Lindsay City Council
January 13, 2026

NUMBER 26-05
TITLE

MEETING

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

LINDSAY ADOPTING UPDATED FINANCE AND ACCOUNTING

POLICIES AND UPDATED PROCUREMENT POLICIES
_____________________________________________________.

At a regularly scheduled meeting of the City of Lindsay City Council held on January 13, 2026, at 6:00 PM at 251 E. Honolulu Street, Lindsay, CA 93247
WHEREAS, the City of Lindsay City Council is responsible for establishing policies that promote sound fiscal management, internal controls, transparency, and accountability in the use of public funds; and
WHEREAS, the City has previously adopted Finance and Accounting Policies and a Procurement Policy to guide financial operations, purchasing activities, and compliance with applicable local, state, and federal requirements; and
WHEREAS, City staff has conducted a comprehensive review of the existing Finance and Accounting Policies and Procurement Policy to ensure continued alignment with current best practices, applicable laws, regulatory requirements, and operational needs; and WHEREAS, the updated Finance and Accounting Policies provide guidance on budgeting, accounting, internal controls, financial reporting, cash management, debt administration, and related fiscal practices; and
WHEREAS, the updated Procurement Policy clarifies purchasing authority, bidding thresholds, contracting procedures, ethical standards, and compliance requirements to promote efficiency, competition, and stewardship of public resources; and
WHEREAS, adoption of the updated policies will strengthen internal controls, improve consistency across departments, and support effective financial and procurement management; and
WHEREAS, the City Council has reviewed and considered the updated Finance and Accounting Policies and the updated Procurement Policy as presented by staff.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LINDSAY DOES HEREBY RESOLVE AS FOLLOWS:

SECTION 1. Adoption of Finance and Accounting Policies.

The City Council hereby adopts the updated Finance and Accounting Policies, effective January 13, 2026, as presented to the City Council and on file with the City Clerk.

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF LINDSAY
RESOLUTION NO. 26-05

SECTION 2. Adoption of Procurement Policy.

The City Council hereby adopts the updated Procurement Policy, effective January 13, 2026, as presented to the City Council and on file with the City Clerk.

SECTION 3. Supersession of Prior Policies.

Upon the effective date of this resolution, the adopted policies shall supersede any prior Finance and Accounting Policies and Procurement Policies, or portions thereof, that are inconsistent with the updated policies.

SECTION 4. Implementation.

The City Manager, Finance Director, Purchasing Agent, and all department heads are authorized and directed to implement and administer the adopted policies and to take all actions necessary to carry out the intent of this resolution.

SECTION 4. Severability.

If any section, subsection, sentence, clause, or phrase of this resolution is for any reason held to be invalid or unconstitutional, such decision shall not affect the validity of the remaining portions of the resolution.

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF LINDSAY
RESOLUTION NO. 26-05

PASSED AND ADOPTED by the City Council of the City of Lindsay as follows:

MEETING DATE January 13, 2026
MOTION

SECOND MOTION
AYES
ABSENT

ABSTAIN
NAYS

CERTIFICATION OF THE FOREGOING RESOLUTION AS FULL, TRUE, PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF LINDSAY AS DETAILED. _____________________________________
Misty Villarreal, Mayor

CERTIFICATE OF ATTESTING OFFICER
The undersigned, Miranda Cordova, City Clerk of the City of Lindsay does hereby attest and certify that the foregoing Resolution is a true, full and correct copy of a resolution duly adopted at a meeting of the City of Lindsay which was duly convened and held on the date stated thereon, and that said document has not been amended, modified, repealed or rescinded since its date of adoption and is in full force and effect as of the date thereof.

ATTEST: _____________________________________
Miranda Cordova, City Clerk
Finance Policies
and Procedures
Update 1.13.2026
Policies last updated
December 12, 2023
Why update
so soon?
• Regulatory Compliance
• Consistency and Uniformity
• Clarify processes
• Reduce confusion
• Improve services
Policy Updates ➢ Help employees understand process.
• Budget
• Purchases
• Grants
• Credit Cards
• Travel and Training
• Inventory and Surplus
➢ Everyone on the same page on how to do things.
• Purchasing levels and authorization
• Credit Card usage
• Allowed Travel and Training reimbursement
4 Efficiency Consistency

HIGHLIGHTS
• Fund Balance 20% of
Annual Revenue for the
Fund
• Streamline Budgeted
Purchases
• Unbudgeted Expenses and
Non-Emergency have
different approval rules
• Forgetting to Budget
something is not an
Emergency
Budgeted
Expenses $1-10,000 $10,001-$49,999 $50,000-$49,999 Over $200,000 Director x x x x
3 Quotes x x x
City
Manager x x
Council,
RFQ/RFP, x
5 Thank you

FINANCE POLICIES AND PROCEDURES
JANUARY 13, 2026

TABLE OF CONTENT
INTRODUCTION……………………….….………..1
FINANCIAL PROCEDURES……….……………..3
FUND & FUND BALANCE.……………………....6
BUDGET ……………………………….…………….11
PROCUREMENT ……………………….............20
GRANT TRACKING………………………………..38
TRAVEL AND TRAINING………………………….40
CREDIT CARD ……………………………………..41
INVESTMENT POLICY…………………………….43
FIXED ASSET & CAPITALIZATION …………….51
INVENTORY CONTROL AND SURPLUS ……56

ATTACHMENTS

1. FEDERALLY FUNDED PROCUREMENT- 2 CFR200

2. LOCAL ASSISTANCE PROCEDURES MANUAL
CHAPTER 10

3. DAVIS BACON

4. FEDERAL FINANCIAL MANAGEMENT
POLICIES (24CFR PART 85)

5. ABBREVIATION & ACCRONYMS

6. FUND DESCRIPTIONS & LIST

7. GLOSSARY OF PROCUREMENT TERMS

8. GLOSSARY OF TERMS

INTRODUCTION
The City of Lindsay has adopted policies to provide the framework for managing the City’s financial resources. These policies are designed to:
• Contribute to the confidence in the City operations and the commitment of the City Council, City Manager and staff to sound financial practices.
• Save time and energy of the CityCouncil and appointed officials. Once certain decisions are made at the policy level, those policies may be applied to individual situations and issues. • Direct attention of the City Council, City Manager, Directors and the public to the City’s total financial condition and link day-to-day operations with long-range financial planning. • Contribute to the stability and expeditious handling oftheCity’s financial affairs. The policies will guide employees on policies and processes.

The Finance Policies are intended to be a guide of the fiscal policies and procedures for the City.

The manual will serve both the management and the accounting staff to maintain good internal accounting and administrative controls; assist in the expected flow of accounting; and to establish a uniform and systematical accumulation of information and statistical data necessary to fulfill the financial and accounting requirements.

The management of the City of Lindsay is responsible for establishing and maintaining a system of internal accounting control. In fulfilling this responsibility, estimate and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of the system are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with generally accepted accounting policies.

The City of Lindsay prepares its financial statements in conformity with generally accepted accounting principles as applied to government units. The Governmental Accounting Standards Boards (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles.

Annual audits by an Independent Certified Public Accountant will be performed in accordance with our City Charter and the State of California audit requirements.

A Single Audit report is also prepared in accordance with auditing standards and in conformance with OMB Circular A-133. If the threshold of Federal Funds used is met a Single Audit will be prepared.
1 The City Annual Audit is routinely filed with each member of government, including the Tulare County Association of Governments (TCAG), the California State Controller's Office, HUD, Caltrans, and all lenders and/or bond holders as may be required.

Lindsay’s Budget and Audited Financial Statements present the financial position of the City government and its blended component unit. Blended component units are entities for which the City is considered to be financially accountable.

The Annual Budget and Audited Financial Statements of the City of Lindsay are prepared in conformity with Generally Accepted Accounting Principles (GAAP) as applicable to government entities. Generally Accepted Accounting Principles (GAAP) are national accounting standards adopted by the Governmental Accounting Standards Board (GASB). GASB is the nation-wide accepted standard body for establishing governmental accounting and financial reporting principles and practices.

Pursuant to ABx 126, the City of Lindsay serves as the Successor Agency of the former Lindsay Redevelopment Agency and is responsible for the “wind-down” of that agency’s affairs in conjunction with a separate Oversight Board. The City does maintain a unique fund within its treasury designated as the Redevelopment Obligation Retirement Fund (RORF) and shall report all activity within this fund on its annual financial statements for each year ended June 30th until all assets have been legally liquidated and all debt fully retired. 2 FINANCIAL MANAGEMENT AND ACCOUNTING PROCEDURES
The Director of Finance is the designee of the City with the primary responsibility to ensure compliance with accounting policies and procedures by all City staff; to maintain accurate and upto-date accounting records; to assist Department Directors with budget development; to supply other departments with revenue and expense reports on a regular basis; to provide financial reports to the City Manager and the governing body; and to act as liaison between the Independent Auditor and Finance Staff to facilitate preparation of the Financial Statements and Single Audit reports.

The City uses funds and account groups to report on its financial position and the result of its operations. Fund accounting is designed to demonstrate legal compliance to aid financial management by segregating transactions related to certain government functions or activities.

Funds and account groups are organized and accounted for as separate fiscal and accounting entities with self-balancing sets of accounts.

Government Activities are principally supported by taxes and intergovernmental revenues.

Examples are general government, public safety, streets, economic development, parks, and recreation.

Business-Type Activities are intended to recoup all or a significant portion of their cost through user fees and charges. Examples include water, sewer, and refuse.

REVENUES
The Finance Department shall be responsible for recording all revenues, from all sources, to the general ledger. Assigned finance staff shall be responsible for the monthly utility billing, quarterly business license billing, other miscellaneous billings and loan draws as dictated by budgeted project activities. All departments that generate revenue must report to the Finance Department.

Payments received over-the -counter or by mail shall be entered by the front desk clerk into the accounting system. The front desk clerk shall balance the daily receipts and a second clerk shall confirm the balance. The second clerk will create the deposit slip and take the deposit to the bank the next business day in a sealed deposit drop bag.

INVOICING AND ACCOUNTS RECEIVABLE
The Finance Department shall maintain accounts receivable and invoice on a monthly or quarterly basis. The Director of Finance shall determine any amounts that are deemed uncollectible and get approval from the City Manager before writing them off. 3 PAYROLL
Each Department head, or their assigned supervisor, is responsible for ensuring the proper recording of time worked, use of vacation, compensatory time, sick leave, and holiday pay for all employees under their direction.

Non-Exempt employees shall submit a Time Sheets for every pay period with daily hours and track hours worked which are being charged to a specific project or grant.

Exempt employees are required to submit approved leave request but are not required to submit a Time Sheet for every pay period if they are not charging any part of their time to grants. Exempt employees are to keep and submit a Time Sheet if any of their time is to be charged to a specific project or grant for which reimbursement will be sought from another intergovernmental agency.

Only actual time worked may be charged to a grant-funded project; leave time may not be charged to a grant- funded project and only benefits relative to actual time worked may be charged against a grant.

City Services field personnel shall keep time sheets with fund allocations denoted at the time worked.

Overtime, including compensated leave accrual in lieu of overtime, and time off must be preapproved and the time sheet shall include the approval of the Department Director.

All time sheets, sell backs and payroll items are to be forwarded to the finance department for processing no later than noon on Monday prior to a Friday payday.

PAYMENT PROCESSING
Upon receipt of an invoice, or similar claim for payment, the request shall be routed to the department responsible for the agreement with the vendor, coding, and approval by the Department Supervisor or the Department Director. Departments must adhere to the Purchasing Policy and the Finance Department is authorized to request additional information on any charge prior to processing the payment.

The Director of Finance shall review the check request, verify accounts and supporting documents before a check may be processed and printed.

A check register is to be printed from the accounting system and included on the Council agenda for review by City Council and other interested parties of all payments processed in the time period immediately preceding the Council meeting and subsequent to inclusion on a previous agenda. The Director of Finance or their designee shall reconcile the bank accounts monthly. 4 UNCLAIMED CHECKS
Under California Government Code Section 50050 et seq., Unclaimed funds will become the property of the City three (3) years after the check is issued, or after twelve (12) months for checks less than $15.

The City will publish a notice in a newspaper about the unclaimed funds and the owners can file a claim with the agency providing proof of identity. If the checks remain unclaimed after the notice period, the funds will revert to the City general fund. 5 FUNDS AND FUND BALANCE POLICY
Financial records shall be maintained in accordance with generally accepted accounting principles, applicable grant agreements, OMB Circular A-87, OMB Circular 133, and applicable County, State and Federal regulations. Financial transactions shall be accounted for by the use of the modified accrual basis of accounting, whereby revenues are recognized when they become both measurable and available to finance expenditures of the current period, and expenditures are generally recognized when the related fund liabilities are incurred. The City shall maintain separate and distinct funds to ensure proper segregation of assets and liabilities; to ensure proper enterprise fund maintenance for all business-type activities; to record and track all grant funds; to ensure proper segregation of all funds for accuracy in tracking and maintenance of all governmental activities.

Governmental Fund Types (Tax-Supported Activities)
Governmental Funds including the General Fund, Special Revenue Funds and Debt Service Funds are accounted for current financial resources. This means that only current assets and current liabilities are generally included on their balance sheets. Governmental Fund operating statements and budgets present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.

The modified accrual basis of accounting is used by the City of Lindsay to apply revenues and expenditures to its Governmental Funds. Under the modified accrual basis of accounting, revenues are recorded when they become measurable and available to pay for expenditures of the current period. “Measurable” means that the amount of the transaction can be determined. “Available” means collectible within the current period or soon enough thereafter to pay liabilities of the current period.

Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the providers have been met.

Taxes, intergovernmental revenues, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual, and are therefore recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current period is considered to be susceptible to the accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City.

The City of Lindsay considers all revenues available if they are collected within sixty (60) days after the end of the fiscal year. Revenues that are accrued include property taxes, franchise fees, interest 6 revenue and charges for service. Sales taxes and motor vehicle license fees collected and held by the state at year end on behalf of the City are also recognized as revenue. Licenses, permits and fines are accrued when received as they are not measurable until received in cash. Investment earnings are recorded as earned. Other receipts and taxes become measurable and available when cash is received by the government and are recognized as revenue at that time.

Entitlements and shared revenues are recorded at the time of receipt or earlier if accrual criteria are met. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met.

The City reports deferred revenue on its balance sheet. Deferred revenues arise when potential revenue meets the asset recognition criteria but does not meet both the “measurable” and “available” revenue criteria for recognition in the current period. Deferred revenues also arise when the City receives resources before it has a legal claim to them, such as when grant monies are received prior to the incurring of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized.

Proprietary Fund Types (Business-Type Activities) and Fiduciary Fund Types All Proprietary Funds like the Internal Service Funds, Enterprise Funds and all Fiduciary Funds are accounted for on a flow of economic resources. This means that all assets and all liabilities (whether current or non-current) associated with this activity are included on their balance sheets.

Their reported fund equity (net total assets) is segregated into contributed capital and retained earnings components. Proprietary Funds operating statements present increases (revenues) and decreases (expenses) in net total assets.

Expenditures are generally recognized in Enterprise Funds, Internal Service Funds, Private Purpose Trust Funds and Agency Trust Funds under the modified accrual basis of accounting when the related fund liability is incurred. Exceptions to this general rule include principal and interest on general long-term debt which is recognized when due. Certain compensated absences and claims and judgments are recognized when the obligations are expected to be liquidated with expendable available financial resources. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred.

Cash and Investments
Cash and cash equivalents represent the City’s cash bank accounts including, but not limited to, certificates of deposit, money market funds and cash management pools for reporting purposes.

Additionally, investments with maturities of three months or less when purchased are included as cash equivalents.
7 The City maintains a cash and investment pool that is available for use by all Funds. Interest earnings as a result of this pooling are distributed to the appropriate funds based on month-end cash balances in each fund. Cash is divided into three risk levels in accordance with standards that have been developed by the Governmental Accounting Standards Board (GASB) in Statement No.

3. In accordance with Governmental Accounting Standards Board (GASB) 31, all City investments are stated at fair value. Fair value is based on the quoted market prices as of the valuation date. Aside from investments clearly identified as belonging to a specific fund, any unrealized gain/loss resulting from the valuation will be recognized within the General Fund to the extent cash and investments’ balance exceeds the cumulative value of those investments subject to Governmental Accounting Standards Board (GASB) 31.

The fair value of the City’s investment in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 is reported in the City’s financial records and financial statements at amounts based on the pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.

Restricted funds are the beginning cash balances in the cash drawer for all departments may not be altered without written authorization from the Director of Finance. The following designated areas shall maintain a starting cash balance, which is to be verified following the reconciliation of the cash drawer:
• Wellness Center: $200.00
• Finance Department: $500.00
• Public Safety: $200.00
• City Services: $200.00
All Departments shall reconcile and remit all receipts to the Finance Department at the close of business every day. In the event of a designated holiday or weekend, reconciliation and remittance should be completed on the next business day.

FUND BALANCE IN GOVERNMENT FUNDS and

CASH AND INVESTMENT BALANCE IN ENTERPRISE AND FIDUCIARY FUNDS It is essential the City of Lindsay maintain adequate levels of fund balance to provide working capital, mitigate current and future risks (e.g. revenue shortfalls and unanticipated expenditures) 8 and to ensure stable tax rates. Fund balance levels are also a crucial consideration in long- term financial planning.

Accountants employ the term “Fund Balance” to describe the net assets of governmental funds calculated in accordance with generally accepted accounting principles (GAAP). Budget professionals commonly use this same term to describe the net assets of governmental funds calculated on a government’s budgetary basis. In both cases, “Fund Balance” is intended to serve as a measure of the financial resources available in a governmental fund.

The “Cash and Investment Fund Balance” is that portion of fund equity that can be used for operating, capital and debt service expenditures, and is intended to serve as a measure of the financial resources available in an Enterprise Fund.

Credit rating agencies carefully monitor levels of fund balance in a government’s General Fund to evaluate a government’s continued creditworthiness. Those interested primarily in a government’s creditworthiness or economic conditions are likely to favor higher levels of fund balance.

In establishing a policy governing the level of unrestricted (unreserved) fund balance in governmental funds and cash and investment fund balance in its Enterprise Funds, the City Council takes into consideration the following factors:

1. The predictability of its revenues and the volatility of its expenditures (i.e. higher levels of unrestricted (unreserved) fund balance may be needed if significant revenue sources are subject to unpredictable fluctuations or if operating expenditures are highly volatile).

2. The availability of resources in other funds as well as the potential drain upon General Fund resources from other funds (i.e. the availability of resources in other funds may reduce the amount of unrestricted (unreserved) fund balance needed in the General Fund, just as deficits in other funds may require that a higher level of unrestricted (unreserved) fund balance be maintained in the General Fund.

3. Liquidity (i.e. disparity between financial resources actually become available to make payments and the average maturity of related liabilities may require that a higher level of resources be maintained.

4. Designations (i.e. the City of Lindsay may wish to maintain higher levels of Unrestricted (unreserved) fund balance to compensate for any portion of unrestricted (unreserved) fund balance already designated for a specific purpose.

FUND BALANCE
A reasonable minimum fund balance of 20 % of annual revenues in the General Fund, Special Revenue Funds in reasonable unrestricted cash and 20 % will be maintained in the Enterprise and Fiduciary Funds for the following purposes:
9 • Provide sufficient working capital for daily cash needs • Provide a reserve to absorb emergency expenditures caused by natural disaster such as fire, flood or earthquake.
• Cover any unanticipated deficit resulting from a shortfall in actual revenues in a given budget year or unanticipated cuts by the State Legislature and Governor of City revenues.

Restricted reserved fund balances in the General Fund, Special Revenue Funds, and will be separated out and identified in the City’s accounting records, financial statements, budgets and audit reports. This same policy is followed with respect to restricted amounts in the cash and investment balances of the Enterprise Funds. The purpose of this policy is to show the City Council, staff and the public what funds in these balances are unrestricted and what funds are to be used for specific purposes.

Unappropriated Fund Balance and Unreserved Cash and Investments The Unappropriated Fund Balance in Governmental Funds and Unreserved Cash and Investments balances in Proprietary Funds indicate that portion of Fund Equity which is available for appropriation in future periods. Restricted Fund Balances or Reserved Fund Equity indicates that a portion of Fund Balance or Fund Equity has been segregated for specific purposes or is not available for appropriation. Reservations of retained earnings are limited to outside third-party restrictions.

Mitigating Risk through Insurance and Risk Management
The City of Lindsay has liability insurance coverage in place for:
• Liability
• Workers Compensation
• Property
• Bond Coverage for Public Employee Dishonesty
in order to mitigate risk and when appropriate the City requires all individuals and/or groups that use City property for a special event to have liability coverage in place and name the City as Additional Insured prior to being allowed to proceed with their event. 10 BUDGET POLICY
The Annual Budget conforms to Lindsay’s Strategic Plan and City Council goals and objectives and is the primary mechanism for their implementation. The budget is a policy document, operations guide, financial plan and a communications device. It is the single most important means of setting spending policies and priorities in the City. It constitutes approval by the City Council of service levels and operating programs and provides resources to finance them.

The City uses funds and account groups to report on its financial position and the result of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities.

Funds and account groups are organized and accounted for as separate fiscal and accounting entities with self-balancing sets of accounts.

All City Accounting Funds are included in the annual budget and all revenues and other financing sources are appropriated by the City Council each fiscal year in the annual budget. Annual operating budgets in the General Fund and Enterprise Funds are carefully reviewed to insure that budget appropriations reflect appropriate funding for service levels established by the City Council.

Adequate revenue streams are important to fund municipal services determined appropriate by the City Council. It is the policy of the City Council to take appropriate steps to ensure full and continued funding for services, programs and facilities that the City is required to provide by law or regulation or elects to provide.

The City will consider requests for new or expanded programs during the course of the regular budget process. Only in extreme circumstances will new or expanded program requests be considered during the middle of the year.

All revenue sources will be monitored to maximize revenue collections and provide early warning if revenues fail to meet projections.

Government activities are principally supported by Taxes and Intergovernmental revenues while Business Type Activities are intended to recoup all, or a significant portion of their costs through user fees and charges. The Governmental activities of the City include general government, public safety, highways and streets, economic development, and culture and recreation. The BusinessType activities of the COL include Water, Sewer, Refuse, and the Lindsay Wellness Center

REVENUE TYPES
The Finance Department shall be responsible for recording all revenues, from all sources, to the general ledger. Assigned finance staff shall be responsible for the monthly utility billing, quarterly 11 business license billing, other miscellaneous billings and loan draws as dictated by budgeted project activities. All departments that generate revenue must report to the Finance department.

Sales Tax
California sales tax is imposed on retailers for the privilege of selling tangible personal property. A portion of the tax is a state tax and a portion is locally imposed. The tax base for the sales tax is the retail price of tangible personal property. Tangible personal property is any material asset, such as household goods and business equipment which is readily moveable and not permanently attached to real property. Sales tax applies to a transaction if (1) the seller’s registered place of business in California participates in the sale and (2) title to the goods passes to the customer within the state.

The use tax complements the sales tax. It is imposed on the storage or use, or other consumption in California of property purchased from a retailer in cases where the sales tax is not collected.

While sales tax is imposed on the seller, the use tax is imposed on the purchaser and at the same rates as the sales tax. The use tax was first imposed in 1935, in order to discourage buying from out of state solely for the purpose of avoiding state sales tax, and thereby placing California retailers at a competitive disadvantage. Sales and use taxes are collected by the State Board of Equalization and remitted to the City quarterly. Sales and use taxes are recorded as revenues when received by the State Board of Equalization.

Property Taxes
Tulare County is responsible for the assessment, collection and apportionment of property taxes for all taxing jurisdictions. Property tax is imposed on real property (land and permanently attached improvements such as buildings) and tangible personal property (moveable property) located within the state. The California property tax is ad valorem, based on the value of the property rather than on a fixed amount or benefit to the property or persons. Intangible assets and rights are not subject to taxation except to the extent that they are necessary to put real property interests to beneficial or productive use. Taxable property includes land, improvements, and other properties that are accounted for on the property tax rolls, which are primarily maintained by the Tulare County Assessor. Tax rolls contain an entry for each parcel of land, including parcel number, owner’s name and value.

The amount of the tax is based on an annually determined assessed valuation. The property tax is paid to the county tax collector and allocated to local taxing agencies. The property tax is guaranteed by placing a lien on the real property. For this reason, types of properties are distinguished as secured or unsecured.

Certain special exemptions to the standard assessment rules are provided in the State Constitution and state law. These exemptions include federal and state-owned property, municipal owned 12 property except property outside the legal boundaries of the agency, home-owners property tax exemption, property owned, irrevocably dedicated to religious, hospital, cemeteries and schools and the California Air Patrol; Williamson Act; disabled veterans; and other exemptions.

Property taxes are levied in equal installments on November 1 and February 1. They become delinquent respectively on December 10 and April 10. The lien date is March 1 of each year. Property taxes are accounted for in the City of Lindsay’s General Fund; revenue collected and remitted to the City acting as the Successor Agency is deposited into the RORF Fund. The City is permitted by Article XIIIA of the State of California Constitution (known as Proposition 13) to levy a maximum of $1.00 per $100 of full cash value. Property tax revenues are recognized when they become measurable and available to finance current liabilities. The City considers property taxes as available if they are collected within 60 days after the end of the fiscal year. Property tax on the unsecured roll are due on the March 1 lien date and become delinquent if unpaid on August 31.

However, unsecured property taxes are not susceptible to year-end accrual. Taxes on individual pieces of property may be delinquent up to five years before the property is sold for delinquent taxes.

Under state statute, the County Treasurer, acting as a tax collector, must settle and disburse all current tax collections to all taxing units by the end of March following the taxing year. Delinquent taxes are collected throughout the year and dispersed to the taxing units on a routine basis.

Franchise Fees
Franchise fees collected by Southern California Edison and The Gas Company are remitted to the City each year on April 15. Cable television franchise fees from Charter Cable are sent to the City quarterly.

Transient Occupancy Fees
Transient Occupancy Fees are assessed by local motels and remitted to the City on a quarterly basis.

GRANT REVENUES FROM FEDERAL, STATE, AND COUNTY
The City seeks to acquire grant revenue from Federal, State and County sources. The City uses these one- time and non-recurring Federal, State and County grant revenues for capital projects or major capital equipment purchases and allowable expenses per the grants.

UTILITY AND USER FEE REVENUES
The City charges the direct beneficiaries of City service fees that recover the partial or full cost of providing certain services. These include recreation programs, building permits, animal licenses and many others. In some cases full cost recovery is not permitted because of statutory 13 restrictions, and in other cases full cost recovery may not be desired for health, safety or welfare reasons. In determining its fee structure, the City:
• Develops broad policies concerning funding of services. • Periodically reviews all services to determine if a fee should be charged. • Considers market rates and charges levied by other public and private organizations for similar services.
• Sets fees that are comparable to other jurisdictions. • Periodically evaluates fee amounts.

DEVELOPMENT IMPACT FEE REVENUES
The City seeks to recover some of the cost of growth through Development Impact Fee assessments on new developments in the City of Lindsay. As Lindsay’s population grows, the demand for the expansion of public infrastructure and the purchase of capital equipment needed to serve new development in the City increases.

State law allows (State Mitigation Fee Act, Government Code 66000 et. seq.) and fairness dictates that the new residents creating the need for expanded infrastructure and additional equipment capital costs should make a contribution to their acquisition in the form of development impact fees. Development impact fees can only be spent for capital purchases due to growth and are not used for salary or maintenance or operation expenditures.

LONG-TERM DEBT AND PUBLIC BORROWING
The City may acquire the funds necessary to meet financial obligations by means of loans from either public or private entities. All loans shall be approved by resolution of the City Council and may not exceed the standard limit as set forth by the Controller of the State of California Public borrowing through lease-purchase agreements, general obligation (GO) bonds, revenue bonds, certificates of participation (COP) or other legal debt instruments may be in the public interest. The City’s elected officials, City Manager and other staff members will use debt in a wise and judicious manner.

The City will continuously seek new revenues and diversify its revenue sources to provide resource stability and limit the dependence on single or a small number of revenue sources.

Proposition 218, which was approved by the voters in November 1996, regulates the City’s ability to impose, increase and extend taxes, assessments, and fees subject to the provisions of Proposition 218, require voter approval before they can be implemented. Additionally, Proposition 218 provides 14 that these taxes, assessments and fees are subject to the voter initiative process and may be rescinded in the future by the voters.

Under Article XIIIB of the California Constitution (the GANN Spending Limitation Initiative), the City is restricted as to the amount of annual appropriations from the proceeds of taxes, and if proceeds of taxes exceed allowed appropriations, the excess must be either refunded to the State Controller or returned to the taxpayers through revised tax rates, revised fee schedules or other refund arrangements.

BALANCED BUDGET
All City departments, activities and programs should function within the limits of the financial resources identified and available according to the approved budget from Council. Lindsay will adopt a balanced budget that maintains a balance between all fund revenues and personnel, maintenance and operations, capital and debt service expenditures during the current budget period and over the long term.

The City Manager has the authority to reduce, augment or realign the budgets of each accounting fund or to transfer funds within each accounting fund during the fiscal year to maintain a balanced budget.

Staff will disclose to the City Council the budget versus actual revenue and expenditures throughout the year.

In order to work towards a balanced budget the following principals should be kept in mind:

Forecasting Revenue and Expenditures is not an exact science and at times relies upon the best professional judgment of the forecaster. To reduce the risks of miscalculating revenues and expenditures, the City attempts to identify as many factors as possible that may contribute to changes in revenues and expenditures.

Appropriations in all funds are limited to the sum of available, unencumbered cash balances and revenues estimated to be received in the current budget period. Use of unrestricted fund balances is appropriate, but will be carefully scrutinized.

Enterprise Funds will be self-supporting entities through annual reviews of their fee structures, charges for services, and other operating revenues and expenditures.

User charges and fees shall be pursued and levied to support the full cost (operating, direct, indirect and capital) of operations. Market rates and charges levied by other public and private organizations shall be considered when establishing tax rates, fees and charges. 15 New and expanded unrestricted revenue streams shall be first applied to support existing programs prior to funding new or expanded programs.

Multi-year capital cost projections shall be prepared and updated each year to identify the impact on resources.

A Five-Year Capital Improvements Plan shall be prepared and updated each year. The operating impact of each project shall be identified and incorporated into annual operating budgets. Capital assets shall be purchased and maintained on a regular schedule.

Reserves may be used for capital expenditures, one time projects, for operating expenses in the event of an economic down turn that reduces projected revenues or to cover unanticipated revenue shortfalls.

BUDGET ADOPTION PROCEDURE
Budgetary procedures for the City have been established by the City Council, which require the legal adoption of a budget for all Accounting Funds. The following are the administrative procedures followed by the City in its budgetary process.

March 1st The Departments submit to the Finance Director the proposed budgets, goals, and performance standards for the coming fiscal year based on guidance provided by the City Manager and City Council.

