should be included in the annual budget process and approved through the Annual Appropriation Ordinance (Budget Ordinance) and Annual Salary Ordinance (ASO). The Budget Ordinance and the ASO authorize, respectively, the expenditure of funds and the creation of City positions. They have the same force and effect as the grant “Acceptance and Expenditure” process. When to Include Grants in the Annual Budget Request Departments should include a grant in its Annual Budget Request if both of the following apply: 



The grant spending will begin on or after the first day of the budget year. The department is confident that the grant will be awarded or renewed in the budget year and can document the basis for the projected grant budget. The grant budget has not already been authorized through a grant “Acceptance and Expenditure Process”.

Estimate Grant Budget If departments do not know their exact grant award amount at the time they prepare their Budget Ordinance budgets, they should include their best estimate. Departments should notify the Controller’s Accounting and System Division, Operations Unit as soon as they learn of any changes in grant award levels from the amounts estimated in the Budget Ordinance. The Budget Ordinance includes a clause allowing the Controller to adjust grant revenue and expenditure budgets if award levels change without requiring Board action (see Section 11.1 of the FY 2015 Budget Ordinance). With Controller approval, the Department could revise the grant budget in FAMIS to match the final grant award after the original budget has been set up through the budget system by initiating journal entries. Please see Section 12.2.1.9 Manual Set-up through Journal Entries for details.

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12.2.1.2

| AUTHORITY TO ACCEPT & EXPEND

Acceptance and expenditure of grants and gifts require approval of the Board of Supervisors with the following exceptions: 



Grants less than $100,000 (including any required City matching funds) that do not create new City positions. If subsequent increases to a grant raise the cumulative amount of the grant to $100,000 or more, Board approval is required. Gifts less than $10,000.

Board approval can be obtained through either of the following two ways:  

Include the grant budget in the Budget Ordinance and grant-funded positions in the Annual Salary Ordinance (ASO). Submit a resolution or ordinance to the Board for approval through the “Accept and Expend” process.

12.2.1.3

| ACCEPT & EXPEND PROCESSING GUIDELINES

This section describes the Resolution, Ordinance, and the “Accept and Expend” processes. Administrative Code, Section 10.170 defines the authority of the Board and the Controller’s Office over the grant “Accept and Expend” process. Ordinance No. 97-12 amended Section 10.170-1 to include a dollar amount threshold for Board actions required for grant acceptance and expenditure. Departments only need Board approval to “Accept and Expend” grants of $100,000 or more (including any required City matching funds). If subsequent increases to a grant raise the cumulative amount of the grant to $100,000 or more, an “Accept and Expend” resolution is required. In addition, if a grant had been previously approved by the Board, the department can “Accept and Expend” any individual increases of less than $50,000 without further Board action. Ordinance No. 230-06 amended Section 10.170-1 of the San Francisco Administrative Code to require the acceptance and expenditure of grants of any amount creating new City positions be approved by an appropriate amendment to the Annual Salary Ordinance (ASO) in an ordinance. The table below defines the situations and the required board documents to approve the acceptance and expenditure of a grant not included in the Budget Ordinance.

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TABLE 12-1. DOCUMENTS REQUIRED FOR GRANT ACCEPT & EXPEND PROCESS

GRANTS

GRANT AMOUNT*

BOARD ACCEPT & EXPEND NEEDED

BOARD ACCEPT & EXPEND THROUGH

New Grant

≥ $100,000

Yes

Resolution

< $100,000

No

N/A

Increase making the total grant ≥ $100,000

Yes

Resolution

Increase ≥ $50,000 and total grant ≥ $100,000

Yes

Resolution

Increase resulting in the total grant < $100,000

No

N/A

Increase of < $50,000

No

N/A

ANY

Yes

Ordinance

Existing Grant

New or Existing Grant that creates new positions

* Amount includes matching City funds, if any Administrative Code, Section 10.100-305 requires gifts greater than $10,000 to be approved by the Board for acceptance and expenditure through resolutions. The department should submit the complete Accept and Expend resolution or ordinance package with the original resolution/ordinance signed by the Department Head, an electronic copy of the package, and another two (2) hard copies to the Controller’s Office to start the grant Accept and Expend process. The package will go through the following review and adoption procedures.  1. Controller’s Office review: Fund Accountants at the Controller’s Office Accounting Operations Unit will first review the Accept and Expend package for its completeness and consistency of the financial and other data in the documents. Upon review of the package, the resolution/ordinance will be approved and signed by the Controller. Please allow two business days for Controller’s Office review and signature.  2. Mayor’s Budget Office review: Upon Controller’s signature, the Accept and Expend resolution/ordinance package will be forwarded by the Controller’s Office staff to the Mayor’s Office of Public Policy and Finance (Mayor’s Budget Office) to be reviewed by the Fiscal and Policy Analysts. Each Analyst is assigned a group of specific departments to review, and periodically a new list of assignments is

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circulated to the Controller’s Office. Please allow two business days for Mayor’s Fiscal and Policy Analysts to review.  3. Review by Mayor’s Legislative Director: Upon approval, the Fiscal and Policy Analysts will forward the package to the Mayor’s Legislative Director. Please note that for Accept and Expend Resolutions/Ordinances, to be introduced on any given Tuesday, the Legislative Director must receive the redline packet and the electronic file by the Friday prior. Upon review, the resolution/ordinance will be approved and signed by the Mayor’s Office.  4. Upon Signature, Mayor’s Office staff will forward the package to the Clerk of Board of Supervisors.  5. Clerk of Board of Supervisors / Committee review: The resolution/ordinance package (with all copies) must arrive at the Clerk’s Office by Monday noon in order to be introduced on the second following Board agenda, to be referred to a Board committee. If Monday is a holiday the deadline day moves forward to Friday at noon. The agenda will be recommended to the full Board upon the Committee’s approval.  6. Board of Supervisors Adoption: The Board of Supervisors will have to adopt the resolution or ordinance by majority vote in their weekly Board meeting. Upon adoption, the resolution/ordinance will be forwarded to the Mayor for final signature.  7. Mayor’s Signature: Mayor has ten (10) calendar days to sign and return the resolution/ordinance to the Clerk of Board for the legal document to take effect. Upon Mayor’s signature, the resolution is then numbered, copied and distributed. Special Timeline Requirements Under normal circumstances, allow at least four (4) weeks after submittal for Accept and Expend Resolutions to be reviewed by the Board of Supervisors and signed by the Mayor. If you have special timeline requirements, you must state them in the cover letter to the Clerk of Board so that the Clerk’s office will be aware of your needs. The following Figure provides a sample cover letter.

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FIGURE 12-1. GRANT ORDINANCE COVER MEMO & CHECKLIST

TO:

Angela Calvillo, Clerk of the Board of Supervisors

FROM: DATE: SUBJECT:

Accept and Expend Ordinance for Subject Grant

GRANT TITLE: Attached please find the original* and one copy of each of the following: ___ Proposed grant ordinance; original* signed by Department, Mayor, Controller ___ Grant information form, including disability checklist ___ Grant budget ___ Grant application ___ Letter of Intent or grant award letter from funding agency ___ Ethics Form 126 (if applicable) ___ Contracts, Leases/Agreements (if applicable) ___ Other (Explain):

Special Timeline Requirements:

Departmental representative to receive a copy of the adopted ordinance: Name:

Phone:

Interoffice Mail Address: Certified copy required Yes

No

(Note: certified copies have the seal of the City/County affixed and are occasionally required by funding agencies. In most cases ordinary copies without the seal are sufficient).

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Copies of the Adopted Resolution or Ordinance If you need to have a copy of the adopted legislation to send to a funding agency, you may request a “Certified Copy” which is signed, dated, and has the seal of the City & County affixed; or you may request a copy which will be an official copy without the seal. Unofficial copies can be obtained at the Board of Supervisor’s website at: http://www.sfbos.org/index.aspx?page=2285 12.2.1.4

| DOCUMENTS TO INCLUDE IN THE ACCEPT & EXPEND PACKAGE

1. Cover Letter addressed to the Clerk of the Board transmitting the proposed resolution and all supporting documents. (Refer to Figure 12-1)  

Make sure to clearly identify the department submitting the package. It is recommended to print the cover letter on department letterhead. Mark all the documents attached in the checklist.

2. Proposed Resolution or Ordinance authorizing the acceptance and expenditure of grant funds, signed by the following signatories in the order specified:     

Department Head Deputy City Attorney (for Ordinances only) Department of Human Resources Director or designee (for Ordinances only) Controller or Controller’s designee (obtaining signature is handled by the Controller’s Accounting Operations Unit) Mayor’s Office of Public Policy and Finance designee

A sample is provided in the Figure below.

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FIGURE 12-2. GRANT ORDINANCE TEMPLATE FILE NO. ________________________________

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ORDINANCE NO. ______________

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3. The original resolution or ordinance must be printed on red-lined paper available from Reproduction Services and must have the above signatures prior to being submitted to the Clerk.   

Lines in the document must be aligned with the line numbers. On the first page, make sure “File No.” appears on the upper left corner, and “Resolution No.” or “Ordinance No.” appears on the upper right corner. On each page, the page number should appear at the lower right corner. Name of the Supervisor or Committee or Department should appear at the lower left corner along with “Board of Supervisors”.

4. Grant Information Form (with Disability Checklist) signed by the Department Head and department’s Mayor’s Office on Disability authorized reviewer prior to submittal. Authorized reviewers,

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called ADA Coordinators, for each department can be found on the Mayor’s Office on Disability website at: http://www.sfgov2.org/index.aspx?page=429. A sample Grant Information Form and Disability Checklist is provided below. FIGURE 12-3. GRANT INFORMATION FORM & DISABILITY CHECKLIST

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5. Grant Budget including expenditures by budget category and number of grant-funded positions, their classification and duration, as applicable. This should be the grant budget as specified by the grantor. 6. Copy of Grant Application to funding agency (if grant was applied for). 7. Copy of Award Letter from funding agency, or letter of intent to award the grant. Downloadable “Accept & Expend” packages are available on the City’s Intranet Document Center at http://mission.sfgov.org/doccenter. Click on the word “Agency” to pull down Board of Supervisors | Grant Package from the “Select an Agency to View” menu. For samples of resolutions and ordinances, please go to the Board of Supervisors website http://www.sfbos.org/index.aspx?page=2285 for examples of prior passed resolutions and ordinances. 12.2.1.5

| GUIDELINES FOR DRAFTING THE ACCEPT & EXPEND RESOLUTION/ORDINANCE

Obtaining approval to apply for a grant The Administrative Code, Section 10.170 allows departments to apply for grants less than $5,000,000 without obtaining prior Board authorization. But, in some cases, a funding agency may require a Board Resolution to be attached to a grant application. In this situation, departments can obtain Board approval through a resolution to “apply for” the grant. Alternatively, a resolution or ordinance to “apply for, accept, and expend” the grant may be routed for Board approval, depending on whether new positions are being created. Indirect cost When preparing the grant application and budget, indirect costs should be included unless expressly unallowable under the terms of the grant. The resolution should contain language to waive indirect cost inclusion in this case. 1. If indirect costs are ineligible, you can state: “Whereas, The grant terms prohibit including indirect costs in the grant budget; now, therefore, be it” “Further Resolved, That the Board of Supervisors hereby waives inclusion of indirect costs in the grant budget.” (This Resolved paragraph must follow the first Resolved paragraph authorizing action or authority for the grant.) 2. If indirect costs are eligible, but are waived to maximize funds for program use, you can state: “Whereas, The Department proposes to maximize use of available grant funds on program expenditures by not including indirect costs in the grant budget; now, therefore, be it”

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“Resolved, That the Board of Supervisors hereby waives inclusion of indirect costs in the grant budget.” (This Resolved paragraph must follow the first Resolved paragraph authorizing action or authority for the grant). 3. If indirect costs are included, you can state: “Whereas, The grant budget includes provision for indirect costs of $(insert amount) now, therefore, be it” Please note: If you do have indirect costs you do not need a separate resolved statement authorizing them (as you do with the prohibited and waived costs); you would simply continue with your resolution making the next paragraph your first resolved paragraph. “Common Sense” view of resolution documents All resolutions are divided into two major sections of text. The first section contains the “WHEREAS” statements, and the last section contains the “RESOLVED” statements, both of these statements should consist of only one single statement of fact. 



WHEREAS Statements: Need to be accurate, but they are not as strictly prescribed by law as the “RESOLVED” statements. For this reason it is permissible to include as many “WHEREAS” statements as the department thinks necessary to fully describe the purpose and restrictions of the grant to the Board of Supervisors and the public. The templates available in the Board of Supervisors Document Center only mention a minimum number of required “WHEREAS” statements. RESOLVED Statements: Only those statements required to make the resolution legally enforceable should be included as “RESOLVED” statements. At a minimum, those would be to authorize the department to Accept and Expend the funds and to waive indirect costs, if applicable.

ASO amendment For an ordinance that creates any new position (i.e., amends the ASO), the department should accurately state the funding source (FAMIS codes) and information of the position added. See the Figure below for the format and information needed. Problems related to establishing the grant-funded position in the payroll system might arise if the funding source submitted when setting up the position is different from the funding source stated in the ordinance. The department needs to contact the Department of Human Resources to clarify the issue when this type of problem arises.

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FIGURE 12-4. FORMAT FOR INCLUDING POSITION INFORMATION IN ORDINANCE

For a resolution that does not create any new position (i.e., does not amend the ASO), the following language should be included: 

“Whereas, the grant does not require an ASO amendment;”

Matching funds and other special conditions Make sure the resolution or ordinance includes approval for any special grant conditions or uses of program income, including any matching requirements or legal waivers of liability. For matching requirements, the percentage of match or the dollar amount of the matching fund, and any in-kind matching services or expenditures from outside agencies, must be stated in the resolution or ordinance. Program income If a grant program is expected to earn program income—such as from interest on advances, fees paid by participants, or repayments of loans funded by the grant—the resolution should include explicit instructions for how the program income will be expended. The department should also include anticipated program income in the total amount of the Accept and Expend so that spending authority for the program income is obtained without returning to the Board. An exception is loan repayments and interest earnings in special revenue funds designated for affordable housing. FY 2015 Budget Ordinance Section 11.23 allows self-appropriation of loan repayments and interest earnings for affordable housing grants.

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12.2.1.6

| FINANCIAL SYSTEM GRANT SETUP

The structure of a grant in the City’s financial system (FAMIS) is established through the use of grant codes, grant details, and index codes. 



Grant codes are intended to facilitate analysis of the grant budget and expenditure, and to track separately the grant’s assets and liabilities. This is to ensure that grant reporting can be performed correctly. Index codes function to direct transactions to a specific funding source and to control posting of transactions in that funding location. Correct set-up of grant index codes ensures grant transactions are posted to the correct funding source and ensures grant expenditure posting is controlled at the correct spending and appropriation level and the appropriate period.

These codes need to be set up before the grant budget can be recorded. Initial setup of the correct grant structure in the financial system is very important in ensuring accurate recording and efficient monitoring of the grant. Incorrect grant code or index code setup may lead to difficulty in providing necessary documentation for audits, as well as increased risk of financial record errors and potential audit finding. After-the-fact restructuring due to incorrect grant setup would require extensive analysis and could be extremely labor-intensive and time-consuming. The following principles apply when establishing the structure of a grant. 12.2.1.7

| NEW GRANT DETAIL FOR EACH GRANT BUDGET/AWARD

As a general rule, a grant should have a two-digit detail after the first six digits of the grant that describes the fiscal year in which the grant will be spent. In special circumstances, departments may use the grant detail 1 for other purposes rather than fiscal year. Grant detail 2 (2 characters), detail 3 (one character) and detail 4 (one character) are optional and may be used in any way the department finds useful for reporting or analysis purposes. Recurring Grants For grants that are renewed each year on the City’s fiscal year schedule, departments should request a new grant detail code in FAMIS and the budget system each fiscal year. The coding should follow the convention of using the last two digits of the year in which the fiscal year-ends (i.e., use detail “13” to designate fiscal year 2012-2013). If a department receives operating grant awards on a recurring cycle that differs from the City's fiscal year (i.e. the grant period cross two fiscal years), the coding should be the last two digits of the fiscal year that the recurring grant is awarded.

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Multi-year Grants If the grant term is more than one fiscal year (multi-year grant), a new detail should be added for each fiscal year if the grant agreement stipulates a separate budget for each fiscal year. A multi-year grant that has only one grant budget that spans through the entire grant period should be established in one grant detail only. However, departments should be careful to avoid including unspent funds in subsequent Budget Ordinances. Grants with More than One Funding Source Grant types are usually not mixed, unless the grants are reported together. For example, if a program is receiving both State and federal grants and the expenditures under each grant are reported separately, make a separate detail for each grant type. If a grant has a federal and state share, and the expenditures are reported together, the two grants may be reported in the same detail. (Note: In this case, the details would show the federal catalog number for the federal grant and only the federal share of the expenditures would be reported in the annual Single Audit). One-time Grants or Gifts For unique, one-time grants or gifts, the grant code may be sufficient and no grant detail is needed. However, if a grant code is initially set up with no details (i.e. “lower level required” on FAMIS screen 5070 is “N”), grant details cannot be added afterwards. Miscellaneous Gifts Gifts for the same purpose may be combined in one grant code. Some gift campaigns can result in numerous small gifts for a single purpose, such as a civic celebration or an historic building restoration process. These gifts may be combined in a single grant code/detail if there is no need to distinguish each one in FAMIS for reporting purposes. Subventions – Grant Codes Not Required Grant code or grant details are not required for annual subventions (entitlement payments) that are recorded in the general fund and are entirely expended during the same fiscal year. Expenditure appropriations associated with these subventions are not carried forward from one year to the next; as a consequence, it is not necessary to maintain separate fiscal year grant details. When a New Index Code is Needed A new index code may or may not be necessary for each grant. Some departments administer multiple grants with one index code. Others prefer to embed the grant code or grant detail in the index code and to set up a new code for each grant detail. However, department policy on index code set-up should be consistent. In general and as much as possible, departments should use no more than one index code to record all grant expenditure in a given grant detail.

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If the department is not using the Labor Distribution System (LDS), the lowest-level grant detail must be embedded in the grant index code in order to charge personnel costs directly to a grant. Setting up Grants with Projects Departments should use the grant and project structure together in FAMIS under the following circumstances: 

The grant involves a capital project All capital projects must be tracked in the project structure as part of the fixed assets reporting system (FAACS). So, even if a grant is the sole source of funding for the capital project, the expenditures must be recorded as both a grant and a project.



The grant relates to a project with multiple funding source The grant funds a project with multiple funding sources and the department wants to use the project structure for combined reporting.

Matching Funds Many grants require matching funds or in-kind contributions, which could come from the general fund, other grants, nonprofit agencies or individual volunteers. Departments are responsible for tracking and reporting matching funds and contributions to comply with grant agreements and support audits. Departments may work with their Fund Accountants at the Controller’s Office Accounting Operations Unit to determine the most efficient way to track matching funds. Possibilities may include using separate index codes, project codes/details, and grant details to record matching funds expenditure. Grant-Funded Personnel for Another Department Some grants are awarded to a single department in the City, but support personnel or other service expenditure of departments other than the awarded department. In this case, the department awarded the grant has the responsibility to obtain Accept and Expend authority for the grant, set up the grant, and administer the grant. There are two ways to set up the appropriation for the expenditure for the other beneficiary departments. Direct Charge The administering department can set up a separate grant detail for the beneficiary department to separate the grant budget and expenditure of the administering department and the beneficiary department. Use detail 2 since detail 1 is usually used to indicate fiscal year. The beneficiary department can embed its grant detail in its department index code for the grant (i.e. JVXXXX_10PD in 05XXXX), which points to the same sub-fund location as the administering department’s grant index code, so that grant expenditures charged in this index code are directly charged to the grant. Please refer to the Figure below for an illustration. Page 371

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FIGURE 12-5. DIRECT-CHARGE BUDGET STRUCTURE FOR GRANT WITH GRANT-FUNDED PERSONNEL FOR ANOTHER DEPARTMENT Org

PDR

JUV

Total Grant budget

I/C

05XXXX

12XXXX

Grant Detail

JVXXXX_10PD

JVXXXX_10JV

S/O

Budget FY10

Budget FY10

44939

$

52,513

$

104,552

$

157,065

00101

$

36,722

$

49,858

$

86,580

Fringes

$

15,791

$

19,444

$

35,235

$

35,250

$

35,250

104,552

$

157,065

JVXXXX_10

Revenue

Expenditure

03800 Total expenditure

$

52,513

$

Revenue - Expenditure

$

(0)

$

0

$

-

This method of setup is ideal for straight payroll charges where the grant funds a full-time (1.0 FTE) position. Payroll can be charged to the grant without initiation of additional journal entries. However, there is a risk that ineligible expenditures of the beneficiary department can also flow to the grant via the beneficiary department’s index code without the administering department’s approval. Therefore, this method of setup requires a great amount of control from both the beneficiary department and the administering department to make sure that all expenditures recorded in the grant are eligible and the beneficiary department’s index code is used solely for recording expenditure for the grant. Work Order The administering department can also set up a work order with the beneficiary department in order to transfer grant funds to the beneficiary departments and to recover their eligible grant expenditures. The beneficiary department needs to appropriate its grant funds from the administering department in its work order sub-fund and use its work order index code to record their expenditures. For details, please see Section 7 Work Orders. 12.2.1.8

| GRANT CODES AND INDEX CODES SETUP

Some departments are authorized to set up grant codes and index codes in FAMIS. Other departments need to submit requests to the Controller’s Office Operations Unit. Requests to set up grants should be submitted with complete information in a grant setup form and an index code setup form to the

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Controller’s Office Operations Unit. Refer to the instructions below and the following sample forms and FAMIS Screens on filling out the forms. Filling out the Grant Set-up Form A grant code has six digits: the first two characters of the grant code are the two-digit alphabetic department code; the remaining four digits of the grant code can be any alphanumeric combination of significance to the grant. The grant title should accurately describe the nature and purpose of the grant. It is limited to a maximum of 40 characters in FAMIS. FAMIS contains the following grant types to identify the grant’s funding sources: 











F: federal Direct Funds received directly from a federal agency. Catalog of federal Domestic Assistance (CFDA) number is required if this grant type is chosen. T: federal Pass-Through federal funds administered by and received from the State or other non-federal entity. Catalog of federal Domestic Assistance (CFDA) number is required if this grant type is chosen. S: State Funds derived from the State budget. These usually are received directly by a State agency, but in some cases, may be administered by and received from a regional or local agency, such as the Metropolitan Transportation Commission (MTC). L: Local Funds received from other local public agencies and derived from locally administered taxes, fees or other revenue sources. Examples include Metropolitan Transportation Commission (MTC) and Bay Area Air Quality Management District (BAAQ) grants derived from locally paid gas taxes or vehicle license fees. In some cases, funds administered by a local agency, such as the MTC, may come from taxes collected by the State but redistributed to regional agencies for the purpose of making grants. Generally, if the State provides the funds to the regional agency by a formula based on taxes or fees paid in the region, the funds should be considered “local.” If the State apportions money from a statewide pool to regional agencies based on some other criteria, the funds should be considered “State.” M: Mixed Use when a grant code includes more than one funding source type (e.g. federal and state). CFDA number is required if one of the funding source is federal. P: Private Grants Funds received from individuals or private for-profit and non-profit corporations (that are not federal or state pass-through funds) that have time or spending restrictions and reporting requirements.

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G: Gifts Funds received from individuals or private for-profit and non-profit corporations that does not have any time or spending restrictions and have no reporting requirements.

The responsible department is the 3-digit character code of the department responsible for administering the grant. The donor agency field is a required field for all grant codes. This should indicate the agency that directly contracts with the City for the grant funding. For example, if a federal pass-through grant is awarded by the State, the State agency that awards the grant funds is the donor agency that should be entered here. In addition, please put the grant identifying number provided by the donor agency in the Notepad when the budget for the grant is set up in FAMIS. Catalog of federal Domestic Assistance (CFDA) numbers are required for all federal direct and passthrough grants and should be accurately recorded in FAMIS. CFDA numbers are important for reporting grants in the City & County’s annual Schedule of Expenditures of federal Awards (SEFA) and information gathering for the purpose of the annual Single Audit. The CFDA number should be obtained from the funding agency and could be searched on-line at http://www.cfda.gov. A CFDA number is a 5-digit number, e.g. 14218 for Community Development Block Grants. The first two digits represent the federal department: 14 = Department of Housing & Urban Development (HUD), 93 = Department of Health & Human Services (HHS), etc. Some unique federal cooperative agreements may not have catalog numbers, in which case the funding department designates them. If the number is not in FAMIS, please contact the Controller’s Office Accounting Operations Unit to set up the code. “Plan start date” and “Plan end date” represent the grant period as stated on the grant agreement to show the period of performance in which expenditures are allowed to be incurred. “Actual start date” and “actual end date” denote the effective period of the grant code that allows actual processing of grant transactions in FAMIS. These fields and how they are shown in the FAMIS screen are presented in the Figure below.

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FIGURE 12-6. FAMIS SCREEN 5070, GRANT SET-UP SCREEN FAML5070 V5.1 LINK TO:

CITY AND COUNTY OF SAN FRANCISCO--NFAMIS GRANTS

GRANT : DAAUTO GRANT DETAIL : 10 TITLE : FY 09-10 LOWER LVL REQUIRED : N GRANT TYPE : S CONTYP /FNDS CTL: GY Y CCSF FILE NMBR : RESP DEPARTMENT : DAT DONOR AGENCY : CDOI CCSF APPROVAL : FEDERAL CATALOG : CLOSING DATE : INT DIST BY GRT : PLAN DATES START : 07/01/2009 ACTUAL DATES START : 07/01/2009 CREATE DATE : 01/27/2009 UPDATE DATE : 01/27/2009

02/18/2010 9:54 AM PAGE 1 OF 4

DEPT OF INS AUTO INSURANCE FRAUD FY 09-10

STATE GRANT DONOR FUNDING FY DISTRICT ATT -RESPONSIBLE DEPT FOR GRANT CALIFORNIA DEPARTMENT OF INSURANCE

END : 06/30/2010 IDC REIMBURSE : N END : 10/30/2010 GRACE PERIOD : N STATUS IND : A STATUS DATE : 01/27/2009

Note: the following fields are not currently populated but are reserved for future use:   

“CCSF File Nmbr” “CCSF Approval” “IDC Reimburse”

Filling out the Index Code Set-up Form An index code has six to twelve digits. It is recommended to use the 3-character department code as the first three characters of the index code. Some departments may be limited to six characters if the index code is used for labor charges. In that case, the first two characters of the index code are the two-digit alphabetic or numeric department code; the remaining four digits of the index code can be any alphanumeric combination of significance to the grant. The index code title should accurately describe the nature and purpose of the index code or the location it is pointing to. It is limited to a maximum of 40 characters. The fund type refers to the type of funds to which grant transactions should be directed. Below are the general fund types:  

2S (special-revenue fund) – for general non-enterprise operating grants 3C (capital projects fund) – for capital grants

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 

5X (enterprise fund, “X” character indicate department) - for enterprise departments’ grants, e.g. PUC, MTA, Airport, Port, etc. 7E (Expendable trust funds) – for gifts and bequests

The “fund” field refers to the fund to which grant transactions should be directed. Below are examples of funds:   

PPF (Public Protection Fund) – for public protection grants CPF (Capital Projects Fund) – for enterprise capital projects grants GIF (Gift Fund) – for all expendable gifts

The “sub-fund” field is the sub-fund to which grant transactions should be directed. Below are the general sub-funds:    

GNC – for all non-enterprise, non-capital grants that are not associated with continuing projects GPC – for all non-enterprise, non-capital grants that are associated with continuing projects ARA – for all American Recovery and Reinvestment Act (ARRA) grants GIF – for all expendable gifts

Enter in the “program” field the code for the program where the grant funds are expended. The “Dept activity” code is optional and is currently not required for grant index codes. Enter in the “Organization” field the department’s organization code. Some departments have multiple codes for different divisions. In this case, the code for the division administering or expending the funding of the grant should be used. The project code or project detail is optional and could be embedded in the index code so that transactions are directly posted to the project using the index code without inputting the project code in the transaction. The grant code or grant detail is optional and could be embedded in the index code so that transactions are directly posted to the grant using the index code without inputting the grant code in the transaction. User code is needed only when the index code is used for transfer-in and transfer-out transactions. Sub-object is not currently used. Allocation control / allotment control is the appropriation control in FAMIS that limits the expenditure transaction amount and the allotment amount to the appropriation available in a certain funding location or classification. For available types of allocation/allotment control, please go to FAMIS screen 5300 and drill down at the ALLOTMENT CTL field. To set up grants, the appropriation control should be at least at the grant detail level. Therefore, grant index codes should at least have allocation control “84” (Grant Detail 1), unless the grant has no grant details. The department should choose the allocation

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control according to the grant provisions. If the grant provisions stipulate that spending of grant funds should be limited per budget line item, then allocation control at character level “85” should be used. If the grant provisions stipulate that the department has the flexibility to arrange grant budget line items without notification to the grantor, then allocation/allotment control at the grant detail level should be used. The City does not use cash control, but input in this field is required in FAMIS for index code set up. Please use “GG” for grant index codes. The start and end dates of the index code dictate the effective period that an index code can be used. The start and end dates should match the grant code’s actual start and end dates if the index code is used to record revenue/expenditure for only one grant or grant detail. These fields and how they are shown in FAMIS are presented in the Figure below. FIGURE 12-7. FAMIS SCREEN 5300, INDEX CODE SET UP FAML5300 LINK TO:

CITY/COUNTY OF SAN FRANCISCO PRODUCTION: FAMIS INDEX CODES

INDEX CODE : 235105 JAIBG FY 00/01(MYJABG/01CY) FUND TYPE : 2S SPECIAL REVENUE FUNDS FUND : PPF PUBLIC PROTECTION SPECIAL REVENUE FUND SUBFUND : GNC GRANTS, NON-PROJECT, CONTINUING PROGRAM : CAQ CHF-CHILDREN PROGRAMS DEPT. ACTIVITY : optional ORGANIZATION : CHFAA GENERAL SERVICE SUPPORT PROJECT : optional, for capital grants only PROJECT DETAIL : optional GRANT : MYJABG JUV ACCOUNTABILITY BLOCK GRANT GRANT GR DETAIL : MYJABG 01CY DEPT CHILDREN,YOUTH & FAMILIES USER CD : optional SUB-OBJECT : optional ALLOTMENT CTL : 87 SFD/DEPT/GRANT/DETL2 ALLOCATION CTL : 87 SFD/DEPT/GRANT/DETL2 CASH CTL TYPE : GG GRANT COST DISTR : PSC% : TAX REBATE% : EXTERN RPT REQ : START/END DATES : 04/01/2000 / 09/30/2004 FUTURE YEAR INDEX : CREATE DATE: 02/23/2000 STATUS IND: UPDATE DATE: 09/29/2004 STATUS DATE:

12.2.1.9

| GRANT BUDGET SET-UP

Grant budget needs to be set up in FAMIS. Grants that are authorized through the Annual Appropriation Ordinance (Budget Ordinance) have grant budgets posted to FAMIS through the budget system with all other operating budgets that are also approved together with the Budget Ordinance. Grants not

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included in the Budget Ordinance need to have their budgets manually recorded in FAMIS through journal entries. Set-up in the Budget System – Budget Ordinance Departments need to contact the Controller’s Office Budget Division for detailed instructions and deadlines for using and inputting the grant budget into the budget system. In general, please note the following: 







Include a budget for anticipated program income, if applicable If a grant is expected to receive program income—from interest on advances, loan repayments, or other revenue sources—you may include an estimate of that program income in the budget and a plan for spending it. If the program income is uncertain, the Controller’s Office or the Board may reserve some or all of the appropriation. Grant-funded positions: Use “G” indicator In the budget system, grant-funded positions are entered with position status indicator “G” and are shown by classification. Position status indicators allow for analysis of the City-wide workforce and facilitate budget balancing. Balance budgets for revenues and expenditures at grant level Grants in the annual budget use the same sub-objects as those approved through “Accept and Expend Resolutions”. Revenues and expenditures are recorded, and the grant is balanced at the grant level. Review grant information each budget year Once a grant is included in the annual budget, all budget records, including revenue, expenditure, and position entries, are “rolled over” into the base budget for the following fiscal year. The base budget column becomes available for analysis and comparison with other budget phases. Some grants that are not recurring may appear in the base budget. Departments are responsible for identifying any non-recurring grants and deleting them from their budget submission. If the recurring grant will be budgeted in a new grant detail, departments must enter the appropriate amounts and position records in the new grant detail and zero out old grant details. For grant funds set up in FAMIS as continuing funds—that is, unspent amounts from prior years are continued—departments do not need to re-enter unspent balances in new grant details.

Manual Set-up through Journal Entries Departments should use the following document types and prefixes to initiate budget entries to set up grant budgets in FAMIS that have not been set up through the budget system. For grants that need to go through the “Accept and Expend” process, the manual set up is done after the Board approval of the resolution or ordinance to Accept and Expend the grant. Refer to Section 12.2.1.3 Accept & Expend Processing Guidelines for criteria in determining whether a grant needs Board approval. 

Document Type GB : (Non-rims) (Document Prefix GB)

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Document Type GM : (Rims) (Document Prefix GM)

When submitting a new grant budget entry or grant budget revision in FAMIS, the Notepad must include the following information with supporting documentation:         

Name of the funding agency, federal pass-through agency, if applicable Grant Type (federal, State, federal Pass-through, or Private, etc.) Catalog of federal Domestic Assistance (CFDA) number, if applicable Grant identifying number provided by the donor agency, if applicable Grant award amount and Grant period Board Resolution number or Ordinance number, if applicable Required matching/in-kind amount Funding source of matching/in-kind amount, if any Reporting and audit requirements and due dates

The following documents must be forwarded to the Fund Accountant at Controller’s Office Operations Unit to approve the budget set-up entry. After approving the budget setup entry, the Fund Accountant will track the following grant information in a database.  

   

A copy of the passed resolution or ordinance (if Board approval is required) Completed Grant Information Form with signed Disability Checklist (if Board approval is not required). The form is available at http://mission.sfgov.org/DocCenter/DispDetail.aspx?DocNo=69&S=0&P=ByDept.aspx&T=Boar d%20of%20Supervisors%20|%20Grant%20Package&K=114 Grant award letter Grant agreement Grant budget document from the grantor Grant guidelines or web link to the guidelines

All grant budgets must match with the grant awards, and funding sources must balance with uses so that expenditures of the grant activities will be fully supported. Grant budgets will not be approved if they do not balance or match with the grant award. 12.2.1.10 | DELEGATED AUTHORITY FOR GRANTS: MTA EXAMPLE

Regarding Section 12.1, the following is the language from the 2007 Prop A Charter amendment: “… Have exclusive authority to apply for, accept, and expend state, federal, or other public or private grant funds for Agency purposes.” (Section 8A. 102 (12)) The MTA board has delegated authority to the CFO (Sonali) to accept and expend grants (sample below). Unless the grantor requires a specific MTA board resolution, this is all that is necessary. Page 379

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MTA’s closeout process is currently under review. I expect within the next 30 days we will have a process that has been agreed on internally that I can share.

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12.2.2

| Grant Changes

This section sets out the policies and procedures that must be followed when grant-related data in the financial system must be changed. 12.2.2.1

| FINAL GRANT AWARD AMOUNT DIFFERENT FROM ESTIMATED AMOUNT IN BUDGET ORDINANCE BUDGET

As defined by Budget Ordinance Section 11.1, recurring grant funds that are detailed in department budget submissions, and approved by the Mayor and Board of Supervisors in the annual budget, shall be deemed to have met the requirements of Administrative Code, Section 10.170 and do not need to go through the “Accept and Expend” process. If departments do not know the exact grant award amount at the time they prepare their Budget Ordinance budgets, they should include their best estimate. If the final grant award has a different amount from the estimate amount in the Budget Ordinance and has no other changes, Board approval is not needed and the Controller has the authority to adjust the grant budget to reflect the final award amount. Departments should submit the granting agency documents to the Controller’s Office Operations Unit, and initiate a journal entry (document type: GE or GR) to update the grant budget in FAMIS to match the final award. 12.2.2.2

| GRANT AWARD MODIFICATION BY GRANTOR

The funding agency might increase or decrease grant award levels based on their funding availability, the beneficiary departments’ needs, and other considerations. When the department is notified of a grant award modification from the funding agency, it should submit the notification (or approval if applied) through e-mail or fax to the Controller’s Office Operations Unit, and initiate a journal entry (document type: GE or GR) to update the grant budget in FAMIS to match the revised award. 15% rule A department, agency, or office may reallocate or transfer funds of line item expenditures within an approved grant budget, if such reallocations or transfers are within the total of the approved budget and are allowed by the granting agency. If any line item of a federal or state grant is modified or increased by more than 15%, copies of documentation of such modification or increase that are transmitted to federal or state agencies shall also be transmitted to the Board of Supervisors. $100,000 threshold for Accept and Expend If the modification increased the cumulative grant amount to over $100,000 and the grant had not been previously approved by the Board (either through Budget Ordinance or Accept and Expend), the department needs to obtain Board approval by submitting a resolution through the Accept and Expend process in order to be able to post the grant budget changes.

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12.2.2.3

| GRANT BUDGET LINE-ITEM TRANSFER

Budgetary transfer between expenditure line items is usually permissible, as long as it is allowed by the grant agreement. If unsure, obtain written approval (e-mail acceptable) from the funding agency. No grantor approval needed, no staffing increase If the funding agency allows the budgetary transfer between line items without its approval, and there is no proposed increase in staffing, the department does not have to notify the Board of Supervisors according to Administrative Code, Section 10.170-1(H). However, in order to have the initiated budgetary transfer journal entry approved and posted, the department needs to certify on the entry Notepad that the budgetary transfer is permitted according to the grant provisions. No grantor approval needed, with staffing increase If a department wants to shift grant funds into salaries in order to hire more staff, and thereby create new positions, the department must obtain prior approval from the Board of Supervisors through an ordinance amending the ASO. The department should work with the Department of Human Resources (HRD) to prepare an amendment to the ASO, including the index code, fund, and position classification(s). For ASO amendments, please contact HRD at 557-4800. Grantor approval needed, less than 15% If the grant provisions require that approval be obtained from the funding agency in order to move budgets around, and the budgetary change involves less than 15% of the budget line item, get written approval (e-mail acceptable) from the funding agency and forward the approval documentation to the Controller’s Operations Unit in order for the budgetary transfer journal entry to be approved. No Board action is needed. Grantor approval needed, more than 15% If the grant provisions require approval from the funding agency in order to move budgets around, and if the budgetary change involves at least 15% of a budget line item, then the department must submit a copy of that documentation to the Board of Supervisors. See the below Figure for a sample memo to the Board of Supervisors to notify them of the budget revision. The notification can also be submitted through [email protected]

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FIGURE 12-8. MEMO FORMAT FOR BUDGET REVISION NOTIFICATION TO BOARD

Date: To:

Clerk of the Board of Supervisors

CC:

Controller’s Office Operations Unit

From: Subject:

Grant Budget Revision Grant name:

In accordance with Administrative Code Section 10.170-1(H), this memo serves to notify the Board of Supervisors of a (type Federal or State) grant line item budget revision in excess of 15% requiring funding agency approval. We have attached a copy of budget revision documentation submitted to the funding agency. Attachment: Budget revision documentation

12.2.2.4

| GRANT PERIOD EXTENSIONS

As the end of the grant period approaches, departments might find that they still have unused grant funds due to project or hiring delays. In this case, a department needs to request the funding agency for an extension of the grant period in order to use up those funds and finish the grant projects. Once the extension is approved, the department should update the grant end date (planned and active) on FAMIS Screen 5070, and the index code expire date on FAMIS Screen 5300, to reflect the extension and allow for transactions to be recorded in the grant during the extended grant period. For departments that do not have access to update FAMIS Screen 5070 and 5300, they should provide the approval documentation and send request to the Controller’s Office Operations Unit to update the respective dates in FAMIS.