May The Proposed Operating and Capital Budgets for all Governmental, Proprietary and Fiduciary Funds is presented to the City Council for the subsequent fiscal year. The budget documents illustrate proposed financing sources along with the proposed operating and capital budget expenditures.

A Public Budget Work Meeting is held to review the proposed annual budget and receive public input.

A Public Hearing is held to receive comments on all aspects of the proposed budget. A notice in the local newspaper precedes the hearing. The notice is given at least ten days before the hearing and includes the time, date and place of the hearing. All budget documents are required to be available at least seven days prior to the public hearing.

June A final budget is adopted by the City Council for the subsequent fiscal year beginning July

1. 16

BUDGET CONTROL AND ACCOUNTABILITY
The budgetary control and accountability is maintained at the Department level. Changes to the budget are allowed as follows:
• The City Council has the authority to adopt the annual budget and transfer budget appropriations between funds.
• The City Manager acting as the City’s Budget Officer, has the authority to transfer budget appropriations within funds, departments and individual line items to maintain a balanced budget.
• The Finance Director shall provide quarterly updates on the budget to the Council. • Budget Amendments must be presented and approved by Council.

CAPITAL IMPROVEMENT BUDGET
The Five-Year Capital Improvements Plan (CIP) is a multi-year guide to the construction of community improvements such as roads, storm drains, curbs, gutters, sidewalks, water facilities, sewer facilities, storm drainage facilities and other needed City improvements. It is through this process that the long-range plan for the orderly maintenance and improvement of Lindsay’s physical fixed assets can be accomplished. This document is intended to serve as a planning tool and is structured to present a meaningful perspective of the community’s long-range needs.

The Five-Year Capital Improvements Plan (CIP) determines the budgeted capital projects for the current fiscal year only. There are no specific appropriations established via the adoption of the Five-Year Capital Improvements Plan (CIP). Appropriations and actual funding sources are identified as part of the preparation of the annual budget.

Each Department is asked every year to identify potential capital projects and their estimated cost.

Financial forecasts are prepared to identify what monies will be available for future projects. City Council will review and approve potential capital projects during the Council budget work session.

The City can face significant changes in economic conditions, funding sources and political priorities every year. Therefore, the Five-Year Capital Improvement Plan must be annually updated.

Projects that may be funded by entitlement grants or competitive grants from the federal, state and county governments will be considered based on the availability of funds and the requirements of the granting agency. In addition, the City Council may accelerate capital projects where the City has the opportunity to participate in partnership with other public or private entities or where timing is critical or funding may be lost.
17 Projects that enhance revenues or reduce costs will be given first priority in order to improve the financial position of the City and enhance the ability to do future projects or deliver high levels of municipal services. New commercial, residential and industrial development may pay for its infrastructure through impact fees, construction or other appropriate methods approved by the City Manager.

Capital Projects Categories
Lindsay’s capital projects may be divided into four categories. They are current-year funded projects, future projects, planned but unfunded projects, and unfunded future needs projects.

Category 1 Projects: Current -Year Funded Projects
This category includes projects that funding has been appropriated in the current fiscal year’s Annual Budgets. The City Council has determined through the annual budgeting process that these projects are in the best interest of the public’s health, safety and welfare. These projects have been carefully planned to maximize the benefits derived through the use of the City’s limited resources.

Projects that generate future revenues that will fund future services and projects and benefit the entire community will receive first priority for funding.

Category 2 Projects: Future Projects
This category includes projects where funding will come from projected revenues in the second through fifth year of the Five-Year Capital Improvements Plan (CIP). The fiscal year in which anticipated funding has been reserved may change due to the available revenues. All projects in this category must be tied to a projected funding source.

Category 3 Projects: Planned but Unfunded Projects
This category includes projects that are planned and required to maintain established levels of services throughout the City for the existing population. Typically these projects are needed as a result of deteriorating infrastructure, updates to various General Plan Elements, or are in areas where minimum levels of service are not currently being met. These projects are not intended to promote residential growth, but to sustain municipal services for the existing residents. If a funding source becomes available, a project in this category may be moved to a Category 2 Project.

Category 4 Projects: Unfunded Future Needs Projects
Projects under this category are a condition of future growth and will generally be included in undeveloped areas. It is the intent of the City that development should pay for public improvements to meet established minimum levels of service. In this category, projects are not anticipated to be upgraded to a higher category without revenue generating potential. 18 CAPITAL PROJECT FINANCING
Capital improvements and equipment purchases are financed in accordance with the following policies:

General Fund and Enterprise Fund Equipment Purchases.

City departments within the General Fund will finance equipment purchases from current year appropriations.

General Infrastructure Construction Projects.

Capital projects for general governmental purposes such as land purchases, building construction, road construction, street paving, storm drain installation and other major improvements are financed from revenues allocated to the General Capital Projects Fund. The General Capital Projects Fund contains revenues from unrestricted sources as well as restricted sources such as development impact fees or federal, state and county grants. Major capital improvements that cannot be delayed until the required funds are accumulated may be financed by issuing general obligation bonds, revenue bonds (where permissible), or by a combination of any of these methods.

Enterprise Fund Construction Projects.

All capital projects in the Enterprise Funds are paid from resources provided by development impact fees, contributed capital revenues and net income from operations. If these sources cannot provide sufficient resources for Enterprise Fund improvements, construction of these improvements may be financed by general obligation bonds, revenue bonds or by a combination of any of these methods.

Special Assessment Districts.

Capital improvements or public services that benefit a given area may be financed in accordance with state law by special assessment districts. These districts are established where the majority of the residents or businesses want specific improvements or public services and consent to pay for them over time. In these cases the City establishes a Landscape, Lighting, and Assessment District (LLAD) that is reevaluated annually to determine the assessment fee and services provided and for which a public hearing shall be held prior to the determination of the assessment for the upcoming tax year. The City of Lindsay contracts with the County of Tulare Assessor’s office to provide collection services via property tax payment process. 19 PROCUREMENT POLICY
This Procurement Policy document is intended to serve as a reference tool for City staff and departments. It details the policies and procedures of the City’s purchasing authority. It outlines the procurement process for projects using state and/or federal funds, clarifies the responsibilities of individual departments and staff, and explains the legal requirements affecting the City.

This guide will help City personnel familiarize themselves with procurement processes and enable them to timely and efficiently obtain the goods and services they need while maintaining compliance with all local, state, and federal funding sources.

As State and Federal funding agencies update their policies annually, this guide includes links to the applicable statute that shall be reviewed prior to the beginning of any project using Regional, State, or Federal funds. (See related Attachment No. 1 – 5.) Procurement is the process through which purchases are planned, solicitations issued, vendors selected, purchase orders issued, and goods or services are received.

Purchasing goods and services from local vendors is desired because it stimulates the Lindsay economy and recognizes that local vendors are valued members of our community. City staff, exercising good judgement by considering factors such as quality, previous performance, availability, and potential tax revenues to the City will, when practicable, give preference to purchasing and contracting locally. All other portions of this policy relative to normal competitive bidding will apply. A local advantage cannot be considered for Federal funded contracts. For more information see Uniform Guidance 2 CFR Ch. II §200.319 (7)(b). A local advantage cannot be considered for State funded contracts due to increasingly strict State requirements mirroring Federal standards (e.g. CalTrans funded programs).

The City of Lindsay desires to be both effective and efficient in purchasing with the goal of integrity woven throughout the process. Ethically purchasing goods and services with an emphasis on the best value for the City’s dollar.

The City of Lindsay maintains a decentralized procurement system, which is under the authority of the City Manager or his/her designee(s) as the City Purchasing Agent (PA) established by the Purchases section of the City’s Municipal Code. The decentralized purchasing is necessary due to the small amount of administrative staff and is functional because of the small size of the City. This means that the PA is ultimately responsible for procurement in general, but delegates his/her authority in limited measure to Department Heads within the City. Purchases are made directly by each department, as applicable, while payment and oversight of purchases are maintained through a centralized accounts payable process in the Finance Department, with each affected fund / department charged accordingly.
20 Purchasing Ordinance
The Purchasing ordinance is contained within the City Charter, Article VIII, Section 8.11, "Purchases & Contracting" that was established in January 1996 to govern the activities of the City. In general, it established that the Purchasing Agent shall have the duties and powers prescribed by the laws of the State of California relating to City Purchasing Agents, Public Contract Code, and Government Code. A full copy of the Code Section is available in the Documents section of the City’s website:
www.lindsay.ca.us
State and Federal Laws
State laws that are applicable to various City procurement activities can be found in the Government Code, the Civil Code, and the Public Contract Code (including the California Uniform Public Construction Cost Accounting Act; CUPCCAA). Where pertinent, specific code sections are referenced throughout this policy.

Federal law is applicable to City procurement activities any time federal funds are used for particular procurements. Make sure to review and follow 2 CFR 200 Federal procurement guidelines and grants management Attached 1.

PROCUREMENT OBJECTIVES AND STANDARDS OF CONDUCT
The City’s procurement policy objectives and standards are applied to all transactions through the following values:
• Establish the legal authority of the procurement function within the City • Simplify, clarify, and reflect the laws governing procurement • Enable uniform procurement policies throughout the City • Build public confidence in public procurement
• Ensure the fair and equitable treatment of everyone who deals with the procurement system • Provide for increased efficiency, economy, and flexibility in public procurement activities and maximize to the fullest extent the purchasing power of the City • Foster effective broad-based competition from all segments of the supplier community • Safeguard the integrity of the procurement system and protect against corruption, waste, fraud, and abuse
• Ensure appropriate public access to contracting information 21 • Foster equal employment opportunities that are in line with legal requirements, in the policies and practices of suppliers and subcontractors wishing to do business with the City

The following ethics statements are applicable to all City employees and Council members who participate in the procurement process.
• City employees shall not obligate the City of Lindsay, financially or otherwise, by any means, including but not limited to purchase orders and contracts, when the employee has a personal, material, financial, or other interest in the obligation. • Employees are prohibited from directly or indirectly soliciting or accepting any rebate, kickback, gift, gratuity, or favor for personal gain from any individual, corporation, or group. • The City’s employees, directors, appointed or elected officials, volunteers, agents or contacts shall neither solicit nor accept gratuities, favors, gifts, consulting fees, trips, or which conflict with FPPC restrictions related to receiving gifts, honoraria, travel payments, and loans.
• City employees, when purchasing an item(s) for personal use, must avoid the appearance of City representation. The employee shall pay all such purchases with his or her personal funds. When personal purchases are made under these circumstances, separate invoices or sales receipts must be issued by the supplier. Such invoices must bear the employee's name, home address, and phone number and may not be delivered to the City. Employees may not solicit, or accept, discounts, reduced prices, or other benefits from suppliers because of employees’ position with the City.

PROCUREMENT PROCESS CONFLICTS OF INTEREST
There will be uniform and equitable application of the Standards of Conduct of the City of Lindsay involving all activities associated with the procurement of goods and services. This section also defines responsibility to identify and prevent real or apparent Conflicts of Interest.

Prior to the issuance of a procurement solicitation, informational and research contacts with prospective vendors may be made for the purpose of gathering data. However, in making such contacts, employees, officers, Council Members, and agents shall avoid any commitment or implication of a possible future award.

Accordingly, no request for complimentary services or supplies, which may imply an obligation on the part of the City, shall be made. Requests for testing services, product samples, or demonstrations, and free trips to examine vendor products are to be avoided. 22 Whenever procurement is in process (e.g., during the solicitation, evaluation, negotiation, and award phases) all contacts with potential contractors or vendors shall be made through the Purchasing Agent or designee(s).

Employees, officers, directors, and agents of the City are also subject to the laws of the City and State of California concerning conflicts of interest. Monetary penalties and, in some cases, criminal penalties are imposed by California law for violations. In addition, City employees are subject to discipline for a violation that could lead to, or result in, termination of employment in addition to consequences relative to the California Fair Political Practices Commission (FPPC).

Gratuities and Kickbacks
No member of the groups listed above will either solicit or accept gratuities, favors or anything of monetary value from contractors, potential contractors, or parties to sub- agreements. Anyone failing to adhere to the above will be subject to any disciplinary proceeding deemed appropriate by the City of Lindsay.

Personal Conflicts of Interest
No City employee, officer, Council member, agent or contact shall participate in the selection, award or administration of a third-party contract, or other agreement, if a real or apparent conflict of interest would be involved. Such a conflict of interest arises, whether real or apparent, when any of the following has a financial or other interest in the firm(s) considered or selected for award:
• An employee, officer, board member, or agent of the City; • Any member of their immediate family, including but not limited to, husband, wife, father, mother, brother, sister, son, daughter, father-in-law, mother-in-law, son-in-law, and daughter-in-law;
• Their partner or business associate; or
• A company or organization which is about to employ any of the above.

Apparent or Appearance of Conflict is based on a reasonableness standard i.e. would a reasonable person with knowledge of all material facts believe there appears to be a conflict? Organizational Conflict of Interest
An organizational conflict of interest may be real or apparent and arises where, because of other activities, financial interests, relationships, or contracts – a contractor is unable, or potentially unable, to render impartial assistance or advice to the City. Such a conflict exists in circumstances 23 where the contractor’s objectivity is, or might be, impaired or where the contractor has an unfair competitive advantage.

Organizational conflicts lead to two (2) distinct problems - bias or an unfair competitive advantage. • Bias is a situation where an advisor is placed in a position that creates an incentive to distort advice or decision making.
• Unfair competitive advantage occurs when one contractor has information not available to other contractors in the normal course of business. For example, an unfair competitive advantage would occur when a contractor developing specifications or work statements has access to information that the City has paid the contractor to develop, or information which the City has furnished to the contractor for its work, when that information has not been made available to the public and to other offerors. Because this information enhances the contractor’s competitive position in the procurement process, it represents an unfair competitive advantage over other offerors.

The City’s procurement activities shall be structured to ensure full and open competition and to eliminate or minimize any unfair competitive advantage in circumstances where an organizational conflict, real or apparent, is presented. Appropriate structural steps are dependent upon the particular circumstances surrounding the procurement and might include: prohibiting the contractor from participating in the procurement, the bid process or in evaluation of bids, fully disclosing all information to all prospective offerors for a reasonable amount of time, adjustment of specifications to address any potential advantage, among others.

Confidential Information
No member of the groups listed above shall furnish advice or services to a firm which is bidding on or planning to bid on a contract with the City, or which is doing business presently with the City. No member shall use confidential information for his or her actual or anticipated personal gain, or the actual or anticipated personal gain of any other person related to them by blood, marriage, or by common commercial or financial interest.

Anyone failing to adhere to the above will be subject to any disciplinary proceeding deemed appropriate by the City of Lindsay.
24 BUDGETED EXPENSES
$1 to $10,000 At the buyers discretion and the purchase can be made with the vendor recommended by the Department.
$10,001 to $49,999 Directors can recommend the vendor to make the purchase from. Directors need to receive 3 quotes for the item and keep the quotes available for review for 3 years from the purchase date.
$50,000 to $199,999 The City Manager approves purchases proposed from Department Directors.

Directors need to receive 3 quotes for the item and keep the quotes available for review for 3 years from the purchase date.

Over $200,000 requires a formal bid and Request for Proposal or Qualifications. Competitive bidding is required. Staff must acquire approval to go to bid or RFP / RFQ from City Council before issuing either a formal sealed Invitation for Bids (IFB) or Request for Proposals (RFP), depending on the type of procurement. The number of vendors contacted will vary depending on the dollar amount of the purchase and the time available, but three is preferred.

Award is made to the lowest responsive and responsible bidder. In the case of RFPs, award is made in accordance with the evaluation criteria, terms, and conditions stated therein.

UNBUDGETED EXPENSES AND NON-EMERGECY
$1 to $10,000 Department Directors can make the purchase after discussing and reviewing the purchase with the Finance Director. The purchase can be made with the vendor recommended by the Department and 3 quotes are included.
$10,001 -$100,000 City Manager has to approve the purchase in writing. The purchase can be made with the vendor recommended by the Department with 3 quotes and approved by the City Manager.

Over $100,000 City Council approval is required.

EMERGENCY
The City Manager can approve any emergency expenditure. Council will be formally notified of the expenditure at the following Council meeting.

The item(s) purchased are immediately necessary for:
• The continued operation of the office or department involved; or 25 • Are immediately necessary for the preservation of life or property.

An emergency need is one that could not have been foreseen. Failure to submit a proper documentation on time does NOT constitute a valid emergency.

SETTLEMENT AND OTHER AGREEMENTS
$1 to $150,000 –City Manager
The City Manager must act on behalf of the City with regard to settlements and other legal agreements where expeditious action would be of great benefit to the City. The City Manager can act to settle disputes and other agreements up to the $150,000 limit. The City Manager shall report the action to the Mayor at their earliest convenience and to the Council as a whole by the next regular Council Meeting available.

Over $150,000- City Council
In cases where settlements are in excess of $150,000, the City Manager must gain approval from the city Council to agree to a settlement.

PROCUREMENT AND PURCHASING STANDARDS
The City shall maintain a contract administration system which ensures contractors perform in accordance with the terms, conditions and specifications of their contracts or purchase orders.

The City shall maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer or agent of the City shall participate in selection, or in the award or administration of a contract if a conflict of interest, real or apparent, would be involved. Such a conflict would arise when:
• The employee, officer or agent;
• Any member of his or her immediate family;
• His or her partner; or
• An organization which employs, or is about to employ, any of the above, has a financial or other interest in or a tangible personal benefit from a firm considered for award.

The City’s officers, employees or agents will neither solicit nor accept gratuities, favors or anything of monetary value from contractors, potential contractors, or parties to sub-agreements. Such a 26 conflict will not arise where the financial interest is not substantial or the gift is an unsolicited item of nominal intrinsic value ($50 or less). The City’s standards of conduct provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the City.

The City shall not enter into a contract with a non-Federal entity has a parent, affiliate, or subsidiary organization that is not a state, local government or Indian tribe, unless the non-Federal entity maintains written standards of conduct covering organizational conflicts of interest. Organizational conflicts of interest mean due to relationships with a parent company, affiliate, or subsidiary organization, the non- Federal entity is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization.

The City shall avoid acquisition of unnecessary or duplicative items. Consideration will be given to consolidating or breaking out procurements to obtain a more economic purchase. Where appropriate, an analysis will be made of lease versus purchase alternatives, and any other appropriate analysis to determine the most economical approach.

The City shall consider entering into state and local intergovernmental agreements or inter-entity agreements where appropriate for procurement or use of common or shared goods and services.

The City shall consider using value engineering clauses in contracts for construction projects of sufficient size to offer reasonable opportunities for cost reductions. Value engineering is a systematic and creative analysis of each contract item or task to ensure its essential function is provided at the overall lower cost.

The City shall make awards only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed purchase. Consideration will be given to such matters as contractor integrity, compliance with public policy, record of past performance and financial and technical resources.

The City shall use time and material type contracts only:
• After a determination is made that no other contract is suitable; and • If the contract includes a ceiling price the contractor exceeds at their own risk.

The City alone shall be responsible, in accordance with good administrative practice and sound business judgment, for the settlement of all contractual and administrative issues arising out of procurements. These issues include, but are not limited to, source evaluation, protests, disputes and claims. These standards do not relieve the City of any contractual responsibilities under its contracts.
27 Competition
The City will conduct procurement transactions in a manner providing full and open competition.

To ensure objective contractor performance and eliminate unfair competitive advantage, contractors developing or drafting specifications, requirements, statements of work, or invitations for bids or requests for proposals shall be excluded from competing for such procurements.

The City shall conduct procurements in a manner prohibiting the use of statutorily or administratively imposed in-state or local geographical preferences in the evaluation of bids or proposals, except in those cases where applicable Federal statutes expressly mandate or encourage geographic preference. When contracting for architectural and engineering (A/E) services, geographic location may be a selection criterion provided its application leaves an appropriate number of qualified firms, given the nature and size of the project, to compete for the contract.

The City shall have written procedures for procurement transactions. These procedures will ensure that all solicitations:
- Incorporate a clear and accurate description of the technical requirements for the material, product or service to be procured. Such description shall not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured, and when necessary, shall set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use. Detailed product specifications should be avoided. When it is impractical or uneconomical to make a clear and accurate description of the technical requirements, a brand name or equal description may be used to define the performance or other salient requirements of procurement. The specific features of the named brand which must be met by offerors shall be clearly stated; and
- Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or proposals.

The City shall ensure prequalified lists of persons, firms or products that are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition. The City shall not preclude potential bidders from qualifying during the solicitation period.

METHODS OF PROCUREMENT/PURCHASE TO BE FOLLOWED
The City shall use one of the following methods of procurement for purchasing:
28 Procurement by Micro-Purchases is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed the $10,000 micro-purchase threshold as set by the Federal Acquisition Regulation at 48 CFR Subpart 2.1 (Definitions) and adjusted periodically for inflation.

Procurement by Small Purchase Procedures are those relatively simple and informal procurement methods for securing services, supplies or other property that do not cost more than $50,000 the simplified acquisition threshold as set by the Federal Acquisition Regulation at 48 CFR Subpart 2.1 (Definitions) and in accordance with 41 U.S.C. 1908 and periodically adjusted for inflation. If small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources.

Procurement by Sealed Bids (Formal Advertising).

Bids are publicly solicited and a firm-fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming to all the material terms and conditions of the invitation for bids, is the lowest in price.
a. For sealed bidding to be feasible, the following conditions should be present:
i. A complete, adequate, and realistic specification or purchase description is available;
ii. Two or more responsible bidders are willing and able to compete effectively for the business; and
iii. The procurement lends itself to a firm-fixed-price contract and the selection of the successful bidder can be made principally based on price. b. If sealed bids are used, the following requirements apply:
i. The invitation for bids will be publicly advertised and bids shall be solicited from an adequate number of known suppliers, providing them sufficient time prior to the date set for opening the bids;
ii. The invitation for bids, which will include any specifications and pertinent attachments, shall define the items or services for the bidder to properly respond; iii. All bids will be publicly opened at the time and place prescribed in the invitation for bids;
iv. A firm-fixed-price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost and life cycle costs shall be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and
v. If there is a sound documented reason, any or all bids may be rejected. 29 Procurement by Competitive Proposals
The technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed-price or cost-reimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids. If this method is used, the following requirements apply:
a. Requests for proposals shall be publicized and identify all evaluation factors including relative importance. Any response to publicized requests for proposals shall be honored to the maximum extent practical;
b. Proposals will be solicited from an adequate number of qualified sources; c. The City shall conduct technical evaluations of the proposal received and for selecting awardees;
d. Awards will be made to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered; and
e. The City may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby competitors’ qualifications are evaluated and the most qualified competitor is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms are a potential source to perform the proposed effort.

Procurement by Noncompetitive Proposals
Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source and may be used only when one or more of the following circumstances applies:
a. The item is available only from a single source;
b. The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
c. The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in a written request from the City; or
d. After solicitation of multiple sources, competition is determined inadequate.

Contracting with Small and Minority Businesses, Women’s Business Enterprises and Labor Surplus Area Firms
a. The City shall take all necessary affirmative steps to assure that minority businesses, women’s business enterprises and labor surplus area firms are used when possible. 30 b. Affirmative steps include:
i. Placing qualified small and minority businesses and women’s business enterprises on solicitation lists;
ii. Assuring that small and minority businesses and women’s business enterprises are solicited whenever they are potential sources;
Contracts Cost and Price
The City shall perform a cost or price analysis in every purchasing action. The method and degree of analysis will be dependent on the facts surrounding each purchase. As a starting point, the City shall make independent estimates before receiving bids or proposals.

Costs or prices based on estimated costs for contracts under the Federal award will be allowable only to the extent that costs incurred or cost estimates included in negotiated prices would be allowable for the City under Subpart E – Cost Principles of Title 2, Subtitle A, Part 200 (Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards).

The cost plus a percentage of cost and percentage of construction cost methods of contracting shall not be used.

Federal Awarding Agency or Pass-Through Entity Review
a. The City shall make available, upon request of the Federal awarding agency or pass-through entity, technical specifications on proposed procurements where the Federal awarding agency or pass-through entity believes such review is needed to ensure that the item or service specified is the one being proposed for purchase. b. The City shall make available upon request, for the Federal awarding agency or pass-through entity pre- procurement review, procurement documents, such as requests for proposal or invitations for bids, or independent cost estimates when:
• The City’s procurement procedures or operation fails to comply with the procurement standards of Title 2, Subtitle A, Part 200, Subsection 200.324; • The procurement is expected to exceed the simplified acquisition threshold and is to be awarded without competition or only one bid or offer is received in response to a solicitation;
• The procurement, which is expected to exceed the simplified acquisition threshold, specifies a “brand name” product;
• The proposed contract is more than the simplified acquisition threshold and is to be awarded to other than the apparent low bidder under a sealed bid procurement; or • A proposed modification changes the scope of a contract or increases the contract amount by more than the simplified acquisition threshold. 31 a. The City may be exempted from the pre-procurement review in subsection 8.b. above if the Federal awarding agency or pass-through entity determines that its procurement systems comply with the standards set forth in Title 2, Subtitle A, Part 200, or the City self-certifies compliance with such standards if self- certification is permitted by the Federal awarding agency or pass-through entity.

Bonding Requirements
For public projects, the City shall require bid guarantees, performance bonds, and payment bonds consistent with Title 2, Part 200, Section
200.325 of the Code of Federal Regulations.

Contract Provisions
The City’s contracts shall contain the provisions in Appendix II to Title 2, Subtitle A, Part 200 – Contract Provisions for non-Federal Entity Contracts Under Federal Awards, as applicable.

Suspended or Debarred Parties
City employees shall not enter into covered transactions with parties that are suspended or debarred or otherwise excluded from or ineligible for participation in Federal assistance programs and activities (2 CFR 200.213; 2 CFR 180).

EXCEPTIONS TO BIDDING
Sole Source/Brand Procurement
An exception may be granted based on two premises:
• Only a single company or organization can supply the needed product or service. As in the case of proprietary software maintenance, only the licensor of the product can provide support.
• Only a single “brand/model” will meet the department’s technical/functional requirements. For example, only the Brand X equipment is compatible with existing system requirements. Brand X is available through several distributors. Brand X would be considered a “sole brand” but not a “sole source” since it is available from many sources (distributors).

Sole source requests should not be made unless the department is confident that the request is reasonable, appropriately justified to meet the City’s requirements, and can withstand a possible audit. Sole source/brand purchasing minimizes or eliminates competition and should be avoided whenever possible.
32 If a department believes that only a specific make and model will meet its needs, it should include an objectively written explanation that details the unique features of the sole source/brand item, which states why these features are required. If other brands or models have been tested or used previously, the department should specify the brands or models tested or used, the dates they were tested or used, and why they are not acceptable.

A written justification, signed by the department head must be submitted for the PA’s review/approval. Department should provide the written justification in a standard memo format to the Purchasing Agent.

Use of Existing Agreement
An exception may be granted if the product/service is available through the utilization of another public entity’s contract (includes city, county, state, federal, school district, League of California Cities, California Communities Program, Federal GSA). The contract must have been competitively bid, be current within the last year, and be for the same product or service. It must also meet all City policies.

Standardization
When supplies, equipment, or services are uniformly adopted or otherwise standardized, or when an item is designated to match others in use by the City, the purchase may be exempt from bidding requirements or be made with limited competition to distributors of the manufacturer of the standardized item. Compatibility issues between differing technologies will also be considered for exception.

Contracted City Staff
The City of Lindsay is dependent upon contracted professional staff to fill staff positions normally performed by in-house staff such as City Engineer, City Planner, and Certified Operators as required by the State for water and/or wastewater treatment monitoring. Therefore, an exception to the normal bidding process may apply when using contracted professional staff in their role as the City representative, in their respective field, under their existing contract.

WRITTEN CONTRACTS
City staff will typically require a written contract when the cost of the services, and in some cases goods, exceeds $50,000. New construction contracts are needed for projects exceeding $100,000.

The City of Lindsay prefers to use a Standard Services Contract and will provide it to departments upon request. The standard contract has been approved by the City Attorney and Risk Management.

Use of any contract other than the standard contract, or making material changes to the standard contract, will require City Attorney approval.
33 CONTRACT CHANGE ORDER POLICY - Project Increases
For unforeseen construction costs, and all City Services projects that involve a contract, the following policy is required:
• Project bid proposals shall be received and abstract of bids be developed. Project shall be awarded to the lowest responsible bidder by Council action, as required. • A 10% contingency may be allowed to increase the project amount via CCO's depending on the scope of the CCO and the overall project budget. This 10% contingency is an aggregate total of all CCO's, not CCO's presented on an individual basis. • The City Council, through the City Manager, shall authorize the City Services Director to execute CCO increases so long as they fall within the 10% contingency and there is a nexus to the original scope of work.
• For CCO (individual or aggregate} increases that exceed the 10% aggregate contingency and are below 25% increase of the project bid and there is a nexus to the original scope of work, the City Council shall approve and authorize the City Manager to execute the CCO. • For CCO's (individual or aggregate} that exceed 25% of the original bid proposal, and there is a nexus to the original scope of work, City Council shall approve and authorize the City Manager to execute a Supplemental Agreement with the Contractor. • All CCO's must be pre-approved by the City Manager, and if applicable pursuant to the thresholds established herein by the City Council.
• All CCO's, regardless of the threshold increase, shall be presented to Council either as a consent calendar item, or actionable item, to ensure the governing body is made aware of any contract increases.

Contract Change Order (CCO) Policy – Quality Control
All Contract Change Orders shall:
• contain backup written justification supporting the need • specify the source of funds to pay for the proposed changes • clearly specify the method of payment to apply
All Contract Change Orders should be paid at Agreed Unit or Lump Sum Prices whenever possible, and as such payment on a Time and Materials basis would be discouraged, and utilized only as necessary
34 For Contract Change Orders to be paid at Agreed Unit or Lump Sum Prices, the City shall prepare and maintain a backup estimate and documentation supporting the payment of fair and reasonable prices to the Contractor.

For Contract Change Orders to be paid as Extra Work at Force Account (Time and Materials plus markups), the City shall independently establish the amount of labor and equipment usage (via Daily Reports) prior to obtaining agreement with the Contractor on said number of hours charged to the Contract Change Orders.

Should any Contract Change Order grant the Contractor contract time in the form of additional working days, the City shall conduct a time impact analysis verifying that the Contract Change Order affected the Contractors progress schedule and the controlling operation of work.

INSURANCE REQUIREMENTS
The City requires that contractors have, and maintain, certain types of insurance coverage when they enter into contractual agreements to perform services. Insurance requirements vary depending on the type/scope of services provided.

Proof of insurance must be provided to the City Clerk prior to the start of any work. The following are the most commonly required types of coverage.
• Commercial General Liability: The City should be added, by endorsement, as an “additional insured.”
• Automobile Liability: Is required if driving or traveling is required in providing the contracted services If the vendor/contractor has employees, but no vehicles registered to the business (non- owned and hired automobile liability coverage should be provided). • Workers’ Compensation: Contractors working on City property must first provide proof of Workers’ Compensation for all employees working on the job site. Requirement may be waived if the vendor is a sole proprietor/partner/corporate officer with no employees. • Professional Liability (Errors and Omissions): is required for certain services – including but not limited to – appraisers, notaries, software programmers, auditors, lawyers, insurance agents, surveyors, dentists, doctors, counselors, engineers, etc.

The City Clerk should be contacted for specific insurance coverage required.

PREVAILING WAGES
In accordance with Labor Code Sections 1770-1773, prevailing wages must be paid to all workers on a “public works” project (see Glossary for definition) when the project is over $1,000. (Reference Attachment 3 Davis- Bacon and Related Acts Policy.)
35 When bidding on public works projects that exceed $1,000, under the law, all bidders are expected to use the same wage rates. The California Department of Industrial Relations determines the prevailing rate of wages for specific geographic areas. Additional information is available at www.dir.ca.gov/dlsr/pwd/index.htm.

SURETY AND PERFORMANCE BONDS
Bid Bonds
The bid bond guarantees the City that the bidder will enter into the contract if it is awarded. Bid security shall be required for all construction work bids when the cost is estimated to exceed $25,000. Bids must be accompanied by a Bid Security in the amount of not less than 10% of the amount bid in one of the following forms:
• Cash
• A cashier's check made payable to the City of Lindsay • A certified check made payable to the City of Lindsay • A bidder's bond executed by an admitted surety insurer, made payable to the City of Lindsay Upon an award to the lowest responsive and responsible bidder, the security of an unsuccessful bidder shall be returned in a reasonable period, but in no event shall that security be held by the City beyond 60 days from the time the award is made.

A bid received and not accompanied by cash, cashier's check, certified check, or approved bond will result in return of the bid without consideration. Bid security is optional for other bids or proposals.

Performance and Payment Bonds
The performance bond guarantees that the contractor will perform the duties assumed by entering the contract. The payment bond guarantees that the contractor will pay all suppliers and subcontractors who assist in the performance of the work.

One hundred percent (100%) performance and payment bonds are required on all public works projects awarded in excess of $25,000.

Performance and payment bonds are optional for other bids or proposals. In most instances, bonds are not necessary if a contractor has been selected after a thorough review of references, qualifications, and financial stability.
36 RECORDS RETENTION POLICY
The record retention requirements may vary for different grants the records retention period for any Project using Regional, State or Federal funds shall adhere to the stricter guidelines. Project records are to be retained by local agencies for a period of three years from stated payment of the final voucher, or a four-year period from the date of the final payment under the contract, whichever is longer. The file must contain all Notices of Completion and acknowledgement by the governing body and funding agency, or agencies if multiple funding sources are used, that the project has met all requirements to be accepted as complete.

SB1383 RECYCLED CONTENT AND RECOVERED ORGANIC WASTE
It is the policy It is the policy of the City of Lindsay comply with all state and federal laws related to procurement and therefore to incorporate environmental considerations including recycledcontent and recovered Organic Waste product use into purchasing practices and procurement.

Purchase of Recycled-Content Paper
Departments will try to purchase Recycled products in compliance with Section 22150 of the Public Contract Code which requires local governments to purchase recycled products instead of nonrecycled products whenever recycled products are available at the same or a lesser total cost than non-recycled items, if fitness and quality are equal.

If the non-recycled items and Recycled items are equal, all Departments shall purchase RecycledContent Paper Products and Recycled-Content Printing and Writing Paper that consists of at least thirty percent (30%), by fiber weight, postconsumer fiber, whenever available at the same or a lesser total cost than non-recycled items, consistent with the requirements of the Public Contracts Code, Sections 22150 through 22154 and Sections 12200 and 12209, as amended. 37 GRANT TRACKING PROCEDURES
Grant funding activity is to be managed by the Director of finance and shall track grants as follows:
• A copy of the signed grant is filed with the Finance Department. • The Director of the Department that accepted the Grant and the Finance Director are responsible to ensure expenses are in compliance with the Grant award agreement. • A Grant Tracking Spreadsheet shall be developed and maintained by the Department that accepted the grant and the Finance Department.
• The Tracking Spreadsheet should include information on the funding source including original dollar amount of the grant, beginning and ending dates, extensions of terms if any, expenses by fiscal year, grant draw downs by fiscal year, and grant available balances. • The Tracking Spreadsheet should be updated periodically. • Grant drawdowns should be processed at the minimum once a quarter or as soon as $500,000 are due to the City for reimbursement, whichever comes first. • The Finance Director and the designee from the Department who accepted the grant shall meet at the minimum once every quarter to review expenses, draw downs, and grant balance.

LOCAL ASSISTANCE PROCEDURES MANUAL-CHAPTER 10
The State of California Department of Transportation (Caltrans) has developed the Local Assistance Procedures Manual (LAPM), Chapter 10 (Attachment 2) Consultant Selection which sets forth policies and procedures for procurements and managements of contracts for engineering and design related consultant services contracts on federal and state funded transportation projects to ensure compliance with applicable Federal and State laws and regulations. Prior to the commencement of any project using funds as indicated in this section, staff shall check the following link, which is update annually, to ensure all requirements are met:
https://dot.ca.gov/programs/local-assistance/guidelines-and-procedures/local-assistanceprocedures-manual-lapm 38 FEDERALLY FUNDS -2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
The City of Lindsay’s policy related to Federally-funded projects and/or grants is established to be in compliance with 2 CFR 200 contained herein as Attachment 1.

The Office of Management and Budget (OMB) issues guidance for federal grant management. The guidance is contained in the Code of Federal Regulations (C.F.R.) at 2 C.F.R. Part 200. 2 C.F.R. Part 200 is formally known as the "Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards" and informally referred to as the "Uniform Guidance." The City will operate with the regulation for the procurement of property or services stemming from federal aid. This section shall apply to the awarding of sub-grants and contracts by the City stemming from federal grants to the City. This section shall have the same application on the awarding of sub- grants and contracts by the City stemming from state, county or other non-federal government entity grants originating as federal grants. https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200 39 TRAVEL AND TRAINING POLICY
The City recognized the constructive value of professional conferences, seminars, meetings, and training. The travel and training cost should be included in the approved budget and the Director should approve travel and training prior to employees registering or incurring expenses. The City Manager shall approve all travel related for Department Directors. The City will cover expenses related registration, transportation, meals, parking, fuel, and lodging.

The Travel Expense Form should be completed in order to request per diem and payment for travel and training expenses. The Travel Expense Form should include a copy of the training brochure or announcement,registration, hotel receipt, and any request for advance or reimbursement receipts, a copy of the US General Services Administration (GSA) Meals and Incidental Expenses (GSA M& IE) rates. Expenditures for Spouse, Children or guest are not reimbursable expenses.

Registration Fees
All Registration Fees for trainings or conferences will be paid by the City. Departments should try to do early registration when possible in order to get a discounted registration fee.

Lodging
It is expected that employees seek hotels costs that provide the greatest value to the City. This may include hotel accommodations at a host hotel for a conference or the nearest hotel possible.

Employees should try to get the conference group rate or a preferred government rate when possible.

Transportation/City Vehicle
A City vehicle should be used when traveling to a business related conference or meeting. The request for the use of the City vehicle should be made through the employee Supervisor or Director.

If the use of a privately owned automobile is authorized by the Director or no City vehicle is available the mileage reimbursement rate will be the one in effect under the US General Services Administration or IRS rate whichever one is less. If prior authorization for the use of the personal vehicle is not obtained, employees may not be reimbursed for the use of their private automobile.

Meals
The City will use the US General Services Administration (GSA) Meals and Incidental Expenses rates for the County where the training will be taking place. The Meals and Incidental Expenses (M&IE) rates can be requested as per dium. The rates for the first and the last day of travel equal 75% of the M&IE rate. The GSA rate breakdown will apply for single day trainings. 40 CREDIT CARD POLICY
A City credit card shall be issued to employees for the purpose of making authorized small-dollar purchases, securing reservations, paying travel expenses, placing phone/computer online orders, and doing City business in the most efficient manner. Use of the City credit card is not intended to replace procurement/purchasing policy which enable, volume discounts.

The City Manager and Department Directors may request in writing for a credit card to be issued to an employee or authorize an employee to check out a credit card from the Finance Department.

In some cases the City will issue generic cards which don’t include an individual’s name on the card. Prior to checking out a credit card, employees will need to sign acknowledgement of the Credit Card Policy.

A current list of all credit cards, authorized users, and credit limits shall be kept on file in the Finance Department at all times.

The cardholder is responsible for the security of the City Credit Card. Generic Credit Cards must be returned to the Finance Department within 24 hours of being checked out or the completion of travel unless prior arrangements have been made with the Finance Department.

The Use of the City Credit Card is restricted to:
• Credit cards use is for the sole purpose of conducting official business of the City. • Cardholders must ensure that sufficient funds are available prior to making purchases.

The City Credit Cards can’t be used for:
• Alcoholic beverages.
• Any personal items and personal services.
• Cash advances, wire transfers, money orders, etc.
• Betting, casino gaming, or related activities.
• Political or religious organizations.
• Court costs, fines, bail, or bonds.
• Rental or lease payments.

The credit card limits will vary depending on vendors. The Finance Department will request and authorize employees in the following positions with credit card limits for the Monthly statements will be mailed to the City and a copy will be distributed to the Departments for their review and processing of the Check Request. Upon receipt of the statement, cardholders shall submit a check request for the payment after completing the following steps:
41 1. Balance all sales invoices with receipts to Statements, which show all transactions made during the billing cycle.

2. All items must be accounted for on the statement with supporting documentation.

If a credit card was checked out from the Finance Department the following items must be completed at the time of returning the generic credit card:

1. The Credit Card Purchase Form

2. Receipts

3. Other forms required by the Finance Department.

If no documentation can be provided the person who made the purchase may be required to reimburse the City for the charge in question.

Improper use of a City credit card may be treated as misuse of public funds and may subject the employee to disciplinary action up to and including termination and prosecution.

Failure to follow this policy by any cardholder may result in the user's credit card privileges being suspended or revoked.

The Finance Department will process all credit card payments. Under no circumstances will the Finance Department "hold" a payment pending the resolution of a dispute or while waiting for backup documentation from the Cardholder.

If a purchased item is billed incorrectly, the Cardholder is responsible for contacting the vendor as soon as the error is discovered and dispute the transaction on the statement.

To avoid finance charges and late fees, Finance will pay all credit charges in full, including disputed amounts or pending credits. Departments are responsible for resolving the disputed charges and obtaining credit on the next monthly statement.

Should a Cardholder/employee lose a City credit card or have it stolen, it is his/her responsibility to contact the Finance Director immediately.

Cardholders will immediately surrender their credit card upon request by their Department Director, Human Resources or Finance. Human Resources will be responsible for retrieving the credit card when an employee separates from the City.
42 INVESTMENT POLICY
The City’s investment policies apply to all funds under the direct authority of the City of Lindsay.

These funds include, but are not limited to, the City’s revenues associated with the General Fund, Special Revenue Funds, Enterprise Funds, Internal Service Funds, Debt Service Funds, Capital Project Funds, Private-Purpose Trust Funds, Agency Funds, proceeds from bond sales and any other funds under the City’s control.

Except for cash in certain restricted and special funds, the City of Lindsay consolidates cash balances from all funds to maximize investment earnings. The City schedules its collection of receipts, deposits of funds and disbursements of monies to ensure maximum availability of cash for temporary investment purposes. Investment income is allocated to the various Funds based on their respective participation and in accordance with Generally Accepted Accounting Principles (GAAP).

Investment policies and practices of the City of Lindsay are based upon state law, City ordinances, Generally Accepted Accounting Principles (GAAP), prudent money management principals and the “prudent person” standard (Civil Code Section 2261, et. seq.). The City has five primary goals in the investment of its public funds. They are:

1. Achieve a reasonable rate of return while minimizing the potential for capital losses arising from market changes or issuer default.

2. Meet the daily cash flow needs of the City. Including the debt obligations under the City’s management.

3. Comply with City ordinances and the laws of the State of California regarding investment of public funds.

4. Maintain accurate and complete investment accounting records.

5. Prepare reliable financial reports of the investment portfolio for the City Council, City Manager, and the public.

Safety and principal and preservation of capital are the foremost objectives of the investment program. Investments are undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.

In order to meet the objective of safety of principal and preservation of capital the City will review:

Credit Risk To minimize credit risk, the risk of loss due to the failure of the security issuer or backer by:
43 • Limiting investments to the safest type of securities, • Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisers with whom the City of Lindsay will do business,
• Diversifying the investment portfolio so that potential losses on individual securities will be minimized.

Interest Rate Risk The City of Lindsay will minimize the risk that the market value of securities in the portfolio will fall due to changes in general interest rates by:
• Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity.
• Investing operating funds primarily in shorter-term securities or with state and local government investment pools.

Liquidity The investment portfolio remains sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrently with the City’s cash needs to meet anticipated demands (static liquidity). A portion of the portfolio also may be placed in money market mutual funds or Local Government Investment Pools (LGIP’s) which offer either same-day or next-day liquidity. Furthermore, since all possible cash demands cannot be anticipated, the portfolio shall consist largely of securities with active secondary or resale markets (dynamic liquidity).

Yield The investment portfolio is designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs of the City. Return on investment is of secondary importance compared to the safety and preservation of capital and liquidity objectives described above.

The core investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed.

Loss of Principal A security with declining credit may be sold early to minimize loss of principal.

Security Swap A security swap would improve the quality, yield, or target duration in the portfolio.

Liquidity Liquidity needs of the portfolio require that the security be sold. 44 Prudence
The standard of prudence used by investment officials is the “prudent” person standard (Civil Code Section 2261, et. seq.) and is applied in the context of managing an overall investment portfolio.

Investment officers acting in accordance with written procedures and this overall investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and sale of securities are carried out in accordance with the terms of this policy.

Investments are made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.

Public Trust, Ethics and Conflicts of Interest.

Investment officials recognize that the investment portfolio is subject to public review and evaluation. The overall program is designed and managed with a degree of professionalism that is worthy of the public trust.

Officers and employees involved in the investment process refrain from personal business activity that could be in conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial investment decisions. Employees and investment officials disclose any material interests in financial institutions with which they conduct business.

They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City of Lindsay.

Delegation of Authority.

Authority to manage the City’s investment program is granted to the City Manager and his or her designee, hereinafter referred to as the “Investment Officer.” Responsibility for the operation of the investment program is hereby delegated to the Investment Officer, who shall act in accordance with this investment policy.

AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City transacts business with banks and savings and loans, and with investment securities dealers in compliance with the City’s investment policy. The Finance Department will maintain a 45 list of financial institutions authorized to provide investment services. All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following as appropriate:
• Audited financial statements.
• Proof of National Association of Securities Dealers (NASD) certification. • Proof of state registration.
• Completed broker/dealer questionnaire.
• Certification of having read and understood and agreeing to comply with the City of Lindsay’s investment policy. The City on an annual basis submits a copy of the current investment policy to all financial institutions approved to do business with the City.

Confirmation of receipt of this policy is considered evidence that the dealer has read and understands the City’s investment policy and will recommend and execute only transactions suitable for and in compliance with the City’s investment policy.

In selecting financial institutions for deposit or investment of City funds, the creditworthiness of the institutions will be considered. The City will continue to monitor financial institution’s credit characteristics and financial history throughout the period in which City funds are deposited or invested. The City is authorized by the City Council to conduct investment transactions with the following institutions or any new institutions approved by Council. Investment transactions with firms, other than those appearing on this list, are prohibited.

Local Agency Investment Fund
Banks: Bank of the Sierra, U.S. Bank, and Bank of America Institutional Investment Companies: Multi-Bank Securities (MBS), Public Agency Retirement Services (PARS).

Suitable and Authorized Investments
The City is authorized by California Government Code Section 53600, et. seq. to invest in specific types of securities. Section 43601 of the Government Code sets limits on the type investments that may be in the City portfolio.
• 30% in Medium Term Notes.
• 40% in Negotiable Certificates of Deposit.
• 40% in Bankers Acceptance Notes, not to exceed 180 days in maturity. 30% in Commercial Paper, not to exceed 270 days.
• 100% in U.S. Government Treasury Obligations. 100% in U.S. Government Agency Debt Issues. 100% in Pass-Book Savings Deposits.
46 The City Council has established further limits on the types of securities in which the City may invest its idle cash. Any investment security (except investment of bond proceeds as explained in the next section) not listed below is not a valid investment for the City of Lindsay.

Local Agency Investment Fund (LAIF) Investments
LAIF is a special fund of the State of California Treasury that local agencies may use to deposit funds for investment. Investments by the State Treasurer for City funds in LAIF are authorized by the City Council. State law prohibits LAIF from impounding any depositor’s funds and prohibits the fund from ever declaring bankruptcy.

United States Government Debt Obligations
These investments would include U.S. Government direct obligations such as Treasury bills, bonds, notes and other certificates of indebtedness where the full faith and credit of the United States are pledged for payment of principal and interest.

United States Government Agency Debt Issues
These investments include obligations, participations or other instruments of, or issued by, a Federal Agency or a United States government-sponsored enterprise, including obligations of the Federal Home Loan Bank (FHLB) or Federal Farm Credit Bank (FFCB) or other obligations or other instruments issued by, or fully guaranteed as to principal and interest by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association (FNMA). While these U.S.

Government debt issues are not backed by the full faith and credit of the United States, they do in fact have de facto backing from the federal government, and it would be most unlikely that the government would let any of these agencies default on its obligations.

Certificates of Deposit (CD)
A Certificate of Deposit is a time deposit with a specific maturity evidenced by a certificate.

Certificates of Deposit must be issued through financial institutions insured by the Federal Deposit Insurance Corporation (FDIC), a federal agency of the United States Government that insures bank deposits up to $250,000 per account.

Pass Book Savings Account Demand Deposits
Savings accounts are approved by the Lindsay City Council provided they are maintained only with banks and savings and loan institutions which are insured by the Federal Deposit Insurance Corporation (FDIC), a federal agency of the United States Government that insures bank deposits up to $250,000 per account.
47 Overnight Repurchase Agreements
The City is authorized with City Council approval to set up a “sweep account” and to enter into an overnight repurchase agreement with an authorized bank to sweep cash from its checking accounts and other appropriate accounts to earn overnight interest on the funds in these accounts.

Zero Coupon Bonds
Zero Coupon Bonds may be purchased only for purposes of bond defeasance.

INVESTMENT BOND PROCEEDS
The City directs the investment of proceeds on bonds or similar debt instruments issued as instructed in the bond indenture or similar investment documents. Securities authorized by the bond indenture or similar investment documents that are not authorized by the City’s investment policy will be considered approved when the bond indenture or similar investment document is approved by the City Manager or City Council. Bond reserve funds, escrow funds and any funds approved by the City Council may be invested in securities with maturity limits of five years or an appropriate longer period.

INVESTMENT PARAMETERS
Diversification.

Other than funds invested in U.S. Government debt obligations and the State of California Local Agency Investment Fund (LAIF), the City’s remaining investment portfolio is diversified to avoid incurring unreasonable and avoidable risks regarding specific security types or individual financial institutions. Diversification is dividing investment funds among a variety of securities offering independent returns. LAIF is a special fund in the State Treasury which local agencies may use to deposit funds for investment. State law prohibits LAIF from impounding any depositor’s funds and prohibits the fund from declaring bankruptcy.

Maximum Maturities
Section 53601 of the California Government Code allows the investment of City surplus funds in specified types of securities provided that, at the time of investment, the securities have a maturity of five years or less, unless the legislative body has granted expressed authority to make that investment either specifically, or as a part of the Investment Policy approved by the legislative body, no less than three months prior to the investment. It is herein authorized as part of the current investment policy to invest in securities with an estimated average life of five years or less. It is also authorized to invest in securities with a maturity greater than five years, but only when authorized by the City Council no less than three months prior to the investment. 48 Risk Tolerance
The City recognizes that investment risks can result from issuer defaults, market price changes or various technical complications leading to temporary liquidity. Portfolio diversification is employed as a way to control risk. The City displays prudence in the selection of securities as a way to minimize default risk. No individual investment transaction is undertaken which jeopardizes the total capital position of the overall portfolio. Funds invested in LAIF are considered consistent with this policy. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 3, the City’s investment risk is divided into three categories:
• Category 1. Securities that are insured and registered or securities held by the entity or its agent in the City’s name.
• Category 2. Securities that are uninsured and registered with securities held by by the pledging financial institution’s trust department or agent in the City’s name. • Category 3. Securities that are uninsured and unregistered with securities held by the counter party, or by its trust department or agent, but not in the entity’s name. This includes the portion of the carrying amount of any underlying securities.

Equal Opportunity.

The City does not knowingly invest funds in an institution that practices or supports, directly or indirectly through its actions, discrimination based on race, religion, color, creed, nationality or ethnic origin, age, sex or physical disability.

Prohibited Investment Activities.

This policy specifically prohibits trading securities for the sole purpose of speculating on the future direction of interest rates. It further prohibits investing in common stocks, using reverse repurchase agreements, using derivative products, buying mortgage derived interest only strips, purchasing investments using margin accounts and/or leveraging of the City’s investment portfolio.

SAFEKEEPING AND CUSTODY
Custody
To protect against potential losses by the collapse of individual securities dealers, all securities owned by the City shall be held in safekeeping by a third party bank trust department acting as agent for the City under the terms of custody agreement executed by the bank and the City. No outside broker/dealer or advisor may have access to City funds, accounts or investments, and any transfer of funds to or through an outside broker/dealer must be approved by the City Council. 49 Internal Controls
A system of internal controls has been established to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, or unanticipated changes in financial markets. Internal controls deemed most important include control of collusion, separation of transaction authority from accounting and record keeping, custodial safekeeping, avoidance of physical delivery of securities, clear delegation of authority to subordinate staff members, written confirmation of transactions for investments and wire transfers and development of a wire transfer agreement with the lead bank and third-party custodian.

Delivery vs. Payment
All trades where applicable are executed by delivery vs. payment (DVP) to ensure that securities are deposited in an eligible financial institution prior to the release of funds. Securities are held by a third- party custodian as evidenced by safekeeping receipts.

REPORTING REQEUIREMENTS
The City Treasurer shall submit quarterly investment reports in accordance with California Government Code Section 53646 The report(s) shall include the following:

1. Statement indicating that all cash and investments are in conformity with this investment policy.

2. Statement indicating that there are sufficient funds to meet the expenditures for the next six months.

3. Copy of the most recent statement or statements from the institutions in which the City has funds invested available to Council upon request.

INVESTMENT POLICY ADOPTION AND REVIEW
The City’s independent certified public accountants annually review and make recommendations regarding the City’s investment policies to the City Manager and the City Council. In accordance with Senate Bill 564 and Senate Bill 866, effective January 1, 1996, the City staff bring forward each year the City’s Investment Policy for review by the City Council. 50 FIXED ASSET AND CAPITALIZATION POLICY
Capital Expenditures for Fixed Assets, including land, buildings, machinery, equipment, construction in progress, improvements and infrastructure with an original cost of $15,000 or more, will be subject to accounting and reporting capitalization. All costs associated with the purchase or construction of the asset are part of the capitalization threshold including ancillary costs such as freight, transportation charges, site preparation expenditures, professional fees, warranties, taxes and legal claims directly The City’s Fixed Asset policies and procedures are established in accordance with Generally Accepted Accounting Principles (GAAP) and statements issued by the Government Accounting Standards Board (GASB). This policy is intended to provide specific guidance for the tracking of fixed assets guidelines for their purchase, use, accountancy, inventory, transferring and disposal.

In order to properly manage current assets through asset retirement and to plan for replacement and future acquisition, the City shall maintain schedules to plan for future needs and City audit.

All items valued in excess of $15,000.00 are to be tracked in the City of Lindsay Fixed Asset per GASB

34. Each Director in coordination with the Finance Department ensures assets meeting the reporting threshold are properly coded and tracked during useful life and through asset retirement.

Depreciation expense is to be posted to the financial statements annually. Unit value shall be set at an amount equal to the original cost of acquisition plus any costs associated with bringing the asset into an operation or useful condition. Such costs included but not limited to taxes, freight, installation, testing and related costs.

In cases where an asset has been acquired by gift or other means by which costs are not readily available, cost shall be established using and estimate of fair market value.

The City’s fixed asset policies apply to all departments, divisions and offices of the City government as well as all associated accounting funds under the direct authority of the City of Lindsay.

The Finance Department is responsible for establishing systems and procedures so that the purposes of these policies are implemented and ensure that fixed assets are identified, processed, tracked, inventoried and appropriately reported by fund and asset category.

Department Heads are responsible to ensure that proper budgeting and purchasing guidelines are followed, and to ensure that fixed assets are adequately controlled, safeguarded, preserved, and used only for appropriate City purposes.

Capital Asset Categories
The City of Lindsay will apply the following Capital Asset Categories to its fixed asset policies and procedures with an original cost of $15,000 or more and a useful life beyond one year. 51 Land
Land includes the investment in real property or the ownership of ground space such as parcels, easements, and rights-of-way. Land improvements such as fill, grading, and excavation that provide permanent benefits and incur limited deterioration with use or the passage of time are to be classified with land as non-depreciable.

The cost of land includes all expenditures in connection with acquisition and preparation for use such as, but not limited to purchase price, title search fees; filing/recording fees; appraisal and negotiation fees; relocation costs; condemnation costs; surveying fees; clearing, filling and grading land for use; demolishing or removing structures; and hazardous waste clean-up. Proceeds from the sales of salvage are credited against the land cost.

In the case of land and buildings acquired as a single parcel, the value of the land and buildings should be determined individually and recorded separately into their respective capital accounts.

Buildings
Buildings are structures that are physical property of a permanent nater that enclose people, equipment, services or functions. They are of a fixed or semi-fixed nature, which provide shelter and/or create interior space. Buildings also include picnic shelters, storage sheds and restrooms.

Buildings may include major high-cost components such as boilers, elevators, HVAC systems and roofs. If practical, these components should be recorded separately in the capital asset system to simplify future replacement transaction and because their useful lives can differ from buildings.

The cost of buildings includes all expenditures in connection with acquisition or construction, such as, but not limited to purchase price, construction, filing fees, closing costs, architect fees, permits, licenses, inspections, insurance during construction, and fixtures attached to the structure.

Machinery and Equipment
Moveable personal property such as furniture, machines, tools and vehicles.

The cost of equipment includes all costs necessary to acquire and place the equipment into service, such as, but not limited to purchase prices, freight charge, transportation taxes for sale use or transportation and installation costs.

The cost of new equipment should not be reduced by the value of trade-ins. Trade-ins shall be retired from the capital asset and financial systems, and in proprietary funds any gain or loss for the asset being traded-in should be recognized on its disposition.

Costs to train employees to use the asset is not capitalized since it does not get the asset ready for its intended use. Training costs only provide for the City to get ready to use it, however these costs do not provide a benefit throughout the useful life of the asset. 52 Improvement other than Buildings /Infrastructure
Infrastructure is categorized as community service assets that are long lived, generally stationary in nature, and normally preserved for a significant greater number of years than most capital assets.

Examples are Includes bridges, traffic signals, streets, roads, curbs, gutters, sidewalks, water lines, sewer lines and storm drain lines.

The cost of infrastructure includes the purchase price, contract prices, internal costs and any other expenditure necessary to put the infrastructure into its intended state of operation. Infrastructure assets are primarily created through construction of a Capital Improvement Program project.

Expansion and improvement to infrastructure are those capital outlays that increase the asset’s capacity or level of service, such as adding lanes to a road.

Developer constructed roads are historically donated to the City and thus added to the City’s roadway inventory using the developer’s actual construction cost as the original cost.

Construction in Progress
Assets that are being built that are not usable at the end of the fiscal year, such as an incomplete building, waterline, sewer line, storm drain line, street, road, traffic signal, or other public improvement or infrastructure.

CAPITALIZATION POLICY
Fixed Asset Components For the purpose of capitalization, the threshold will generally not apply to components of fixed assets. For example, a keyboard, monitor and central processing unit purchased as components of a computer system will not be evaluated individually against the capitalization threshold. The entire computer system will be treated as a single fixed asset.

Individual Units of Fixed Assets The $15,000 capitalization threshold is applied to individual units of fixed assets. For example, fifteen desks purchased through a single purchase order, each costing $1,000, will not qualify for capitalization even though the total ($15,000) exceeds the capitalization threshold of $15,000.

Grants
When a grant funds the acquisition of a fixed asset and impose a requirement that the fixed asset be tracked and identified as a grant-funded asset and to ensure proper disposal according to grant guidelines.
53 Dedications and Donations
When an asset is acquired through dedications, donations, developer funding, or in-lieu of fees, the asset will be recorded at its estimated fair market value at the date of acquisition, as determined by the appropriate City department using an appropriate method to determine value.

Repairs and Maintenance
Repairs to existing fixed assets will generally not be subject to capitalization unless the repair extends the useful life of the asset. In this case, the repair represents an improvement and is subject to the capitalization requirements described below.

Improvements
Improvements to existing fixed assets which extend the useful life of the related fixed assets, will be subject to capitalization only if the cost of the improvement meets the $15,000 threshold.

Capital Projects
Capital projects will be capitalized as “construction in progress” until completed and maintained under the CIP Program designation neither placed into service, nor capitalized or depreciated until accepted by Council as complete. The date placed into service shall be the date of acceptance by Council as complete. The costs associated with the capital project include direct costs, such as labor and materials, as well as indirect and ancillary costs.

DEPRECIATION
Principles and Guidelines
The purpose of depreciation is to spread the cost of fixed assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of the fixed asset.

General Accounting Standards Board (GASB) Statement 34 requires that all capital assets with limited useful lives be depreciated over their estimated useful lives. Depreciation of all fixed assets is charged as an expense against operations each year. The total amount of depreciation taken over the years, called accumulated depreciation, is reported on the balance sheet as a reduction in the book value of the fixed assets.
54 Depreciation Method
Depreciation is provided using the straight line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated.

Estimated Useful Life
The estimated useful life of an asset will vary depending on the type of fixed asset that is being depreciated. The useful life for various fixed assets are indicated below:

Buildings 50 Years
Infrastructure 50 Years
Street Drainage 50 Years
Curb, Gutter and Sidewalk 30 Years
System Infrastructure 30 Years
Furniture, Fixtures & Vehicles 5 Years
55 INVENTORY CONTROL AND SURPLUS POLICY
Inventory control is applied only to movable assets and not to land, buildings or fixed assets subject to capitalization. Assets will be subject to inventory control if they meet at least two of the following criteria’s:
• The asset has a useful life that exceeds one year.
• The original cost of the asset is equal to or greater than $1,000. • Any asset as requested from a department. This may include machinery and equipment that due to their portability or value outside of the office are susceptible to loss or theft. • Any asset required to be controlled and separately reported pursuant to grant conditions or any other externally imposed reporting requirement.
• All assets purchased with federal funds in excess of $500 shall be tracked separately.