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12.2.3

| Grant Revenues

Grant revenues must be treated consistently because the City reports these revenues in the annual financial statements and audit reports. 12.2.3.1

| GRANT REVENUE SUB-OBJECTS

The correct grant revenue sub-object should be used when setting up the grant budget. This is crucial in order to identify the source of the grant revenue in the City’s financial reports. A complete list of subobjects can be found in FAMIS Table 5999 (link to Screen 5200, and press F2). Federal-funded Grants   

44939 “Federal Direct Grants” - used for federal grants received directly from federal agencies and those without a unique sub-object. 44931 “Federal Grants Passed Thru State/Other” - used for grant revenues involving federal funds administered and provided by the state or other non-federal agency. 44936 “Federal Direct Contracts” – used for contracts awarded by federal agencies where City is the contractor. Revenues recorded using this sub-object is excluded from the Single Audit.

State Grants 

48999 "Other State Grants and Subventions” - used for state grants that involve state money (not federal pass-through) without a unique sub-object.

Local Grants  

49102 “SF Transportation Authority” - used for grants from the San Francisco Transportation Authority. 49999 "Other Local/Regional Grants" -used for miscellaneous grants from local or regional public agencies.

Gifts & Bequests and Private Grants  

78101 "Gifts and Bequests” 78201 “Private Grants”

Some programs have specific sub-objects. For example, revenue sub-objects 40124 “Food Stamps E&TFed Share” and 43111 “FEMA, Federal Share” are specific to those programs. In addition, revenue subobjects for ARRA federal direct and pass-through grants have been created. New sub-objects can be created when necessary or useful; contact your Controller’s Office Fund Accountant to discuss.

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12.2.3.2

| GENERAL PRINCIPLES FOR RECORDING GRANT REVENUE

Departments should bill the granting agency in a timely manner for all eligible grant expenditures. Revenue sources (e.g. federal, state, private, etc.) must be reported and recorded consistently. Revenue must be precisely recognized at any relevant point in time supporting underlying economic transactions (booking receivable, recognizing revenue from advances, etc.). Revenue must be recognized quarterly at a minimum. For grants where claims are submitted every six (6) months, revenue still needs to be recognized every quarter. 12.2.3.3

| RECOGNIZING REVENUES

GASB 33 Impact The principal issue addressed in GASB 33 is the timing of recognition of non-exchange transactions, including expenditure driven / reimbursement type grants. GASB 33 requires that expenditures be made and revenue be available before revenue can be recognized. Available means “the government has collected the revenues in the current period or expects to collect them soon enough after the end of the period to use them to pay liabilities of the current period.” The availability period should be consistent with the time frame currently used for revenue recognition, which for the City is 90 days. This means that only revenues received on or before September 30 may be included as income for the prior fiscal year. Government-mandated non-exchange transactions, such as federal or state programs that are required of State or local governments, will be recognized when all eligibility requirements are met, as specified in Statement 33. For example, when a recipient is required to incur allowable costs before reimbursement, the incurring of allowable costs is an eligibility requirement. The Statement also distinguishes between two types of stipulations on the use of resources: time requirements and purpose restrictions. Public agency accounting guidelines require the City to report revenues as soon as they are earned, rather than when they are received. This rule requires separate accounting procedures depending on whether grant funds are disbursed to the City before or after the related expenditures. Gifts are usually treated as revenue as soon as they are received, unless there is a significant possibility that the City might be required to return the gift. References: Accounting and Financial Reporting for Nonexchange Transactions: GASB 33 (PDF) at www.hud.gov/offices/reac/pdf/account11.pdf and http://www.gasb.org/.

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Advance Grants 

Deposit funds as advance (T/C 724, GL 222 or 223) When grant money is received before expenditures are incurred, it is considered an advance. This means that the City has not yet earned the grant revenue. If priorities change so that the money received will not be spent on the intended program, the City may be obligated to return the advance to the funding agency. Therefore, when an advance is received, it should not be recorded as revenue, but as a liability using General Ledger (GL) 223, “grants received in advance” or if a subvention, GL 222, “subventions received in advance”, using Transaction Code 724. These GL accounts are liability accounts properly reported as advance liabilities.



Recognize revenue as the advance is spent (T/C 526) As the advance is expended on eligible costs, an entry should be initiated to recognize that portion of the advance as revenue, using Transaction Code 526. Review grants and subventions with advances at least quarterly to post revenue in amounts equal to the eligible expenditures incurred.



Refund to grantor for grant funds not used (T/C 233) If the department was not able to utilize the grant funds by the end of the grant period, and no extension is approved, the remaining grant funds are liable to be returned to the funding agency. In this case, initiate a one-time document (document type: OT) using T/C 233 to generate a check to the funding agency for the remaining grant funds.

Reimbursement Grants With reimbursement-based grants, departments need to incur eligible expenditures using the City’s money first before requesting reimbursement from the granting agency. While waiting for reimbursement, the City loses the interest income it might have received on the grant funds.

Submission of claims—delay costs the City money. Example: If $10 million in grant funds were unclaimed for a year, and if the City earns 1.5% on short-term investments, the financial loss to the City could amount to $12,500 per month, or $150,000 per year, due to the delay.

Therefore, as funds are expended, departments should bill the granting agency in a timely manner according to the maximum frequency stipulated by the grant provisions in order to recover the City’s cash position promptly. If billing frequency is not stipulated in the grant provisions, departments should

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perform billing at least quarterly. For large subvention programs, departments should bill the funding agency at least monthly. Accrue receivables and recognize revenues upon submission of claims (T/C 528) Revenues are earned as eligible expenditures are incurred (with all other eligibility requirements met). As soon as the funding agency is billed for reimbursement, the receivable should be accrued and revenue should be recognized for the amount of expenditure incurred for the period, which should be equal to the amount billed. (Transaction code 528, GL 120 for ordinary grants or GL 122 for subventions). The Controller’s Office recommends that departments accrue receivables in FAMIS each time they bill a funding agency and clear those receivables when they receive the reimbursement payments. This gives a more accurate picture of the City’s financial position at any particular time. An exception to this policy may be made for grants with automatic draw downs, where reimbursements come within a few days of the claim. In those cases, receivables should be set up only to account for any claims outstanding as of the end of the fiscal year (June 30). Departments must keep track of cash positions on grants and analyze large negative balances. To see the cash position of the grant, refer to FAMIS Screen 6410, GL 101, “Equity in City Treasury-Pool.” A negative GL 101 balance indicates that the City has expended and should be able to file a claim or draw down on grant funds to reimburse for grant-related expenditures. Apply reimbursements received to receivable when received (T/C 714) When the money is deposited with the City treasury, use Transaction Code 714 to transfer the funds in the “Equity in City Treasury-Pooled Funds”, GL 101, and reduce the balance from the receivable account GL 120 for ordinary grants or GL 122 for subventions. Funds received by the Treasurer may initially be deposited into GL 248, “Unidentified Receipts.” Departments are responsible for clearing unidentified receipts within 15 calendar days. To verify whether unidentified receipts have been fully cleared, view by document number on FAMIS Screen 6050. For more details, drill down to Screen 6051. Year-end revenue accrual adjustment – with cash in only (T/C 678) Revenue recognition becomes critical at fiscal year-end when the City needs to obtain the accurate financial data to produce its Comprehensive Annual Financial Reports (CAFR). If it happens that grant revenue that was supposed to be accrued for the past fiscal year is recognized in the following fiscal year, the department can initiate a journal entry to adjust the recognition of revenue by setting up a receivable at year-end with an automatic reversal of the revenue and receivables in the beginning of the fiscal year (using Transaction Code 678). This process should be used only if the associated reimbursements have already been received and posted as revenue in the new fiscal year.

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Record deferred inflow of resources for receivable not expected to be received within 90 days after year-end (T/C 671R, GL224) GASB 63 and GASB 65 dictate that revenues and other governmental fund financial resources should be recognized in the accounting period in which they become both measureable and available. When the revenue is earned but not available, it should be reported as deferred inflow of resources until such time as the cash is received. The City follows the 90-day rule in deferring revenues (Transaction Code 671R, GL 224). To record deferred inflow of resources, the grant must already have expenditures incurred, claims made, and receivables booked. In contrast, departments using the accrual basis of accounting should recognize revenues as soon as they are earned regardless of the timing of related cash inflows. The department should be aware of the basis of accounting to which it adheres. If grantor denies all or part of claim, reduce receivables (T/C 527) and abate the ineligible expenditures When a grantor denies all or part of a claim, reduce the grant revenue and receivables by the amount denied using Transaction Code 527. The ineligible expenditures must be moved out of the grant to another department budget. If there is no suitable budget available, discuss with your Fund Accountant. Refund to grantor for reimbursements deemed ineligible (T/C 217) If the department has already received the reimbursement but the related expenditure is deemed ineligible, the expenditure needs to be abated out of the grant and the revenue received needs to be returned to the grantor. Initiate a revenue refund document (document type: RR) using Transaction Code 217 to generate a check to the grantor for the ineligible revenue received. 12.2.3.4

| PROGRAM INCOME

Program income is any revenue derived from grant-funded activities, such as repayments of loans that were originally grant funded, or fees paid by program participants or beneficiaries and interest related to repayment of grant funded loans. These revenues are often obligated to be used in concurrence with the purpose of the grant. 12.2.3.5

| INTEREST DISTRIBUTION

Grants with Positive Cash Balances Grants that receive advances may have a positive cash balance earning interest. The interest may be allocated back to the grant if the grant requirements specify that they must be used on the grant programs, or returned to the funding agency. Departments should bring any interest allocation issues to the attention of their Fund Accountant.

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Grants with Negative Cash Balances Most grants require the department to expend funds first and then get reimbursed by the granting agency. This results in a negative cash balance in the grant account until the final reimbursement is received. Interest costs are calculated for the negative cash balances in the grant account, but the default procedure is to charge those interest costs to the general fund. Departments are expected to minimize these interest costs by obtaining reimbursement from funding agencies as quickly as possible. In special cases, interest costs on negative cash balances may be allocated to the grant account. This would usually occur if the cash balance cycles between negative and positive, so that interest costs on negative balance are used to offset interest earned on the positive balances.

12.2.4

| Grant Expenditures

Once a grant award is approved—either through the Accept and Expend process when necessary, or the Annual Appropriation Ordinance—the budget can be set up in FAMIS. The department may then begin to expend the grant funds. Departments must comply with the following general principles when spending down the grant:

 

 

12.2.4.1

All grant expenditures must be made within the grant’s provisions. All grant expenditures must be made within the grant period. Time extensions need to be approved by the grantor before eligible grant expenditure can be incurred during the extension periods. All grant expenditures must be made within the approved budget categories stated in the award. All grant expenditures, including indirect costs, should be charged to the grant on a regular basis, at least quarterly, or within the same quarter that the expenditure has incurred.

| GRANT-FUNDED PERSONNEL EXPENDITURES

This section describes the guidelines for grant personnel expenditures.   

The personnel service provided must be reasonable and must conform to the established policies. The personnel expenditure must follow an appointment made in accordance with governmental unit’s law and rules, merit system, or other requirements. The expenditure must be supported by payroll documentation including: o Proper attendance records

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o Time distribution records Standards for time and effort reporting: o If the personnel expenditure has already been incurred, use actual instead of estimates. o Full disclosure is required, including list of activities. o Appropriate verification is required, i.e., timesheets must be signed by employees and supervisors. o Time & effort reporting must be prepared at the time that work is performed.

Payroll Set-up Personnel expenditures funded by the grant are budgeted in the Annual Salary Ordinance or an Accept and Expend Ordinance approved the Board of Supervisors. The department’s payroll unit is responsible for processing personnel requisitions with the Department of Human Resources and setting up the payroll for the employee hired. After this is done, the City will charge the employee’s payroll cost directly to the grant funding the position through an interface with the eMerge PeopleSoft Labor Distribution System (LDS). The Grant Manager is responsible for examining the payroll charges to make sure that payroll is set up in the grant correctly and the personnel expenditures charged to the grant are all eligible and within budget. All grant-funded personnel expenditures must be supported by authorized (signed) timesheets for audit purposes. Abatements Some grants disallow overtime expenditures or fringes, and some grants only pay for overtime for personnel who backfill the positions of other personnel in training. Salary abatements between grants and other funding sources are therefore necessary in these specific instances, and they should be done in a timely manner (i.e., within the same quarter that the expenditure incurred). When submitting salary abatement journal entries, use document type GE or GR and provide the following in the Notepad:  

Employee name and associated pay period, or Reference Labor Distribution System LDS entries

Overspent Payroll Charges Note that the Labor Distribution System (LDS) overrides index code appropriation controls to ensure employees’ pay will not be affected. Therefore, personnel expenditures could be charged to the grant even when the grant budget may be exceeded. In this case, the excess payroll charges will cause grant budget overruns and the Grant Manager must check if the grant budget projections need to be revised and act immediately to do one of the following: 

Reallocate the grant budget to provide more funds for personnel expenditures, if allowed by the grant award or request grantor’s approval,

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  

Request additional grant funds from the funding agency, Abate the excess payroll charges to other funding source for which the charges would be eligible, or Request a surplus transfer or supplemental appropriation from the Board of Supervisors to cover the excess payroll charges.

12.2.4.2

| GRANT-RELATED PROCUREMENT PROCEDURES

Departments using federal, state, or local grant funds for procurement may be required to comply with different procurement requirements than the City’s procurement rules. Departments must be in full compliance with the grant provisions in the procurement of goods and services using grant funds. Uniform Guidance – Procurement Guidance All OMB guidance for federal awards has been streamlined in Title 2 of the Code of Federal Regulations (2 CFR), Subtitle A, Chapter II, Part 200. Major procurement requirements are as follows. Procurement by States (2 CFR Section 200.317) A state must:   

Follow the same policies and procedures it uses for procurements from its non-federal funds when procuring property and services under a federal award. Comply with Section 200.322 - Procurement of Recovered Materials and ensure that every purchase order or other contract includes any clauses required by Section 200.326 – Contract Provisions. All other non-federal entities, including sub-recipients of a state, will follow Section 200.318 – General procurement standards through Section 200.326 – Contract provisions.

General Procurement Standards (2 CFR Section 200.318) Non-federal entities must:    

Use its own documented procurement procedures provided that they conform to applicable federal law (including general procurement standards), state and local laws and regulations. Maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contract or purchase orders. Maintain written standards of conduct covering conflicts of interest and governing the performance of employee engaged in the procurement process; including (i) selection, (ii) award, (iii) and administration of contracts. Maintain written standards of conduct: o Covering organizational conflicts of interest for relationships with parent, affiliate, or subsidiary organizations that are not a state, local governments, or Indian tribe.

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     



o The standards of conduct must include disciplinary actions for employees, officers, or agents of the non-Federal entity in the event of violation. Avoid acquisition of unnecessary or duplicative items. Make efforts to use federal excess and surplus property in lieu of purchasing new equipment and property to reduce project costs. Make efforts to use value engineering clauses in contracts for construction projects of sufficient size to offer reasonable opportunities for cost reductions. Award contracts only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. Maintain records sufficient to detail the history of procurement; including, but not limited to: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Use time and materials contracts only after the determination was made that no other contract is suitable. o Must set a ceiling price o Awarding entity must assert a high degree over oversight Be responsible, have good administrative practice, and sound business judgment for the settlement of all contractual and administrative issues arising out of procurement.

Competition (2 CFR Section 200.319) To be competitive:   

 

Procurements must be conducted in a manner providing full and open competition. To ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop draft specifications, requirements, statements of work, and invitations for bids or requests for proposals must be excluded from competing for such procurements. Restrictive competition situations can be considered as: o Placing unreasonable requirements on firms in order for them to qualify to do business; o Requiring unnecessary experience and excessive bonding; o Noncompetitive pricing practices between firms or between affiliated companies; o Noncompetitive contracts to consultants that are on retainer contracts; o Organizational conflicts of interest; o Specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement; and o Any arbitrary action in the procurement process. No state or local geographical preferences in the evaluation of bids or proposals, except when applicable federal statutes expressly mandate or encourage geographical preference. Must have written procurement procedures for transactions that (i) incorporate a clear and accurate description of the technical requirements for the material, product, or service and (ii) identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or proposals.

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All pre-qualified lists of persons, firms, or products that are used in acquiring goods and services must be current and include enough qualified sources to ensure maximum open and free competition.

Methods of Procurement (2 CFR Section 200.320) One of the following five procurement methods must be used:     

Procurement by Micro Purchase Procurement by Small Purchase Procedures Procurement of Sealed bids (formal advertising) Procurement by Competitive Proposal Procurement by Noncompetitive Proposal

1. Procurement by Micro Purchase    

Aggregate dollar amount of supplies or services does not exceed $3,000; Should distribute micro-purchases evenly among qualified supplies; May be awarded without soliciting competitive quotes if the price is reasonable; and Noncompetitive contracts to consultants that are on retainer contracts.

2. Procurement by Small Purchase Procedures   

Procedures are simple and informal for supplies and services (or other property) that do not exceed the Simplified Acquisition Threshold ($150,000); and If small purchase procedures are used, price or rate quotes must be obtained from an adequate number of qualified sources. Purchasing cards (P-card) purchases above $3,000 will require documentation of price quotes.

3. Procurement of Sealed Bids (Formal Advertising)  

Publicly solicited bids, and a firm fixed price contract is awarded at the lowest price. Preferred method for procuring construction under specified conditions.

4. Procurement by Competitive Proposal    

Conducted with more than one source submitting an offer Either fixed price or cost-reimbursement type contract is awarded Used when conditions of sealed bids are not appropriate Requirements are:

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o Requests for proposals must be publicized and identify all evaluation factors and relative importance; o Proposals must be solicited from an “adequate” number of qualified sources; o Written method for conducting technical evaluations of the proposals and selecting recipients is mandatory; o Contracts must be awarded to the entity whose proposal is most advantageous; and o The selection method, where price is not used as a selection factor, can only be used in procurement of architectural/engineering professional services. 5. Procurement by Noncompetitive Proposal  

Procurement through the solicitation of a proposal from only one source; and May be used when one or more of the following apply: o The item is available from a sole source only; o Public emergency will not allow a delay resulting from competitive solicitation; o Noncompetitive proposals are authorized in response to a written request from the nonFederal entity; and o The competition is considered inadequate after a soliciting a number of sources.

Contracting with Small and Minority-owned Business (2 CFR Section 200.321)  

Non-federal entities must take necessary actions to ensure that minority and women-owned businesses, and labor surplus area firms are used when possible. Affirmative steps include: o Including qualified small, minority, and women-owned businesses on solicitation lists; o Small, minority, and women-owned businesses are solicited whenever they are potential sources; o Dividing total requirements into smaller tasks to permit maximum participation by small, minority, and women-owned businesses; o Establish delivery schedules that encourage the participation from small, minority, and women-owned businesses; o Using the services and assistance of SBA and the Minority Business o Development Agency of the Department of Commerce; and o Requiring the prime contractor to select a subcontractor based on the affirmative steps listed above.

Contract Cost and Price (2 CFR Section 200.323) The non-federal entity must: 

Perform cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold (including modifications).