Each Department is ultimately responsible for safeguarding their assets against theft or loss.

TAGGING
Assets will be tagged to support inventory control, prevent theft, stop losses, track the asset, promote accountability. Most assets are tagged with a asset tag, however some assets are not tagged because of the way that asset is used.

DISPOSAL OF ASSETS
No assets may be disposed of without checking with other City Departments to see if they can use the property.

Value below $1,000
The asset may be disposed of in a manner approved by the Department Director, City Manager and Finance Director.

Value above $1,000
Disposal of assets with a value of over $1,000 must have City Council approval.

SURPLUS SALE
Assets may be disposed of in any of the following ways:
• Sealed bids after at least three public notices have been published in the newspaper. • Public auction after at least three notices have been published in the newspaper. 56 • Traded in to reduce the purchase price of a new replacement for a fixed asset. • Taken to a federal or state surplus property facility and sold through that facility. • Sold or donated to another government agency.
• Recycled and disposed of as junk to a landfill or other appropriate waste removal facility. • Other method approved by the City Council or the City Manager where it is believed that the highest price can be obtained for the fixed asset. The City Council or City Manager will determine the most appropriate method of disposing of assets.

PROCEEDS FROM SALES AND AUCTIONS
All proceeds from the sale of assets will be allocated to the City’s General Fund unless the property was originally purchased with monies from a specific City Accounting Fund, in which case, the proceeds will be returned to that specific Accounting Fund. 57 ATTACHMENTS

1. 2 CFR 200

2. LOCAL ASSISTANCE PROCEDURES MANUAL- CHAPTER 10

3. DAVIS BACON

4. FEDERAL FINANCIAL MANAGEMENT POLICIES (24 CFR PART 85)

5. ABBREVIATION & ACRONYMS

6. FUND DESCRIPTIONS & LIST

7. GLOSSARY OF PROCUREMENT TERMS

8. GLOSSARY OF TERMS
58 ATTACHMENT 1: Federally Funded Procurement – 2 CFR 200 Council on Financial Assistance Reform Priorities (COFAR) goal is to reduce risk of waste, fraud, and abuse while reducing administrative burdens through the establishment of a Uniform Administrative Requirement, Cost Principles, and Audit Requirement for Federal Awards (2 CFR 200). The City of Lindsay’s policy related to Federally‐funded projects and/or grantsis established to reflectthis goal and be in compliance with 2 CFR 200 contained herein:

As a result, the City will operate with the following regulation for the procurement of property or services stemming from federal aid. This section shall apply to the awarding of sub‐grants and contracts by the City stemming from federal grants to the City. This section shall have the same application on the awarding of sub‐ grants and contracts by the City stemming from state, county or other non‐federal government entity grants originating as federal grants. 2 CFR 200
A. The City shall thoroughly review all grant agreements and guidelines to understand requirements as well as deliverables, developing a written checklist and timeline of completion to verify the national objectives are being achieved within the parameters of the grant award/agreement.

B. Determination of Federal Awards Requirements for Pass‐thru Agencies, Subrecipients, and Contractors (200.330 & 200.331)

1. The City may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor, depending on the substance of its agreements with Federal awarding agencies and pass‐through entities.

Therefore, the City will make a case‐by‐case determination for each agreement it makes for the disbursement of Federal program funds that the party receiving the funds in the role of a subrecipient or a contractor.

The City will comply with any additional guidance to support these determinations from the awarding agency provided such guidance does not conflict with this section.

1. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. For purposes of making a determination as a subrecipient the City will consider the following characteristics of a Federal assistance relationship:
a. Determines who is eligible to receive what Federal assistance; 59 b. Has its performance measured in relation to
whether objectives of a Federal program were
met;
c. Has responsibility for programmatic decision making; d. Is responsible for adherence to applicable
Federal program requirements specified in the
Federal award; and
e. In accordance with its agreement, uses the Federal
funds to carry out a program for a public purpose
specified in authorizing statute, as opposed to
providing goods or services for the benefit of the
pass‐through entity.

2. A contract is for the purpose of obtaining goods and services for the City’s own use and creates a procurement relationship with the contractor. For purposes of making a determination as a contractor the City will consider the following characteristics of a procurement relationship:
a. Providesthe goods and services within normal business operations; b. Providessimilar goods or servicesto many different purchasers; c. Normally operatesin a competitive environment;
d. Provides goods or services that are ancillary to the operation ofthe Federal program; and
e. Is not subject to compliance requirements of the
Federal program as a result of the agreement,
though similar requirements may apply for other
reasons.

3. The Purchasing Agent, or designee, will use theirjudgement in classifying each agreement as a subaward (Federal assistance relationship) or a procurement contract (procurement relationship). The substance of the relationship is more important than the form of the agreement in making the determination.

2. Every subaward will be clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. If some of the information is not available, the City will provide the best information available to it.

1. Federal Award Identification data as listed in Section 200.331 (1‐4) and appropriate terms and conditions concerning closeout of the subaward. 60 3. Every subrecipient will be subject to evaluation and monitoring by the City as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass‐ through entity monitoring of the subrecipient must include:

1. Reviewing financial and performance reportsrequired by the pass‐through entity.

2. Following‐up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass‐through entity detected through audits, on‐site reviews, and other means.

3. Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass‐through entity as required by § 200.521
61 Management decision.

4. Depending upon the pass‐through entity's assessment of risk posed by the subrecipient (as described in 200.331(b), the following monitoring tools may be useful for the pass‐ through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals:
a. Providing subrecipients with training and technical assistance on program‐related matters; and
a. Performing on‐site reviews of the subrecipient's program operations;
b. Arranging for agreed‐upon‐procedures engagements as
described in § 200.425 Audit services.

1. The City will verify that every subrecipient is audited asrequired by Subpart F ‐ Audit Requirements of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501 Audit requirements.

2.The City will consider whether the results of the subrecipient's audits, on‐site reviews, or other monitoring indicate conditionsthat necessitate adjustmentsto the pass‐through entity's own records.

3.The City will consider taking enforcement action against noncompliant subrecipients as described in § 200.338.
62 ATTACHMENT 2: Local Assistance Procedures Manual – Chapter 10 The State of California Department of Transportation (Caltrans) has developed the Local Assistance Procedures Manual (LAPM), Chapter 10, Consultant Selection which sets forth policies and procedures for procurements and managements of contracts for engineering and design related consultant services contracts on federal and state funded transportation projects to ensure compliance with applicable Federal and State laws and regulations. Prior to the commencement of any project using funds asindicated in this section,staff shall check the following link, which is updated annually, to ensure all requirements are met:
https://dot.ca.gov/‐/media/dot‐media/programs/local‐assistance/documents/lapm/ch10.pdf 63 ATTACHMENT 3: Davis‐Bacon and Related Acts Policy
The project manager under the supervision of the City Services Director shall follow this policy anytime a project requires enforcement of Davis Bacon.

Pre‐Bid
• Check Funding Source: Example; CDBG, EDBG, HUD, Department of Transportation, etc. • Once the Funding source isidentified, obtain all grant requirements/agreements. • Contact funding source Representative. Funding source representative must be kept informed of all process.
• If required, request from funding source representative federal wage rates. • If not required, then select the most recent Davis‐Bacon / U.S. DOL Wage Determination for the appropriate category (building, heavy, or highway) at http://www.wdol.gov/dba.aspx#O. • Also check California Department of Industrial Relations to obtain the Wage Determinations at http://www.dir.ca.gov/dlsr/PWD/index.htm and follow the website instructions. • After you have obtained both federal and State wage determinations, complete the Pre‐Bid Project Wage Rate Sheet.
• Prepare Bid Specifications and submit to City Services Directorforreview and approval. • Ensure all applicable U.S. DOL Wage Determinations for Tulare County, Davis‐Bacon contracting language (see your Grant Agreement), and Grant Provisions/ Special Terms & Conditions are attached to or incorporated by reference into contracts.

Project Types
Building Construction
Includes construction of sheltered enclosures with walk‐in access for the purpose of housing persons, machinery, equipment or supplies; all construction of such structures; the installation of utilities and of equipment, both above and below grade levels; as well as incidental grading, utilities and paving. Such structures need not be "habitable" to be building construction. Also, the installation of heavy machinery and/or equipment does not generally change the project's character as a building.

Heavy Construction
Includes those projects that are not properly classified as either "building," "highway," or "residential." Unlike these classifications, heavy construction is not a homogenous classification. Because of this catch‐ all nature, projects within the heavy classification may sometimes be distinguished based on their particular project characteristics, and separate schedules may be issued for dredging projects, water and sewer line projects, dams, major bridges, and flood control projects.

Highway Construction
Includes construction, alteration or repair of roads, streets, highways, . runways, taxiways, alleys, trails, paths, parking areas, and other similar projects not incidental to building or heavy construction.

Residential Construction
64 Includes the construction, alteration or repair of single‐family houses, apartment buildings of no more than four stories in height. This includes all incidental items such as site work, parking areas, utilities, streets, and sidewalks.

Monitor Wage Determination
The Davis‐Bacon I U.S. DOL Wage Determination that is included with bid specifications on the date requests for bids are issued will remain in effect for the duration of the project unless:

1. A wage modification is published after requests for bids are issued but no less than 10 days prior to the opening of bids; or

2. A wage modification is published after requests for bids are issued but less than 10 days before the opening of bids and there is reasonable time to notify bidders of the modification before the opening of bids.

Therefore, if a modification is issued between the date requests for bids are issued but no less than 10 days prior to the opening of bids, you must notify the bidders of the modification so that they may adjust their bids. If a modification is issued between the 10‐day point and the opening of the bids, you must determine whether there is reasonable time to notify the bidders of the modification so that they may adjust their bids. If you decide that there is no time, please create a record of this decision and retain a copy of such record in your project files. Once the bids are opened, the wage determination included in the request for bids remains in effect as long as the contract is awarded within 90 days from the date of bid opening. (Depending on funding source, obtain wage rate determinations and 10‐day update from Representative prior to bid opening)
Post‐Bid
• Conduct debarment check at https://www.sam.gov/ to ensure contractor & each subcontractor is able to work on federally funded projects. The search must be done with the firm name and the names of each officer of the company (e.g. Principal, Officer, Treasurer, etc). Print search results for file.
• Check the Contractors State License Board http://www.cslb.ca.gov/ to ensure proper licensure, insurance, workers compensation, etc. Print search results for file. • Pre‐construction meeting. Require prime contractor and all subcontractors attend the meeting.

Notify funding source representative of the meeting (some funding agencies that require notification are also required to be present). Prime contractor must submit prior to preconstruction meeting a list of all planned job classificationsto be used during the course of the job. Use this information to prepare wage rate sheet for meeting. • Have the prime contractor & subcontractors review the instructions for and complete and sign the Pre‐ Construction Project Wage Rate Sheet. Review the Wage Sheet to ensure that the prime contractor & subcontractors have addressed both hourly wages and hourly fringe benefit. • If the contractor indicates that apprentices or trainees will be employed, have the contractor review the DBA: Documentation Required for Apprentices and Trainee Form and submit the required information prior to or with the first Certified Weekly Payroll. • Have prime contractor & subcontractors review the Authorization of Other Deductions Form. If employee deductions fall into a category covered on the Form, the contractor and the employee 65 must execute the Fonn., and the contractor must submit the Form prior to or with the first Certified Weekly Payroll.
• Have prime contractor & subcontractors review Information and Documentation to be Submitted by Bona Fide Business Owners Form. If applicable, the subcontractor must execute and submit the Form prior to or with the first Certified Weekly Payroll. • Have prime contractor & subcontractors review the Instructions to and the template for the Certified Weekly Payroll Form WH‐347 or Form A‐1‐131 (depending on grant requirements). • Create a project Calendar tracking start day and when payroll is due. Record on calendar when payrolls are either received, reviewed, and/or revised. Must keep copies of all communication.

During Project / Job
• A Davis‐Bacon Rights Poster must be posted at every job site for the duration of the work. The poster is available in English and Spanish.
• The applicable U.S. DOL Wage Determinations must be posted with the Davis‐Bacon Rights Poster. • Ensure that the contractor is paying employees on a weekly basis and submitting the ORIGINAL Certified Weekly Payroll on time. The subcontractor has 7 calendar days from the end of the week worked to pay employees. The subcontractor then has 7 calendar days from the date the employees are paid to submit the Certified Weekly Payroll to the City. • Review Certified Weekly Payrolls for accuracy as soon as possible after receipt. Follow the Davis‐ Bacon Compliance Checklist For Review of Certified Weekly Payrolls. • If any additional information, forms, or Payroll corrections are required, you must work with the contractor to resolve any issues and obtain confirmation of restitution owed/ back wages paid.

Keep track of this information. Payments can be withhold if necessary until adequate payroll is received.
• California Labor Code Working Hours: Payment of not less than time and one‐half the basic or regular rate paid is required for overtime Contractors are assessed liquidated damages for overtime pay violations (in addition to paying back wages). If City discovers overtime pay violations, they shall collect liquidated damages from contractors. The liquidated damages charge is $25/day where the overtime was improperly paid.

For example, a Davis‐Bacon covered laborer works 12‐hour days for 5 days in a week (60 hours total), and the employer does not properly pay the overtime hours. Starting on day four of the week, the laborer exceeds the 40‐hour threshold and begins to work overtime hours. Thus, the employee worked overtime hours on two total days. The liquidated damages charge would be $50 = $25/day x 2 days worked where overtime was not properly paid.
• Visit job sites and conduct employee interviewsto verify the information received. Use the Record of Employee Interview Form to document the information obtained during the interview.

Conduct a desktop review by comparing the information obtained to that contained in a Certified Weekly Payroll. Investigate any discrepancies.

Employee interviews must be conducted by the Project Engineer. As many employees as possible in each worker classification should be interviewed, but, at a minimum, at least two employees in each classification. Depending on the duration of the project, the City should begin interviewing employees 66 after receipt of at least one Certified Weekly Payroll so that the project manager can compare the information set forth on the Payroll with the information received during the interviews.

Although on‐site/ in‐person interviews are preferred, the U.S. DOL does permit the use of telephone or mail interviews to meet the employee interview compliance requirement. Should interviews be conducted by telephone or mail, please indicate such on the Record of Employee Interview. • Contact Department of Industrial Relations or US Wage and Hour Division if you suspect intentional misclassifications of workers or underpayment of wages or if you receive a complaint alleging violations of Davis‐Bacon. City must investigate and attempt to resolve all complaints. • DOL Semi‐Annual Davis‐Bacon Report: The City is required to report information regarding Davis‐ Bacon compliance on a semi‐annual basis. Upon completion of your project, email the following information to [email protected]
o Number of contractors/subcontractors against whom complaints were received o Number of investigations by City
o Number of contractors/subcontractors found in violation o Amount of wage restitution found due
Davis‐Bacon and Related Acts
Overtime Violations
• An "investigation" is "any corrective action taken to enforce the provisions of DBA/overtime violations for covered employees." City should record receipt of payrolls, review of payrolls, interviews performed, and site visits ‐‐ such activities are not part of an investigation until an employee is not properly paid or it appearsthat the employee has not been properly paid. Actions taken to resolve that problem become an investigation; even if it is resolved by determining the initial thought of violation is not true (the worker was classified properly, etc).

Davis‐Bacon Compliance Checklist for Review of Certified Weekly Payrolls • Project Manager and/orsupportstaff to follow the checklist. • Authorized Signature on Statement of Compliance for each payroll sheet. • Certificate authorizing others to sign the State of Compliance (SOC) for payrolls. Ifsomeone other than the Owner, President, Vice President, or Treasurer will be signing the payrolls, confirm that the Federal funds recipient receives this authorization with the payrolls being sent. • Statement of Compliance is completed and signed on each payroll sheet (pg. 2). Original signatures are required for each payroll sheet. No copies of signatures are allowed, as well as any whiteout or any marks on the payroll. This is an official document and shall not be altered. The SOC must have the Federal language. Check the United States Department of Labor Wage & Hour Division website for latest language. http://www.dol.gov/whd/ • Appropriate block is checked regarding payment of fringe benefits on the SOC. • Payrolls are numbered. First payroll marked "Initial #1" and the last and final payroll for a project should be marked "FINAL."
• Days and dates appear under item number 4 on payroll sheet. • Project Number, Name, and Location should be listed on each payroll sheet. Some projects are similar in name.
67 • Name and Individual Identifying Number of Worker: Enter each worker's full name and an individual identifying number (e.g., last four digits of worker's social security number) on each weekly payroll submitted.
• Fill in job classification in column 3.
• Note in column 3; if employee is an apprentice, attach on the payroll proof of registration in a DOL‐approved program.
• When "other" deductions column is filled out the amount must be verified. The contractor shall provide upon the project manager request an employee authorization of the other deductions.

The authorization must be
• specific of what the deductions are. For example; if child support, require a copy of the court order, cash advances to employee (letter signed by employee authorizing the cash advances deductions
• Make sure net wages, gross wages, and deductions are shown. Gross amount in column 7 minus deductions should equal net in column 9.
• Time‐and‐a‐half (1 ½) is paid for all hours over 40 in a week. The employee may be permitted to work over 8 hours a day. But, for all hours over 40 for the WEEK, regardless of number of sites (jobs), the employee must be paid 1 ½ for overtime.

City of Lindsay Responsible Staff
• Work with City Services to obtain the Wage Determination from State and Federal websites. If required from funding source, contact the Representative to obtain Federal Wage Rates. • Prepare a Pre‐bid wage rate sheet.
• Obtain Wage Determination and confirm determinations 10 days prior the bid opening. Request wage determinations from the funding source representative if required. • Prepare Bid Document.
• Supervise Pre‐Bid Process
• Do Post‐Bid Process
• Do Post‐Bid Process and provide training forsupport staff forthis process • Supervise all Davis Bacon activity
68 ATTACHMENT 4: Federal Financial Management Policies (24 CFR PART 85)

ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND COOPERATIVE AGREEMENTS TO STATE, LOCAL AND

FEDERALLY RECOGNIZED INDIAN TRIBAL GOVERNMENTS
Subpart A—General
§ 85.1 Purpose and scope of this part.
§ 85.2 Scope ofsubpart.
§ 85.3 Definitions.
§ 85.4 Applicability.
§ 85.5 Effect on other issuances.
§ 85.6 Additions and exceptions.

Subpart B—Pre‐Award Requirements
§ 85.10 Formsfor applying for grants.
§ 85.11 State plans.
§ 85.12 Special grant orsubgrant conditionsfor “high‐risk” grantees.

Subpart C—Post‐Award Requirements Financial Administration § 85.20 Standardsforfinancial managementsystems.
§ 85.21 Payment.
§ 85.22 Allowable costs.
§ 85.23 Period of availability of funds.
§ 85.24 Matching or cost sharing.
§ 85.25 Program income.
§ 85.26 Non‐Federal audit.

Changes, Property, and Subawards
§ 85.30 Changes.
§ 85.31 Real property.
§ 85.32 Equipment.
§ 85.33 Supplies.
§ 85.34 Copyrights.
§ 85.35 Subawardsto debarred and suspended parties.
§ 85.36 Procurement.
69 § 85.37 Subgrants.

Reports, Records, Retention, and Enforcement
§ 85.40 Monitoring and reporting program performance.
§ 85.41 Financial reporting.
§ 85.42 Retention and accessrequirementsfor records.
§ 85.43 Enforcement.
§ 85.44 Termination for convenience.

Subpart D—After‐the‐Grant Requirements
§ 85.50 Closeout.
§ 85.51 Later disallowances and adjustments.
§ 85.52 Collection of amounts due.

Subpart E—Entitlement [Reserved]
Authority: 42 U.S.C. 3535(d).

Source: 53 FR 8068, 8087, Mar. 11, 1988, unless otherwise noted.

Subpart A—General
§ 85.1 Purpose and scope of this part.

This part establishes uniform administrative rules for Federal grants and cooperative agreements and subawards to State, local and Indian tribal governments. § 85.2 Scope of subpart.

This subpart contains general rules pertaining to this part and procedures for control of exceptions from this part.
§ 85.3 Definitions.

As used in this part:

Accrued expenditures mean the charges incurred by the grantee during a given period requiring the provision of funds for: (1) Goods and other tangible property received; (2) services performed by employees, contractors,subgrantees,subcontractors, and other payees; and (3) other amounts becoming owed under programs for which no current services or performance is required, such as annuities, insurance claims, and other benefit payments.

Accrued income means the sum of: (1) Earnings during a given period from services performed by the grantee and goods and other tangible property delivered to purchasers, and (2) amounts becoming owed to the grantee for which no current services or performance is required by the grantee.

Acquisition cost of an item of purchased equipment means the net invoice unit price of the property including the cost of modifications, attachments, accessories, or auxiliary apparatus necessary to make the property usable for the purpose for which it was acquired. Other charges such as the cost of installation, transportation, taxes, duty or protective in‐transit insurance, shall be included or excluded from the unit acquisition cost in accordance with the grantee's regular accounting practices. 70 Administrative requirements mean those matters common to grants in general, such as financial management, kinds and frequency of reports, and retention of records. These are distinguished from programmatic requirements, which concern matters that can be treated only on a program‐by‐program or grant‐by‐grant basis, such as kinds of activities that can be supported by grants under a particular program.

Awarding agency means (1) with respect to a grant, the Federal agency, and (2) with respect to a subgrant, the party that awarded the subgrant.

Cash contributions means the grantee's cash outlay, including the outlay of money contributed to the grantee orsubgrantee by other public agencies and institutions, and private organizations and individuals.

When authorized by Federal legislation, Federal fundsreceived from other assistance agreements may be considered as grantee or subgrantee cash contributions.

Contract means (except as used in the definitions for grant and subgrant in this section and except where qualified by Federal) a procurement contract under a grant or subgrant, and means a procurement subcontract under a contract.

Cost sharing or matching means the value of the third party in‐kind contributions and the portion of the costs of a federally assisted project or program not borne by the Federal Government.

Cost‐type contract means a contract or subcontract under a grant in which the contractor or subcontractor is paid on the basis of the costs it incurs, with or without a fee.

Equipment means tangible, nonexpendable, personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit. A grantee may use its own definition of equipment provided that such definition would at least include all equipment defined above.

Expenditure report means: (1) For non‐construction grants, the SF–269 “Financial Status Report” (or other equivalent report); (2) for construction grants, the SF–271 “Outlay Report and Request for Reimbursement” (or other equivalent report).

Federally recognized Indian tribal government means the governing body or a governmental agency of any Indian tribe, band, nation, or other organized group or community (including any Native village as defined in section 3 of the Alaska Native Claims Settlement Act, 85 Stat 688) certified by the Secretary of the Interior as eligible for the special programs and services provided by him through the Bureau of Indian Affairs.

Governmentmeans a State orlocal government or a federally recognized Indian tribal government.

Grant means an award of financial assistance, including cooperative agreements, in the form of money, or property in lieu of money, by the Federal Government to an eligible grantee. The term does not include technical assistance which provides services instead of money, or other assistance in the form of revenue sharing, loans, loan guarantees, interestsubsidies, insurance, or direct appropriations. Also, the term does not include assistance, such as a fellowship or other lump sum award, which the grantee is not required to account for.

Grantee means the government to which a grant is awarded and which is accountable for the use of the funds provided. The grantee is the entire legal entity even if only a particular component of the entity is designated in the grant award document.
71 Local government means a county, municipality, city, town, township, local public authority (including any public and Indian housing agency under the United States Housing Act of 1937) school district, special district, intrastate district, council of governments (whether or not incorporated as a nonprofit corporation under state law), any other regional or interstate government entity, or any agency or instrumentality of a local government.

Obligations means the amounts of orders placed, contracts and subgrants awarded, goods and services received, and similar transactions during a given period that will require payment by the grantee during the same or a future period.

OMB meansthe United States Office of Management and Budget.

Outlays (expenditures) mean charges made to the project or program. They may be reported on a cash or accrual basis. For reports prepared on a cash basis, outlays are the sum of actual cash disbursement for direct charges for goods and services, the amount of indirect expense incurred, the value of in‐kind contributions applied, and the amount of cash advances and payments made to contractors and subgrantees. For reports prepared on an accrued expenditure basis, outlays are the sum of actual cash disbursements, the amount of indirect expense incurred, the value of in‐kind contributions applied, and the new increase (or decrease) in the amounts owed by the grantee for goods and other property received, for services performed by employees, contractors, subgrantees, subcontractors, and other payees, and other amounts becoming owed under programsfor which no currentservices or performance are required, such as annuities, insurance claims, and other benefit payments.

Percentage of completion method refers to a system under which payments are made for construction work according to the percentage of completion of the work, rather than to the grantee's cost incurred.

Prior approval means documentation evidencing consent prior to incurring specific cost.

Real property meansland, including land improvements,structures and appurtenancesthereto, excluding movable machinery and equipment.

Share, when referring to the awarding agency's portion of real property, equipment or supplies, means the same percentage as the awarding agency's portion of the acquiring party's total costs under the grant to which the acquisition costs under the grant to which the acquisition cost of the property was charged.

Only costs are to be counted—not the value of third‐party in‐kind contributions.

State means any of the several States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or any agency or instrumentality of a State exclusive of local governments. The term does not include any public and Indian housing agency under United States Housing Act of 1937.

Subgrant means an award of financial assistance in the form of money, or property in lieu of money, made under a grant by a grantee to an eligible subgrantee. The term includesfinancial assistance when provided by contractual legal agreement, but does not include procurement purchases, nor doesit include any form of assistance which is excluded from the definition of grant in this part.

Subgrantee means the government or other legal entity to which a subgrant is awarded and which is accountable to the grantee for the use of the funds provided.

Suppliesmeans alltangible personal property otherthan equipment as defined in this part. 72 Suspension means depending on the context, either (1) temporary withdrawal of the authority to obligate grant funds pending corrective action by the grantee or subgrantee or a decision to terminate the grant, or (2) an action taken by a suspending official in accordance with agency regulations implementing E.O. 12549 to immediately exclude a person from participating in grant transactions for a period, pending completion of an investigation and such legal or debarment proceedings as may ensue.

Termination means permanent withdrawal of the authority to obligate previously‐awarded grant funds before that authority would otherwise expire. It also meansthe voluntary relinquishment of that authority by the grantee or subgrantee. Termination does not include: (1) Withdrawal of funds awarded on the basis of the grantee's underestimate of the unobligated balance in a prior period; (2) Withdrawal of the unobligated balance as of the expiration of a grant; (3) Refusal to extend a grant or award additional funds, to make a competing or non‐competing continuation, renewal, extension, or supplemental award; or (4) voiding of a grant upon determination that the award was obtained fraudulently, or was otherwise illegal or invalid from inception.

Terms of a grant or subgrant mean all requirements of the grant or subgrant, whether in statute, regulations, or the award document.

Third party in‐kind contributions mean property or services which benefit a federally assisted project or program and which are contributed by non‐Federal third parties without charge to the grantee, or a cost‐ type contractor under the grant agreement.

Unliquidated obligations for reports prepared on a cash basis mean the amount of obligations incurred by the grantee that has not been paid. For reports prepared on an accrued expenditure basis, they represent the amount of obligations incurred by the grantee for which an outlay has not been recorded.

Unobligated balance means the portion of the funds authorized by the Federal agency that has not been obligated by the grantee and is determined by deducting the cumulative obligations from the cumulative funds authorized.
§ 85.4 Applicability.
(a) General. Subparts A—D of this part apply to all grants and subgrants to governments, except where inconsistent with Federal statutes or with regulations authorized in accordance with the exception provision of §85.6, or:
(1) Grants and subgrantsto State and local institutions of higher education or State and local hospitals. (2) The block grants authorized by the Omnibus Budget Reconciliation Act of 1981 (Community Services; Preventive Health and Health Services; Alcohol, Drug Abuse, and Mental Health Services; Maternal and Child Health Services; Social Services; Low‐Income Home Energy Assistance; States' Program of Community Development Block Grants for Small Cities; and Elementary and Secondary Education other than programs administered by the Secretary of Education under title V, subtitle D, chapter 2, section 583—the Secretary's discretionary grant program) and titles I‐III of the Job Training Partnership Act of 1982 and under the Public Health Services Act (section 1921), Alcohol and Drug Abuse Treatment and Rehabilitation Block Grant and part C of title V, Mental Health Service for the Homeless Block Grant). (3) Entitlement grantsto carry outthe following programs of the Social Security Act:
(i) Aid to Needy Families with Dependent Children (title IV‐A of the Act, not including the Work Incentive Program (WIN) authorized by section 402(a)19(G); HHS grants for WIN are subject to this part); 73 (ii) Child Support Enforcement and Establishment of Paternity (title IV‐D of the Act); (iii) Foster Care and Adoption Assistance (title IV‐E of the Act); (iv) Aid to the Aged, Blind, and Disabled (titlesI, X, XIV, and XVI‐AABD of the Act); and (v) Medical Assistance (Medicaid) (title XIX of the Act) not including the State Medicaid Fraud Control program authorized by section 1903(a)(6)(B).
(4) Entitlement grants underthe following programs of The National School Lunch Act:
(i) School Lunch (section 4 of the Act),
(ii) Commodity Assistance (section 6 of the Act),
(iii) Special Meal Assistance (section 11 of the Act),
(iv) Summer Food Service for Children (section 13 of the Act), and (v) Child Care Food Program (section 17 of the Act).
(5) Entitlement grants underthe following programs of The Child Nutrition Act of 1966:
(i) Special Milk (section 3 of the Act), and
(ii) School Breakfast (section 4 of the Act).
(6) Entitlement grantsfor State Administrative expenses under The Food Stamp Act of 1977 (section 16 of the Act).
(7) A grant for an experimental, pilot, or demonstration project that is also supported by a grant listed in paragraph (a)(3) of this section;
(8) Grant funds awarded under subsection 412(e) of the Immigration and Nationality Act (8 U.S.C. 1522(e)) and subsection 501(a) of the Refugee Education Assistance Act of 1980 (Pub. L. 96–422, 94 Stat. 1809), for cash assistance, medical assistance, and supplemental security income benefits to refugees and entrants and the administrative costs of providing the assistance and benefits; (9) Grants to local education agencies under 20 U.S.C. 236 through 241–1(a), and 242 through 244 (portions of the Impact Aid program), except for 20 U.S.C. 238(d)(2)(c) and 240(f) (Entitlement Increase for Handicapped Children); and
(10) Payments underthe Veterans Administration's State Home Per Diem Program (38U.S.C. 641(a)). (b) Entitlement programs. Entitlement programs enumerated above in §85.4(a) (3) through (8) are subject to subpart E.
§ 85.5 Effect on other issuances.

All other grants administration provisions of codified program regulations, program manuals, handbooks and other non‐regulatory materials which are inconsistent with this part are superseded, except to the extent they are required by statute, or authorized in accordance with the exception provision in §85.6. § 85.6 Additions and exceptions.
(a) For classes of grants and grantees subject to this part, Federal agencies may not impose additional administrative requirements except in codified regulations published in the Federal Register. (b) Exceptionsfor classes of grants or grantees may be authorized only by OMB. (c) Exceptions on a case‐by‐case basis and for subgrantees may be authorized by the affected Federal agencies.

Subpart B—Pre‐Award Requirements
§ 85.10 Forms for applying for grants.
(a) Scope.
(1) This section prescribes forms and instructions to be used by governmental organizations (except hospitals and institutions of higher education operated by a government) in applying for grants. This section is not applicable, however, to formula grant programs which do not require applicants to apply for funds on a project basis.
74 (2) This section applies only to applications to Federal agencies for grants, and is not required to be applied by grantees in dealing with applicants for subgrants. However, grantees are encouraged to avoid more detailed or burdensome application requirements for subgrants. (b) Authorized forms and instructions for governmental organizations. (3) In applying for grants, applicants shall only use standard application forms or those prescribed by the granting agency with the approval of OMB under the Paperwork Reduction Act of 1980. (4) Applicants are not required to submit more than the original and two copies of preapplications or applications.
(5) Applicants must follow all applicable instructions that bear OMB clearance numbers. Federal agencies may specify and describe the programs, functions, or activitiesthat will be used to plan, budget, and evaluate the work under a grant. Other supplementary instructions may be issued only with the approval of OMB to the extent required under the Paperwork Reduction Act of 1980. For any standard form, except the SF–424 factsheet, Federal agencies may shade out or instruct the applicant to disregard any line item that is not needed.
(6) When a grantee applies for additional funding (such as a continuation or supplemental award) or amends a previously submitted application, only the affected pages need be submitted. Previously submitted pages with information that is still current need not be resubmitted. § 85.11 State plans.
(a) Scope. The statutes forsome programs require States to submit plans before receiving grants. Under regulations implementing Executive Order 12372, “Intergovernmental Review of Federal Programs,” States are allowed to simplify, consolidate and substitute plans. This section contains additional provisions for plans that are subject to regulations implementing the Executive order. (b) Requirements. A State need meet only Federal administrative or programmatic requirements for a plan that are in statutes or codified regulations.
(c) Assurances. In each plan the State will include an assurance that the State shall comply with all applicable Federal statutes and regulations in effect with respect to the periods for which it receives grant funding. For this assurance and other assurances required in the plan, the State may:
(1) Cite by number the statutory or regulatory provisions requiring the assurances and affirm that it gives the assurances required by those provisions,
(2) Repeatthe assurance language in the statutes orregulations, or (3) Develop its own language to the extent permitted by law. (d) Amendments. A State will amend a plan whenever necessary to reflect:
(1) New orrevised Federalstatutes or regulations or;
(2) A material change in any State law, organization, policy, or State agency operation. The State will obtain approval for the amendment and its effective date but need submit for approval only the amended portions of the plan.
§ 85.12 Special grant or subgrant conditions for “high‐risk” grantees. (a) A grantee or subgrantee may be considered high risk if an awarding agency determines that a grantee or subgrantee:
(1) Has a history of unsatisfactory performance, or
(2) Is notfinancially stable, or
(3) Has a managementsystem which does not meet the management standards set forth in this part, or (4) Has not conformed to terms and conditions of previous awards, or (5) Is otherwise not responsible; and if the awarding agency determines that an award will be made, special conditions and/or restrictions shall correspond to the high risk condition and shall be included in the award.
75 (b) Special conditions or restrictions may include:
(1) Payment on a reimbursement basis;
(2) Withholding authority to proceed to the next phase until receipt of evidence of acceptable performance within a given funding period;
(3) Requiring additional, more detailed financial reports; (4) Additional project monitoring;
(5) Requiring the grantee or subgrantee to obtain technical or management assistance; or (6) Establishing additional prior approvals.
(c) If an awarding agency decides to impose such conditions, the awarding official will notify the grantee or subgrantee as early as possible, in writing, of:
(1) The nature of the special conditions/restrictions;
(2) The reason(s) forimposing them;
(3) The corrective actions which must be taken before they will be removed and the time allowed for completing the corrective actions and
(4) The method of requesting reconsideration of the conditions/restrictions imposed.

Subpart C—Post‐Award Requirements Financial Administration § 85.20 Standards for financial managementsystems.
(a) A State must expand and account for grant funds in accordance with State laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its subgrantees and cost‐type contractors, must be sufficient to— (1) Permit preparation ofreportsrequired by this part and the statutes authorizing the grant, and (2) Permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. (b) The financial management systems of other grantees and subgrantees must meet the following standards:
(1) Financial reporting. Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or subgrant.
(2) Accounting records. Grantees and subgrantees must maintain records which adequately identify the source and application of funds provided for financially‐assisted activities. These records must contain information pertaining to grant or subgrant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and income. (3) Internal control. Effective control and accountability must be maintained for all grant and subgrant cash, real and personal property, and other assets. Grantees and subgrantees must adequately safeguard all such property and must assure that it is used solely for authorized purposes. (4) Budget control. Actual expenditures or outlays must be compared with budgeted amounts for each grant or subgrant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or subgrant agreement. If unit cost data are required, estimates based on available documentation will be accepted whenever possible.
(5) Allowable cost. Applicable OMB cost principles, agency program regulations, and the terms of grant and subgrant agreements will be followed in determining the reasonableness, allowability, and allocability of costs.
(6) Source documentation. Accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records, contract and subgrant award documents, etc.
76 (7) Cash management. Procedures for minimizing the time elapsing between the transfer of funds from the U.S. Treasury and disbursement by grantees and subgrantees must be followed whenever advance payment procedures are used. Grantees must establish reasonable procedures to ensure the receipt of reports on subgrantees' cash balances and cash disbursements in sufficient time to enable them to prepare complete and accurate cash transactions reports to the awarding agency. When advances are made by letter‐of‐credit or electronic transfer of funds methods, the grantee must make drawdowns as close as possible to the time of making disbursements. Grantees must monitor cash drawdowns by their subgrantees to assure that they conform substantially to the same standards of timing and amount as apply to advances to the grantees.
(c) An awarding agency may review the adequacy of the financial management system of any applicant for financial assistance as part of a pre‐award review or at any time subsequent to award. § 85.21 Payment.
(a) Scope. This section prescribes the basic standard and the methods under which a Federal agency will make payments to grantees, and grantees will make payments to subgrantees and contractors. (b) Basic standard. Methods and procedures for payment shall minimize the time elapsing between the transfer of funds and disbursement by the grantee or subgrantee, in accordance with Treasury regulations at 31 CFR part 205.
(c) Advances. Grantees and subgrantees shall be paid in advance, provided they maintain or demonstrate the willingness and ability to maintain procedures to minimize the time elapsing between the transfer of the funds and their disbursement by the grantee or subgrantee. (d) Reimbursement. Reimbursement shall be the preferred method when the requirements in paragraph (c) of this section are not met. Grantees and subgrantees may also be paid by reimbursement for any construction grant. Except as otherwise specified in regulation, Federal agencies shall not use the percentage of completion method to pay construction grants. The grantee or subgrantee may use that method to pay its construction contractor, and if it does, the awarding agency's payments to the grantee or subgrantee will be based on the grantee's or subgrantee's actual rate of disbursement. (e) Working capital advances. If a grantee cannot meet the criteria for advance payments described in paragraph (c) of this section, and the Federal agency has determined that reimbursement is not feasible because the grantee lacks sufficient working capital, the awarding agency may provide cash or a working capital advance basis. Under this procedure the awarding agency shall advance cash to the grantee to cover its estimated disbursement needs for an initial period generally geared to the grantee's disbursing cycle. Thereafter, the awarding agency shall reimburse the grantee for its actual cash disbursements.

The working capital advance method of payment shall not be used by grantees or subgrantees if the reason for using such method is the unwillingness or inability of the grantee to provide timely advances to the subgrantee to meet the subgrantee's actual cash disbursements. (f) Effect of program income, refunds, and audit recoveries on payment. (1) Grantees and subgrantees shall disburse repayments to and interest earned on a revolving fund before requesting additional cash payments for the same activity. (2) Except as provided in paragraph (f)(1) of this section, grantees and subgrantees shall disburse program income, rebates, refunds, contract settlements, audit recoveries and interest earned on such funds before requesting additional cash payments.
(g) Withholding payments.
(1) Unless otherwise required by Federal statute, awarding agencies shall not withhold payments for proper charges incurred by grantees or subgrantees unless— (i) The grantee orsubgrantee hasfailed to comply with grant award conditions or (ii) The grantee orsubgrantee isindebted to the United States. (2) Cash withheld for failure to comply with grant award condition, but without suspension of the 77 grant, shall be released to the grantee upon subsequent compliance. When a grant is suspended, payment adjustments will be made in accordance with §85.43(c). (3) A Federal agency shall not make payment to grantees for amounts that are withheld by grantees or subgrantees from payment to contractors to assure satisfactory completion of work. Payments shall be made by the Federal agency when the grantees orsubgrantees actually disburse the withheld fundsto the contractors or to escrow accounts established to assure satisfactory completion of work. (h) Cash depositories.
(1) Consistent with the national goal of expanding the opportunities for minority business enterprises, grantees and subgrantees are encouraged to use minority banks (a bank which is owned at least 50 percent by minority group members). A list of minority owned banks can be obtained from the Minority Business Development Agency, Department of Commerce, Washington, DC 20230. (2) A grantee orsubgrantee shall maintain a separate bank account only when required by Federal‐ State agreement.
(iii) Interest earned on advances. Except forinterest earned on advances of funds exempt under the Intergovernmental Cooperation Act (31 U.S.C. 6501 et seq.) and the Indian Self‐ Determination Act (23 U.S.C. 450), grantees and subgrantees shall promptly, but at least quarterly, remit interest earned on advances to the Federal agency. The grantee or subgrantee may keep interest amounts up to $100 per year for administrative expenses. § 85.22 Allowable costs.
(a) Limitation on use of funds. Grant funds may be used only for:
(1) The allowable costs of the grantees,subgrantees and cost‐type contractors, including allowable costs in the form of payments to fixed‐price contractors; and (2) Reasonable fees or profit to cost‐type contractors but not any fee or profit (or other increment above allowable costs) to the grantee or subgrantee.
(b) Applicable cost principles. For each kind of organization, there is a set of Federal principles for determining allowable costs. Allowable costs will be determined in accordance with the cost principles applicable to the organization incurring the costs. The following chart lists the kinds of organizations and the applicable cost principles.
§ 85.23 Period of availability of funds.
(a) General. Where a funding period is specified, a grantee may charge to the award only costs resulting from obligations of the funding period unless carryover of unobligated balances is permitted, in which case the carryover balances may be charged for costs resulting from obligations of the subsequent funding period.
(b) Liquidation of obligations. A grantee must liquidate all obligations incurred under the award not laterthan 90 days afterthe end of the funding period (or asspecified in a program regulation) to coincide with the submission of the annual Financial Status Report (SF–269). The Federal agency may extend this deadline at the request of the grantee.
§ 85.24 Matching or costsharing.
(a) Basic rule: Costs and contributions acceptable. With the qualifications and exceptions listed in paragraph (b) of this section, a matching or cost sharing requirement may be satisfied by either or both of the following:
(1) Allowable costs incurred by the grantee, subgrantee or a cost‐type contractor under the assistance agreement. This includes allowable costs borne by non‐Federal grants or by others cash donations from non‐Federal third parties.
(2) The value of third party in‐kind contributions applicable to the period to which the cost sharing or matching requirements applies.
(b) Qualifications and exceptions—
78 (1) Costs borne by other Federal grant agreements. Except as provided by Federalstatute, a costsharing or matching requirement may not be met by costs borne by another Federal grant.

This prohibition does not apply to income earned by a grantee or subgrantee from a contract awarded under another Federal grant.
(2) General revenue sharing. For the purpose of this section, general revenue sharing funds distributed under 31 U.S.C. 6702 are not considered Federal grant funds. (3) Cost or contributions counted towards other Federal costs‐sharing requirements. Neither costs nor the values of third party in‐kind contributions may count towards satisfying a cost sharing or matching requirement of a grant agreement if they have been or will be counted towards satisfying a cost sharing or matching requirement of another Federal grant agreement, a Federal procurement contract, or any other award of Federal funds.
(4) Costsfinanced by program income. Costsfinanced by program income, as defined in §85.25, shall not count towards satisfying a cost sharing or matching requirement unless they are expressly permitted in the terms of the assistance agreement. (This use of general program income is described in §85.25(g).)
(5) Services or property financed by income earned by contractors. Contractors under a grant may earn income from the activities carried out under the contract in addition to the amounts earned from the party awarding the contract. No costs of services or property supported by this income may count toward satisfying a cost sharing or matching requirement unless other provisions of the grant agreement expressly permit this kind of income to be used to meet the requirement. (6) Records. Costs and third party in‐kind contributions counting towards satisfying a cost sharing or matching requirement must be verifiable from the records of grantees and subgrantee or cost‐type contractors. These records must show how the value placed on third party in‐kind contributions was derived. To the extent feasible, volunteer services will be supported by the same methods that the organization uses to support the allocability of regular personnel costs. (7) Specialstandardsfor third party in‐kind contributions. (i) Third party in‐kind contributions count towards satisfying a cost sharing or matching requirement only where, if the party receiving the contributions were to pay for them, the payments would be allowable costs.
(ii) Some third party in‐kind contributions are goods and services that, if the grantee, subgrantee, or contractor receiving the contribution had to pay for them, the payments would have been an indirect costs. Costssharing or matching credit forsuch contributionsshall be given only if the grantee, subgrantee, or contractor has established, along with its regular indirect cost rate, a special rate for allocating to individual projects or programs the value of the contributions. (iii) A third party in‐kind contribution to a fixed‐price contract may count towards satisfying a cost sharing or matching requirement only if it results in:
(A) An increase in the services or property provided under the contract (without additional cost to the grantee or subgrantee) or
(B) A costsavingsto the grantee orsubgrantee.
(iv) The values placed on third party in‐kind contributions for cost sharing or matching purposes will conform to the rules in the succeeding sections of this part. If a third party in‐ kind contribution is a type not treated in those sections, the value placed upon it shall be fair and reasonable.
(c) Valuation of donated services—
(1) Volunteerservices. Unpaid services provided to a grantee orsubgrantee by individuals will be valued at rates consistent with those ordinarily paid for similar work in the grantee's or subgrantee's 79 organization. If the grantee or subgrantee does not have employees performing similar work, the rates will be consistent with those ordinarily paid by other employers for similar work in the same labor market. In either case, a reasonable amount for fringe benefits may be included in the valuation. (2) Employees of other organizations. When an employer other than a grantee, subgrantee, or cost‐ type contractor furnishes free of charge the services of an employee in the employee's normal line of work, the services will be valued at the employee's regular rate of pay exclusive of the employee's fringe benefits and overhead costs. If the services are in a different line of work, paragraph (c)(1) of this section applies.
(d) Valuation ofthird party donated supplies and loaned equipment orspace. (1) If a third party donates supplies, the contribution will be valued at the market value of the supplies at the time of donation.
(2) If a third party donates the use of equipment or space in a building but retains title, the contribution will be valued at the fair rental rate of the equipment or space. (e) Valuation of third party donated equipment, buildings, and land. If a third party donates equipment, buildings, or land, and title passes to a grantee or subgrantee, the treatment of the donated property will depend upon the purpose of the grant or subgrant, as follows:
(1) Awards for capital expenditures. If the purpose of the grant or subgrant is to assist the grantee or subgrantee in the acquisition of property, the market value of that property at the time of donation may be counted as cost sharing or matching,
(2) Other awards. If assisting in the acquisition of property is not the purpose of the grant or subgrant, paragraphs (e)(2) (i) and (ii) of this section apply:
(i) If approval is obtained from the awarding agency, the market value at the time of donation of the donated equipment or buildings and the fair rental rate of the donated land may be counted as cost sharing or matching. In the case of a subgrant, the terms of the grant agreement may require that the approval be obtained from the Federal agency as well as the grantee. In all cases, the approval may be given only if a purchase of the equipment or rental of the land would be approved as an allowable direct cost. If any part of the donated property was acquired with Federal funds, only the non‐federal share of the property may be counted as cost‐sharing or matching.
(ii) If approval is not obtained under paragraph (e)(2)(i) of this section, no amount may be counted for donated land, and only depreciation or use allowances may be counted for donated equipment and buildings. The depreciation or use allowances for this property are not treated as third party in‐kind contributions. Instead, they are treated as costs incurred by the grantee or subgrantee. They are computed and allocated (usually as indirect costs) in accordance with the cost principles specified in §85.22, in the same way as depreciation or use allowances for purchased equipment and buildings. The amount of depreciation or use allowances for donated equipment and buildings is based on the property's market value at the time it was donated. (f) Valuation of grantee or subgrantee donated real property for construction/acquisition. If a grantee or subgrantee donates real property for a construction or facilities acquisition project, the current market value of that property may be counted as cost sharing or matching. If any part of the donated property was acquired with Federal funds, only the non‐federal share of the property may be counted as cost sharing or matching.
(g) Appraisal of real property. In some cases under paragraphs (d), (e) and (f) of this section, it will be necessary to establish the market value of land or a building or the fair rental rate of land or of space in a building. In these cases, the Federal agency may require the market value or fair rental value be set by an independent appraiser, and that the value or rate be certified by the grantee. This requirement 80 will also be imposed by the grantee on subgrantees.
§ 85.25 Program income.
(a) General. Grantees are encouraged to earn income to defray program costs. Program income includes income from fees for services performed, from the use or rental of real or personal property acquired with grant funds, from the sale of commodities or items fabricated under a grant agreement, and from payments of principal and interest on loans made with grant funds. Except as otherwise provided in regulations of the Federal agency, program income does not include interest on grant funds, rebates, credits, discounts, refunds, etc. and interest earned on any of them. (b) Definition of program income. Program income means gross income received by the grantee or subgrantee directly generated by a grant supported activity, or earned only as a result of the grant agreement during the grant period. During the grant period is the time between the effective date of the award and the ending date of the award reflected in the final financial report. (c) Cost of generating program income. If authorized by Federal regulations or the grant agreement, costs incident to the generation of program income may be deducted from gross income to determine program income.
(d) Governmental revenues. Taxes, special assessments, levies, fines, and othersuch revenues raised by a grantee or subgrantee are not program income unless the revenues are specifically identified in the grant agreement or Federal agency regulations as program income. (e) Royalties. Income from royalties and license fees for copyrighted material, patents, and inventions developed by a grantee or subgrantee is program income only if the revenues are specifically identified in the grant agreement or Federal agency regulations as program income. (See §85.34.) (f) Property. Proceeds from the sale of real property or equipment will be handled in accordance with the requirements of §§85.31 and 85.32.
(g) Use of program income. Program income shall be deducted from outlays which may be both Federal and non‐Federal as described below, unless the Federal agency regulations or the grant agreement specify another alternative (or a combination of the alternatives). In specifying alternatives, the Federal agency may distinguish between income earned by the grantee and income earned by subgrantees and between the sources, kinds, or amounts of income. When Federal agencies authorize the alternatives in paragraphs (g) (2) and (3) of this section, program income in excess of any limits stipulated shall also be deducted from outlays.
(1) Deduction. Ordinarily program income shall be deducted from total allowable coststo determine the net allowable costs. Program income shall be used for current costs unlessthe Federal agency authorizes otherwise. Program income which the grantee did not anticipate at the time of the award shall be used to reduce the Federal agency and grantee contributions rather than to increase the funds committed to the project.
(2) Addition. When authorized, program income may be added to the funds committed to the grant agreement by the Federal agency and the grantee. The program income shall be used for the purposes and under the conditions of the grant agreement.
(3) Cost sharing or matching. When authorized, program income may be used to meet the cost sharing or matching requirement of the grant agreement. The amount of the Federal grant award remains the same.
(h) Income after the award period. There are no Federal requirements governing the disposition of program income earned after the end of the award period (i.e., until the ending date of the final financial report, see paragraph (a) of this section), unless the terms of the agreement or the Federal agency regulations provide otherwise.
§ 85.26 Non‐Federal audit.
(a) Basic rule. Grantees and subgrantees are responsible for obtaining audits in accordance with the 81 Single Audit Act Amendments of 1996 (31 U.S.C. 7501–7507) and revised OMB Circular A–133, “Audits of States, Local Governments, and Non‐Profit Organizations.” The audits shall be made by an independent auditor in accordance with generally accepted government auditing standards covering financial audits.
(b) Subgrantees. State or local governments, asthose terms are defined for purposes of the Single Audit Act Amendments of 1996, that provide Federal awards to a subgrantee which expends $300,000 or more (or other amount as specified by OMB) in Federal awards in a fiscal year, shall:
(1) Determine whether State or local subgrantees have met the audit requirements of the Act and whethersubgrantees covered by OMB Circular A–110, “Uniform Administrative Requirementsfor Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non‐Profit Organizations,” have met the audit requirements of the Act. Commercial contractors (private for‐profit and private and governmental organizations) providing goods and services to State and local governments are not required to have a single audit performed. State and local governmentsshould use their own procedures to ensure that the contractor has complied with laws and regulations affecting the expenditure of Federal funds;
(2) Determine whether the subgrantee spent Federal assistance funds provided in accordance with applicable laws and regulations. This may be accomplished by reviewing an audit of the subgrantee made in accordance with the Act, Circular A–133 (as set forth in 24 CFR part 45), or through other means (e.g., program reviews) if the subgrantee has not had such an audit; (3) Ensure that appropriate corrective action is taken within six months after receipt of the audit report in instance of noncompliance with Federal laws and regulations; (4) Consider whether subgrantee audits necessitate adjustment of the grantee's own records; and (5) Require each subgrantee to permit independent auditors to have access to the records and financial statements.
(c) Auditorselection. In arranging for auditservices, §85.36 shall be followed. [53 FR 8068, 8087, Mar. 11, 1988, as amended at 57 FR 33255, July 27, 1992; 62 FR 61617, Nov. 18, 1997]
Changes, Property, and Subawards
§ 85.30 Changes.
(a) General. Grantees and subgrantees are permitted to rebudget within the approved direct cost budget to meet unanticipated requirements and may make limited program changes to the approved project. However, unless waived by the awarding agency, certain types of post‐award changesin budgets and projects shall require the prior written approval of the awarding agency. (b) Relation to cost principles. The applicable cost principles (see §85.22) contain requirements for prior approval of certain types of costs. Except where waived, those requirements apply to all grants and subgrants even if paragraphs (c) through (f) of thissection do not. (c) Budget changes ‐
(1) Nonconstruction projects. Except as stated in other regulations or an award document, grantees or subgrantees shall obtain the prior approval of the awarding agency whenever any of the following changes is anticipated under a nonconstruction award:
(i) Any revision which would result in the need for additional funding. (ii) Unless waived by the awarding agency, cumulative transfers among direct cost categories, or, if applicable, among separately budgeted programs, projects, functions, or activities which exceed or are expected to exceed ten percent of the current total approved budget, whenever the awarding agency's share exceeds $100,000.
(iii) Transfer of funds allotted for training allowances (i.e., from direct paymentsto trainees to 82 other expense categories).
(2) Construction projects. Grantees and subgrantees shall obtain prior written approval for any budget revision which would result in the need for additional funds. (3) Combined construction and non‐construction projects. When a grant or subgrant provides funding for both construction and non‐construction activities, the grantee or subgrantee must obtain prior written approval from the awarding agency before making any fund or budget transfer from non‐ construction to construction or vice versa.
(d) Programmatic changes. Grantees or subgrantees must obtain the prior approval of the awarding agency whenever any of the following actions is anticipated:
(1) Any revision of the scope or objectives of the project (regardless of whether there is an associated budget revision requiring prior approval).
(2) Need to extend the period of availability of funds. (3) Changes in key persons in cases where specified in an application or a grant award. In research projects, a change in the project director or principal investigator shall always require approval unless waived by the awarding agency.
(4) Under non‐construction projects, contracting out, subgranting (if authorized by law) or otherwise obtaining the services of a third party to perform activities which are central to the purposes of the award. This approval requirement is in addition to the approval requirements of §85.36 but does not apply to the procurement of equipment, supplies, and general support services. (e) Additional prior approval requirements. The awarding agency may not require prior approval for any budget revision which is not described in paragraph (c) of this section. (f) Requesting prior approval.
(1) A request for prior approval of any budget revision will be in the same budget formal the grantee used in its application and shall be accompanied by a narrative justification for the proposed revision. (2) A request for a prior approval under the applicable Federal cost principles (see §85.22) may be made by letter.
(3) A request by a subgrantee for prior approval will be addressed in writing to the grantee. The grantee will promptly review such request and shall approve or disapprove the request in writing. A grantee will not approve any budget or project revision which is inconsistent with the purpose or terms and conditions of the Federal grant to the grantee. If the revision, requested by the subgrantee would result in a change to the grantee's approved project which requires Federal prior approval, the grantee will obtain the Federal agency's approval before approving the subgrantee's request. § 85.31 Real property.
(a) Title. Subject to the obligations and conditions set forth in this section, title to real property acquired under a grant or subgrant will vest upon acquisition in the grantee or subgrantee respectively. (b) Use. Except as otherwise provided by Federal statutes, real property will be used for the originally authorized purposes as long as needed for that purposes, and the grantee or subgrantee shall not dispose of or encumber its title or other interests.
(c) Disposition. When real property is no longer needed for the originally authorized purpose, the grantee or subgrantee will request disposition instructions from the awarding agency. The instructions will provide for one of the following alternatives:
(1) Retention of title. Retain title after compensating the awarding agency. The amount paid to the awarding agency will be computed by applying the awarding agency's percentage of participation in the cost of the original purchase to the fair market value of the property. However, in those situations where a grantee or subgrantee is disposing of real property acquired with grant funds and acquiring replacement real property under the same program, the net proceeds from the disposition may be used as an offset to the cost of the replacement property.
83 (2) Sale of property. Sell the property and compensate the awarding agency. The amount due to the awarding agency will be calculated by applying the awarding agency's percentage of participation in the cost of the original purchase to the proceeds of the sale after deduction of any actual and reasonable selling and fixing‐up expenses. If the grant is still active, the net proceeds from sale may be offset against the original cost of the property. When a grantee or subgrantee is directed to sell property, sales procedures shall be followed that provide for competition to the extent practicable and result in the highest possible return.
(3) Transfer of title. Transfer title to the awarding agency or to a third‐party designated/approved by the awarding agency. The grantee or subgrantee shall be paid an amount calculated by applying the grantee or subgrantee's percentage of participation in the purchase of the real property to the current fair market value of the property.
§ 85.32 Equipment.
(a) Title. Subject to the obligations and conditions set forth in this section, title to equipment acquired under a grant or subgrant will vest upon acquisition in the grantee or subgrantee respectively. (b) States. A State will use, manage, and dispose of equipment acquired under a grant by the State in accordance with State laws and procedures. Other grantees and subgrantees will follow paragraphs (c) through (e) of this section.
(c) Use.
(1) Equipment shall be used by the grantee or subgrantee in the program or project for which it was acquired aslong as needed, whether or not the project or program continuesto be supported by Federal funds. When no longer needed for the original program or project, the equipment may be used in other activities currently or previously supported by a Federal agency. (2) The grantee orsubgrantee shall also make equipment available for use on other projects or programs currently or previously supported by the Federal Government, providing such use will not interfere with the work on the projects or program for which it was originally acquired. First preference for other use shall be given to other programs or projects supported by the awarding agency. User fees should be considered if appropriate.
(3) Notwithstanding the encouragement in §85.25(a) to earn program income, the grantee or subgrantee must not use equipment acquired with grant funds to provide services for a fee to compete unfairly with private companies that provide equivalent services, unless specifically permitted or contemplated by Federal statute.
(4) When acquiring replacement equipment, the grantee or subgrantee may use the equipment to be replaced as a trade‐in or sell the property and use the proceeds to offset the cost of the replacement property, subject to the approval of the awarding agency. (d) Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part with grant funds, until disposition takes place will, as a minimum, meet the following requirements:
(1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holdstitle, the acquisition date, and cost of the property, percentage of Federal participation in the cost of the property, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property.
(2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years.
(3) A control system must be developed to ensure adequate safeguardsto prevent loss, damage, ortheft of the property. Any loss, damage, or theft shall be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the grantee or subgrantee is authorized or required to sell the property, propersales procedures 84 must be established to ensure the highest possible return. (e) Disposition. When original or replacement equipment acquired under a grant or subgrant is no longer needed forthe original project or program or for other activities currently or previously supported by a Federal agency, disposition of the equipment will be made as follows:
(1) Items of equipment with a current per‐unit fair market value of less than $5,000 may be retained, sold or otherwise disposed of with no further obligation to the awarding agency. (2) Items of equipment with a current per unit fair market value in excess of $5,000 may be retained or sold and the awarding agency shall have a right to an amount calculated by multiplying the current market value or proceeds from sale by the awarding agency's share of the equipment. (3) In cases where a grantee or subgrantee fails to take appropriate disposition actions, the awarding agency may direct the grantee or subgrantee to take excess and disposition actions. (f) Federal equipment. In the event a grantee orsubgrantee is provided federally‐owned equipment:
(1) Title will remain vested in the Federal Government. (2) Grantees or subgrantees will manage the equipment in accordance with Federal agency rules and procedures, and submit an annual inventory listing.
(3) When the equipment is no longer needed, the grantee or subgrantee will request disposition instructions from the Federal agency.
(g) Right to transfer title. The Federal awarding agency may reserve the right to transfer title to the Federal Government or a third part named by the awarding agency when such a third party is otherwise eligible under existing statutes. Such transfers shall be subject to the following standards:
(1) The property shall be identified in the grant or otherwise made known to the grantee in writing. (2) The Federal awarding agency shall issue disposition instruction within 120 calendar days after the end of the Federal support of the project for which it was acquired. If the Federal awarding agency fails to issue disposition instructions within the 120 calendar‐day period the grantee shall follow §85.32(e). (3) When title to equipment is transferred, the grantee shall be paid an amount calculated by applying the percentage of participation in the purchase to the current fair market value of the property. § 85.33 Supplies.
(a) Title. Title to supplies acquired under a grant or subgrant will vest, upon acquisition, in the grantee or subgrantee respectively.
(b) Disposition. If there is a residual inventory of unused supplies exceeding $5,000 in total aggregate fair market value upon termination or completion of the award, and if the supplies are not needed for any other federally sponsored programs or projects, the grantee or subgrantee shall compensate the awarding agency for its share.
§ 85.34 Copyrights.