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 

Negotiate profit separately, as an element of price, for each contract that does not have competition. Costs and prices are only allowable to the extent that they are incurred based on estimates and included as part of negotiated prices under the OMB Cost Principles Subpart (E)

Federal awarding agency or pass-through entity review (2 CFR Section 200.324) 



The non-federal entity must make available to the federal agency or pass-through entity: o Technical specifications on proposed procurements; and o Pre-procurement review: procurement documents, such as, requests for proposals or invitations for bids or independent cost estimates. The non-federal entity is exempt from the pre-procurement review if the federal awarding agency or pass-through entity determines that its procurement system compliance with the standards of this Part.

Contract Provisions (2 CFR Section 200.326) Contract provisions must include all applicable provisions in Appendix II to Part 200 – Contract Provisions for Non-Federal Entity Contracts Under Federal Awards.      

  

Contracts over the simplified acquisition threshold (currently $150,000) must address administrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, and provide for such sanctions and penalties as appropriate Contracts in excess of $10,000 must address termination for cause and for convenience by the non-Federal entity including the manner by which it will be effected and the basis for settlement Equal Employment Opportunity applies to all “federally assisted construction contract”. Davis-Bacon Act applies to all prime construction contracts in excess of $2,000. Contract Work Hours and Safety Standards Act applies to all contracts awarded by the nonFederal entity in excess of $100,000 that involve the employment of mechanics or laborers. Wages and overtime are computed using a standard 40-hour work week. Rights to Inventions Made Under a Contract or Agreement applies when the Federal award meets the definition of “funding agreement” under 37 CFR Section 401.2 (a) and the recipient or subrecipient wishes to enter into a contract with a small business firm or nonprofit organization regarding the substitution of parties, assignment or performance of experimental, developmental, or research work under that “funding agreement”. Clean Air Act and the Federal Water Pollution Control Act applies to contracts and sub-grants of amounts in excess of $150,000. Debarment and Suspension: A contract award must not be made to parties listed on the government-wide exclusions in the System for Award Management which is searchable on www.SAM.gov. Byrd Anti-Lobbying Amendment:

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Contractors that apply or bid for an award exceeding $100,000 must file the required certification. Other Federal Procurement Requirements This section provides some specific examples of federal procurement requirements. Prohibition of geographical preferences Grantees and sub-grantees will conduct procurements in a manner that prohibits the use of statutorily or administratively imposed in-state or local geographical preferences in the evaluation of bids or proposals, except where federal statutes expressly mandate so. Competitive bidding All procurement transactions will be conducted in a manner providing full and open competition subject to but not limited to sole source procedures. Circumstances exempt from competitive bidding that may allow sole source waiver request include:    

The item is available only from a single source; The urgency of the requirement does not permit a delay resulting from competitive solicitation; The awarding agency authorizes noncompetitive proposals; After solicitation of a number of sources, competition is determined inadequate.

Prospective contractor suspended or debarred City departments receiving federal grants are prohibited from contracting with suspended or debarred parties. Covered transactions include those procurement contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in Code of Federal Regulations Title 2 Grants and Agreements (2 CFR) Section 180.220. When a City department enters into a contract equal to or exceeding $25,000, it must verify that the prospective contractor is not suspended or debarred before awarding the contract. This verification may be accomplished by (1) checking the debarment status at www.sam.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). City departments shall establish continuous monitoring procedures to ensure that any parties excluded from federal Procurement or Non-procurement programs are not awarded assistance in violation of 2 CFR Section 180. Departments shall check the debarment status periodically to ensure continuous compliance.

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City departments shall also establish procedures to provide for effective use and/or dissemination of the list to assure that their grantees and sub-grantees (including contractors) at any tier do not make awards in violation of the non-procurement debarment and suspension common rule. Davis Bacon Act Non-federal entities shall include in their construction contracts subject to the Act:  



Requirement that the contractor or subcontractor comply with the requirements of the Davis Bacon Act, and Requirement for the contractor or subcontractor to submit to the non-federal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Payment should not be made without receiving the certified payrolls.

Given factors such as geographical preference prohibition in certain grant requirements, departments should discuss with the City’s Human Rights Commission (HRC) concerning application of its rules. Work with Purchasers (OCA) Departments are responsible for reflecting grant conditions and provisions of the governing federal, state, or local grantors, such as the geographical preference prohibition, in the service contracts, grant agreements with sub-recipients, requisitions, purchase orders, work orders, requests for proposal, etc. The City’s Office of Contract Administration (OCA or Purchasing) and the City Attorney’s Office have specific instructions to departments to make appropriate changes to the model contracts and requests for proposals (RFPs) as necessary. Departments, when submitting requisitions or contracts to Purchasing, are to identify the funding source, provide the requisition or contract with the appropriate additions and deletions in compliance with federal, state, or local grant fund requirements, and identify the department contact person who could answer any questions that Purchasing may have regarding the grant restrictions and provisions. Departments must also identify the funding source in the FAMIS Notepad and advise that special requirements may apply. Abatements If the procurement expenditure is encumbered and paid for by another funding source and is abated to the grant after-the-fact, the department should submit a journal entry (GE/GR) for the abatement within the same quarter that the expenditure incurred. The abatement should be justified with supporting documents and adequately explained in the Notepad of the journal entry. The department should identify the expenditure the same way in the grant as it was initially recorded (i.e., same sub-object code), unless it is seen as a different category (character) of expenditure in the grant. Consult the Controller’s Office Grants Unit if unsure.

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12.2.4.3

| GRANT SUB-RECIPIENT CONTRACTS & GUIDELINES

While the City often directly administers grant funds received, many times the City may designate subrecipients to provide the grant services. In these cases, the department identified as the “grantee” in a grant agreement is responsible for the overall administration of the grant. Grant vs. Contract (Sub-recipient vs. Vendor) A grant or cooperative agreement shall be used only when the principal purpose of a transaction is to accomplish a public purpose of support or stimulation authorized by federal statute. Contracts shall be used when the principal purpose is acquisition of property or services for the direct benefit or use of the federal government. A grant shall be awarded to a sub-recipient when the organization:     

Determines who is eligible to receive what federal financial assistance; Has its performance measured against whether the objectives of the federal program are met; Has responsibility for programmatic decision making; Has responsibility for adherence to applicable federal program compliance requirements; and Uses the federal funds to carry out a program of the organization as compared to providing goods or services for a program of the pass-through entity.

A grant shall be awarded to a vendor when the organization:     

Provides the goods and services within normal business operations; Provides similar goods and services to many different purchasers; Operates in a competitive environment; Provides goods or services that are ancillary to the operation of the federal program; and Is not subject to compliance requirements of the federal program.

Federal pass-through entity responsibilities A pass-through entity shall perform the following for the federal awards it makes to sub-recipient: 

To General Public [Federal Funding Accountability and Transparency Act (FFATA)] o The Federal Funding Accountability and Transparency Act (FFATA), which was signed on September 26, 2006, requires information on federal awards (federal financial assistance and expenditures) be made available to the public via a single, searchable website: www.USASpending.gov. The FFATA sub-award Reporting System (FSRS) is the reporting tool federal prime grantees use to capture and report sub-award and executive compensation data regarding their first-tier sub-awards to meet the FFATA reporting requirements.

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o Prime grantees are required to report each first-tier sub-award or sub-award amendment that results in an obligation of $25,000 or more in federal funds by the end of the month following the month in which the subcontract award or modification occurs. To Sub-recipients o At the time of the award, the pass-through agency must identify federal awards to each sub-recipient the federal award information, i.e., CFDA title and number, award name and number, award year, if the award is research and development, and name of federal agency. o Advise sub-recipients of requirements imposed on them. o Monitor their activities. o Ensure that sub-recipients expending $500,000 or more in federal awards during the fiscal year have met the audit requirements of this part for that fiscal year. o Issue a management decision on audit findings within six months after receipt of the subrecipient’s audit report and ensure that the sub-recipient takes appropriate and timely corrective action. o Consider whether sub-recipient audits necessitate adjustment in our own records. o Require sub-recipient to permit the pass-through entity and auditors to have access to the records and financial statements.

Sub-recipient Monitoring The City is responsible for the funds provided to sub-recipients and is ultimately liable and at risk for disallowed expenses if sub-recipients are not in compliance with the terms of the grant. Departments should ensure that all grant sub-recipients comply with the terms of the grants by reviewing sub-recipients' financial statements, audit reports and procurement procedures, and monitor sub-recipients periodically through site visits and/or other activities as required by the grantor. Monitoring methods include:   



Frequent, scheduled phone conversations. This approach allows an informal assessment of how things are proceeding, but may not necessarily reveal whether problems have arisen. Face-to-face meetings provide a more extensive forum for discussion. Written progress reports are a very reliable technique for staying on top of performance. A good progress report should: o Indicate the status of the project. o Highlight the accomplishments vis-à-vis the goals and objectives. o Point out any problems or obstacles. o Discuss work planned for the next period. Financial status reports and payment requests should be used in conjunction with progress reports to ensure expenditures are occurring at a level commensurate to project progress.

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   

Review of draft deliverables allows for revising the work product in accordance with the contract specifications before the final version is submitted. Site visits. Visiting a sub-recipient’s location is the best means of obtaining firsthand information on performance. If possible, site visits should be conducted during each major phase of a project. Make use of sub-recipient monitoring system such as Contracts Online (COOL) and Total Grant Solution (TGS). Use City G100 Model Grant Agreement.

G-100 Templates [NOTE: THE CITY ATTORNEY MAY REPLACE THE G-100 WITH NEW P-600] Departments must ensure that grants are administered in accordance with the grantor’s terms and conditions, and applicable City policies and procedures. In addition, “grantee” departments must ensure that all sub-recipients adhere to grantors’ term and conditions. Contracts with sub-recipients must contain language in compliance with grantor's regulations. The Controller’s Office recommends that departments use the G-100 template to write grant funded contracts. The template is available at http://sfController.org/modules/showdocument.aspx?documentid=6828 [LINK UPDATED 12/8/2015]. 12.2.4.4

| GRANT-FUNDED INTERDEPARTMENTAL SERVICES (WORK ORDERS): CO-OPERATION BETWEEN THE REQUESTING AND PERFORMING DEPARTMENT

Departments should identify the funding source when submitting interdepartmental work orders. The department requesting the service (“Requesting Department”) must make known the funding source of work order/work authorization to the other City department that will be performing the service (“Performing Department”). If the funding source is from a grant, Requesting Departments must provide the pertinent grant funding requirements to the Performing Departments and make sure the Performing Departments adhere to grant provisions when they expend the grant funds. Performing Departments reserve the right to advise whether they can or cannot comply with the requirements and, if they cannot, the Requesting Department has the right to cancel the work order. No grant funds should flow through to the Performing Department if it does not comply with the grant’s requirements. Both the Requesting Department and the Performing Department have the responsibility to make sure the grant funds are spent according to the grant’s requirements. Abatements If interdepartmental services are deemed eligible expenditures to the grant but are encumbered and paid for in a different funding source (e.g., reproduction and mail charges or central shop work orders), the department could submit a journal entry (GE/GR) to abate these expenditures to the grant. Note that in this case the expenditure is identified as budgeted interdepartmental expenditure at the original funding source, but not in the grant. Therefore, when performing the abatement the department needs to decrease the interdepartmental expenditure (character 081) at the original funding source and increase expenditure in the SERVICE categories in the grant.

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12.2.4.5

| INDIRECT COSTS

Administrative Code, Section 10.170-1(F) requires that every grant budget contain provisions for the reimbursement of indirect costs, unless indirect costs are disallowed by the grantor or when departments need to maximize the use of grant funds for program costs. For grants that need to go through the Accept and Expend process (refer to Section 12.2.1.3 - Accept & Expend Processing Guidelines), the Board has to authorize the waiver of inclusion of indirect costs in the grant budget. Include indirect costs in all large grant budgets whenever allowable. Grants that prohibit reimbursement of indirect costs may occasionally allow them to be included toward meeting a local matching requirement. Departments should confirm specific indirect cost guidelines with the funding agency. Definition Indirect costs are general costs of doing business that are difficult to identify directly to a grant, including department overhead and City-wide services that support departments. OMB A-87 defines indirect costs as:  

Incurred for a common or joint purpose benefiting more than one cost objective, and Not readily assignable [to a grant]…without effort disproportionate to the results achieved. The term "indirect costs," as used herein, applies to costs of this type originating in the grantee department, as well as those incurred by other departments in supplying goods, services, and facilities.

Indirect Cost vs. Normal Grant Expenditure Any administrative expenses that can be specifically assigned to a particular grant should be budgeted and claimed directly rather than included in an indirect cost base. For example, if a grant program is large enough to require one full-time accounting staff member, that staff person should be billed directly to the grant. Small grants that use an accountant part-time may not be able to bill directly. Also, if a grant program is large enough to occupy a facility or a portion of a facility exclusively, the grant program’s share of the facility charges may be billed as direct charges. If grant activities are just one of many activities in a facility, then facility charges are allocated as part of indirect costs. Calculation of Indirect Cost Indirect costs are normally billed as a percentage of salaries or total direct costs charged to a grant. There may be a wide range of appropriate indirect cost rates, depending on the type of activity and base charges they relate to. The County-wide Cost Allocation Plan (COWCAP) allocates certain Countywide support functions to departments (including Human Resources, Board of Supervisors, Retirement System, City Attorney, etc.). This can be the basis of a partial indirect cost rate. However, the full indirect cost that might be charged to a grant could also include department overhead for the grant’s share of facility, department management, and support costs. This is why each department should calculate its

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own indirect cost rate to get the maximum advantage when indirect costs can be reimbursed. Check with your department fiscal officers for your department’s specific calculation bases and rates. No matter what rate the department uses, all indirect costs must be supported by a written plan that shows how they are calculated. The Controller’s Office Operations Unit is available to assist you with questions about establishing and documenting indirect cost rates. For additional information regarding the State Handbook of Cost Plan Procedures for California Counties, visit the website: http://www.sco.ca.gov/Files-ARD/manual_costplanhandbook.pdf. Indirect Cost Recovery in Operating Fund Indirect costs are usually first incurred in operating funds and then allocated to grant funds as expenditures to support grant claims. Indirect cost recovery in operating funds should be budgeted and recorded as expenditure abatement instead of revenue, since indirect cost-related revenue has already been reported in grant funds. Specifically, for operating funds, do not budget or record indirect cost recovery in revenue sub-object 44933; instead, budget and record the recovery as expenditure abatement in Character 020 Overhead using sub-object 02019 Department Overhead, for example. 12.2.4.6

| ALLOCATED CHARGES

Some departments (e.g., DPW, MTA) budget and record grant expenditures using allocated charges (subobject 07999). These departments budget a negative amount of this sub-object in their operating fund as an expenditure recovery item. The Controller’s Office Operations Unit recommends that departments secure approval from funders prior to using this methodology for recovering shared costs. 12.2.4.7

| YEAR-END EXPENDITURE ACCRUALS

Expenditure recognition becomes critical at fiscal year-end when the City needs to obtain the accurate financial data to produce its Comprehensive Annual Financial Report (CAFR). The department needs to analyze expenditure items at fiscal year-end and determine the correct recognition period for those expenditures. Grant-funded payments to contractors and sub-recipients should be posted in the same fiscal year as the expenditures were incurred. If a contractor submits a bill in July 2013 for expenditures incurred in June 2013, the payment for the bill should be processed as of Fiscal Month 12 (June) of Fiscal Year 12-13. If it happens that an expenditure item that should have been recognized in the past fiscal year is paid or recognized in the following fiscal year, the department should initiate an adjusting journal entry in fiscal month 13 to accrue the expenditure as a payable in the past fiscal year. This can be done with Transaction Code 665 or 545. Transaction Code 665 has built-in automatic reversal in month 1 of the following fiscal year so that no other reversal entry is needed. If the expenditure was paid from an

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encumbrance, follow with Transaction Code 626. Refer to Section 17.2 FAMIS Transaction Codes for more information. 12.2.4.8

| ANALYZING “APPROPRIATION EXCEEDED” ERRORS

When a grant expenditure to be recorded exceeds the grant’s appropriation control, (e.g., about to be overspent as a whole or at its budgeted categories), “appropriation exceeded” errors may occur when department staff tries to initiate or post the expenditure to the grant. Do the following to identify the problem area to be fixed:  





Check index code on Screen 5300 to review allotment and allocation controls. This identifies the level at which FAMIS checks for available appropriation within an index code. Review Appropriation Inquiry Screen 6250 (link to Appropriation Detail Inquiry Screen 6260). This screen indicates the amount of appropriation exceeded. Determine whether there is any remaining un-allotted or reserved appropriation to fund the expenditures. See Figure 12-9 and Figure 12-10. Use Grant Summary Inquiry Screen 6220 to compare expenditure budget to actual, by grant, grant detail and sub-fund. See Figure 12-13 for an example screen. All grant activity should normally take place in a single sub-fund, unless there is a good reason for using more than one. Look for areas where the budget appears to have been exceeded. Check Grant Trial Balance Inquiry Screen 6410 for reserved budgets (GL 451). See Figure 12-14 for an example of a grant with a reserved appropriation. In this case, the appropriation was reserved until design work is completed and a budget to complete the project can be established.

FIGURE 12-9. FAMIS SCREEN 6250, APPROPRIATION INQUIRY FAML6250 V5.1 LINK TO:

CITY AND COUNTY OF SAN FRANCISCO--NFAMIS APPROPRIATION CONTROL INQUIRY FISCAL MO/YEAR INDEX CODE SUB-OBJECT

: 10 2010 APR : 380717 :

CHARACTER OBJECT CODE FUNDING PERIOD USER CD PROJECT PROJECT DETAIL GRANT GRANT DETAIL

: : : : : : : SFCOPS : 09PC

04/06/2010 1:09 PM

2010

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FIGURE 12-10. FAMIS SCREEN 6260, APPROPRIATION DETAIL INQUIRY FAML6260 V5.1 LINK TO:

CITY AND COUNTY OF SAN FRANCISCO--NFAMIS APPROPRIATION CONTROL DETAIL INQUIRY

04/06/2010 1:09 PM

FISCAL PD : 10 2010 CONTROL TYPE : 87 SFD/DEPT/GRANT/DETL2 FDTP 2S SPECIAL REVENUE FUNDS FUND PPF PUBLIC PROTECTION SPE SFND GNC GRANTS, NON-PROJECT, DEPT POL POLICE GRNT SFCOPS COPS PROGRAM -AB3229/ GRDT SFCOPS09PC SFCOPS PROG. YR 13, P

S

APR

TOTAL 44,366.00 -15,685.23 28,680.77 .00 .00 28,680.77 9,643.93 .00 .00

19,036.84 19,036.84 19,036.84

CITY AND COUNTY OF SAN FRANCISCO--NFAMIS GRANT TRIAL BALANCE INQUIRY

04/06/2010 1:12 PM

ORIGINAL AAO REVISIONS TO BUDGET REVISED BUDGET RESERVES UNALLOTTED AMOUNT ALLOTTED AMOUNT EXPENDITURES ENCUMBRANCES PRE-ENCUMBRANCES

2010 .00 .00 .00 .00 .00 .00 .00 .00 .00

BALANCE

FIGURE 12-11. FAMIS SCREEN 6410 W/ RESERVED APPROPRIATION FAML6410 V5.1 LINK TO:

FISCAL MO/YEAR : 10 2010 CURRENCY CODE : GRANT : SFCOPS COPS PROGRAM -AB3229/AB1913 GRANT DETAIL : 09PC SFCOPS PROG. YR 13, POLICE FUND TYPE : 2S SPECIAL REVENUE FUNDS FUND : PPF PUBLIC PROTECTION SPECIAL REVENUE FUND SUBFUND : GNC GRANTS, NON-PROJECT, CONTINUING PROJECT : PROJECT DETAIL : -----------------------------------------------------------------------------S ACCT DESCRIPTION APR 2010 BALANCE 101 EQUITY IN CITY TREASURY-POOL 0.00 19,036.84 223 GRANTS RECEIVED IN ADVANCE 0.00 -19,036.84 379 RESERVE FOR APPROPRIATION (N 0.00 -28,680.77 381 UNREALIZED ESTIMATED SOURCES 0.00 28,680.77 401 SOURCES-AAO BUDGET 0.00 44,366.00 403 SOURCES-OTHER TRANSFERS & AL 0.00 -15,685.23 411 ACTUAL SOURCES 0.00 -9,643.93 421 USES-AAO BUDGET 0.00 -44,366.00 423 USES-OTHER TRANSFERS & ALLOC 0.00 15,685.23 431 ACTUAL USES 0.00 9,643.93 452 APPROPRIATIONS-ALLOTTED 0.00 -28,680.77 459 APPROPRIATION CONTROL-CONTRA 0.00 28,680.77 GRANT DETAIL TOTAL 0.00 0.00

12.2.5

| Grant Reconciliation

The department should periodically reconcile active grants between claims to the funding agency and FAMIS financial records to identify errors and issues and to ensure the financial record of the grant is

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accurate. When the full grant cycle is complete, the grant should be fully reconciled and promptly closed out. 12.2.5.1

| BASIC PRINCIPLES OF RECONCILIATION

Reconcile Quarterly Grants should be reconciled at least quarterly by the administering department. Timely and regular reconciliation helps to identify and correct issues in time, before these issues grows bigger and become more problematic and difficult to correct. Claimed Expenditure = FAMIS Expenditure Expenditures reported on the claim or financial reports to the funding agency must be equal to the grant expenditure amount shown on FAMIS records. Any variances must be noted, investigated and corrected. Revenue = Expenditure For most grants, revenues recognized at a particular time should equal eligible grant expenditures at that point of time. Initiate journal entries to make corrections and adjustments to the grant if necessary. If revenues exceed expenditures, one of several possibilities may have occurred:     

Excess revenues may belong to a different grant. Excess revenues were recognized in advance of expenditures, so should be reclassified as “advances.” Some grant expenditures were charged to the wrong account and should be reclassified into the grant. Some grant expenditures were recognized in a different fiscal year from the one when the service was provided. Excess reimbursement was received and should be returned to the funding agency.