The Federal awarding agency reserves a royalty‐free, nonexclusive, and irrevocable license to reproduce, publish or otherwise use, and to authorize others to use, for Federal Government purposes:
(a) The copyright in any work developed under a grant, subgrant, or contract under a grant or subgrant; and
(b) Any rights of copyright to which a grantee, subgrantee or a contractor purchases ownership with grant support.
§ 85.35 Subawardsto debarred and suspended parties.

Grantees and subgrantees must not make any award or permit any award (subgrant or contract) at any tier to any party which is debarred or suspended or is otherwise excluded from or ineligible for participation in Federal assistance programs under Executive Order 12549, “Debarment and Suspension.” 85 § 85.36 Procurement.
(a) States. When procuring property and services under a grant, a State will follow the same policies and procedures it uses for procurements from its non‐Federal funds. The State will ensure that every purchase order or other contract includes any clausesrequired by Federal statutes and executive orders and their implementing regulations. Other grantees and subgrantees will follow paragraphs (b) through (i) in this section.
(b) Procurement standards.
(1) Grantees and subgrantees will use their own procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this section.
(2) Grantees and subgrantees will maintain a contract administration system which ensures that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.
(3) Grantees and subgrantees will maintain a written code of standards of conduct governing the performance of their employees engaged in the award and administration of contracts. No employee, officer or agent of the grantee or subgrantee shall participate in selection, or in the award or administration of a contract supported by Federal funds if a conflict of interest, real or apparent, would be involved. Such a conflict would arise when:
(i) The employee, officer or agent,
(ii) Any member of hisimmediate family,
(iii) His or her partner, or
(iv) An organization which employs, or is about to employ, any of the above, has a financial or other interest in the firm selected for award. The grantee's or subgrantee's officers, employees or agents will neither solicit nor accept gratuities, favors or anything of monetary value from contractors, potential contractors, or parties to sub‐agreements. Grantee and subgrantees may set minimum rules where the financial interest is notsubstantial or the gift is an unsolicited item of nominal intrinsic value. To the extent permitted by State or local law or regulations, such standards or conduct will provide for penalties, sanctions, or other disciplinary actions for violations ofsuch standards by the grantee's and subgrantee's officers, employees, or agents, or by contractors or their agents. The awarding agency may in regulation provide additional prohibitions relative to real, apparent, or potential conflicts of interest. (4) Grantee and subgrantee procedures will provide for a review of proposed procurements to avoid purchase of unnecessary or duplicative items. Consideration should be given to consolidating or breaking out procurements to obtain a more economical purchase. Where appropriate, an analysis will be made of lease versus purchase alternatives, and any other appropriate analysis to determine the most economical approach.
(5) To foster greater economy and efficiency, grantees and subgrantees are encouraged to enter into State and local intergovernmental agreements for procurement or use of common goods and services. (6) Grantees and subgrantees are encouraged to use Federal excess and surplus property in lieu of purchasing new equipment and property whenever such use is feasible and reduces project costs. (7) Grantees and subgrantees are encouraged to use value engineering clauses in contracts for construction projects of sufficient size to offer reasonable opportunities for cost reductions. Value engineering is a systematic and creative analysis of each contract item or task to ensure that its essential function is provided at the overall lower cost.
(8) Grantees and subgrantees will make awards only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. 86 Consideration will be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. (9) Grantees and subgrantees will maintain records sufficient to detail the significant history of a procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.
(10) Grantees and subgrantees will use time and material type contracts only— (i) After a determination that no other contract issuitable, and (ii) Ifthe contract includes a ceiling price that the contractor exceeds at its own risk. (11) Grantees and subgrantees alone will be responsible, in accordance with good administrative practice and sound business judgment, for the settlement of all contractual and administrative issues arising out of procurements. These issues include, but are not limited to source evaluation, protests, disputes, and claims. These standards do not relieve the grantee or subgrantee of any contractual responsibilities under its contracts. Federal agencies will not substitute their judgment for that of the grantee or subgrantee unless the matter is primarily a Federal concern. Violations of law will be referred to the local, State, or Federal authority having proper jurisdiction. (12) Grantees and subgrantees will have protest procedures to handle and resolve disputes relating to their procurements and shall in all instances disclose information regarding the protest to the awarding agency. A protestor must exhaust all administrative remedies with the grantee and subgrantee before pursuing a protest with the Federal agency. Reviews of protests by the Federal agency will be limited to:
(i) Violations of Federal law or regulations and the standards of this section (violations of State or local law will be under the jurisdiction of State or local authorities) and (ii) Violations of the grantee's or subgrantee's protest procedures for failure to review a complaint or protest. Protests received by the Federal agency other than those specified above will be referred to the grantee or subgrantee.
(c) Competition.
(1) All procurement transactions will be conducted in a manner providing full and open competition consistent with the standards of §85.36. Some of the situations considered to be restrictive of competition include but are not limited to:
(i) Placing unreasonable requirements on firmsin order for them to qualify to do business, (ii) Requiring unnecessary experience and excessive bonding, (iii) Noncompetitive pricing practices between firms or between affiliated companies, (iv) Noncompetitive awards to consultants that are on retainer contracts, (v) Organizational conflicts of interest,
(vi) Specifying only a brand name product instead of allowing an equal product to be offered and describing the performance of other relevant requirements of the procurement, and (vii) Any arbitrary action in the procurement process.
(2) Grantees and subgrantees 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 in those cases where applicable Federal statutes expressly mandate or encourage geographic preference. Nothing in this section preempts State licensing laws. When contracting for architectural and engineering (A/E) services, geographic location may be a selection criteria provided its application leaves an appropriate number of qualified firms, given the nature and size of the project, to compete for the contract.
(3) Grantees will have written selection proceduresfor procurement transactions. These procedures will ensure that all solicitations:
87 (i) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description shall not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured, and when necessary, shall set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use. Detailed product specifications should be avoided if at all possible. When it is impractical or uneconomical to make a clear and accurate description of the technical requirements, a brand name or equal description may be used as a means to define the performance or other salient requirements of a procurement. The specific features of the named brand which must be met by offerors shall be clearly stated; and (ii) Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or proposals.
(4) Grantees and subgrantees will ensure that all pre‐qualified lists of persons, firms, or products which are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition. Also, grantees and subgrantees will not preclude potential bidders from qualifying during the solicitation period.
(d) Methods of procurement to be followed.
(1) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the simplified acquisition threshold fixed at 41 U.S.C. 403(11) (currently set at $100,000). If small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources.
(2) Procurement by sealed bids (formal advertising). Bids are publicly solicited and a firm‐fixed‐ price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bid method is the preferred method for procuring construction, if the conditions in §85.36(d)(2)(i) apply. (i) In orderforsealed bidding to be feasible, the following conditionsshould be present:
(A) A complete, adequate, and realistic specification or purchase description is available;
(B) Two or more responsible bidders are willing and able to compete effectively and for the business; and
(C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) Ifsealed bids are used, the following requirements apply:
(A) The invitation for bids will be publicly advertised and bids shall be solicited from an adequate number of known suppliers, providing them sufficient time prior to the date set for opening the bids;
(B) The invitation for bids, which will include any specifications and pertinent attachments, shall define the items or services in order for the bidder to properly respond;
(C) All bids will be publicly opened at the time and place prescribed in the invitation for bids;
(D) A firm fixed‐price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs shall be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and 88 (E) Any or all bids may be rejected if there is a sound documented reason. (3) Procurement by competitive proposals. The technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed‐price or cost‐ reimbursement type contract is awarded. It is generally used when conditions are not appropriate for the use of sealed bids. If this method is used, the following requirements apply:
(i) Requests for proposals will be publicized and identify all evaluation factors and their relative importance. Any response to publicized requestsfor proposalsshall be honored to the maximum extent practical;
(ii) Proposals will be solicited from an adequate number of qualified sources; (iii) Grantees and subgrantees will have a method for conducting technical evaluations of the proposals received and for selecting awardees;
(iv) Awards will be made to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered; and
(v) Grantees and subgrantees may use competitive proposal procedures for qualifications‐ based procurement of architectural/engineering (A/E) professional services whereby competitors' qualifications are evaluated and the most qualified competitor is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms are a potential source to perform the proposed effort.
(4) Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is determined inadequate. (i) Procurement by noncompetitive proposals may be used only when the award of a contract is infeasible undersmall purchase procedures, sealed bids or competitive proposals and one of the following circumstances applies:
(A) The item is available only from a single source;
(B) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
(C) The awarding agency authorizes noncompetitive proposals; or (D) Aftersolicitation of a number of sources, competition is determined inadequate. (ii) Cost analysis, i.e., verifying the proposed cost data, the projections of the data, and the evaluation of the specific elements of costs and profits, is required. (iii) Grantees and subgrantees may be required to submit the proposed procurement to the awarding agency for pre‐award review in accordance with paragraph (g) of this section. (e) Contracting with small and minority firms, women’s business s Enterprise and labor surplus area firms.
(1) The grantee and subgrantee will take all necessary affirmative steps to assure that minority firms, women's business enterprises, and labor surplus area firms are used when possible. (2) Affirmative stepsshall include:
(i) Placing qualified small and minority businesses and women's business enterprises on solicitation lists;
(ii) Assuring that small and minority businesses, and women's business enterprises are solicited whenever they are potential sources;
(iii) Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum participation by small and minority business, and women's business enterprises;
(iv) Establishing delivery schedules, where the requirement permits, which encourage participation by small and minority business, and women's business enterprises; 89 (v) Using the services and assistance of the Small Business Administration, and the Minority Business Development Agency of the Department of Commerce; and (vi) Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in paragraphs (e)(2) (i) through (v) of this section. (f) Contract cost and price.
(1) Grantees and subgrantees must perform a cost or price analysis in connection with every procurement action including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, grantees must make independent estimates before receiving bids or proposals. A cost analysis must be performed when the offeror is required to submit the elements of his estimated cost, e.g., under professional, consulting, and architectural engineering services contracts. A cost analysis will be necessary when adequate price competition is lacking, and for sole source procurements, including contract modifications or change orders, unless price reasonableness can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to the general public or based on prices set by law or regulation. A price analysis will be used in all other instances to determine the reasonableness of the proposed contract price.
(2) Grantees and subgrantees will negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed. To establish a fair and reasonable profit, consideration will be given to the complexity of the work to be performed, the risk borne by the contractor, the contractor's investment, the amount of subcontracting, the quality of its record of past performance, and industry profit rates in the surrounding geographical area for similar work.
(3) Costs or prices based on estimated costs for contracts under grants will be allowable only to the extent that costs incurred or cost estimates included in negotiated prices are consistent with Federal cost principles (see §85.22). Grantees may reference their own cost principles that comply with the applicable Federal cost principles.
(4) The cost plus a percentage of cost and percentage of construction cost methods of contracting shall not be used.
(g) Awarding agency review.
(1) Grantees and subgrantees must make available, upon request of the awarding agency, technical specifications on proposed procurements where the awarding agency believes such review is needed to ensure that the item and/or service specified is the one being proposed for purchase. This review generally will take place prior to the time the specification is incorporated into a solicitation document.

However, if the grantee or subgrantee desires to have the review accomplished after a solicitation has been developed, the awarding agency may still review the specifications, with such review usually limited to the technical aspects of the proposed purchase.
(2) Grantees and subgrantees must on request make available for awarding agency pre‐award review procurement documents, such as requests for proposals or invitations for bids, independent cost estimates, etc. when:
(i) A grantee's or subgrantee's procurement procedures or operation fails to comply with the procurement standards in this section; or
(ii) The procurement is expected to exceed the simplified acquisition threshold and is to be awarded without competition or only one bid or offer is received in response to a solicitation; or (iii) The procurement, which is expected to exceed the simplified acquisition threshold,specifies a “brand name” product; or
(iv) The proposed award is more than the simplified acquisition threshold and is to be awarded to other than the apparent low bidder under a sealed bid procurement; or 90 (v) A proposed contract modification changes the scope of a contract or increases the contract amount by more than the simplified acquisition threshold. (3) A grantee orsubgrantee will be exempt from the pre‐award review in paragraph (g)(2) of this section if the awarding agency determines that its procurement systems comply with the standards of this section.
(i) A grantee or subgrantee may request that its procurement system be reviewed by the awarding agency to determine whether its system meets these standards in order for its system to be certified. Generally, these reviews shall occur where there is a continuous high‐ dollar funding, and third‐party contracts are awarded on a regular basis. (ii) A grantee orsubgrantee may self‐certify its procurement system. Such self‐ certification shall not limit the awarding agency's right to survey the system. Under a self‐ certification procedure, awarding agencies may wish to rely on written assurances from the grantee or subgrantee that it is complying with these standards. A grantee or subgrantee will cite specific procedures, regulations,standards, etc., as being in compliance with these requirements and have its system available for review.
(h) Bonding requirements. For construction orfacility improvement contracts orsubcontracts exceeding the simplified acquisition threshold, the awarding agency may accept the bonding policy and requirements of the grantee or subgrantee provided the awarding agency has made a determination that the awarding agency's interest is adequately protected. If such a determination has not been made, the minimum requirements shall be as follows:
(1) A bid guarantee from each bidder equivalent to five percent of the bid price. The “bid guarantee” shall consist of a firm commitment such as a bid bond, certified check, or other negotiable instrument accompanying a bid as assurance that the bidder will, upon acceptance of his bid, execute such contractual documents as may be required within the time specified. (2) A performance bond on the part of the contractor for 100 percent of the contract price. A “performance bond” is one executed in connection with a contract to secure fulfillment of all the contractor's obligations under such contract.
(3) A payment bond on the part of the contractor for 100 percent of the contract price. A “payment bond” is one executed in connection with a contract to assure payment as required by law of all persons supplying labor and material in the execution of the work provided for in the contract. (i) Contract provisions. A grantee's and subgrantee's contracts must contain provisions in paragraph (i) of this section. Federal agencies are permitted to require changes, remedies, changed conditions, access and records retention, suspension of work, and other clauses approved by the Office of Federal Procurement Policy.
(1) Administrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, and provide for such sanctions and penalties as may be appropriate. (Contracts more than the simplified acquisition threshold)
(2) Termination for cause and for convenience by the grantee or subgrantee including the manner by which it will be effected and the basis for settlement. (All contracts in excess of $10,000)
(3) Compliance with Executive Order 11246 of September 24, 1965, entitled “Equal Employment Opportunity,” as amended by Executive Order 11375 of October 13, 1967, and as supplemented in Department of Labor regulations (41 CFR chapter 60). (All construction contracts awarded in excess of $10,000 by grantees and their contractors orsubgrantees) (4) Compliance with the Copeland “Anti‐Kickback” Act (18 U.S.C. 874) as supplemented in Department of Labor regulations (29 CFR part 3). (All contracts and subgrants for construction or repair) (5) Compliance with the Davis‐Bacon Act (40 U.S.C. 276a to 276a–7) as supplemented by Department of Labor regulations (29 CFR part 5). (Construction contracts in excess of $2000 awarded by grantees 91 and subgrantees when required by Federal grant program legislation) (6) Compliance with Sections 103 and 107 of the Contract Work Hours and Safety Standards Act (40 U.S.C. 327–330) as supplemented by Department of Labor regulations (29 CFR part 5). (Construction contracts awarded by grantees and subgrantees in excess of $2000, and in excess of $2500 for other contracts which involve the employment of mechanics or laborers) (7) Notice of awarding agency requirements and regulations pertaining to reporting. (8) Notice of awarding agency requirements and regulations pertaining to patent rights with respect to any discovery or invention which arises or is developed in the course of or under such contract. (9) Awarding agency requirements and regulations pertaining to copyrights and rights in data. (10) Access by the grantee, the subgrantee, the Federal grantor agency, the Comptroller General of the United States, or any of their duly authorized representatives to any books, documents, papers, and records of the contractor which are directly pertinent to that specific contract for the purpose of making audit, examination, excerpts, and transcriptions.
(11) Retention of all required records for three years after grantees orsubgrantees make final payments and all other pending matters are closed.
(12) Compliance with all applicable standards, orders, or requirements issued under section 306 of the Clean Air Act (42 U.S.C. 1857(h)), section 508 of the Clean Water Act (33 U.S.C. 1368), Executive Order 11738, and Environmental Protection Agency regulations (40 CFR part 15). (Contracts, subcontracts, and subgrants of amounts in excess of $100,000).
(13) Mandatory standards and policies relating to energy efficiency which are contained in the state energy conservation plan issued in compliance with the Energy Policy and Conservation Act (Pub. L. 94– 163, 89 Stat. 871). [53 FR 8068, 8087, Mar. 11, 1988, as amended at 60 FR 19639, 19642, Apr. 19, 1995]
§ 85.37 Subgrants.
(a) States. States shall follow state law and procedures when awarding and administering subgrants (whether on a cost reimbursement or fixed amount basis) of financial assistance to local and Indian tribal governments. States shall:
(1) Ensure that every subgrant includes any clauses required by Federal statute and executive orders and their implementing regulations;
(2) Ensure that subgrantees are aware of requirements imposed upon them by Federal statute and regulation;
(3) Ensure that a provision for compliance with §85.42 is placed in every cost reimbursement subgrant; and
(4) Conform any advances of grant funds to subgrantees substantially to the same standards of timing and amount that apply to cash advances by Federal agencies. (b) All other grantees. All other grantees shall follow the provisions of this part which are applicable to awarding agencies when awarding and administering subgrants (whether on a cost reimbursement or fixed amount basis) of financial assistance to local and Indian tribal governments. Grantees shall:
(1) Ensure that every subgrantincludes a provision for compliance with this part; (2) Ensure that every subgrant includes any clauses required by Federal statute and executive orders and their implementing regulations; and
(3) Ensure that subgrantees are aware of requirements imposed upon them by Federal statutes and regulations.
(c) Exceptions. By their own terms, certain provisions of this part do not apply to the award and administration of subgrants:
(1) Section 85.10;
(2) Section 85.11;
92 (3) The letter‐of‐credit procedures specified in Treasury Regulations at 31 CFR part 205, cited in §85.21; and Section 85.50.

Reports, Records, Retention, and Enforcement
§ 85.40 Monitoring and reporting program performance.
(a) Monitoring by grantees. Grantees are responsible for managing the day‐to‐day operations of grant and subgrant supported activities. Grantees must monitor grant and subgrant supported activities to assure compliance with applicable Federal requirements and that performance goals are being achieved.

Grantee monitoring must cover each program, function or activity. (b) Non‐construction performance reports. The Federal agency may, if it decides that performance information available from subsequent applications contains sufficient information to meet its programmatic needs, require the grantee to submit a performance report only upon expiration or termination of grant support. Unless waived by the Federal agency this report will be due on the same date as the final Financial Status Report.
(1) Grantees shall submit annual performance reports unless the awarding agency requires quarterly or semi‐annualreports. However, performance reports will not be requiredmore frequently than quarterly.

Annual reports shall be due 90 days after the grant year, quarterly or semi‐annual reports shall be due 30 days after the reporting period. The final performance report will be due 90 days after the expiration or termination of grant support. If a justified request is submitted by a grantee, the Federal agency may extend the due date for any performance report. Additionally, requirements for unnecessary performance reports may be waived by the Federal agency. (2) Performance reports will contain, for each grant, brief information on the following:
(i) A comparison of actual accomplishments to the objectives established for the period. Where the output of the project can be quantified, a computation of the cost per unit of output may be required if that information will be useful.
(ii) The reasonsforslippage if established objectives were not met. (iii) Additional pertinent information including, when appropriate, analysis and explanation of cost overruns or high unit costs.
(3) Grantees will not be required to submit more than the original and two copies of performance reports.
(4) Grantees will adhere to the standards in this section in prescribing performance reporting requirements for subgrantees.
(c) Construction performance reports. For the most part, on‐site technical inspections and certified percentage‐of‐completion data are relied on heavily by Federal agencies to monitor progress under construction grants and subgrants. The Federal agency will require additional formal performance reports only when considered necessary, and never more frequently than quarterly. (d) Significant developments. Events may occur between the scheduled performance reporting dates which have significant impact upon the grant or subgrant supported activity. In such cases, the grantee must inform the Federal agency as soon as the following types of conditions become known:
(1) Problems, delays, or adverse conditions which will materially impair the ability to meet the objective of the award. This disclosure must include a statement of the action taken, or contemplated, and any assistance needed to resolve the situation.
(2) Favorable developments which enable meeting time schedules and objectives sooner or at less cost than anticipated or producing more beneficial results than originally planned. (e) Federal agencies may make site visits as warranted by program needs. (f) Waivers, extensions.
(1) Federal agencies may waive any performance report required by this part if not needed. 93 (2) The grantee may waive any performance report from a subgrantee when not needed. The grantee may extend the due date for any performance report from a subgrantee if the grantee will still be able to meet its performance reporting obligations to the Federal agency. § 85.41 Financial reporting.
(a) General.
(1) Except as provided in paragraphs (a) (2) and (5) of this section, grantees will use only the forms specified in paragraphs (a) through (e) of this section, and such supplementary or other forms as may from time to time be authorized by OMB, for:
(i) Submitting financial reports to Federal agencies, or (ii) Requesting advances or reimbursements when letters of credit are not used. (2) Grantees need not apply the forms prescribed in this section in dealing with their subgrantees.

However, grantees shall not impose more burdensome requirements on subgrantees. (3) Granteesshall follow all applicable standard and supplemental Federal agency instructions approved by OMB to the extend required under the Paperwork Reduction Act of 1980 for use in connection with forms specified in paragraphs (b) through (e) of this section. Federal agencies may issue substantive supplementary instructions only with the approval of OMB. Federal agencies may shade out or instruct the grantee to disregard any line item that the Federal agency finds unnecessary for its decision‐making purposes.
(4) Grantees will not be required to submit more than the original and two copies of forms required under this part.
(5) Federal agencies may provide computer outputs to grantees to expedite or contribute to the accuracy of reporting. Federal agencies may accept the required information from grantees in machine usable format or computer printouts instead of prescribed forms. (6) Federal agencies may waive any report required by thissection if not needed. (7) Federal agencies may extend the due date of any financial report upon receiving a justified request from a grantee.
(b) Financial Status Report ‐
(1) Form. Grantees will use Standard Form 269 or 269A, Financial Status Report, to report the status of funds for all non‐construction grants and for construction grants when required in accordance with §85.41(e)(2)(iii) of this section.
(2) Accounting basis. Each grantee will report program outlays and program income on a cash or accrual basis as prescribed by the awarding agency. If the Federal agency requires accrual information and the grantee's accounting records are not normally kept on the accural basis,the grantee shall not be required to convert its accounting system but shall develop such accrual information through and analysis of the documentation on hand.
(3) Frequency. The Federal agency may prescribe the frequency of the report for each project or program. However, the report will not be required more frequently than quarterly. If the Federal agency does not specify the frequency of the report, it will be submitted annually. A final report will be required upon expiration or termination of grant support.
(4) Due date. When reports are required on a quarterly or semiannual basis, they will be due 30 days after the reporting period. When required on an annual basis, they will be due 90 days after the grant year. Final reports will be due 90 days after the expiration or termination of grant support. (c) Federal Cash Transactions Report ‐
(1) Form.
(i) For grants paid by letter or credit, Treasury check advances or electronic transfer of funds, the grantee will submit the Standard Form 272, Federal Cash Transactions Report, and when necessary, its continuation sheet, Standard Form 272a, unless the terms of the award exempt 94 the grantee from thisrequirement.
(ii) These reports will be used by the Federal agency to monitor cash advanced to grantees and to obtain disbursement or outlay information for each grant from grantees. The format of the report may be adapted as appropriate when reporting is to be accomplished with the assistance of automatic data processing equipment provided that the information to be submitted is not changed in substance.
(2) Forecasts of Federal cash requirements. Forecasts of Federal cash requirements may be required in the “Remarks” section of the report.
(3) Cash in hands of subgrantees. When considered necessary and feasible by the Federal agency, grantees may be required to report the amount of cash advances in excess of three days' needs in the hands of their subgrantees or contractors and to provide short narrative explanations of actions taken by the grantee to reduce the excess balances.
(4) Frequency and due date. Grantees must submit the report no later than 15 working days following the end of each quarter. However, where an advance either by letter of credit or electronic transfer of funds is authorized at an annualized rate of one million dollars or more, the Federal agency may require the report to be submitted within 15 working days following the end of each month. (d) Request for advance orreimbursement ‐
(1) Advance payments. Requests for Treasury check advance payments will be submitted on Standard Form 270, Request for Advance or Reimbursement. (This form will not be used for drawdowns under a letter of credit, electronic funds transfer or when Treasury check advance payments are made to the grantee automatically on a predetermined basis.)
(2) Reimbursements. Requestsfor reimbursement under non‐construction grants will also be submitted on Standard Form 270. (For reimbursement requests under construction grants, see paragraph (e)(1) of this section.)
(3) The frequency for submitting payment requests is treated in §85.41(b)(3). (e) Outlay report and requests for reimbursement for construction program‐ (1) Grants that support construction activities paid by reimbursement method. (i) Requestersfor reimbursement under construction grants will be submitted on Standard Form 271, Outlay Report and Request for Reimbursement for Construction Programs. Federal agencies may, however, prescribe the Request for Advance or Reimbursement form, specified in §85.41(d), instead of this form.
(ii) The frequency for submitting reimbursement requests is treated in §85.41(b)(3). (2) Grants that support construction activities paid by letter of credit, electronic funds transfer or Treasury check advance.
(i) When a construction grant is paid by letter of credit, electronic funds transfer or Treasury check advances, the grantee will report its outlays to the Federal agency using Standard Form 271, Outlay Report and Request for Reimbursement for Construction Programs. The Federal agency will provide any necessary special instruction. However, frequency and due date shall be governed by §85.41(b) (3) and (4).
(ii) When a construction grant is paid by Treasury check advances based on periodic requests from the grantee, the advances will be requested on the form specified in §85.41(d).
(iii) The Federal agency may substitute the Financial Status Report specified in §85.41(b) for the Outlay Report and Request for Reimbursement for Construction Programs. (3) Accounting basis. The accounting basis for the Outlay Report and Request for Reimbursement for Construction Programs shall be governed by §85.41(b)(2). § 85.42 Retention and accessrequirements for records.
95 (a) Applicability.
(1) This section applies to all financial and programmatic records, supporting documents, statistical records, and other records of grantees or subgrantees which are:
(i) Required to be maintained by the terms of this part, program regulations or the grant agreement, or
(ii) Otherwise reasonably considered as pertinent to program regulations or the grant agreement.
(2) This section does not apply to records maintained by contractors or subcontractors. For a requirement to place a provision concerning records in certain kinds of contracts, see §85.36(i)(10). (b) Length of retention period. (1) Except as otherwise provided, records must be retained for three years from the starting date specified in paragraph (c) of this section. (2) If any litigation, claim, negotiation, audit or other action involving the records has been started before the expiration of the 3‐year period, the records must be retained until completion of the action and resolution of all issues which arise from it, or until the end of the regular 3‐year period, whichever is later.
(3) To avoid duplicate recordkeeping, awarding agencies may make special arrangements with grantees and subgranteesto retain any records which are continuously needed for joint use. The awarding agency will request transfer of records to its custody when it determines that the records possess long‐term retention value. When the records are transferred to or maintained by the Federal agency, the 3‐year retention requirement is not applicable to the grantee or subgrantee. (c ) Starting date of retention period ‐
(1) General. When grant support is continued or renewed at annual or other intervals, the retention period for the records of each funding period starts on the day the grantee or subgrantee submits to the awarding agency its single or last expenditure report for that period. However, if grant support is continued or renewed quarterly, the retention period for each year's records starts on the day the grantee submits its expenditure report for the last quarter of the Federal fiscal year. In all other cases, the retention period starts on the day the grantee submits its final expenditure report. If an expenditure report has been waived, the retention period starts on the day the report would have been due.
(2) Real property and equipment records. The retention period for real property and equipment records starts from the date of the disposition or replacement or transfer at the direction of the awarding agency.
(3) Records for income transactions after grant or subgrant support. In some cases grantees must report income after the period of grant support. Where there is such a requirement, the retention period for the records pertaining to the earning of the income starts from the end of the grantee's fiscal year in which the income is earned.
(4) Indirect cost rate proposals, cost allocations plans, etc. This paragraph applies to the following types of documents, and their supporting records: Indirect cost rate computations or proposals, cost allocation plans, and any similar accounting computations of the rate at which a particular group of costs is chargeable (such as computer usage chargeback rates or composite fringe benefit rates). (i) If submitted for negotiation. If the proposal, plan, or other computation is required to be submitted to the Federal Government (or to the grantee) to form the basis for negotiation of the rate, then the 3‐year retention period for its supporting records starts from the date of such submission.
(ii) If not submitted for negotiation. If the proposal, plan, or other computation is not required to be submitted to the Federal Government (or to the grantee) for negotiation purposes, then the 3‐year retention period for the proposal plan, or computation and its 96 supporting records starts from end of the fiscal year (or other accounting period) covered by the proposal, plan, or other computation.
(d) Substitution of microfilm. Copies made by microfilming, photocopying, or similar methods may be substituted for the original records.
(e) Accessto records ‐
(1) Records of grantees and subgrantees. The awarding agency and the Comptroller General of the United States, or any of their authorized representatives, shall have the right of access to any pertinent books, documents, papers, or other records of grantees and subgrantees which are pertinent to the grant, in order to make audits, examinations, excerpts, and transcripts. (2) Expiration of right of access. The rights of access in this section must not be limited to the required retention period but shall last as long as the records are retained. (f) Restrictions on public access. The Federal Freedom of Information Act (5 U.S.C. 552) does not apply to records Unless required by Federal, State, or local law, grantees and subgrantees are not required to permit public access to their records.
§ 85.43 Enforcement.
(a) Remedies for noncompliance. If a grantee or subgrantee materially fails to comply with any term of an award, whether stated in a Federal statute or regulation, an assurance, in a State plan or application, a notice of award, or elsewhere, the awarding agency may take one or more of the following actions, as appropriate in the circumstances:
(1) Temporarily withhold cash payments pending correction of the deficiency by the grantee or subgrantee or more severe enforcement action by the awarding agency, (2) Disallow (that is, deny both use of funds and matching credit for) all or part of the cost of the activity or action not in compliance,
(3) Wholly or partly suspend or terminate the current award for the grantee's orsubgrantee's program, (4) Withhold further awardsforthe program, or
(5) Take other remediesthat may be legally available.
(b) Hearings, appeals. In taking an enforcement action, the awarding agency will provide the grantee or subgrantee an opportunity for such hearing, appeal, or other administrative proceeding to which the grantee or subgrantee is entitled under any statute or regulation applicable to the action involved. (c) Effects of suspension and termination. Costs of grantee or subgrantee resulting from obligations incurred by the grantee or subgrantee during a suspension or after termination of an award are not allowable unless the awarding agency expressly authorizes them in the notice of suspension or termination or subsequently. Other grantee or subgrantee costs during suspension or after termination which are necessary and not reasonably avoidable are allowable if:
(1) The costs result from obligations which were properly incurred by the grantee orsubgrantee before the effective date of suspension or termination, are not in anticipation of it, and, in the case of a termination, are non‐cancellable, and,
(2) The costs would be allowable if the award were not suspended or expired normally at the end of the funding period in which the termination takes effect.
(d) Relationship to debarment and suspension. The enforcement remedies identified in this section, including suspension and termination, do not preclude grantee or subgrantee from being subject to “Debarment and Suspension” under E.O. 12549 (see §85.35). § 85.44 Termination for convenience.