If grant expenditures exceed revenues, examine the account to check for the following possibilities:  



Additional revenues need to be claimed and accrued as receivables. Excess expenditures charged to the grant in error need to be charged to some other department appropriation. If the department does not have the available budget, it will need to request a supplemental appropriation from the Board. For reimbursement-based grants, make sure receivables are established for all outstanding eligible expenditures.

For most gifts, revenues do not need to equal expenditures each fiscal year. Most gifts are recognized as revenue as soon as the funds are received; expenditures are booked as they occur. Thus, if the gift is not fully expended in the year it is received, revenues will exceed expenditures during that year, and Page 405

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expenditures will exceed revenues in subsequent years. When the gift is fully expended, revenues should equal expenditures and the gift detail should be closed out in FAMIS. An exception is for conditional gifts where there is a significant likelihood that funds would have to be returned if the gift conditions are not met. In such a case, as discussed above, the gift should be treated just like an advance grant, with revenues recognized each fiscal year equal to the eligible expenditures. Estimated Revenue = Appropriation Estimated revenue and appropriation of the grant that makes up the grant budget should be balanced. Budget imbalance might result from errors during recording or revision of the grant budget. The department needs to make sure the corrections are made. Actual Expenditure <= Grant Budget Grant expenditure should not exceed the amount of grant funds available. If the grant is overspent, excess expenditures should be abated to another available funding source or the department has to request a supplemental appropriation from the Board of Supervisors. Identify and Abate Any Ineligible Expenditure If grant expenditures were charged improperly to a grant or were found ineligible by the funding agency, they must be transferred out of the grant fund. The department must find another funding source to cover those ineligible expenditures or request a supplemental appropriation from the Board of Supervisors. 12.2.5.2

| DOCUMENTING RECONCILIATION IN A SPREADSHEET

Controller’s Office recommends that departments use a spreadsheet to document the reconciliation of grants. Departments may use any format for the reconciliation spreadsheet as long as the following is included:   

Each claim made (identified with numbers) and the associated expenditure breakdown (by document numbers), Revenue amount accrued and received, Comparison between the amount claimed and the expenditure recorded in FAMIS. Variance must be shown and explained.

See the Figure below for a sample reconciliation spreadsheet.

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FIGURE 12-12. SAMPLE RECONCILIATION SPREADSHEET

Reconciliation of FY 2011-12 Expenditure Reports and Drawdowns with FAMIS A. Reports to Grantor of FY 11-12 Expenditures Date

Report Period

10/15/11

July - Sep 2011

$700,000

1/15/12

Oct - Dec 2012

$350,000

4/15/12

Jan - Mar 2012

$1,500,000

7/15/12

Apr - Jun 2012

$800,000

9/15/12

Apr-Jun 2012 Adjustment

$50,000

Total FY 11-12 expenditures reported

FY 11-12 Exps Reported

$3,400,000

Note: if grant involves sub recipients that file their own reports, include summary and reconciliation of their reports here.

B. Revenues Received/Claims to Grantor Cash Receipts (CRs) can be found by drilling down in FAMIS Screen 6410 under GL101 at the lowest grant detail Attributable to: Date

Cash Receipt #/Collection

Total

FY 10-11 exps

FY 11-12 exps

7/31/11

CR11XXXXXXXX

$650,000

$650,000

$0

10/31/11

CR11XXXXXXXX

$750,000

$50,000

$700,000

1/31/12

CR11XXXXXXXX

$375,000

$0

$350,000

4/30/12

CR11XXXXXXXX

$1,500,000

$0

$1,500,000

$3,275,000

$700,000

$2,550,000

Total

Claims for reimbursement of FY 11-12 exps after 6/30/12 7/15/12 Receivable/claim billed

$800,000

9/15/12 Receivable/claim billed

$50,000

Total FY 11-12 claims:

$3,400,000

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C. FAMIS FY 11-12 Expenditures, by Grant Detail Grant Summary Screen 6220, Year-to-date, Fiscal month 13/12

Grant Detail

YTD FAMIS Exps

MOXXXX/11

$750,000

MOXXXX/12

$2,700,000

$0

$2,700,000

$3,450,000

($50,000)

$3,400,000

Total

Adjustmts

Adjusted FAMIS Exps

($50,000)

Notes

$700,000 $50K FY11 exps recorded in FY 12

D. FAMIS FY 11-12 Revenues, by Grant Detail Grant Summary Screen 6220, Year-to-date, Fiscal month 13/12

12.2.5.3

   

Grant Detail

YTD Revs in FAMIS

MOXXXX/11

$700,000

Adjustmts $0

Adjusted FAMIS Revs

Notes

$700,000

MOXXXX/12

$2,700,000

$0

$2,700,000

Total Revenues

$3,400,000

$0

$3,400,000

Revs include $850K receivables

| USING FAMIS SCREENS TO ANALYZE GRANTS

Use Grant Summary Inquiry Screen 6220 to analyze revenues and expenditures. Use balance type “A” (all year) to see the complete picture of the budget and spending of the grant. See Figure 12-13. Use Grant Trial Balance Inquiry Screen 6410 to see cash position, review general ledger accounts, or drill down to documents. See Figure 12-14. Note: Do not use index code Screen 6450 to analyze grants. Relying on the index code information in the Organization Summary Inquiry Screen 6450 to analyze grants may not provide a complete picture.

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FIGURE 12-13. FAMIS SCREEN 6220, GRANT SUMMARY INQUIRY FAML6220 V5.1 LINK TO:

CITY AND COUNTY OF SAN FRANCISCO--NFAMIS GRANT SUMMARY INQUIRY

04/01/2010 9:15 AM

BALANCE (Y,M,Q,A) : A CURR/PRIOR PRD : CURRENCY CODE : FISCAL MO/YEAR : 09 2010 MAR 2010 GRANT END DATE: 10/30/2010 GRANT : DAAUTO DEPT OF INS AUTO INSURANCE FRAUD GRANT DETAIL : 10 FY 09-10 CHARACTER : X OBJECT CODE : FUND TYPE : FUND : SUBFUND : -----------------------------------------------------------------------------S CHAR DESCRIPTION BUDGET ACTUAL PREENC/ENC BALANCE 450 INTERGOVERNMENTAL 409,966 181,723 -228,243 REVENUE TOTAL 409,966 181,723 -228,243 001 SALARIES 299,289 217,761 81,528 013 MANDATORY FRINGE B 68,624 51,613 17,011 020 OVERHEAD 29,929 29,929 021 NON PERSONNEL SERV 12,124 12,124 EXPENDITURE TOTAL 409,966 269,374 140,592 REVENUE LESS EXPEN -87,651 -87,651

FIGURE 12-14. FAMIS SCREEN 6410, GRANT TRIAL BALANCE INQUIRY FAML6410 V5.1 LINK TO:

CITY AND COUNTY OF SAN FRANCISCO--NFAMIS GRANT TRIAL BALANCE INQUIRY

04/01/2010 9:18 AM

FISCAL MO/YEAR : 09 2010 CURRENCY CODE : GRANT : DAAUTO DEPT OF INS AUTO INSURANCE FRAUD GRANT DETAIL : 10 FY 09-10 FUND TYPE : FUND : SUBFUND : PROJECT : PROJECT DETAIL : -----------------------------------------------------------------------------S ACCT DESCRIPTION MAR 2010 BALANCE 101 EQUITY IN CITY TREASURY-POOL -28,468.42 -187,381.17 120 GRANTS RECEIVABLE 0.00 99,729.74 379 RESERVE FOR APPROPRIATION (N 0.00 -409,966.00 381 UNREALIZED ESTIMATED SOURCES 0.00 409,966.00 401 SOURCES-AAO BUDGET 0.00 456,556.00 403 SOURCES-OTHER TRANSFERS & AL 0.00 -46,590.00 411 ACTUAL SOURCES 0.00 -181,722.74 421 USES-AAO BUDGET 0.00 -456,556.00 423 USES-OTHER TRANSFERS & ALLOC 0.00 46,590.00 431 ACTUAL USES 28,468.42 269,374.17 452 APPROPRIATIONS-ALLOTTED 0.00 -409,966.00 459 APPROPRIATION CONTROL-CONTRA 0.00 409,966.00 GRANT DETAIL TOTAL 0.00 0.00

Retrieving Archived Financial Data To retrieve FAMIS data prior to Fiscal Year 2008, log in to “FAMISC” archive database. (When entering FAMIS, type “NFAMISC” instead of “NFAMIS”).

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Executive Information System (EIS) Flexible Reports The Flexible Reports display data in relationship to other data. Various reports can be generated for grant analysis. Contact the Controller’s Office EIS Unit through [email protected] for more information. 12.2.5.4

| CONTROLLER’S OFFICE QUARTERLY GRANT RECONCILIATION PROCEDURE

As a monitoring measure, the Controller’s Office Operations Unit downloads the financial balances at the end of each quarter of all grants (recorded in grant codes) awarded to the City and performs preliminary analysis at a high level. The department’s Fund Accountant will download the grant balances on a spreadsheet (“reconciliation report”) and send the spreadsheet with recommended actions on abnormal grant balances to the department. Departments must return the quarterly reconciliation report sent to them within set deadlines with “solid” responses, including descriptions of actions completed. How to Use the Reconciliation Report            

Operating accounts and general ledger accounts are combined into the report Examine any discrepancy between the Estimated Revenues and Appropriation Process Grant Receivable adjustments Process Unavailable Revenue adjustments Transfer out all ineligible costs to other funding source(s) Submit reimbursement claims in a timely manner Follow up on outstanding reimbursement claims Analyze excess revenues to see if they need to be returned to the grantor Clear cash and other general ledger accounts for expired and old grants Identify grants for closeout (see Section 12.2.6 Grant Close-out for details) Indicate the correct grant end date. Do not use ending year 2999 Identify “Active” or “Inactive” grants or changes in status.

“Solid” response required For all issues noted in its reconciliation report, the department must submit detailed explanations. In addition, the department must note all of its own actions performed according to the instructions, with document number referenced. Referring to other personnel or other entities for questions asked or notes on actions that will be performed does not constitute a solid response. Submit on time Timely submission of the grant reconciliation spreadsheet ensures both the department and the Controller's Office are updated on the status of the grants. It is also useful for identifying issues and errors in the grants so that they can be corrected in time.

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Department reconciliation still required Completion of the grant reconciliation process with the Controller’s Office does not satisfy the department’s responsibility to reconcile grants quarterly. The department should still reconcile grants at the detailed level as discussed above and have its own documentation of its reconciliations.

12.2.6

| Grant Close-out

Closing out the grant is the final financial activity of the grant cycle. The purpose of the grant close-out process is to achieve a final accounting of all revenues and expenditures attributable to the grant and to reach a final grant balance. Grant close-out is done semi-annually (usually in the months of December and June) by the Controller’s Office Accounting Operations Systems Division. Through the quarterly reconciliation process, the Controller’s Office Operations Unit periodically provides a list of inactive and expired grants to each department for status update. Departments are required to analyze and correct the balances on all expired inactive grants prior to closure. When Can a Grant Be Closed? A grant is ready to be closed out when all the following applies:      

Grant funds are fully utilized and all reimbursements are received (i.e., the grant cycle is complete) Grant program is complete For projects funded by multiple grants, a grant can be closed as long as the grant cycle is complete, even when the related project is still active The grant is expired (e.g., grant period ended and no extension is made) If grant funds are fully utilized and grant cycle is complete before the grant expires, the grant can also be closed Final reconciliation is done and all adjustments to the grant are complete.

Basic Principles of Grant Close-out The following activities should be completed during grant close-out processing:     

At the completion of the grant program, actual revenues should equal actual expenditures, and the actual revenues and expenditures should reconcile with the reports to the funding agency Cash balance of the grant should be zero (i.e., all grant funds used up) Liquidate all outstanding encumbrances Make sure all reimbursements have been received and no receivable balance is outstanding Transfer out all ineligible costs

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 

If costs incurred were disallowed by the granting agency and will not be reimbursed, the department must identify another funding source to charge those expenditures. If no existing budget can cover the expenditures, the department must prepare a supplemental budget request to the Board of Supervisors to cover the amount of the ineligible costs Analyze excess revenues to see if they need to be returned to the grantor If there is leftover grant budget after the grant program or project has been completed, the department needs to make sure the remaining grant budget is not to be utilized or re-obligated upon grantor’s approval. The department may choose to initiate a de-obligation journal entry to de-obligate the grant budget, or let the Controller’s closeout program close the grant budget.

12.2.6.1

| PROCEDURE FOR GRANT CLOSE OUT

 1. Controller's Office Operations Unit identifies all grants with plan end dates past the date of the analysis, and reports the list of grants to departments; often this is done together with the quarterly reconciliation process.  2. Departments review the list of grants and identify the grants that completed and are ready to be closed. All adjustments to the grant need to be made before confirming close out.  3. With department’s confirmation, the Controller’s Office Operations Unit compiles the list of grants that are ready to be closed and performs a high-level review again to make sure all cash and other general ledger balances have been cleared.  4. The Controller’s Office Operations Unit inputs the grant codes of the grants that are ready to be closed into the 1090 interface program, which is then run by the Controller’s Office Systems Unit to close all budget accounts and fund balances. 1090 Close-out Interface Program The 1090 interface is a programmed set of journal entries that closes the remaining budgetary balance of a list of accounts (e.g., grants). It also freezes the accounts and their balances so that no more transactions can be recorded into the accounts after the interface. Grant codes needing to be closed are entered into a pre-established entity on FAMIS Screen 1090 in order to be included in the interface program. After the 1090 interface program runs, FAMIS returns the following:   

Budget (estimated revenue and appropriation) for each sub-object line item will match, and actual revenues and expenditures for that sub-object line item will match. Unrealized estimated source (GL 381) and Reserve for appropriation (GL 379) will be closed to zero. Unreserved Fund Balance Available for Appropriation (GL 399) should match the cash balance (GL 101). Since all cash balances should be cleared at the time the interface is run, there should

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be no balance of GL 399. If the grant has a cash surplus, GL 399 will match the cash balance (i.e., the remaining money is available for other use). Note GL 399 has a credit normal balance. “CLOSING DATE” field on screen 5070 will be populated with the closing date. The status indicator “STATUS IND” will change from “A” (active) to “I” (inactive). See the Figure below.

FIGURE 12-15. FAMIS SCREEN 5070, CLOSED GRANTS WITH CLOSING DATE FAML5070 V5.1 LINK TO: PM

CITY AND COUNTY OF SAN FRANCISCO--NFAMIS GRANTS

04/02/2010 2:10 PAGE 1 OF

4 GRANT : DASVPP GRANT DETAIL : 09 TITLE : FY 08-09 LOWER LVL REQUIRED : N GRANT TYPE : T CONTYP /FNDS CTL: GY Y CCSF FILE NMBR : RESP DEPARTMENT : DAT DONOR AGENCY : OES CCSF APPROVAL : FEDERAL CATALOG : 16588 CLOSING DATE : 06/09CLS INT DIST BY GRT : PLAN DATES START : 10/01/2008 ACTUAL DATES START : 07/01/2008 CREATE DATE : 01/08/2008

THREAT MGMT/STALKING VERTICAL PROSECUTIO FY 08-09 FEDERAL GRANT - STATE PASS-THROUGH DONOR FUNDING FY DISTRICT ATT -RESPONSIBLE DEPT FOR GRANT OFFICE OF EMERGENCY SERVICES-STATE VIOLENCE AGAINST WOMEN FORMULA GRANTS GRANT CLOSED IN FISCAL PERIOD 06/2009 END : 09/30/2009 END : 01/02/2009 STATUS IND : I

IDC REIMBURSE : N GRACE PERIOD : N

Records Retention Following the close-out of the grant, keep the grant records for at least five (5) years, of which two (2) years are on-site, as per Controller’s Office record retention policy. Federal OMB guidelines require recipients keep records for three (3) years following grant close-out. This means three (3) years after the closeout period (i.e., when a final report is given to the funding agency or the funding agency acknowledges that the grant is closed). For non-federal grants, check the records retention requirements on the grant agreements.

12.2.7

| Grant External Audits

Grants are subject to federal and state program audits. This section provides a high-level overview of these types of audits. 12.2.7.1

| FEDERAL SINGLE AUDIT

Background In 1984, Congress passed the Single Audit Act, which has been codified in the Office of Management and Budget’s (OMB) Circular A-133. The primary intent of the Act was to create a system that avoids Page 413

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multiple audits of organizations by different federal and state agencies. Instead, organizations would receive a “single” audit that could be relied on by many different funders. Each fiscal year, all public and non-profit recipients of federal funds must hire independent auditors to conduct a single audit of all spending of those funds. All single audit reports are sent to a federal clearinghouse where they are available electronically to government agencies and interested members of the public. Federal or State pass-through agencies may follow up on corrective actions that organizations must take as a result of any audit findings. One benefit to grant recipients is that, as a result of the Act, federal agencies may not require separate financial audits unless they are willing to pay for them. The Controller's Office is responsible for contracting with the external auditors and coordinating the audit process. The Controller’s Office Operations Unit gives the auditors a report of all federal expenditures from grants and cooperative agreements incurred in the City’s fiscal year, from July 1 to June 30, regardless of the grant schedule. The report sorts the expenditures by federal program, as specified by its 5-digit "CFDA" number from the Catalog of Federal Domestic Assistance. For example, 14.218 is the CFDA # for Community Development Block Grants. The first two digits represent the federal department: 14 = HUD, 93 = HHS, etc. Some unique cooperative agreements may not have catalog numbers, in which case the funding department designates them. The single audit deadline is nine (9) months after the end of the fiscal year (March 31). City’s Responsibility as the Auditee 

    

Identify all federal programs/awards received and expended including, as applicable, the Catalog of Federal Domestic Assistance (CFDA) title and number, award number and year, name of the federal agency, and name of the pass-through entity. Maintain internal control over purchasing, reporting, maintenance of financial records, subrecipient monitoring, and program compliance for all federal programs. Comply with laws, regulations, and the provisions of contracts or grant agreements. Prepare appropriate financial statements, including the schedule of expenditures of federal awards. Ensure that the audits required by this part are properly performed and submitted when due. Follow up and take corrective action on audit findings.