Except as provided in §85.43 awards may be terminated in whole or in part only asfollows:
97 (a) By the awarding agency with the consent of the grantee or subgrantee in which case the two parties shall agree upon the termination conditions, including the effective date and in the case of partial termination, the portion to be terminated, or
(b) By the grantee or subgrantee upon written notification to the awarding agency, setting forth the reasons for such termination, the effective date, and in the case of partial termination, the portion to be terminated. However, if, in the case of a partial termination, the awarding agency determines that the remaining portion of the award will not accomplish the purposes for which the award was made, the awarding agency may terminate the award in its entirety under either §85.43 or paragraph (a) of this section.

Subpart D—After‐the‐Grant Requirements
§ 85.50 Closeout.
(a) General. The Federal agency will close out the award when it determines that all applicable administrative actions and all required work of the grant has been completed. (b) Reports. Within 90 days after the expiration or termination of the grant, the grantee must submit all financial, performance, and other reports required as a condition of the grant. Upon request by the grantee, Federal agencies may extend this timeframe. These may include but are not limited to:
(1) Final performance or progress report.
(2) Financial Status Report (SF 269) or Outlay Report and Request for Reimbursement for Construction Programs (SF–271) (as applicable).
(3) Finalrequestfor payment (SF–270) (if applicable).
(4) Invention disclosure (if applicable).
(5) Federally‐owned property report:

In accordance with §85.32(f), a grantee must submit an inventory of all federally owned property (as distinct from property acquired with grant funds) for which it is accountable and request disposition instructions from the Federal agency of property no longer needed. (c) Cost adjustment. The Federal agency will, within 90 days after receipt of reports in paragraph (b) of this section, make upward or downward adjustments to the allowable costs. (d) Cash adjustments.
(1) The Federal agency will make prompt paymentto the grantee for allowable reimbursable costs. (2) The grantee must immediately refund to the Federal agency any balance of unobligated (unencumbered) cash advanced that is not authorized to be retained for use on other grants. § 85.51 Later disallowances and adjustments.

The closeout of a grant does not affect:
(a) The Federal agency's right to disallow costs and recover funds on the basis of a later audit or other review;
(b) The grantee's obligation to return any funds due as a result of later refunds, corrections, or other transactions;
(c) Records retention as required in §85.42;
(d) Property management requirements in §§85.31 and 85.32; and (e) Audit requirements in §85.26.
§ 85.52 Collection of amounts due.
(a) Any funds paid to a grantee in excess of the amount to which the grantee is finally determined to be entitled under the terms of the award constitute a debt to the Federal Government. If not paid within a reasonable period after demand, the Federal agency may reduce the debt by:
(1) Making an administrative offset against other requests for reimbursements, 98 (2) Withholding advance payments otherwise due to the grantee, or (3) Other action permitted by law.
(b) Except where otherwise provided by statutes or regulations, the Federal agency will charge interest on an overdue debt in accordance with the Federal Claims Collection Standards (4 CFR Ch. II). The date from which interest is computed is not extended by litigation or the filing of any form of appeal.

Subpart E—Entitlement [Reserved]
99 102
ATTACHMENT 5: Abbreviations and Acronyms
AD Assessment District
ADA American Disabilities Act
APA American Planning Association
ARRA American Recovery & Reinvestment Act
CAFR Consolidated Annual Financial Report
CALPERS California Public Employees* Retirement System
CEQA California Environmental Quality Act
CCID Central California Irrigation District
CDA California Downtown Association
CDBG Community Development Block Grant
CFD Community Facilities District
CHRP Cops Hiring Recovery Program
CMAQ Congestion Mitigation and Air Quality Improvement Program COLA Cost of Living Adjustment
COP Certification of Participation
CPI Consumer Price Index
CSJVRMA Central San Joaquin Valley Risk Management Association CSMFO California Society of Municipal Finance Officer
DOF Department of Finance
DOJ Department of Justice
ERAF Education Revenue Augmentation Fund
FAA Federal Aviation Administration
FTE Full Time Equivalent (Employee)
FY Fiscal Year
GAAP Generally Accepted Accounting Principles
GAAS Generally Accepted Auditing Standards
GASB Governmental Accounting Standards Board
GFOA Government Finance Officers Association
BCD Housing and Community Development
HOME Home Investment Partnership Program
HR Human Resources
ISO Insurance Services Office
ISF Internal Service Fund
IT Information Technology
JAG Justice Assistance Grant
JHBG Jobs Housing Balance Grant
L&L/LLD's Landscape & Lighting Districts
LAFCO Local Agency Formation Commissions
LMH Low and Moderate Housing
LGC Local Government Commission
LLEBG Local Law Enforcement Block Grant
LTF Local Transportation Fund
MCAG Merced County Association of Governments
100
103
MOU Memorandum of Understanding
NEPA National Environmental Policy Act
NOFA Notice of Funding Availability
NOI Net Operating Income
NSP Neighborhood Stabilization Program
OPEB Other Post Employee Benefits
OTS Office of Traffic Safety
PTA Planning and Technical Assistance
PTAF Property Tax Administration Fee
RDA Redevelopment Agency
RFP Request for Proposal
RSTP Regional Surface Transportation Program
RTIF Regional Traffic Impact Fee
SB325 Senate Bill 325
SERAF Supplemental Educational Revenue Augmentation Fund SJUAPCD San Joaquin Valley Unified Air Pollution Control District SLESF Supplemental Law Enforcement Services Fund
SOI Sphere of Influence
SRTS Safe Route to Schools Grant
TOT Transient Occupancy Tax
VLF Motor Vehicle in Lieu Fees
WWTP Wastewater Treatment Plant
101
104
ATTACHMENT 6: Fund Descriptions

GOVERNMENTAL FUNDS
101 General Fund
Accounts for the operation of general government departments. i.e. City Manager, City Clerk, Finance, City Services, Planning, Police, Fire, Parks, Streets, Animal Control, and City Attorney.

SPECIAL REVENUE FUNDS
102 – Asset Forfeiture
Accounts for any monies seized during police efforts to combat drug sales and use. Once the forfeiture process is completed by the County the city is awarded a portion of any funds seized that the courts deem to be subject to forfeiture. May only be used for drug‐related policing issues with a mandatory 20% set‐ aside for public outreach and education.
261 Gas Tax ‐ 2107
State allocated fundsfor Street Improvements.
263 Transportation Tax ‐ S.B. 325
County allocated funds for Pedestrian & Transportation Projects. 264 Transportation Tax ‐ S.B. 620
State allocated fundsfor Transit Services – passed thru County. 265 STP Hwy Funds
State allocated funds for Surface Transportation Program. 576 Waste Water Capital‐Reserve
A Capitalreplacementfund forthe wastewatertreatment plant. 556 Land Application
Accountsforthe operation of the Land Application Department.

SPECIAL ASSESSMENT FUNDS
841 Curb & Gutter Fund
102
105
A fund established by City Council as a revolving loan. Loans made to citizens are used for subsidizing improvements to citizens’ curbs, gutters and sidewalks. Repayable interest free for 24 months. Loan issued to citizens under standard curb and gutter contract that is recorded with the County as a lien on subject property.
856 Storm Drain System
Fee placed on all new buildingsfor the building ofstorm drains. 883‐892 LLAD
Lighting & Landscape Assessment Districts

PROPRIETARY

FUNDS/ENTERPRISE FUNDS
400 Wellness Center
Facility dedicated to the health and wellness of Lindsay area 552 Enterprise Fund ‐ Water
Accountsfor the operation of the Water Department
553 Enterprise Fund – Sewer
Accountsfor the operation of the Sewer Department.
554 Enterprise Fund ‐ Refuse
Accountsforthe operation of the Refuse Department.

GENERAL FUND REVENUES
Property Tax
Administering Agency ‐ County Assessor
The combined city‐county‐school district‐special property tax is one percent of assessed value. The county allocates revenues from the one percent tax to cities,school districts, special districts, and itself according to the formula set forth in Sections 95‐100 of the Revenue and Taxation Code. City’s share is approximately 17% of 1%.

Sales and Use Tax
Administering Agency ‐ State Board of Equalization
The State Sales and Use Tax is imposed on retailers for the privilege of selling at retail. The City levies a tax of one percent. Tax is collected on a point of sale basis.

Franchise Fees
103
106
Administering Agency ‐ City
Cities are authorized to impose “franchise” fee on privately owned utility companies and certain other businesses for the privilege of using City streets and rights‐of‐way. Businesses which are required to pay such fees include Southern California Edison Company, Southern California Gas Company, Charter Communications (Cable Co.) and USA Waste.(disposal).

Real Property Transfer Tax
Administering Agency ‐ County
This tax is imposed in the transfer of real property. Counties are authorized to levy the tax at a rate of $0.55 per $500 of the sale value, exclusive of any lien or encumbrance remaining at the time ofsale. Cities are authorized to levy the same tax at one‐half the County rate. The city tax is then credited against the county tax. In such a case, the city and county each receive $0.275 per $500 sale value.

Transient Occupancy Tax
Administering Agency ‐ City
The transient lodging tax is imposed on an individual for the privilege of occupying a room or rooms in a lodging facility unless such occupancy is for a period of more than 30 days. Rooms rented by employees of Federal and State government units while on business, are exempt. The rate for the City of Lindsay is 8 percent.

Utility User’s Tax
Administering Agency ‐ City
The Utility User’s Tax was adopted by the City Council effective November 30, 1994. The rate is 6% and applies to Water, Sewer, Refuse, Gas, Electricity, Telephone and Cable Television. The Ordinance allows a user to pay an annual maximum (tbd each year) to become exempt from any one service. Senior Citizens also qualify for a rebate of one‐third of their taxes paid if they request the rebate at the end of each fiscal year.

Building Permits
Administering Agency ‐ City
The building development fee is imposed on the addition or construction of new residential, commercial, or industrial units to provide for operation of Building Inspection Services pursuant to Section 304 of the Uniform Building Code. These permits include building, electrical, plumbing, mechanical and strong motion instrument. (earthquake).

Business Licenses
Administering Agency ‐ City
The business license tax is imposed on businesses for the privilege of conducting business within the City.

Generally the tax is either based on gross receipts or levied on a flat basis. 104
107
Court Fines
Administering Agency ‐ County
When a misdemeanor or infraction is committed within city boundaries, the City shares with the County all forfeitures of bail and al fines collected upon conviction in any municipal or justice court. Certain revenues from Vehicle Code fines and forfeitures must be issued for traffic safety purposes.

Other Fines
Administering Agency ‐ City
Miscellaneous fines levied by the Municipal Court of which the City receives a share for violations occurring within City boundaries.

Parking Fines
Administering Agency ‐ City
Finesfor violations ofthe City’s parking ordinance. The fine is currently $25.00 per violation.

Interest Income
Administering Agency ‐ City
The account reflects earningsfrom the investment of idle funds.

Rent, Small Business Incubator
Administering Agency ‐ City
Rents collected from the businesses that occupy the Small Business Incubator project. Rents are based on a graduated scale over three years. This is intended to help new businesses become a going concern before they relocate to the community.

Rent, Real Property
Administering Agency – City
Fees are collected for rent of the Multi‐purpose building, Park Arbors, Sweet Briar Plaza, Olive Bowl, and park areas owned and maintained by City.

Sale Personal Property
Administering Agency ‐ City
This account receives funds from the sale of City owned property. Examples of the types of property sold would include items declared as surplus, i.e. vehicles, bicycles, tools, etc.

Zoning Fees
Administering Agency‐City
105
108
These fees are established pursuant to Government Code Section 65250 “to provide funds necessary for work of the planning agencies”. The fees established represent the reasonable cost of providing service.

Fees are collected for entitlement applications, Environmental Assessments and Subdivision processing.

Rebates
Administering Agency‐City
This account receives various refunds, such as the annual retrospective adjustment.

Miscellaneous
Administering Agency‐City
This account receives various revenues, including pay phone revenue from the two pay phones on city property. This account also includes the S.B. 90 state mandated cost reimbursements.

Other Police Services
Administering Agency‐City
Fees charged by the police department for fingerprinting, report copies, blood alcohol fees, etc.

Operational Charges
Administering Agency‐ City
Charges collected and then distributed to the various enterprise funds to reimburse direct costs.

POST
Administering Agency State Commission on Peace Officer Standards and Training Partial training reimbursement for officers and dispatchers tuition, salary, subsistence and travel for POST authorized courses.

Animal Licenses/Fines/Misc.

Administering Agency‐City
Section 38972 of the Government Code authorizes cities to impose a dog license fee not to exceed the cost of providing servicesrelated to dogs.

Motor Vehicle Fines
Administering Agency‐City/
County Cities share with the County all fines collected upon conviction of a misdemeanor or an infraction in any municipal or judicial court and bail moneys forfeited following a misdemeanor or infraction charge when such a fine or forfeiture results from a misdemeanor or infraction committed within city boundaries.

Distribution of these revenues varies depending upon whether the fine or forfeiture is derived from a Vehicle Code violation or some other violation and upon the employing agency of the arresting officer.

Public Safety Augmentation Fund
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Administering Agency‐City
Proceeds from the half cent sales tax that is used to provide additional funding for new programs, services or supplies in the Public Safety Department.

Public Safety Gas Tank Cleanup
Admin Agency‐Water Quality Control Board
A grant from the State of California to cleanup the site of the old underground storage tank.

Bicycle License
Administering Agency‐City
Bicycles are licensed under Section 39000 et seq. of the Vehicle Code. Bicycle license revenue is restricted to support the licensing process, improve bicycle safety programs, etc.

Tulare County COPS Grant
Administering Agency‐State of California
A grant from the State of California to fund equipment in the Public Safety Department.

SLESF Grant
Administering Agency‐State of California
A grant from the State of California to fund a portion of overtime and various supplies in the Public Safety Department.

Curb & Gutter Payments
Administering Agency‐City
Payments received from individuals who have loans outstanding from the Curb and Gutter Revolving Loan Fund.

USDA Loan
Administering Agency‐City
Loans from the USDA to provide expansion of the City of Lindsay Library and Wellness Center including accessibility issues.

GAS TAX FUNDS
Gasoline Taxes
Administering Agency‐State Controller
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Citiesreceive a share of the revenues derived from the State taxes on gasoline. Under section 2105, 2106 2107, and 2107.5, each city receives a monthly share of the revenues on a per‐capita basis, divided into various funds for restricted street maintenance and construction uses.

Transportation Development Act
Administering Agency‐County
This fund was established to receive and expand the City’s allocation of Sales Tax under SB‐325. This bill reduced the State’s percentage of Sale Tax by 1/4% and allowed the counties within the State of California to increase their sales tax percentage by 1/4%. The funds generated by this 1/4% are allocated to the counties and a portion of this is then allocated to the cities within each county.

Measure R
Administering Agency‐TCAG
½ cent gastax passed by Tulare County residentsto addresstransportation issues; city receives a monthly portion of all funds collected within its boundaries and may submit major qualified projects for funding consideration to the TCAG Board.

ENTERPRISE FUNDS
Water
Administering Agency‐City
This find was established to record the operations of the water enterprise of the City. The City collects connection fees for the replacement of the water delivery system.

Refuse
Administering Agency‐City
The City collects user feesfrom businesses and residencesfor refuse service provide via contractor currently Mid‐Valley Disposal Services.

Sewer
Administering Agency‐City
This fund was established to record the operations of the sewer enterprise of the City. The City collects connection fees for the replacement of the sewer system McDermont Field House
Administering Agency‐City
Regional Recreational Center that generatesrevenuesthru user fees, membership fees, rental and special use fees. Coordinates all local recreation programs.

Wellness Center
Administering Agency‐City
Regional Wellness Center that generatesrevenuesthru user fees, membership fees, rental and special use fees. Coordinates all local aquatic and Wellness programs 108
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Special Pickups
Administering Agency‐City
Citizens can call and ask that we send a brush pickup truck out to their home to pickup various items that the normal refuse truck cannot handle.

Waste Water Capital Reserve‐interest
Administering Agency‐City
The interest earned on the balance in the reserve account.

SPECIAL USE FUNDS
Capital Improvement
Administering Agency‐City
New construction building permits are assessed at a 1% fee. These funds are used to purchase new parks and improve existing ones.

Landscape Assessment Districts
Administering Agency‐City
Landowners in new developments are assessed through the County Tax Collectors office for the amount necessary to fund the operations and maintenance ofthe landscape districtssurrounding their developments.

UDAG‐Interest
Administering Agency‐City
The interest earned on the balance in the reserve account.

Housing and Economic Development
Administering Agency‐City
Grants received from various State and Federal Agencies (C.D.B.G., S.R.R.P.,F.M.H.A.) for various housing and economic development purposes.

Storm Drain System‐Assessments
Administering Agency‐City
A fee placed on all new buildingsfor the construction ofstorm drains.

CCPI Pond & Pipeline (Land Application)
Administering Agency‐City
The City pays an annual lease payment for the use of land. CCPI reimbursesthe City for the cost of this lease. 109
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ATTACHMENT 7: Glossary of Procurement Terms
Brand Name Or Equal Specifications.

A specification limited to one or more items by manufacturers’ names or catalog numbers to describe the standard of quality, performance, and other salient characteristics needed to meet City requirements, and which provides for the submission of equivalent products.

Brand Name Specifications.

A specification limited to one or more items by manufacturers’ names or catalognumbers.

Business.

Any corporation, partnership, individual, sole proprietorship, joint stock company, joint venture, or any other private legal entity.

Business, Local.

Any corporation, partnership, individual, sole proprietorship, joint stock company, joint venture, or any other private legal entity, which maintains a physical working office within the geographic boundaries of the City of Farmersville.

Buyer.

A professionally trained person employed by Procurement Services to obtain materials and services for City departments, in accordance with all state and local laws and internal City policies and procedures.

Change Order.

A written order signed and issued by the Purchasing Agent, or his designee, directing the supplier or contractor to make changes or modifications to an order. The change order may make written alteration to the specifications, delivery point, rate of delivery, period of performance, price, quality, quantity, or other provisions of the contract.

Contract.

Any authorized City agreement, regardless of what it is called (purchase order, contract, etc.), for the procurement of supplies, equipment, services, or construction.

Contractor.

Any person having a contract with the City.

Construction.

The erection or assembly of large structures. The term construction is, to a significant degree, synonymous with building, but in common usage it most often is applied to such major works as buildings, ships, aircraft, and public works such as roads, dams, and bridges.

Cost Analysis.

The evaluation of cost data for arriving at costs actually incurred or estimates of costs to be incurred, pricesto be paid, and costs to be reimbursed.

Cost Data.

Factual information concerning the cost of labor, material, overhead, and other cost elements that are expected to be incurred, or which have been actually incurred, by the contractor in performing the contract; or that are expected to be incurred by the City in the use of the equipment or material to be purchased. 110
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Cost Reimbursement Contract.

A contract under which a contractor is reimbursed for costs which are allowable and allocable in accordance with the contract terms and the provisions, and a fee or profit, if any.

Emergency Purchase Order.

An emergency purchase order results when a situation arises in which compliance with normal procurement practice is impracticable or contrary to the public interest.

Employee.

An individual drawing a salary or wagesfrom the City, whether elected or not; any non‐compensated individual performing personal services for the City or any department, agency, commission, council, board, or any other entity established by the executive or legislative branch of the City; and any non‐compensated individual serving as an elected official of the City.

Fixed Asset.

All City equipment and other assets with a purchase price of $5,000 or more, including tax and delivery, and relatively permanent.

Formal Bids.

Formal bids are those that are obtained by written solicitation. The bids are received in writing by a set date and time. The bids are publicly opened by Procurement Services. The written bids and the bid summary are maintained by Procurement Services.

Gratuity.

A payment, loan, subscription, advance, deposit of money, service, or anything of more than nominal value, present or promised, unless consideration of substantially equal or greater value is received Immediate Family.

A spouse, children, parents, brothers, and sisters.

Informal Quotes.

Informal quotes are offers made by vendors. The quotes may be verbal, electronic, or written. The Buyer maintains a summary of the quotes received.

Invitation for Bids.

All documents, whether attached or incorporated by reference utilized for soliciting sealed bids. Invitations for Bids (IFB) are awarded to the lowest responsive and responsible bidder(s).

Local Business. (See Business, Local).

Personal Services Contract.

An accepted meansfor providing specialized tasks, which cannot be as effectively accomplished by the regular work force.

Prevailing Wage.

In accordance with Labor Code Sections 1770‐1773 prevailingwagesmust be paid to all workers on a “public works” project when the project is over $1,000.
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Price Analysis.

The evaluation of price data, without analysis of the separate cost components and profit asin cost analysis, which may assist in arriving at prices to be paid and costs to be reimbursed.

Pricing Data.

Information concerning prices for items substantially similar to those being procured. Pricesin this definition refer to offered or proposed selling prices, historical selling prices and current selling prices. The definition refers to data relevant to both prime and sub‐contract prices.

Procurement.

The buying, purchasing, renting, leasing, trading, or otherwise acquiring of any supplies, equipment,services, or construction. It also includes all functions that pertain to the obtaining of any supplies, equipment, services, or construction, including descriptions of requirements, selection and solicitation of sources, preparation and award of contracts, and all phases of contract administration.

Procurement Policy.

Procurement governing document approved by resolution by the City Council of Farmersville.

Public Works Project.

As defined in Public Contract Code § 20150.2, "public project"means: a project forthe erection, improvement, and repair of public buildings and works.

Purchase Order.

City’s commitment for the value of the material or service ordered. It is a legal document.

Request for Proposals.

All documents, whether attached or incorporated by reference, utilized for soliciting proposals. Requestsfor Proposals (RFP) are generally awarded based on several evaluation factors, including price.

Requesting Department.

Any department, commission, board, or agency requiring supplies, equipment,services, or construction.

Responsible Bidder or Offeror.

A person who hasthe capability in all respectsto perform fully the contract requirements, and the tenacity, perseverance, experience, integrity, reliability, capacity, facilities, equipment, and credit which will assure good faith performance, and who has submitted a bid that conforms in all material respects to the requirements set forth in the solicitation.

Services.

The furnishing of labor, time, or effort by a contractor, not involving delivery of a specific product other than reports which are merely incidental to the required performance.

Specification
Any description or scope of work of the physical or functional characteristics or of the nature of supplies, equipment,service, or construction. It may include a description of any requirement for inspection, testing or delivery of supplies, equipment, services, or construction.

Supplier List.

A list of potential bidders, listed by commodity codesfor materials and servicesfurnished. 112
ATTACHMENT 8: GLOSSARY OF TERMS
Absentee Owner
Property owner who owns property at one location, but lives or operates a business at another location.

Accountability:

Being obligated to explain one’s actions, to justify what one does. Accountability requires governments to answer to the citizenry—to justify the raising of public resources and the purposes for which they are used.

Governmental accountability is based on the belief that the citizenry has a “right to know,” and a right to receive openly declared facts that may lead to public debate by citizens and their elected representatives.

Accrual Basis of Accounting:

A method of accounting that recognizes the financial effect of transactions, events, and inter‐fund activities when they occur, regardless of the timing of related cash flows.

Accrued Interest:

The accumulated interest due on a bond or loan as of the last interest payment made by the issuer.

Accumulated Depreciation:

A valuation account to record the accumulation of periodic credits made to record the expiration of the estimated service life of fixed assets.

Activity:

A specific and distinguishable service performed by one or more organizational components of a government to accomplish a function for which the government is responsible (e.g., police is an activity within the public safety function).

Actuarial Accrued Liability:

Term used in connection with defined benefit pension plans. That portion, as determined by a particular actuarial cost method, of the actuarial present value of pension plan benefits and expenses which are not provided for by future normal costs.

Actuarial Assumptions:

Term used in connection with defined benefit pension plans. Assumptions asto the occurrence of future events affecting pension costs,such as: mortality, withdrawal, disability and retirement; changesin compensation and government‐provided pension benefits; rates of investment earnings and asset appreciation or depreciation; procedures used to determine the actuarial value of assets; characteristics of future entrants for open group actuarial cost methods; and other relevant items.

Actuarial Cost Method:

Term used in connection with defined benefit pension plans. A procedure for determining the actuarial present value of pension benefits and expenses and for developing an actuarially equivalent allocation of such value to time periods, usually in the form of a normal cost and an actuarial accrued liability.

Actuarial Value of Assets:

Term used in connection with defined benefit pension plans. The value of cash, investments, and other property belonging to a pension plan, as used by the actuary for the purpose of an actuarial valuation. The actuarial value of assets, which may represent an average value over time, normally differs from the amount 113
reported in the financial statements, which is a point‐in‐time measure (i.e., as of the date of the statement of net assets).

Ad Valorem Tax:

A tax assessed based on the dollar value of an item or activity. Typical examples are property taxes and sales taxes. Ad valorem taxes, contrast with per‐unit taxes,such as alcoholic beverage and cigarette taxes, which are assessed at a fixed dollar per unit purchased.

Administrative Budget:

Within the context of AB1X 26, this budget covers the administrative costs of Successor Agenciesto the former dissolved Redevelopment Agencies.

Adopted Budget:

The official budget as approved by the Lindsay City Council at the start of each fiscal year.

Advance Refunding:

A transaction in which new debt is issued to provide monies to pay interest on old, outstanding debt as it becomes due, and to pay the principal on the old debt either asit matures or at an earlier call date. An advance refunding occurs before the maturity or call date of the old debt, and the proceeds of the new debt are invested until the maturity or call date of the old debt. Most advanced refundings result in defeasance of debt.

Agency:

A debt security issued by a federal or federally sponsored agency. Federal agencies are backed by the full faith and credit of the U.S. Government. Federally sponsored agencies (FSA’s) are backed by each particular agency with a market perception that there is an implicit government guarantee. An example of a federal agency is the Government National Mortgage Association (GNMA). An example of a FSA is the Federal National Mortgage Association (FNMA).

Agency Fund:

One of the types of a Fiduciary Fund Type. Agency funds are used to report resources held by the reporting government in a purely custodial capacity (assets equal liabilities). Agency Funds typically involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments. Example: Plainview Water District.

AIMS ‐ Acclamation Insurance Management Services:

Third‐party adjusterthat administers all workmen’s compensation and liability claims on behalf of the City.

Amortization:

The systematic reduction of the amount owed on a debt issue through periodic payments of principal.

Annual Appropriated Budget:

The expenditure authority and related estimated revenues created by the appropriation bills or ordinances that are approved by the Lindsay City Council and signed into law by the Mayor. The annual appropriated budget would include all reserves, transfers, allocations, supplemental appropriations, and other legally authorized legislative and executive changes.

Annual Required Contribution (ARC):

Term used in connection with defined benefit pension plans. The employer’s mandated contribution for the year, calculated in accordance with certain parameters. The parameters include requirements for the 114
frequency and timing of actuarial valuations as well as for the actuarial methods and assumptions that are acceptable for financial reporting.

Appropriation:

A legal authorization granted by a legislative body to make expenditures and to incur obligations for specific purposes. An appropriation is usually limited in amount and as to the time when it may be expended.

Assessed Valuation:

A valuation set upon real estate or other property by a government as a basis for levying taxes. Assessed value multiplied by the tax rate determines the property tax.

Assessment District.

A defined area of land which will be benefited by the acquisition, construction or maintenance of a public improvement. An assessment district is not a separate government entity.

Audit:

A review of the City’s accounts by an independent auditing firm to substantiate year‐end fund balances, reserves, cash on hand, revenues, and expenditures.

Availability Criterion:

Principle of the modified accrual basis of accounting according to which revenues may only be recognized when they are collectible within the current period or soon enough thereafter to be used to pay liabilities.

Availability Period:

A specified period immediately following the close of the fiscal year by the end of which cash must be collected for related revenue to be recognized in accordance with the availability criterion of modified accrual accounting (the City of Lindsay period is July 1st thru August 31st).

Basis of Accounting:

The time of recognition, that is, when the effects of transactions or events should be recognized for financial reporting purposes. For example, the effects of transactions or events can be recognized on an accrual basis (that is, when the transactions or eventstake place), or on a cash basis (that is, when cash is received or paid).

Basis of accounting is an essential part of measurement focus because a particular timing of recognition is necessary to accomplish a particular measurement focus.

Betterment:

An addition made to, or change made in, a capital asset, other than maintenance, to prolong its life or to increase its efficiency or capacity. The cost of the addition or change is added to the book value of the asset.

The term “improvement’ is preferred.

Bid:

The indicated price at which a buyer is willing to purchase a security or commodity.

Blighted Areas:

Areas and/or structures of a community which constitute either physical, social, or economic liabilities requiring redevelopment in the interest of health, safety, and general welfare of the people of the community and the state.

Book Value:
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The value at which a security is carried on the inventory lists or other financial records of an investor. The book value may differ significantly from the security’s current value in the market.

Bond:

A written promise to pay a specific sum of money called the face value or principal amount, at a specified date or datesin the future, called maturity date(s), together with periodic interest at a specified rate. The difference between a note and a bond is that the latter runs for a period of time and requires greater legal formality.

Bond Resolution:

A legal order or contract by a governmental unit to authorize a bond issue. A bond resolution carefully details the rights of the bondholders and the obligations of the issuer.

Broker:

A broker brings buyers and sellerstogether for a commission. He or she does not take a position.

Budget:

A plan of financial operation embodying an estimate of proposed expenditures for a given period and the proposed means of financing them. Used without any modifier, the term usually indicates a financial plan for a single fiscal year. The term “budget” is used in two senses in practice. It can designate the financial plan presented to the appropriating body for adoption or the plan finally approved by that body.

Budget Document:

The instrument used by the budget‐making authority to present a comprehensive financial program to the appropriating body. The budget document usually consists of three parts. The first part contains a message from the budget‐making authority, together with a summary of the significant financial data supporting the summary. These schedules show in detail the information as to past years’ actual revenues, expenditures and other data used in making estimates. The third part is composed of drafts of the appropriation, revenue and borrowing measures necessary to put the budget in effect.

Budget Message:

A general discussion of the annual budget as presented in writing by the budget‐ making authority to the legislative body. The budget message should contain an outline of the government’s experience during the past period of financial reporting and its financial status at the time of message, and recommendations regarding the financial policy for the coming period.

Budgetary Control:

The control or management of a government or enterprise in accordance with an approved budget for the purpose of keeping expenditures within the limitations of available appropriations and available revenues.