How are Grants Selected for Audit? Auditors conduct field-testing of federal programs, based on the following guidelines:  

Auditors select field-test programs that include at least 50% of the City’s federal expenditures. If the City can qualify as a “low-risk” auditee, this percentage will drop to 25%. Programs with annual expenditures over $3 million are called “Type A” programs. Auditors usually conduct field testing on these programs unless the auditors designate the program “low risk” and have sufficient other programs to meet the 50% total expenditure threshold. At a

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minimum, programs that exceed $3 million in federal expenditures in a given year must receive a compliance audit at least every three years. Programs with annual expenditures less than $3 million are called “Type B” programs. After evaluating various criteria, auditors may designate certain of these programs “high risk” and test them as well. Initially, ARRA grants of any amount were all designated “high risk”, but OMB, in the 2012 supplement, stated that if the program was audited as a major program in either of the prior two years it may qualify as “low risk”. A “program” here refers to a grant, or a set of grants within a single CFDA number. Additionally, there are programs that are selected and audited as a “cluster” of grants within a subset of related CFDA numbers.

If a Department’s Grants are Selected for Audit The Single Audit is a two-part process:  

Auditors conduct field tests to test the City’s financial management systems and financial control procedures. In late fall, auditors return to audit the following: if departments submit required progress reports on time, if financial figures in these reports reconcile to FAMIS, if back-up documentation for expenditures claimed are adequate (such as signed time sheets and contractor invoices), etc.

Auditors test that expenditures are eligible and in compliance with program-specific requirements. Expenditure related issues include:    

Were the grant expenditures actually incurred? Did the expenditures benefit the grant? Were the expenditures eligible and allowable? Were records prepared accurately and timely and were they retained, as required?

Common audit items include:       

Back-up documentation to support expenditures (timesheets, invoices, etc.) Reports to funding agencies reconcile with FAMIS Reports to funding agencies submitted on time Competitive process used to select contractors and sub-recipients Monitoring sub-grantees (site visits, submission of any required sub-grantee reports) Inventory for grant-funded equipment items worth over $5,000 (including vehicles) Indirect cost rate information on file

OMB Cost Eligibility Guidelines for Federal Grants (OMB A-87) To be allowable under federal awards, costs must meet the following general criteria:

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   

 

 

 

Be necessary and reasonable for proper and efficient performance and administration of federal awards. Be allocable to federal awards under the provisions of Circular A-133. Be authorized or not prohibited under state or local laws or regulations. Conform to any limitations or exclusions set forth in these principles, federal laws, terms and conditions of the federal award, or other governing regulations as to types or amounts of cost items. Be consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the governmental unit. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. Except as otherwise provided for in Circular A-133, be determined in accordance with generally accepted accounting principles. Not be included as a cost or used to meet cost sharing or matching requirements of any other federal award in either the current or a prior period, except as specifically provided by federal law or regulation. Be the net of all applicable credits. Be adequately documented.

Refer to grant agreement and any special funding agency guidelines for specific program requirements on eligible costs. OMB A-87 for federal grants prohibits use of grant funds on certain types of expenditures, including:       

Alcoholic beverages Entertainment Campaigning Lobbying Fines and penalties Fund-raising Unspecified contingencies

OMB Cost Matching Guidelines for Federal Grants (OMB A-110) All contributions, including cash and third party in-kind, shall be accepted as part of the recipient's cost sharing or matching when such contributions meet all of the following criteria: 

Are verifiable from the non-federal entity’s records.

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    

Are not included as contributions for any other federally assisted project or program, unless specifically allowed by federal program laws and regulations. Are necessary and reasonable for proper and efficient accomplishment of project or program objectives. Are allowed under the applicable cost principles. Are not paid by the federal government under another award, except where authorized by federal statute to be allowable for cost sharing or matching. Are provided for in the approved budget when required by the federal awarding agency. Conform to other applicable provisions of the A-102 Common Rule and OMB Circular A-110 and the laws, regulations, and provisions of contract or grant agreements applicable to the program.

Web References The Catalog of Federal Domestic Assistance (CFDA): http://www.cfda.gov OMB Circular A-87, “Cost Principles for State, Local and Indian Tribal Governments,” http://www.whitehouse.gov/omb/circulars_a087_2004/ OMB Circular A-102, “Grants and Cooperative Agreements with State and Local Governments,” http://www.whitehouse.gov/omb/circulars_a102/ OMB Circular A-110, “Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations,” http://www.whitehouse.gov/omb/circulars_a110/ OMB Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations,” http://www.whitehouse.gov/sites/default/files/omb/circulars/a133/ 12.2.7.2

| PROGRAM AUDITS

Individual state grant programs might have different independent audit requirements. For example, the Local Transportation Fund’s transportation grants require annual audit of the grant financial records. Public protection grants funded by the Department of Insurance require annual audits as well. The department should notify the Controller’s Office Operations Unit of the audit requirements with which they need to comply each year. Each year, the Controller’s Office coordinates with external auditors to perform audits on all these miscellaneous grants. The department should provide the list of any new grants that need to be audited to the Controller’s Office Operations Unit as soon as it becomes aware of the requirement. Occasionally grants that previously required program audits cease to require them, and this must also be communicated to the Controller’s Office Operations Unit when the department receives notice. Departments are also required to provide the funding source to which each program’s audit fees should be charged.

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12.3 | Gift & Donation Guidelines 12.3.1

| Gift & Donation Budgeting

[REFER TO SECTION 12.2.1 FOR LANGUAGE?]

12.3.2

| Gift & Donation Revenues

12.3.2.1

| SF DISASTER AND EMERGENCY RESPONSE AND RECOVERY FUND

The governing provision for the San Francisco Disaster and Emergency Response and Recovery Fund is Section 10.100-100 of the Administrative Code, which states: (a) Establishment of Fund. The San Francisco Disaster and Emergency Response and Recovery Fund is established as a response and recovery measure to ensure San Francisco's ability to quickly respond to and recover from disaster and emergency events that impact the City and County of San Francisco, its residents, and its businesses. The San Francisco Disaster and Emergency Response and Recovery Fund is a category eight fund, authorized to receive all donations, grants, gifts, and bequests of money and property which may be offered to the City and County of San Francisco to assist in funding the City's response and recovery efforts during and after a disaster or emergency. (b) Use of Fund. Donors may designate the following categories of use for their funds: (1) Public Infrastructure Repair and Replacement: to replace, repair, and rebuild public buildings, infrastructure, and other assets owned by the City and County that were damaged or rendered unusable as a result of a disaster or emergency. (2) Disaster/Emergency Housing and/or Relief: to provide shelter, food and other assistance to individuals and families in San Francisco who are impacted by a disaster or emergency event that affected San Francisco. (3) Disaster/Emergency Animal Care Relief: to provide shelter, food and other assistance to animals and pets in San Francisco that are displaced or otherwise impacted by a disaster or emergency event that affected San Francisco. (4) If the donor has not specified an intended category of use for the donation, the money or assets may be used for any of the purposes identified above at the discretion of the City Administrator, in consultation with the Controller and the Department of Emergency Management. No costs which may be incurred by any City and County department in administering this fund or disbursements from this fund shall be recovered therefrom, except for electronic transactional or processing fees.

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(c) The City Administrator's Office is responsible for determining the allocation of this fund to the appropriate City agency or agencies in consultation with the Controller, the Department of Emergency Management, and the Office of the Mayor, provided that such allocation is consistent with the designated category of use as provided under subsection (b) above. (d) By July 15 of each year, the City Administrator's Office and the Controller's Office shall submit an annual report to the Mayor and Board of Supervisors regarding Disaster and Emergency Response and Recovery Fund sources and uses. The Controller's Office shall also include the Disaster and Emergency Response and Recovery Fund's sources and uses in its Quarterly Budget Status Report and the related presentation it makes to the Board of Supervisors. The following four revenue index codes have been established for gifts and donations to the San Francisco Disaster and Emergency Response and Recovery Fund. TABLE 12-2. GIFT INDEX CODES

GRANT CODE

INDEX CODE

SUB-FUND

DEPARTMENT

SF Disaster Fund – Public Infrastructure

ADG4DS-PI

70ADGFPI

7E-GIF-GIF

ADM

SF Disaster Fund – Housing & Relief

ADG4DS-HR

70ADG4HR

7E-GIF-GIF

ADM

SF Disaster Fund – Animal Care

ADG4DS-AC

70ADG4AC

7E-GIF-GIF

ADM

SF Disaster Fund – Unspecified

ADG4DS-UN

70ADG4UN

7E-GIF-GIF

ADM

12.3.2.2

| REPORT TO THE CONTROLLER

Reports should be made every six (6) months to the Controller’s Office, to the attention of Ben Rosenfield, Controller, and Jocelyn Quintos, Director of Accounting Operations.  

Amount of the donation (donations under $100 may be reported cumulatively if you choose) Name of donor

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A CGift C O Uof N TProperty I N G P O L&I CGoods I E S & Acknowledgement PROCEDURES Letter

FIGURE 12-16. GIFT OF PROPERTY AND GOODS ACKNOWLEDGEMENT LETTER

Department Name and/or Special Fund Name Department Street Address San Francisco, CA 94xxx Department Phone Number Department Fax Number Date ________________

Donor Name Donor Address Donor City, State, Zip

Dear _______________,

Thank you for your contribution of _________________________. If this contribution is property rather than cash, a detailed description should be attached or noted below. Please keep this written acknowledgement of your gift to the City for your tax records. Thank you for your support! Very truly yours, Department Representative

Description of donated property: (It is the responsibility of the donor to estimate the fair market value of donated items.)

Because a “gift” may include something like a rebate or discount, please estimate the value of any goods or services you received from the City in connection with your gift and make sure that amount is not included in the estimated value of your gift: _____________________________ _____No goods or services were provided by the City in connection with the gift.

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12.3.3

| Gift Expenditures

[TO BE DEVELOPED]

12.3.4

| Gift Reporting

12.3.4.1

| GIFTS UP TO $10,000—BOARD NOTIFICATION ONLY

Departments may accept and expend gifts up to $10,000 without requiring prior Board authorization (See Administrative Code, Section 10.100.305). Departments are required to provide an annual report to the Board by the second week of July of all such small gifts. See the Figure below for a sample notification memo. FIGURE 12-17. MEMO FORMAT FOR ANNUAL REPORT ON GIFTS OF < $10,000

Date: July 14, 20XX To:

Clerk of the Board of Supervisors

From: Subject: Annual Report on Gifts Received up to $10,000 In accordance with Administrative Code Section 10.100-305, this memo serves to provide the Board of Supervisors with a report on gifts up to $10,000 received by the Department during the past fiscal year: Gift Description

Source

Value

Disposition

1. 2. 3.

Gifts over $10,000 require board approval through the “Accept and Expend” process.

12.4 | Donated Capital Assets Guidelines This section provides guidance to City departments for handling non-cash donations. “Capital donations” include any capital asset with a fair market value that meets the City’s capitalization threshold, currently

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$5,000 for equipment and $100,000 for buildings or Construction in Progress. In addition, donations of land are always recorded as capital assets.

12.4.1

| Procedures to Record Capital Asset Donations

Follow the City’s procedures to obtain approval from governing board, commission, or Board of Supervisors for acceptance of gifts as laid out in Administrative Codes 10.170 or 10.100.305 and discussed in greater detail in the above sections. For general fund-supported departments, please forward electronic copies of the duly signed acceptance of donated assets with other asset details available to your Fund Accountant and to the CAFR Manager [Carmen LeFranc] at (415) 554-7645. The CAFR team will work with departments to record donated capital assets to governmental funds.

12.4.2

| Procedures for “In Kind” Donations

In-kind donations are gifts of goods or services that are not capital assets. They are not reported in the City’s records and reports unless they are “material” or the underlying source of the donation is a governmental grant or program. Examples of “in kind” donations include furniture, small dollar equipment, materials and supplies. Services may be considered an “in kind” donation when they are performed specifically for the department and paid for by a “Friends of” organization or other non-City entity. 





Departments should maintain a record of “in kind” donations when the value exceeds $50,000 or more (based on available documentation or estimated fair market value) within a given fiscal year from a single source. At a minimum, these records should include a description of the items, donor or organization’s name, value, and date. These records must be available to the Controller’s Office upon request. “In kind” donations must be reported in the City’s records when they are “material”. In general, this is several million dollars and departments must contact their Controller’s Fund Accountant for specific guidance and advice regarding specific situations. “In kind” donations must also be reported when the underlying funding source is actually a governmental grant or program. When a donation meets these criteria, departments must maintain records for post audit and other reviews as determined by the Controller’s Office.

When the “in kind” donation meets any of the above criteria, departments should contact their Fund Accountant for specific instructions on recording this activity in the financial management system.

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13 | FINANCIAL REPORTING* 13.1 | Overview

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14 | EMERGENCY PROCEDURES* 14.1 | Overview 14.2 | Emergency Purchasing& Payment Emergency purchasing and contracting are regulated and guided by: 1.

San Francisco Administrative Code, Section 21.15 for Emergency Procurement Procedures

2.

San Francisco Administrative Code, Section 6.60 for Emergency Repairs, Work and Contracts

3.

OCA Guide to Ordering Goods and Services, Chapter 700: Emergency Purchasing Procedures. The document is available on the City’s Intranet Document Center under Office of Contract Administration (OCA) http://mission.sfgov.org/DocCenter/DispDetail.aspx?DocNo=222&P=Search.aspx&S=0&K=cha pter%20700

14.2.1

| Emergency Vendor Number Set Up

During an emergency, if a department must purchase from a vendor other than an existing City vendor, forward the vendor name, address, and FEIN (Tax ID) information to the Controller’s Office AOSD Fund Accountant. The Fund Accountant will work with FAMIS Vendor File Support to temporarily add the new vendor to the FAMIS Purchasing module (ADPICS). The department will need to ask the vendor to complete an IRS W-9 form and a P-25 Business Tax Declaration form, and then provide them to the Fund Accountant within 72 hours. The forms are available online at http://sfgov.org/oca/qualify-do-business. For instructions on vendor setup under non-emergency situations, refer to Section 3.4 - Becoming a City Vendor.

14.2.2

| Emergency Procurement Card (P-Card)

Procurement cards, or P-Cards, are City credit cards that serve as another payment method under the City’s purchasing policies and procedures. Disaster P-Cards may be used for allowable expenses during emergencies and are currently utilized by several City departments under a pilot program. For detailed information, refer to Section 5 - Procurement Card (P-Card).

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14.2.3

| Emergency Vendor Check Writing

In an emergency, the Controller’s Office will activate the Continuity of Operations Planning (COOP) procedures, which entail the assessment of staff availability and resource levels. The scale of the disaster will be evaluated and the necessary emergency vendor check procedures will be implemented. Definitions 



SunGard – SunGard provides a check printing solution called Secure32 to a few departments in the City and County of San Francisco, including Retirement Department, Human Services Agency, and the Controller’s Office Payroll and Accounting Operations & Systems Divisions. During emergency situations, SunGard also provides disaster check printing through a service called PayNetExchange to the same departments. Bank of America Positive Pay – A cash management service provided by Bank of America to deter check fraud. The City periodically sends a file of all checks it issues and the bank uses positive pay to match the checks issued with those presented for payment. Checks not matching are reported to the City for a decision to pay/not pay.

Overview Emergency vendor check procedures will depend on the availability and functionality of various systems. In general, during a natural disaster or other emergency, the Controller’s Office has three options to issue vendor checks: 1. Offsite vendor check printing by ReproMail or SunGard, a third-party vendor  Vendor checks can be printed by SunGard when FAMIS is still available and external network connectivity is intact. 2. Onsite vendor check printing using a stand-alone laptop with a MICR-enabled printer  Vendor checks can be printed using the onsite laptop when FAMIS is not available and external network connectivity is severed. 3. Onsite vendor check – handwritten  Vendor checks can be manually handwritten when FAMIS is not available, external network connectivity is severed, and further extraordinary circumstances make the other two options unavailable. 14.2.3.1

| OFFSITE VENDOR CHECK PRINTING

Vendor checks can be printed by SunGard when FAMIS is still available and external network connectivity is intact. In this case, all payment and vendor information is retained in FAMIS. Upon

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submission of a payment request via FAMIS, SunGard will process the checks and route to the Disbursement Unit for final disbursement. 14.2.3.2

| ONSITE VENDOR CHECK PRINTING

Vendor checks can be printed using the onsite laptop when FAMIS is not available and external network connectivity is severed. An overview of the onsite emergency vendor process is shown below: FIGURE 14-1. OVERVIEW OF ONSITE VENDOR CHECK LAPTOP WORKFLOW

Activate DOC Finance & Administration Section Procedure

Offsite vendor check printing

City Departments

Controller’s Office

CON DOC

Disaster Emergency Onsite Vendor Check Print using stand-alone Laptop Computer

Yes

FAMIS & external network available?

No

Onsite vendor check printing using standalone computer

AOSD Fund Accountant Review and Approve for payment

AOSD System upload payment spreadsheet and print checks

Cash Disbursement Unit receives and mails checks out

Department CFO submit authorization form and payment spreadsheet

1. To initiate a check request, departments will first fill out a Disaster Vendor Check Request form (Figure 14-2)

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FIGURE 14-2. DISASTER VENDOR CHECK REQUEST FORM DEPARTMENT :

ADPICS/FAMIS

( D o c . P re f ix)

(Docum ent Num ber) DEPARTMENT CONTROL NO.

CITY/COUNTY OF SAN FRANCISCO

Doc. # DATE

DIRECT PAYMENT REQUEST FORM Vendor # ( V e ndo r N um be r)

( S f x.)

Invoice # ______________________

Vendor Nam e: Address:

(m m /dd/yy)

Invoice Date Date Received Due Date

C O M M O D IT Y O R S E R V IC E C O D E #

D E S C R IP T IO N :

PR EPA R ED B Y ( Pr int )

A PPR OV ED B Y :

Ln.

A dde ndum

T ra ns . C o de

G ra nt

P ro je c t

G e ne ra l Le dge r A t t a c he d

No.

T ra ns . S uf .

A m o unt

Inde x C o de

S ub- O bje c t

Us e r c o de

G ra nt

D e t a il

P ro je c t

D e t a il

GL

S ubs id.

No s. o f P ages ____

F OR A OSD ST A F F P R OC ESSED B Y:

C H EC K N O# :

The disaster form must be approved by the Department Head, Chief Financial Officer, or other pre-authorized official. Signatures will be verified against the Authorized Signature Card file maintained by the Controller’s Office. Once completed, departments will forward the Disaster Vendor Check Request to their designated Fund Accountant for processing. 2. Upon receipt, Fund Accountants will be responsible for reviewing the forms and verifying various elements, including sufficient funding and compliance with disaster accounting code structure (see Section 14.3.1 - Cost Tracking), if applicable. Fund Accountants will proceed to populate a separate Emergency Vendor Check spreadsheet with the information from the check request form. This spreadsheet serves as an interface to the check-writing software on the local laptop. Once approved, the fund accountant will submit the Emergency Vendor Check spreadsheet to the Controller’s Office AOSD Systems Manager to get the physical check printed.

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3. Once printed, the Fund Accountant will forward the check to the Disbursement Unit, which mails the check to the vendor and compares payment against the Emergency Vendor Check spreadsheet. Should postal service become unavailable, check pickup at the Disbursement Unit will be arranged. If necessary, the Controller’s Office will make changes/exceptions to the Bank of America positive pay file before releasing to the bank. 14.2.3.3

| ONSITE VENDOR CHECK – HANDWRITTEN

Handwritten vendor checks can be produced when neither offsite printing nor onsite laptop printing is available. Physical checks are kept in the safe with the Disbursement Unit. The key to the closet housing the safe is kept by the Disbursement Unit to ensure restricted access. If the Controller is unavailable to physically sign the checks, an electronic signature stamper is kept in the Accounting Operations Director’s office. Access to the machine is only available to authorized Fund Accountants. The activation key to operate the stamper is only available to authorized employees within the Disbursement Unit to ensure segregation of duty. 1. Departments must still fill out a Disaster Vendor Check Request form (Figure 14-2). The disaster form must be approved by the Department Head, Chief Financial Officer, or other pre-authorized manager. Signatures will be verified against the Authorized Signature Card file maintained by the Controller’s Office. Once filled out, the department will forward the form to its designated Fund Accountant for processing. 2. Fund Accountants will review the request form, verify the signature against the Authorized Signature Card file, and verify various elements, including sufficient funding and compliance with disaster accounting code structure (see Section 14.3.1 - Cost Tracking), if applicable. Once approved, the Fund Accountant will obtain a physical check from the Disbursement Unit. The fund accountant will write the check and submit it to the Controller for signature. If the Controller is not available for a physical signature, the Fund Accountant must contact the Disbursement Unit for the key to operate the electronic signature stamper. 3. Fund Accountants will be responsible for maintaining a check log to track requested checks. Required information includes date, check number, amount, and payee (vendor name). 4. Once signed, the check will be forwarded by the Fund Accountant to the Disbursement Unit, which will mail the check to the vendor and compare payment to the accountant’s check log. Should postal service become unavailable, check pickup at the Disbursement Unit will be arranged. If necessary, the Controller’s Office will make changes/exceptions to the Bank of America positive pay file before releasing to the bank.

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If any of checks produced from the above procedures cannot be deposited by the vendor, it is likely the check was omitted from the Bank of America Positive Pay file. In this case, the department should contact the Controller’s Office Disbursement Unit to resolve the problem.

14.3 | Finance & Administration 14.3.1

| Cost Tracking

In the event of a major emergency, the Controller’s Office may direct departments to track costs related to response and recovery operations. The primary purpose of tracking costs is to: 

Aid in recovering costs associated with emergency response and recovery, whether through: o Insurance claims, o Litigation, and/or o Federal and state disaster assistance programs; and



Aid in assessing the rate of depletion of the City’s treasury and various operating funds (a. k. a. “Burn Rate”)

Departments shall use their own operating funds in the initial stage unless otherwise directed. 14.3.1.1

| INDEX & PROJECT CODES

In the event that City-wide cost tracking is required, the Controller’s Office AOSD will work with departments to establish special disaster index codes with embedded project codes. For the departments that have the capability to update the Project Code Table and Index Code Table in FAMIS, note that:  

Fund accountants will create the disaster project code(s) and index code(s) for you. Do not set up your own disaster accounting codes. During day-to-day operations, do not use letter “D” to start a project code. Project codes beginning with “D” are reserved for disaster related projects.

Project Code Disaster project codes always start with “DR”. The project code structure would be DRXXXX|AA|BB|CC, where:  

XXXX = four-character code indicating the disaster AA = FEMA Category of Public Assistance; see the Table below for the coding selections available.

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BB & CC = per department specifications. These characters can be used to indicate division, location, type of expenditure, etc.

TABLE 14-1. PROJECT DETAIL CODING INDICATING FEMA PUBLIC ASSISTANCE CATEGORIES

FEMA CATEGORY OF PUBLIC ASSISTANCE

ACCOUNTING CODE

Emergency Work A – Debris Removal

EA

B – Emergency Protective Measures

EB

Permanent Work C – Roads & Bridges

PC

D – Water Control Facilities

PD

E – Buildings & Equipment

PE

F – Utilities

PF

G – Parks & Recreational Facilities

P

Index Code The disaster index code structure is NN|DRXXXX|FY|AA, where:    

NN = two-digit department number XXXX = four-character code indicating the disaster; this must be the same as what is coded in the disaster project code FY = fiscal year in which the disaster occurred AA = per department specifications.

Embedding Project Code in Index Code At a minimum, the first six digits of the project code must be embedded in each disaster index code for City-wide consolidated cost tracking purposes. If departments need to charge labor (LD entries) directly to a disaster index code, the project code and all the details (all 12-digits) must be embedded in the index code. The Figure below is a sample disaster index code and project code using El Niño as the example.

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FIGURE 14-3. SAMPLE DISASTER INDEX CODE & PROJECT CODE

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15 BANKING SERVICES 15.1 | Overview The purpose of this section is to provide guidance to City departments in matters relating to the overall management and processing of receipts throughout the City. This section reflects the Office of the Treasurer and Tax Collector’s (TTX) Departmental Guidelines #2014-1, issued September 13, 2013, under the Treasurer's authority pursuant to San Francisco Charter, Section 6.106. The Treasurer shall be responsible for the collection of taxes, the receipt of all monies collected by the City and County and their safeguard, deposit and investment in accordance with sound financial practice:., and shall be responsible for collection of delinquent revenue.

Most of the following guidelines require that department notifications pertaining to specific issues be sent to both TTX and the Controller’s Office. Wherever that is required, please use the following email addresses:  

[email protected] for TTX, and/or [email protected] for Controller.

15.2 | Bank Account Opening and Closing Account Opening All bank accounts, merchant accounts, or brokerage accounts that will be opened under the name of the City and County of San Francisco must be approved both by TTX and the Controller's Office (CON) and must be opened under the City's main Tax ID. For accounts that do not contain City funds, it is permissible to use the City’s Tax ID as long as the account is authorized by both Offices (e.g., bank accounts used for employee morale, social and/or charitable causes, fiduciary accounts, etc.) Account Closing Departments needing to close a bank account must send a request to TTX together with the bank reconciliation and an instruction on how to record the balance in the account. Upon receipt of such request, TTX will issue a letter to the bank with instructions to close such account and inform CON of such action. Changes to Authorized Signers on Accounts

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Departments have designated staff who are authorized signers on department bank accounts. Any department that has changes in such designated staffing must promptly notify TTX of such change for signature card update.

15.3 | Collections and Deposits Departments must coordinate with TTX to determine appropriate depository services required by departments such as armored car service, remote deposit service, lockbox service, etc. A department may create its own policy to restrict or eliminate check acceptance in the following cases:   

There is high volume of returned checks for reasons such as Non Sufficient Funds (NSFs), closed account, invalid routing number, etc. Individual transactions are low dollar amounts There is no other means to recover payment after service is provided.

In addition, departments with customers who are “repeat NSF offenders” may instruct those customers to bring cash, cashier’s check, or money order, pay in person using a credit or debit card, or send ACH or Wire payments next time they attempt to make payments. See the below Figure for a sample letter that can be used for returned check notification and collection.

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FIGURE 15-1. SAMPLE LETTER FOR NSF NOTIFICATION & COLLECTION

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In all circumstances, funds collected directly by the department or through a third party service provider must be deposited no later than the next business day to a duly authorized City account. Departments needing an exception must get prior authorization from TTX. Checks and money orders must be drawn on banks domiciled in the United States only and cash must only be in US bills and coins. Departments should not accept payments in foreign currency (checks or cash). Departments needing an exception must get prior authorization from TTX.

15.4 | Stale Dated Checks Outstanding checks issued by departments, such as those from revolving fund accounts or department specific disbursement accounts, that are past 180 days must be voided by the issuing department. Departments are required to contact their payees for most recent addresses and arrange for issuance of replacement checks within 30 days.

15.5 | Revolving Fund Replenishment Requests for revolving fund account replenishment should be made payable to the department’s revolving fund account and processed through ACH Paymode disbursement. Departments must contact TTX to help them enroll in Paymode service.

15.6 | Fraud Controls Any bank account that is set up as a Zero Balance Account (ZBA) and is used for disbursement must have Positive Pay service at a minimum. If Positive Pay service is not appropriate, the account cannot be set up as ZBA and must have appropriate fraud controls (e.g., ACH blocks, timely account reconcilement, etc.). Procedures describing how the account will be funded must be in place and provided to both the CON and TTX.

15.7 | Accounting & Reconcilement The Treasurer’s Group of Accounts (TGOA) in the financial management system (FAMIS) is monitored by TTX to ensure that all ZBA bank accounts have zero balances at the end of each day and are reconciled at the end of the month. For that process to take place, departments must reconcile their respective bank accounts on a monthly basis. Examples of these accounts are credit card settlement, disbursement, lockbox, depository, and departmental summary accounts. Many departments, especially those depositing to GL 1051 (the City’s main depository bank account) will be given their own depository account to make the reconciliation process easier for the GL 1051 account and for the remaining departments using this 1051 account. TTX will be contacting those affected departments. In addition,

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many departments will be given a department summary level account into which all ZBAs belonging to the department will roll up at the end of the day. Departments must submit monthly bank reconciliation reports for each of their bank accounts via e-mail to the Controller’s Cash Reconciliation Unit no later than the tenth (10th) day of the following month. Departments must address all reconciling items and correct any errors on a monthly basis. The reconciliation process entails reconciling the bank statement to the balance to the book balance in TGOA.

15.7.1

| Instructions & Recommended Controls for Processing Returned Items

Deposited items returned by the banks for reasons such as NSF, invalid routing number, or closed accounts will go back to the specific account where the items were originally deposited. Departments will be given access to the images of the returned deposited items so they can process those in a timely manner. The following sub-section provides instructions on NSF processing. 1. A staff person designated to process the department’s deposits should not be the same person to process returned deposited items. Returned deposited items are items that cannot be charged against the check originator’s account for reasons such as NSF, closed account, stop payment, questionable or missing signature, etc. In addition, staff making the deposits should no tbe the same person performing bank reconciliations. This is recommended to promote segregation of duties and implement checks and balances in the system. 2. At least two (2) employees from each department should have online access to the bank’s returned deposited items report. This is recommended so that another staff has the ability to access the online reports for monitoring and back-up purposes. 3. Departments must process their returned items in a timely manner as established by each department. This is to mitigate various complaints that a customer may have such as missing the payment deadline and incurring a penalty for late payment due to the department’s late notification. 4. Departments may keep a subsidiary record of their returned deposited items for use in making decisions whether to take future check payments especially from customers who previously bounced a check. 5. Departments with their own depository bank accounts will be retrieving images and processing their own returned items. For more details on recording NSF checks, please see Section 8.3.2 – Non-Sufficient Funds (NSF) Checks.

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15.7.2

| Instructions for Accounting for Banking & Credit Card Fees

In the merchant contract, credit card processing costs and fees show separately from the banking fees. These credit card fees appear in each department’s merchant statement and are deducted from the deposits while the banking fees will continue to show in the monthly analysis statement. This change resulted in new ways of accounting for the fees. 1. Beginning in FY 2014, actual bank fees and charges for department-specific bank activity are now charged to each department as an expenditure. Fees could include bank account maintenance fees, fraud prevention service fees, transaction fees, etc. TTX receives and pays quarterly bank invoices for these expenses and works with the Controller’s Office to charge the individual departments for their specific charges on a quarterly basis. 2. Beginning in FY 2014, all credit card processing fees for the prior month that include discount or interchange fees, per item processing cost, card fines, equipment rentals, etc., are now deducted by the bank from the department’s merchant statement at the beginning of each month. a. Departments record these charges as expenditures under their appropriate index code as follows: T/C 321

RECORD CREDIT CARD FEE CHARGE DIRECTLY THROUGH BANK ACCOUNT

Sub-object

03595 Credit Card Processing Fee

b. Departments should record deposits from credit card payments in the full amount of the payment without reflecting the transaction fee and any other charges involved in these transactions. It is important that departments timely reconcile their bank accounts and notify the bank of discrepancies. The bank will only allow a five (5) business day window from the date of the original transaction to notify them of any discrepancy. If a discrepancy is noted after the five (5) day window, the department will lose the opportunity to recover the correct sale amount. As such, departments should, on a daily basis, reconcile their credit card transactions vs. their merchant activity report and settlement/depository account. In addition to the above, please also: 1. Use Bank of America as the vendor. Vendor #02827, Suffix 10. 2. Use CR as the Document Type to record the fees.

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3. For Treasury Number, use the statement date that the fees were assessed. 4. Record the fees in the same general ledger account as the bank account that was charged the fees. As a reminder, please record all fees associated with credit cards, including equipment rentals, card fines, processing costs, and discount or interchange fees. Also refer to Section 16 – How To and Screenshots for illustrations on various types of NSF check processing in the accounting system.

15.8 | Third Par ty Contracts Procurement and implementation of third party contracts throughout the City that are related to collection services (i.e., merchant processing, gateway, payment applications, systems with a payment component, online payments, etc.) must be approved by TTX to ensure that the services procured comply with banking regulations and Payment Card Industry (PCI) Council requirements. Departments with third party contracts to process collections and disbursements must: 





Perform annual monitoring of their vendors’ compliance with PCI regulations, financial stability requirements, and industry ratings in the service being provided. Departments must coordinate with TTX for guidance on this effort. Perform periodic reviews of their third party vendors to ensure compliance with agreed upon procedures surrounding control processes such as segregation of functions between the third party administrator and the contracting department, dual signatory policy on checks, releasing of checks to payees, etc. Obtain a Service Organization Control (SOC) report from the third party vendor. SOC reports are internal control reports on the services provided by a service organization providing valuable information that users need to assess and address the risks associated with an outsourced service.

Each department relying on third party systems/administrators must develop internal procedures describing its vendor’s participation and role in the collection or disbursement process (i.e., review/sign checks before they are released, release positive pay file, approve exceptions, etc.). In addition, departments must ask their third party administrators for a flowchart of the collection or payment processes and the mechanism and appropriate controls in place to safeguard City funds. These documents must be provided both to TTX and CON. For collection services, departments must complete the applicable Flow of Funds diagram in order for TTX to determine the parties involved and their accountability in the process. Refer to the Figures below for sample diagrams.

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FIGURE 15-2. SAMPLE DIAGRAM FOR THE FLOW OF FUNDS IN AN ONLINE/IVR/PHONE/MOBILE PAYMENT APPLICATION

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FIGURE 15-3. SAMPLE DIAGRAM FOR THE FLOW OF FUNDS IN A CARD PRESENT ENVIRONMENT

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15.9 | Notifications on Incoming Receipts and Payment Requests through Electronic Funds Transfers (EFTs) For the City to optimize its investment interest earnings potential, all departments are required to notify TTX as far in advance as possible (i.e., as soon as you know) or no less than three (3) business days in advance of: 



Incoming receipts, other than regular operating revenues, that are over $10 million. These receipts can be in the form of federal wire transfers, automated clearing house (ACH) payments, or checks. Send these notifications to: [email protected] and [email protected] EFT requests for outgoing payments outside of the Controller’s Office ACH Paymode service. These requests must be sent to [email protected] and [email protected] If TTX receives outgoing payments with less than three (3) business days’ notice, request is subject to delay.

When a Department is requesting TTX to send a Fedwire or ACH payment to its vendor, Departments must fill out TTX’s EFT Template and indicate the duly approved FAMIS document. TTX will not process the wire request if the FAMIS document that is stated on the template has not been approved by the Controller.

15.10

| Emergency Banking Procedures

PENDING

15.11

| Banking Services FAQs

Q. Why did our department's bank GL account number change? A. The Office of the Treasurer and Tax Collector (TTX) modified the City's GL bank account structure in the financial management system (FAMIS) in March 2014. Although the bank accounts at Bank of America did not change, those bank accounts are now attached to new bank account GL numbers in FAMIS (see Screen 6400 under Fund Type 99, Fund 999 and Sub-fund 999). TTX modified the bank account GL numbering scheme for ease in creating and summarizing EIS bank account reports, and to provide departments with easily recognizable numbers. All bank account GL numbers now follow the 14DDXN format:   

14 = bank account DD = two-digit department number X = type of bank account, e.g.,"D" for depository and "C11” for credit card

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N = number of bank account of the account type owned by the department

For example, 144001 is the SFPUC's first depository account. It replaced the prior FAMIS GL 1129, but still reflects the same bank account at Bank of America.

Q. Our department was given a new bank GL account in April 2014, but FAMIS still shows an outstanding balance in our old bank GL account. Which account should we be using? A. Please use your new bank GL account (starts with "14”). Unfortunately, it was necessary for the Treasurer's Office to post all zero balance account (ZBA) entries (the BTIT entries using TC 519) in FAMIS at one time in March 2014, while departments phased in the usage of their new bank account GLs during the month of April. This caused some discrepancies between the deposits recorded by departments and the bank transfers recorded by the Treasurer's Office in the old and new bank GLs. The Controller's Cash Reconciliation Unit is reviewing all old bank GL accounts to identify discrepancies and will work with departments to record transactions in the correct account. For the review period (March-June 2014), the Controller's Office may ask departments to make adjusting entries for other reconciling items as well. The goal is to reconcile all old bank GL accounts with zero balances and prevent further access to them.

Q. We have always used TC 701to record our cash receipts. Why are we being told to use TC703 now? A. Certain bank accounts were previously linked to a bank activity file to aid departments with bank reconciliations. Now that all bank statements and receipt activity are easily accessed by departments through Bank of America's online portal CashPro, these bank activity files are no longer necessary and the City no longer receives them. Since TC 701was used exclusively for bank accounts with bank activity updates, it is no longer needed and should not be used. The Controller's Office will arrange to prevent access to this transaction code as soon as all old accounts are reconciled. Please refrain from using TC 701and use TC 703 instead to record ALL cash receipts.

Q. We did not receive a new depository account. Did this change in bank GL accounts affect our department? A. Yes, your department was affected whether it was given a new depository account or is still using the old account. All FAMIS bank GL numbers now have new FAMIS GL numbers. Although the old bank account numbers in the bank's system have not changed (for example: XXXXX-80051 is still the same), their corresponding GL numbers have changed. The same depository account XXXXX-80051 that used to have a FAMIS bank GL number of 1051 is now 140802. So, even if your department continues to

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deposit receipts into the Treasurer's main account (previously GL 1051), all deposits are now made to the new bank account GL 140802. All departments were contacted by the Treasurer's Office to attend a department training session in April 2014 where they were given instructions, a list of bank accounts and their respective FAMIS numbers (old and new), and new deposit slips and deposit stamps (after surrendering their old slips and stamps). The new deposit slips have the department's two-digit ID as the first two digits of the deposit slip's reference number for ease in identification and reconciliation. The reference number is important for processing the CR entry into FAMIS. See TTX Departmental Guidelines #2014-2 for more information.

Q. How can we order deposit slips? A. Deposit slips (and other supplies) must be ordered through the Treasurer's Office to maintain control of the reference sequential numbering. Your request must include a copy of your last deposit slip to ensure the correct sequence numbering of your order. Please send an email to [email protected] to submit your request.

Q. Who should we contact to open a new bank account, or close an existing bank account, or request a new credit card terminal? A. Supervisors or managers can send an email to [email protected] to request a bank account closure or new bank account or credit card terminal set up. There is a template that the requester will need to complete to ensure that everything is set up properly.

15.11.1 | NSF Items Q. How do we know if we are supposed to record our own NSF Items now? A. Upon implementation of the new bank GL accounts in April 2014, the Treasurer's Office now requires that all departments with their own unique depository accounts, regardless of whether the depository accounts are new or old, record their own NSF returned items and adjustments in FAMIS effective May 1, 2014. As of that date, NSF items appeared in departments' own unique depository accounts on daily online bank reports (CashPro Online) and departments are able to retrieve the check images on their own. Exceptions to this rule are departments which continue to deposit to the Treasurer's main account (previously GL 1051, now 140802). The Treasurer will continue to process NSF Items on their behalf.

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Q. Where can we obtain security access to record NSF (TC 702) transactions? A. Since only the Treasurer had prior access to record NSF transactions, your department must now contact the Controller's Office FAMIS Security ([email protected] and [email protected]) to request NS document type access for the individual(s) to whom your department's CFO designates authority. The CFO should also ensure that the designated individual (or individuals) to record TC 702 transactions has access to do so, and if not, request access at that time.

Q. Why don't we see the bank charges for NSF checks on our online bank statement? Shouldn't we also record those fees? A. Bank charges for NSF checks are not on your bank statements. The fees associated with NSF checks are part of the general bank fees (maintenance fees, fraud prevention service fees, transaction fees, etc.) that the Treasurer's Office compiles from the banks' Account Analysis Statements. The Treasurer's Office provides this information to the Controller's Office, which distributes those charges to departments through a journal entry on a periodic basis (semi-annually in FY 14). Prior to FY 14, those bank fees were netted against the department's interest earnings, but now those actual fees are directly charged to departments as expenditures.

Q. Is it at the department's discretion to collect $50 for an NSF check? A. The $50 fee levied by the City is authorized by San Francisco Administrative Code, Section 10.13-1. Departments should collect this amount and are responsible for documenting how they will implement the assessment of this fee. Although the actual NSF bank fee is lower than $50, the additional amount is meant to recover your department's cost of processing the returned check and collection efforts associated with replacing the returned check. This is considered revenue to your department and may be recorded in whichever index code is appropriate for your department when you collect it. Even if the amount of the written check was for a small amount such as $5, $10, or anything less than $50, the department should still collect the $50 NSF fee from the customer.

Q. How long should our department wait for the customer to send us the replacement check with the $50 NSF fee? A. It is the department's responsibility to establish its own policy on the waiting period for the replacement check. It can be as short as 5 days or 10 days. What is important is for the department to demand that the customer pay the total amount either by cash, credit or debit card, (replacement) check, money order, or cashier's check. However, due to limited City resources, it may be difficult to determine if the replacement check, money order, or cashier's check is valid. Page 444

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Departments should include in their policy whether they are willing to accept checks from customers who previously bounced a check.

Q. Our department's bank statement includes NSF Items. How do we record these NSF transactions? A. Please refer to Section 8.3.2 – Non-Sufficient Funds (NSF) Checks and Section 16 – How-To and Screenshots for illustrations on various types of NSF check processing in the accounting system.

15.11.2 | Bank Fees & Credit Card Fees Q. Are we supposed to record bank fees and/or credit card fees and where can we find them? A. There are different answers to this question. Bank Fees: No. TTX coordinates with the Controller's Office to periodically charge individual departments for their specific bank fees. Prior to FY 2014, those fees were charged as a reduction to interest income revenue, whereas now, actual bank fees are directly charged to departments as expenditures. TTX receives and pays those bank fees (which include account maintenance fees, fraud prevention service fees, transaction fees including NSF, etc.) before it charges departments. If necessary, departments may request a breakdown by bank account from TTX. All fees associated with each bank account are reported on the monthly analysis statements. Examples of these fees include monthly maintenance account, stop payment fees, per item deposit or withdrawal charge, ACH blocks and filters, paper bank statement, online services and reporting, and many others. Credit Card (Merchant) Fees: Yes. Beginning in October 2014, Bank of America Merchant Services (BAMS) moved to a different credit card platform. In the new platform, departments with credit card accounts may now access their own merchant statement through BAMS' Clientline portal. This statement lists your credit and debit card transactions and your monthly fees which you now need to record in FAMIS. However, please note on your statement that on the day the monthly fees are assessed, those fees may be netted against any revenue received on that day. You must record the total fees and, separately, the gross revenue for that day - DO NOT NET THESE AMOUNTS. If there were no revenues received for the day that the fees were assessed, a negative amount will show for that day and that amount will represent the fees for the prior month and/or chargebacks claimed by the customers, if any. In this situation, you will have to record the fees as instructed above and record the chargeback separately by reversing the revenue(s) that was recorded upon the sale. All fees associated with each merchant account are reported on the monthly merchant account statement. These fees include interchange fees, discount fees, and equipment purchases. Equipment purchases do not have to be capitalized since costs are minor.

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Q. Should we accrue credit card fees at fiscal year-end since June fees are charged in July? A. No. You do not have to accrue credit card fees as they are not material. As for every month, record credit card fees as an expense in the month that they were charged on your merchant statements. June charges would be recorded in July.

Q. How do we record the credit card fees on our merchant statement? A. Please refer to Section 15.7.2 – Instructions for Accounting for Banking & Credit Card Fees and Section 16 – How-To and Screenshots for illustrations on processing credit card fees in the accounting system.

15.11.3 | Chargebacks and Merchant Activity Reconciliation A chargeback (also known as a reversal) represents the amount of the original transaction that the credit card network debited from your merchant statement based on an item that was successfully disputed by the customer on his or her credit card statement. Q. Can we charge a fee to our customers for chargebacks just like we do for NSFs? A. No. A chargeback fee cannot be imposed by a merchant upon a customer or cardholder. Even though the customer loses the claim, the Credit Card network does not allow fees to be imposed upon a customer for disputing a charge that appeared on his or her credit card statement.

Q. If a chargeback or reversal shows up on our merchant statement, do we have to record It accordingly or should we wait for the final decision from BAMS before we record it? A. If you see a chargeback or reversal in your merchant statement, your department will have to record it accordingly by reducing your revenue. Even though you, the merchant, are given some time to retrieve the documentation related to the charge, BAMS will debit your merchant account right away upon their receipt of the disputed charge from the credit card network. Lf the claim turns out to be in your favor, a credit will appear in your merchant statement and at that time, you can record the revenue again.

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Q. How will we know if we have a chargeback claim? A. If you are a department which processes credit and debit card transactions, you have been assigned a Merchant Identification Number (MID) that has been set up in BAMS' Clientline portal. You can access your MID and set up notification alerts so that it is not necessary for you to access Clientline on a daily basis if you are monitoring your chargeback items. The notification alert setting will prompt you to look at an incoming chargeback item so that you can process it timely.

Q. How many days do we have before we need to respond to BAMS' retrieval request or submit the required documentation related to the claim? A. You only have 20 calendar days to provide the required documentation for a disputed charge. It is critical that you stay current on all your chargeback items. If you do not provide the required documentation within this timeframe, you will lose the claim. In very rare cases where you can foresee that you will not be able to submit everything within 20 days, make sure you contact BAMS to ask for a special extension. There is no guarantee that BAMS will provide an extension, but it is important to communicate with them.

Q. How do we respond to BAMS' retrieval request or close a chargeback claim? A. You can manage your chargeback items and send the required documentation electronically through the Dispute Manager task bar within BAMS' Clientline portal. You can also write your notes about the claim on the Notepad. If, after your research, you agree that the charge is in error and would like to accept the claim, instead of ignoring it or letting the 20 days expire, you should also access the specific item within the Dispute Manager and accept it. This is important so that the chargeback reports will only highlight the outstanding claims.

Q. We want to reconcile our daily credit and debit card sales to our deposit before we process our CRs in FAMIS. How can we do that? A. Before recording your department's CRs in FAMIS, you want to ensure that your-CRs will reflect the correct amount of revenues that were collected through debit or credit cards. In doing so, you should access Clientline and look for your MID's total transactions that were processed for the day and compare the totals with your settlement or depository account's Previous Day Report (PDR). This PDR can be retrieved through BofA's CashPro online.

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If there are discrepancies in the amounts, look at Clientllne's merchant transaction detail and look for any possible errors in any of the transactions or for chargebacks or fees that were debited from your merchant account. If, after further research, you cannot determine the difference, call BAMS' help desk and ask for assistance.

15.11.4 | Cash Differences (Overages and Shortages) Q. Do cash differences affect our department? A. If your department collects revenues, you need to record your cash differences. A cash difference occurs when you count your daily cash collection and it doesn't match your point of sale system.

Q. Is there a new cash difference policy? When was it effective? A. In 2011, the San Francisco Administrative Code changed to shift responsibility for cash differences and overages from the Treasurer to the Controller. The Controller's Office now requires a new sub-object code (78905) to record cash differences and overages. Similar to TTX, the Controller's Office also requires departments to complete cash difference/overage reports to document instances of shortages and overages and will review those reports on a periodic basis. This policy is effective starting fiscal year 2014. At year-end, the Controller's Office will report to the Board of Supervisors on the total cash difference and overages for departments.

Q. How do we record cash differences? A. Please refer to Section 8.3.1 - Cash Difference/Overage and Section 16 - How-To and Screenshots for illustrations on processing cash differences in the accounting system.

Q. Aren't cash differences the same as bank adjustments that TTX tells us to fix? A. No. A bank adjustment is the difference between the amount reported to the bank and the actual amount received by the bank. A cash difference occurs when you count your daily cash collection and it does not match your point of sale system. If you are a department that deposits to TTX's main bank account (140802), then TTX advises you when you have a bank adjustment that you need to correct in FAMIS. However, if you have your own depository account (whether new or old), you need to handle your own bank adjustments. You will discover these as you reconcile your bank account and they should be processed at that time.

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Q. How do we process bank adjustments (other than NSFs)? A. See responses below: Department Deposits to TTX Main Account (140802): TTX will forward the bank adjustment notices related to your department's deposits but it is your department's responsibility to make the appropriate entry in FAMIS as follows: Department Has Own Depository Account: a) You will find your own bank adjustments in CashPro Online. If the cash receipts recorded in FAMIS are more than what the bank shows, use TC 703R to reduce the initial deposit and adjust in the appropriate index code using:   

TC 718R if the original deposit was to increase revenue TC 714R if the original deposit was to clear receivable TC 716R if the original deposit was to abate expenditure

b) If the cash receipts recorded in FAMIS are less than what the bank shows, use TC 703 to increase the initial deposit and adjust in the appropriate index code using:   

TC 718 if the original deposit was to increase revenue TC 714 if the original deposit was to clear receivable TC 716 if the original deposit was to abate expenditure

Also refer to Section 16 - How-To and Screenshots for illustrations on processing bank adjustments in the accounting system.

15.11.5 | Reconciliations & Other Transactions (See TTX's Departmental Guidelines #2014·1) Q. How do we reconcile our new depository account? A. There is no difference in the way you would reconcile the new bank GL accounts from the old bank accounts. Basically, you reconcile your book (FAMIS) balance to your bank balance (CashPro Online's PDR). Refer to Section 8.2.3.6 Reconcile Collections Daily for the detailed procedures on depositary account reconciliation.

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Q. If our bank accounts are zero balance accounts, where does the money go and how? If they are zero balance accounts, why do we need to reconcile them? A. In FAMIS, you will see a daily bank sweep using TC 519, which moves your deposits out of your account. This transfers the money from your depository (or credit card) account to your summary account (if you have one) and then to the City's main concentration account. If the bank sweep amount matches the deposit amount, then your account will show a zero balance and you have a reconciled account. However, your bank sweep amount may not match the deposit amount because:    

The bank posted credit card fees to your account which were deducted from your sweep amount (and you have not recorded the fees In FAMIS using TC 321). The bank returned NSF checks which it deducted from your sweep amount (and you have not recorded the amounts in FAMIS using TC 702). The bank posted adjustments (and you have not recorded them in FAMIS using TC 703 or 703R) The bank posted a receipt in a different period than you recorded the receipt in FAMIS, i.e.,a timing difference (and the Controller recommends that you record the receipt in the same period that the bank records the receipt. This is important for year-end transactions.)

Then, in each of these situations, your deposit transaction will not match the bank sweep (transfer) that is recorded in FAMIS and you will have an outstanding balance in FAMIS. You will need to reconcile (find) the difference and correct it. It is not enough to just identify the difference as a reconciling item-you must record entries in FAMIS to correct all errors unless they are simply timing differences (see the fourth bullet above, but not year-end). Thus, "zero balance account" refers only to the bank account itself. You must record all bank activity in FAMIS in order to reconcile your FAMIS account. According to the Treasurer's Departmental Guidelines #2014-1, departments are required to reconcile their bank accounts on a monthly basis.

Q. Is there a standard reconciliation template we can use to perform our monthly bank account reconciliations? A. There is no standard template; however, if you would like a template used by the Controller's Office, please send an email to [email protected] with a copy to Kim-Lien Nguyen.

Q. Is there a new process in replenishing our department's revolving fund account? A. Yes, the process for submitting replenishments for your department's revolving fund account has changed. In the past, replenishment requests were paid by checks generated by the Controller's Office which were made payable to the Department Heads. Now, replenishment requests are paid though ACH transfers to your department's revolving fund account. Page 450

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To make this happen, the department will need to do the following steps. Note that these steps are only required once for vendor ID setup. If your department has more than one revolving fund account, you wlll have to create a unique vendor ID for each of your revolving fund accounts. a.

Department will need to contact the Controller's Office at [email protected] to ask for a vendor ID for their department.

b.

Once vendor ID is available, department wlll need to contact the Treasurer's Office at [email protected] o set up its department as an ACH Paymode vendor.

Once steps (a) and (b) are performed, the department can start processing its replenishment requests through FAMIS as in the past. However, now the new department's vendor ID will be used.

Q. Do stop payments happen instantaneously when requested from the bank? Also, what is the price of a stop payment? A. When stop payments are placed on checks issued by the City, that control is in effect after a confirmation is received from the bank. All stop payments for major disbursing accounts are managed and accessed by the Controller's staff. For other accounts such as revolving fund accounts or other minor disbursing accounts, departments must request a stop-payment through Bank of America. In that situation, you will need to contact Bank of America's customer service by sending an email to [email protected] with a copy to [email protected] Currently, the City's cost for each stop payment is $10.00.

Q. We have a desktop remote deposit service (RDS). How long should we store the physical checks that were already scanned and submitted to the bank for deposit? A. Your department should keep and store the physical checks that were already scanned, imaged, and processed in a safe and secured place for at least 14 days. After that time, the checks can be shredded.

Q. How long should we keep our credit or debit card sales receipts? A. BAMS requires that CCSF merchants keep their credit or debit cards sales receipts for a minimum of thirteen (13) months. During that time, make sure they are stored in a safe and secured place to ensure compliance with PCI requirements.

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15.11.6 | Online Banking Q. We need a new user set up in CashPro or Cllentllne. Where should we request that access? A. Supervisors or managers can send an email to [email protected] to request a new user set up. There is a template that the requester will need to complete to ensure that the access is properly in place.

Q. We need access in CashPro Online for current day report (or other bank account access not currently held). A. You would need to provide the reason for requesting a current day report (CDR). Some of the CDR transactions are “fluid” (i.e., ACH transactions) and may include transactions that do not settle by the end of the day. If the intent is to use it for reconciliation purposes, PDR (prior day report) balances (with detail reporting) are much more reliable, since they include amounts that have already settled the previous day. Also, bank statements can be generated from Cash Pro at the end of each month. CDR entitlement is an additional fee per month, per account. If you would like to have this feature activated, please send your request to [email protected] and include in your e-mail the accounts that you wish to have CDR access and this will be forwarded to Bank of America for processing.

Q. How can we get access in CashPro Online for our revolving fund account? A. CashPro Online does not have revolving fund account data because minimal transaction activity does not justify the additional cost of making it available. In addition, maintenance charges apply for each account setup in CashPro. However, if your department has a revolving fund account with many transactions and it is something that you would like to reconcile frequently, you can ask for online reporting by sending your request to [email protected]

Q. What other CashPro reports or information are available? A. There are standard reports and/or information that are available thru CashPro based on the set up of the users accessing the account and account service entitlements. Examples of these standard information and reports are the PDR, images of deposits, adjustments, images of returned items, and online bank statements. You can also explore CashPro University to see how you can maximize your online reporting access.

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Q. Where do we access the NSF information in CashPro Online? A. Log into CashPro Online and click on the Reporting tab. On the dropdown menu, select “Information Reporting”.

Choose “Research Tab”.

Select “Images Tab” and “Returns” from the dropdown menu for Type in the search criteria.

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Enter date range, select “Account” and click on “Search” button.

Important “Image Access” changes: Images currently accessed through “Image Access” will be moving to the Research tab in CashPro Information Reporting starting on August 18, 2014. For any technical issues, please check CashPro’s online help.

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15.11.7 | FIS Applications Q. What Is FIS? How are those transactions processed within FIS related to BAMS transactions? Are chargebacks and NSFs arising from FIS transactions processed the same way as those processed through Bank of America and/or BAMS? A. FIS (formerly “Link2gov”) is the City's contracted vendor for online and phone payments. There are currently about 20 departments using the services of FIS. The contract with FIS expires in October 2016. Each department that has an application with FIS should have an assigned Settlement Code (equivalent to MID with BAMS) that is only used within FIS and not BAMS. By using the assigned Settlement Code, each department can access its FIS transactions through FIS' online portal, which is called DataPoint. In DataPoint, departments can retrieve their daily sales transaction reports, e-check returns, and chargeback items. Just like credit card sales and chargebacks through BAMS and NSF items from Bank of America, sales transactions through the FIS applications should be recorded as receipts using a CR document and NSFs and chargeback items should be processed by each department in FAMIS. Refer to NSF and Chargeback sections in these FAQs for instructions on recording these adjustments.

Q. How shall we pay for our department's outstanding FIS invoices? Are they processed the same way as the bank and credit card fees? Note: This instruction only affects those departments that are on FIS' Agency absorbed pricing model. This means that a department does not impose a convenience fee to their customers for payments made through FIS online or phone applications. If you are on a convenience fee pricing model, you do not have to worry about paying FIS invoices since there is no invoice. A. The process in paying FIS invoices is different from the process involved in recording Bank of America's bank fees and BAMS' merchant fees. There are no invoices presented to the departments for those BAMS merchant fees and there are no payment documents that are prepared for those payments. (See Bank and Credit Card Fees FAQs for more details.) Below are the detailed instructions in paying for FIS invoices and the reasoning behind them: 1.

Use FIS' vendor #76414 to pay for FIS invoices.

2.

For each invoice, 2 documents are required: a.

For the portion of the invoice that is pertaining to interchange fees (AMEX, Discover, Visa, and MasterCard), process the document in FAMIS Purchasing by using a DV document type, TC 200,and using Sub Object 03595, Credit Card Processing Fees.

b.

For the portion that is related to FIS' service, process it in FAMIS Purchasing by using the IV/VC process, TC 205 and Sub Object 02722, Financial Services. Page 455

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It is very important for departments to adhere to the above instructions in paying FIS invoices. The contract amount and the associated purchase order (PO) for FIS only represent the estimated fees that truly belong to FIS. The interchange fees are pass-through fees that are paid to the credit card network and were never estimated to be part of the PO. If you mistakenly use the PO for both interchange fees and FIS fees, your allocated portion of the PO will easily run out and it may be difficult for you to pay for your FIS invoice. To prevent over-usage of the PO and to ensure that the invoices are properly paid using the above instructions, the Treasurer's Office is working on some security controls where its approval will be required to approve all FIS payments. Below is an example of an FIS invoice. This invoice includes all merchant related processing fees plus FIS' service fees for maintaining the applications. To determine the fees that should be charged using TC 200/SO 03595 vs. TC 205/50 02722: 1.

Add the total amount for each credit card type under the category Interchange Fees (AMEX, Discover, MasterCard, and Visa). Process the payment document in FAMIS Purchasing using TC 200 and SO 03595.

2.

Subtract the total of #1 above from the total invoice price and the remaining should represent FIS service fees. Process the payment document in FAMIS Purchasing using TC 205 and SO 02722.

In this sample of FIS invoice, the total amount to be paid to FIS is $210.71. Of that amount, $185.29 should be charged to SO 03595 and $25.42 should be charged to SO 02722.

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FIGURE 15-4. SAMPLE FIS INVOICE

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15.11.8 | Helpful Tips Q. Are there more helpful tips you can offer? A. See below:

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