Business‐Type Activities:

One of two classes of activities reported in the government‐wide financial statements. Business‐type activities are financed in whole or part by fees charged to external parties for goods or services. These activities are usually reported in Enterprise Funds.

California State Board of Equalization (BOE):

California state agency responsible for the collection and administration of the state’s sales and use, alcohol, tobacco, and other taxes. In addition the BOE determinesthe assessed value of certain properties and oversees property tax assessment practices of county assessors.
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California State Controller:

The Controlleristhe Chief Fiscal Officer of the state and is elected every four years. The controllerisresponsible to: account and disburse all state funds; determine the legality and accuracy of claims against the state; pay the state’s bills; audit and process all personnel and state payroll transactions; audit various state and local government programs; administer the Unclaimed Property Law; and inform the public of financial transactions of city, county and district governments.

Capital and Related Financing Activities:

Term used in connection with cash flowsreporting. Capital and related financing activities include (a) acquiring and disposing of capital assets used in providing services or producing goods, (b) borrowing money for acquiring, constructing, or improving capital assets and repaying the amounts borrowed, including interest, and (c) paying for capital assets obtained from vendors on credit.

Capital Assets:

Land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and all other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period.

Capital Expenditure:

A Capital Expenditure is an outlay of funds for fixed assets, including land, buildings, machinery, equipment, construction in progress, design in progress, improvements and infrastructure with an original cost of $5,000 or more.

Capital Improvements Plan (CIP):

A plan for capital expenditure to be incurred each year over a fixed period of yearsto meet capital needs arising from the long‐term work program of the City. It sets forth each project or other contemplated expenditure in which the government isto have a part and specifies the full resources estimated to be available to finance the projected expenditures.

Capital Improvement Projects (CIP) Fund :

A fund created to account for financial resourcesto be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds, special assessment funds, and trust funds).

Certificate of Deposit (CD):

A time deposit with a specific maturity evidenced by a certificate. Large denomination CD’s are typically negotiable.

Capital Outlay:

A budget category which includes all equipment having a unit cost of more than $500 and a useful life of more than one year.

Cash:

The term, used in connection with cash flow reporting, includes not only currency on hand, but also demand deposits with banks or other financial institutions. Cash also includes deposits in other kinds of accounts or cash management pools that have the general characteristics of demand deposit accounts in that the governmental enterprise may deposit additional cash at any time and also effectively may withdraw cash at any time without prior notice or penalty.

Cash Sale/Purchase:
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A transaction which callsfor delivery and payment ofsecurities on the same day that the transaction isinitiated.

Categorical Grant:

Grant typically allocated either to qualifying applicants according to a formula or to applicants competing for project grants through an application process. Categorical grants are the most common form of federal aid.

CAFR – City Annual Financial Report:
comprising the financial report of a state, municipal or other governmental entity that complies with the accounting requirements promulgated by the Governmental Accounting Standards Board CJSVRMA ‐ Central San Joaquin Valley Risk Management Authority:

Joint Powers Authority (JPA) to which the City is a member, along with 53 other Central Valley cities, for the purposed of pooling assets and sharing liability for workmen’s compensation and liability claims administration.

Collateral:

Term used in connection with deposits with financial institutions. Security pledged by a financial institution to a governmental entity for its deposit.

CDBG ‐ Community Development Block Grant:
is a flexible program that provides communities with resourcesto address a wide range of unique community development needs.

Component Unit:

A legally separate organization for which the elected officials of the primary government are financially accountable. In addition, component units can be other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading.

Consumer Price Index (CPI):

A statistical description of price levels provided by the U.S. Department of Labor. The change in this index from year to year is used to measure the cost of living and economic inflation.

Contributed Capital:

This equity is obtained from other sources (e.g., capital grants). Thus it is somewhat like “capital stock” and “paid‐in‐capital in excess of par” for private enterprises. Proprietary fund equity is divided into “contributed capital” and “retained earnings.”
Cost‐Reimbursement Basis:

Term used in connection with internal service funds. The setting of charges so that costs are systematically recovered on a break‐even basis over time.

County Assessor:

An elected official whose main duty is to set values on real property for the purpose of taxation within the county. The Assessor is responsible for the creation and maintenance of assessor parcels from final subdivisions, parcel maps, lot line adjustments, record of survey, deeds and miscellaneous documents.

County Auditor‐Controller:
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The chief accounting officer of the county established to provide various accounting and property tax administration services to the county and other local governments within the county. The Auditor‐Controller is responsible for budget control, disbursements and receipts, financial reporting, and for audits of certain agencies within the county. Auditor‐Controllers are nonpartisan elected officials serving four year terms.

County Treasurer‐Tax Collector:

Administersthe billing, collection, and reporting of property tax revenues and conducts Tax Defaulted Property Sales for real property tax delinquencies remaining after five years. Treasurer‐Tax Collectors are nonpartisan elected officials serving four‐year terms.

Credit Quality:

The measurement of the financialstrength of a bond issuer. This measurement helps an investor to understand an issuer’s ability to make timely interest payments and repay the loan principal upon maturity. Generally, the higher the credit quality of a bond issuer, the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by nationally recognized rating agencies.

Credit Risk:

The risk to an investor that an issuer will default in the payment of interest and/or principal on a security.

Current:

A term which, applied to budgeting and accounting, designates the operation of the present fiscal period as opposed to past or future periods. It usually connotes financial resources likely to be used or converted into cash within one year.

Current Yield (Current Return):

A yield calculation determined by dividing the annual interest received on a security by the current market price of that security.

Dealer:

A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his or her own account.

Debt Financing:

Issuance of bonds and other debt instrumentsto finance municipal improvements and services.

Debt Instrument:

Written pledge to repay debt such as bills, notes and bonds.

Debt Service:

Payment of principal and interest on long‐term indebtedness.

Debt Limit:

The maximum amount of gross or net debt that islegally permitted.

Debt Service Fund:

Governmental Fund Type used to account for the accumulation of resources for, and the payment of, general long‐term debt principal and interest.

Deferred Revenues:
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Resource inflows that do not yet meet the criteria for revenue recognition. Unearned amounts are always reported as deferred revenue. In governmental funds, earned amounts also are reported as deferred revenue until they are available to liquidate liabilities of the current period.

Deficit:
(1) The excess of liabilities of a fund over its assets. (2) The excess of expenditures over revenues during an accounting period, or in the case of proprietary funds, the excess of expenses over income during an accounting period.

Defined Benefit Pension Plan:

A pension plan having terms that specify the amount of pension benefits to be provided at a future date or after a certain period of time; the amount specified usually is a function of one or more factors such as age, years of service, and compensation.

Department:

An organizational unit comprised of divisions or programs. It is the basic unit of service responsible for encompassing a broad mandate of related activities.

Depreciation:

The expiration in the service life of fixed assets, other than wasting assets attributable to wear and tear, deterioration, action of the physical elements, inadequacy and obsolescence. (2) The portion of the cost of a fixed asset other than a wasting asset which is charged as an expense during a particular period. In accounting for depreciation, the cost of a fixed asset, is charged with a portion of such cost. Through this process, the entire cost of asset is ultimately charged off as an expense.

Development Impact Fees:

Fees placed on the development of land or conditionsrequired for the approval of a development project such as the donation (“dedication” or “exaction”) of certain lands (or money) to specific public uses. The fees are typically justified as an offset to the future impact that development will have on existing infrastructure.

Direct Costing:

Term used in connection with the valuation of capital assets. Use of source data (e.g., invoices) to establish the historical cost of a capital asset.

DOF – Department of Finance:

Department within the city that operates asthe financial entity for the city.

Documentary Transfer Tax:

Tax imposed on documentsrecorded in the transfer of ownership in real estate as distinguished from a Real Property Transfer Tax which may only be imposed by Charter Cities.

Duration:

A measure of the timing of the cash flows, such as the interest payments and the principal repayment, to be received from a given fixed‐income security. This calculation is based on three variables: term to maturity, coupon rate, and yield to maturity. The duration of a security is a useful indicator of its price volatility for given changes in interest rates.

Earmarked Funds:

Fundsthat have been tagged or “earmarked” for a specific purpose. 120
Economic Resources Measurement Focus:

Measurement focus under which the aim of a set of financial statements is to report all inflows, outflows, and balances affecting or reflecting an entity’s net assets. The economic resources measurement focus is used for proprietary and fiduciary funds, as well as for government‐wide financial reporting. It also is used by business enterprises and not‐for‐profit organizations in the private sector.

Effectiveness:

Term used in connection with the evaluation of internal controls and performance measurement. The degree to which an entity, program, or procedure is successful in achieving its goals and objectives.

Efficiency:

Term used in connection with the evaluation of internal controls and performance measurement. The degree to which an entity, program, or procedure is successful at achieving its goals and objectives with the least use of scarce resources. Efficiency necessarily presupposes effectiveness.

Eminent Domain:

Authority of a government agency to acquire property for public purposes (not to be confused with meaning public buildings and improvements only). Also known as condemnation.

Encumbrances:

Commitmentsrelated to unperformed contractsfor goods and services.

Enforceable Obligation:

Obligations of the former Redevelopment Agency to be paid by the Successor Agency. Enforceable Obligations include: Bonds. Loans borrowed by the redevelopment agency for a lawful purpose, including money borrowed from the Low and Moderate Income Housing Fund to the extent they are legally required to be paid pursuant of a required repayment schedule. Payments required to the federal government, preexisting obligations to the State or obligations imposed by state law, or legally enforceable payments required in connection with the agencies’ employees. Tax sharing payments are not Enforceable Obligations as they will be paid by the County Auditor‐Controller. Judgments or settlements entered by a competent court of law or binding arbitration. Any legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy. Contracts or agreements necessary for the continued administration or operation of the redevelopment agency including agreements to purchase or rent office space, equipment, supplies and pay‐ related expenses. Amounts borrowed from or payments owed to the Low and Moderate Income Housing Fund that had been deferred as of the effective date of Part 1.9 provided that the repayment schedule is approved by the Oversight Board. Enforceable Obligations do not include any agreements, contracts or arrangements between the community and the former Redevelopment Agency except (1) written agreements entered at the time of issuance and not later than December 31, 2010, and loan agreements within two years of creating the Redevelopment Agency or project area (Health and Safety Code 34167(d) & 3417(d).

Enforceable Obligations Payment Schedule (EOPS):

A list of legally enforceable financial obligations of the former Redevelopment Agency. The Enforcement Obligations Payment Schedule (EOPS) must include the project name associated with the obligations; payee; short description of the nature of the work, product,service, facility, or other thing of value for which payment is to be made and the amount of payments obligated by month. Payment schedules for bonds and employee agreements may be aggregated. The Schedule had to be adopted at a public meeting of the Redevelopment Agency and posted on the Redevelopment Agency’s web site. The schedule may be amended 121
at any public meeting. The Enforcement Obligations Payment Schedule (EOPS) had to be transmitted by mail or electronic means to the County Auditor‐Controller and the Department of Finance (DOF).

Enterprise Fund:

This fund type accounts for operations that are financed and run like a private business. It enables the governing body to provide goods or servicesto the general public on a continuing basis through user charges.

Excise Tax:

Tax placed on a person for a voluntary act, making the tax avoidable. It includes sales and use tax, business license tax, transient occupancy tax (TOT) utility users tax, etc. Phrase “excise tax” is most commonly used to refer to a parcel tax.

Exemption:

The exclusion from the tax base of certain types of transactions or objects. For example, federally owned land is exempt from property taxes.

Expenditures:

Decreases in net financial resources. Expenditures include current operating expenses which require the current or future use of net current assets, debt service and capital outlays. It includes the measurement focus classified as other financing uses.

Fair Value:

Term used in connection with the valuation of investments. The amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

Federal Deposit Insurance Corporation (FDIC):

A Federal agency that insures bank deposits, currently up to $250,000 per deposit.

Federal Accounting Standards Advisory Board:

Authoritative standard‐setting body responsible for establishing Generally Accepted Accounting Principles (GAAP) for the federal government.

Federal Funds (Fed Funds):

Funds placed in Federal Reserve banks by depository institutions in excess of current reserve requirements.

These depository institutions may lend fed funds to each other overnight or on a longer basis. They may also transfer funds among each other on a same‐day basis through the Federal Reserve banking system. Fed funds are considered to be immediately available funds.

Federal Funds Rate:

Interest rate charged by one institution lending federal fundsto the other.

Federal Reserve System:

The central bank of the United States created by Congress and consisting of a seven‐member Board of Governors in Washington, D.C.; 12 regional banks and about 5,700 commercial banks are members of the system.

Fee:

A charge to the consumer for the cost of providing a particular service. California government fees may not exceed the estimated reasonable cost of providing the particular service or facility for which the fee is charged, plus overhead.
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Fiduciary Funds:

Funds used to report assets held in a trustee or agency capacity for others and which therefore cannot be used to support the government’s own programs. The Fiduciary Fund category includes pension (and other employee benefit) trust funds, investment trust funds, private‐purpose trust funds and agency funds.

Final Amended Budget:

Term used in connection with budgetary reporting. The original budget adjusted by all reserves, transfers, allocations, supplementary appropriations, and other legally authorized legislative and executive changes applicable to the fiscal year, whenever signed into law or otherwise legally authorized.

Financial Accountability:

Term used in connection with the definition of the financial reporting entity. The level of accountability that exists if a primary government appoints a voting majority of an organization’s governing board and is either able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. A primary government may also be financially accountable for governmental organizations with a separately elected governing board, a governing board appointed by another government, or jointly appointed board that is financially dependent on the primary government.

Financial Accounting Standards Board (FASB):

The authoritative accounting and reporting standard‐ setting body for business enterprises and not‐for‐profit organizations. The FASB is the direct successor of the Committee on Accounting Procedure and the Accounting Principles Board. The GASB and its predecessors have elected to apply a number of FASB’s standards, as well as those of its predecessors, to state and local governments.

Financial Audits:

Audits designed to provide independent assurance ofthe fair presentation of financial information.

Financial Resources:

Resources that are or will become available for spending. Financial resources include cash and resources ordinarily expected to be converted to cash (e.g., receivables, investments). Financial resources also may include inventories and pre‐paids (because they obviate the need to expend current available financial resources).

Finding:

Term used in conjunction with public‐sector auditing. Published communication of an internal control weakness or instance of noncompliance in connection with an audit conducted in accordance with GAGAS.

Fines, Forfeitures and Penalties:

Revenuesreceived and/or bail moniesforfeited upon conviction of a misdemeanor or municipal infraction.

Fiscal Accountability:

The responsibility of governments to justify that the actions in the current period have complied with public decisions concerning the raising and spending of public moneys in the short term (usually one budgetary cycle or one year). This term is used in contrast to operational accountability.

Fiscal Funding Clause:
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Term used in connection with capital leases. A clause in a lease agreement that generally provides that the lease is cancelable if the City Council or other funding authority does not appropriate the funds necessary for the government unit to fulfill its obligations under the lease agreement.

Fiscal Year:

A 12‐month period to which the annual operating budget applies and at the end of which a government determines its financial position and the results of its operation. Nearly all city fiscal years begin on July 1 and end June 30 of the following year.

Five percent Criterion:

Second of two tests used to determine whether a given governmental fund or enterprise fund must be reported as a major fund in the basic financial statements. This test is applied to the combined total assets, liabilities, revenues or expenses/expenditures of all governmental and enterprise funds for which the 10 % criterion has been met.

Fixed Assets:

Assets of a long‐term nature which are intended to continue to be held or used such as land, buildings, improvements other than buildings, machinery, and equipment.

Former Redevelopment Agency:

A Redevelopment Agency that has been dissolved in accordance with AB1X26.

Franchise Act of 1937:

Like the Broughton Act, restricts franchise collections to 2% of gross annual receipts, but includes a minimum fee of 2% of gross annual receipts, and includes a minimum fee of ½% of gross annual receipts for electric franchises or 1% of gross annual receipts for gas or water franchises operating within the City limits.

Franchise Fee:

A fee levied upon utilities operating within the City limits which is based upon the grossrevenueof the utility.

Full Accrual:

This accounting method recognizes transactions and events as revenues/gains and expenses/losses when they occur, regardless of the timing of related cash flows. Proprietary funds rely upon this accounting method. In contrast, governmental funds rely upon “modified accrual” accounting.

Full Faith and Credit:

Pledge by issuer of general obligation to bondholders that issuer “guarantees all available funds” be used to pay bondholders should the project go into default.

Function:

A group of related activities aimed at accomplishing a major service or regulatory program for which a government is responsible (e.g., public safety).

Functional Revenue:

Revenuesthat can be associated with and allocated to one or more expenditure function and which meet one of the following criteria: (1) the revenue is generated from direct services, such as revenue from fees or charges; (2) the revenue associated with a specific service by external requirements, such as grant conditions, bond sale agreements, or statutory or charter requirements.

Fund:
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An independent fiscal and accounting entity with a self‐balancing set of accounts which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.

Fund Balance:

The difference between assets and liabilitiesreported in a Governmental Fund.

Fund Classifications:

One of three categories(Governmental, Proprietary, and Fiduciary) used to classify account fund types.

Fund Type:

One of 11 classifications into which all individual funds can be categorized. Governmental Fund Types include the General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, and Permanent Funds.

Proprietary Fund Types include Enterprise Funds and Internal Service Funds. Fiduciary Fund Types include Pension (and other employee benefit) Trust Funds, Investment Trust Funds, Private‐ Purpose Trust Funds, and Agency Funds.

General Fixed Assets:

Fixed assets used in operations accounted for in governmental funds. General Fixed Assets include all fixed assets not accounted for in proprietary funds or in trust and agency funds.

General Fund:

The General Fund is one of five Governmental Fund Types and typically serves asthe chief operating fund of a government. This fund is used to account for all financial resources except those required to be accounted for in another fund.

General Law City:

A city that has not adopted a charter and is therefore bound by the State’s general laws, even with respect to municipal affairs. In contrast, charter cities have authority over “municipal affairs,” trumping state law governing the same topic.

General Obligation (GO) Bonds:

Bondsfor the payment of which the full faith and credit of the issuing government are pledged.

General Revenues:

All revenues that are not required to be reported as program revenues. All taxes, even those that are levied for a specific purpose, are general revenues and should be reported by the type of tax‐‐‐for example, sales tax, property tax, franchise tax, income tax. All other non‐tax revenues (including interest, grants, and contributions) that do not meet the criteria to be reported as program revenues should also be reported as general revenues.

General Tax:

A tax imposed for general governmental purposes, the proceeds of which are deposited into the General Fund.

A majority vote of the electorate is required to impose, extend or increase any general tax.

Generally Accepted Accounting Principles (GAAP):

The conventions, rules, and proceduresthat serve asthe norm for the fair presentation of financialstatements.

The various sources of GAAP for state and local government are set forth by SAS NO. 69, The Meaning of “Present in Conformity with Generally Accepted Accounting Principles” in Independent Auditor’s Report. 125
Generally Accepted Government Auditing Standards (GAGAS):

Standards for the conduct and reporting of both financial and performance audits in the public sector. The General Accounting Office promulgates GAGAS through its publication Government Auditing Standards, commonly known as the Yellow Book. The basic GAGAS standards are classed into three broad categories:
general standards, fieldwork standards, and reporting standards. The general standards of GAGAS establish separate fieldwork and reporting standards for financial audits and performance audits. The fieldwork standards and reporting standards used for financial audits build upon the standards of fieldwork and the standards of reporting of GAGAS.

Governmental Accounting Standards Board (GASB):

The ultimate authoritative accounting and financial reporting standard‐setting body for state and local governments. GASB was established in June 1984 to replace National Council on Government Accounting (NCGA).

Governmental Activities:

Activities generally financed through taxes, intergovernmental revenues, and other non‐exchange revenues.

These activities are usually reported in governmental funds and internal service funds.

Governmental Funds:

Funds generally used to account for tax‐supported activities. There are five different types of governmental funds: the General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, and Permanent Funds.

Grants:

Contributions of cash or other assets from another governmental agency to be used or expended for a specific purpose, activity or facility.

Homeowner’s Property Tax Relief:

Revenue from the state to offset city loss of property tax for state‐ imposed $7,000 per dwelling homeowner exemption.

IT – Information Technology:
the study or use of systems (especially computers and telecommunications) for storing, retrieving, and sending information.

Improvement:

An addition made to, or change made in, a capital asset, other than maintenance, to prolong its life or to increase its capacity. The cost of the addition or change is added to the book value of the asset.

Improvement Bond Act of 1915:

State law which allows cities, counties, and “public” districtsto issue assessment bonds and bond anticipation notes. The Improvement Bond Act of 1915 Act does not authorize assessments.

Improvements Other than Buildings:

A fixed asset account which reflects acquisition value of permanent improvements other than buildings, which add value to land. Examples of such improvements are fences, retaining walls, sidewalks, pavements, gutters, tunnels, and bridges.

Indebtedness Obligation:
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Under Health and Safety Code Section 3417(e), Indebtedness Obligation means bonds, notes, certificates of participation (COP), or other evidence of indebtedness issued or delivered by the (former) Redevelopment Agency, or by a joint exercise of powers authority to third‐party investors or bondholders to finance redevelopment Projects.

Independent Auditor:

Auditors who are independent, both in fact and appearance, of the entities they audit. Both GAAS and GAGAS set specific criteria that must be met for an auditor to be considered to be independent.

Indirect Expenses:

Expensesthat cannot be specifically associated with a given service, program, or department and thus, cannot be clearly associated with a particular functional category.

Infrastructure:

Long‐lived capital assetsthat normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems.

Interfund Transfers:

Flows of assets (such as cash or goods) between funds and blended component units of the City of Lindsay without equivalent flows of assetsin return and without a requirement for repayment. (Transfer Out – Transfer In)
Internal Control Framework:

An integrated set of policies and procedures designed to assist management to achieve its goals and objectives.

To be truly comprehensive, a government’s internal control framework must (a) provide a favorable control environment, (b) provide for the continuing assessment of risk, (c) must provide for the design, implementation, and maintenance of effective control‐ related policies and procedures, (d) must provide for the effective communication of information, and (e) must provide for the on‐going monitoring of the effectiveness of control‐related policies and procedures as well as the resolution of potential problems identified by controls.

Internal Service Funds:

Proprietary Fund Type that may be used to report any activity that provides goods or services to other funds, departments, or agencies of the primary government and its component units, or to other governments, on a cost‐reimbursement basis.

Inventory:

A detailed list showing quantities, descriptions and values of property, and, frequently, units of measure and unit prices.

Investments:

Securities and real estate held for the production of revenues in the form of interest, dividends, rentals or lease payments. The term does not include fixed assets used in governmental operations.

Investment Activities:

Term used in connection with cash flows reporting. Investing activities include making and collecting loans (except program loans) and acquiring and disposing of debt or equity instruments.

Investment Earnings:
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Revenue earned from the investment of idle public funds.

Investment Policy:

A concise and clear statement of the objectives and parameters by institutional investors under the prudent person rule. Investment‐grade is restricted to those obligations rated BBB or higher by a rating agency.

Joint Powers Authority (JPA):

The Joint Exercise of Powers Act authorizes local public agencies to exercise common powers and to form joint powers authorities(“JPA”) for the purpose of jointly receiving or providing specific services. Example: CSJVRMA for Work Comp & Liability.

LAIF (Local Agency Investment Fund):

A special fund in the State Treasury which local agencies may use to deposit funds for investment. State law prohibits LAIF from impounding any depositor’s funds and prohibits the fund from declaring bankruptcy. The LAIF fund is highly liquid in addition to being considered one of the most conservative of all investments. State statutes define and authorize the permissible investments of the fund.

Land:

A fixed asset account which reflectsthe cost of land owned by the City of Lindsay or the Successor Agency for the former Lindsay Redevelopment Agency.

Landscaping and Light Act of 1972:

The 1972 Act lets cities, counties and special districtslevy assessmentsfor land purchase and the construction, operation, and maintenance of parks, landscaping, lighting, traffic signals and graffiti abatement.

Landscape and Lighting Assessment District (LLAD):

An area of the City established in accordance with State law where residents pay an annual assessment for a service which specifically benefits them. This area of the law is much broader in defining services eligible for funding than that portion of the law relating to Benefit Assessment Districts (BAD). As such, a broader range of services are funded by Landscaping and Lighting Assessment Districts including park maintenance, street lighting and graffiti removal.

Lapse Period:

A specified time at the beginning of a given budget period during which encumbrances outstanding at the end of the prior budget period may be liquidated using the prior year’s budgetary authority. Many governments avoid the use of a lapse period by automatically appropriating as part of each new budget an amount sufficient to cover encumbrances outstanding at the end of the prior budget period.

Levy:
(Verb) To impose taxes, special assessments or service charges for the support of governmental activities; (noun) the total amount of taxes, and/or special assessments and/or service charges imposed by a governmental agency.

Licenses and Permits:

Charge designated to reimburse City for costs of regulating activities being licensed, such as licensing of animals, bicycles, yard sales, etc.

Lien:

A claim on assets, especially property, forthe payment of taxes or utility service charges. 128
Limited Obligation Bonds:

Similar to general obligation bonds except that security for the issuance is limited exactly to the revenues pledged in the bond statement and not to the full faith and credit of the City.

Liquidity:

A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be sold or purchased at those quotes.

Local Government Investment Pool:

An investment by local governmentsin which their money is pooled as a method for managing local funds.

LUSD – Lindsay Unified School District:

There are a number of joint‐use agreements between the school district and the city that provides for facility sharing which significantly reduces the cost for both parties.

Machinery and Equipment:

Tangible property of a more or less permanent nature, other than land or buildings, and improvements thereon. Examples are machinery, tools, trucks, automobiles, furniture, and furnishings.

Maintenance of Effort (MOE):

A requirement, often as a condition of an intergovernmental subvention or supplemental tax, to maintain a level of spending at a certain level. Maintenance of Effort (MOE) requirements are intended to prevent or limit the use of the additional revenues to supplant existing revenues such that the new revenues result in an increase in the level of program spending and services.

Major Fund:

A governmental fund or enterprise fund reported as a separate column in the basic fund financial statements.

The General Fund is always a major fund. Otherwise, major funds are funds whose revenues, expenditures/expenses, assets, or liabilities (excluding extraordinary items) are at least 10 % of corresponding totals for all governmental or enterprise funds and at least five percent of the aggregate amount for all governmental and enterprise funds for the same item. Any other government or enterprise fund may be reported as a major fund if the government’s officials believe that fund is particularly important to financial statement users.

Major Program:

Term used in the context of Single Audits. As part of the Single Audit, the independent auditor must gain an understanding of internal controls over compliance for each major federal award program and then test those controls. In addition, the independent auditor must render an opinion on whether the government complied with laws, regulations, and provisions of controls or grant agreements that could have a direct and material effect on each federal award program.

Market‐Based Pricing:

Recent trend in pricing public services which uses the marketplace to regulate individual consumer behaviors consistent with overall societal goals by including the true cost of the service on society.

Market Risk:

The risk that the value of a security will rise or decline as a result of changes in market conditions.

Market Value:
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(1) What a willing seller could reasonably expect to receive if he or she were to sell the property on the open market to a willing buyer; (2) current market price of a security.

Marks‐Roos Bonds:

Bonds authorized by the Marks‐Roos Local Bond Pooling Act of 1985 which provide local agencies with flexible financing powers through participation in joint powers authorities.

Matching Requirement:

A requirement that a grant recipient contribute resources to a program that equals or exceed a predetermined percentage of amounts provided by the grantor.

Material Weakness:

A reportable condition (internal control weakness) of such magnitude that it could potentially result in material misstatement of financial statements.

Materiality:

The magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement. The objective of accountability in governmental financial reporting adds another perspective to materiality. Specifically, accountability requires materiality to be judged not only in a quantitative manner but also in a qualitative manner. That is, accountability involves such issues as legal and contractual compliance that may not have a “material” effect on the entity’s reported operating results and financial position, but that would influence or change the judgment of a reasonable person about how the government has conducted its affairs during the period.

Maturity:

The date upon which the principal or stated value of an investment becomes due and payable.

Measure R (2006):
½ cent sales tax passed by Tulare County residents to address major transportation needs within the County; local jurisdictionsreceive a monthly discretionary portion based on gastaxes collected within their boundaries; other major transportation improvement projects may be submitted to the Tulare County Association of Governments (TCAG), the governing body, for funding consideration.

Measurement Focus:

The objective of a measurement, that is, what is being expressed in reporting an entity’s financial performance and position. A particular measurement focus is accomplished by considering not only which resources, but also when the effects of transactions or events involving those resources are recognized (the basis of accounting). The measurement focus of government‐wide financial statements, Proprietary Fund financial statements, and Fiduciary Fund financial statements is economic resources. The measurement focus of Governmental Fund financial statements is current financial resources.

Mello‐Roos Bonds:

Bonds allowing cities, counties, school districts and special districts to finance certain public capital facilities and services, especially in developing areas and areas undergoing rehabilitation. Property ownersin the Mello‐ Roos district pay an annual special tax which is included on the property tax bill.

Mello‐Roos Community Facilities Tax:
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Special non ad valorem tax imposed to finance public capital facilities and services in connection with new development.

MOU – Memorandum of Understanding:
isthe first stage in the formation of a formal contract.

Modified Accrual Basis:

The accrual basis of accounting adapted to the Governmental Fund Type‐ Spending Measurement Focus. Under it, revenues are recognized when they become both “measurable” and “available to finance expenditures of the current period.” Expenditures are recognized when the related fund liability is incurred except for the following: (1) inventories of materials and supplies which may be considered expenditures either when purchased or when used; (2) prepaid insurance and similar items which need not be reported; (3) accumulated unpaid vacation, sick pay and other employee benefit amounts which need to be recognized in the current period, but for which larger‐than‐normal accumulations must be disclosed in the notes to the financial statements; (4) interest on special assessment indebtedness which may be recorded when due rather than accrued, if approximately offset by interest earnings on special assessment levies; and (5) principal and interest on long‐term debts which are generally recognized when due. All government funds and expendable trust funds are accounted for using the modified accrual basis of accounting.

Money Market Investment:

A short‐term, highly liquid debt instrument, including commercial paper, bankers acceptances, and U.S.

Treasury and agency obligations. Asset‐backed securities, derivatives, and structured notes are not included in this term.

Motor Vehicle License Fee (VLF):

The motor vehicle license fee (VLF) is a fee for the privilege of operating a vehicle on public streets. The VLF is levied annually at 2% of the market value of motor vehicles and is imposed by the state “in lieu” of local property taxes. VLF is also called Motor Vehicle In‐ Lieu Tax.

Municipal Facilities Development Impact Fee:

A development impact fee levied upon new development to offset the impact that new development has upon specific City facilities and services.

National Association of Securities Dealers (NASD):

A self‐regulatory organization (SRO) of brokers and dealers in the over‐the‐counter securities business. Its regulatory mandate includes authority over firmsthat distribute mutual fund shares as well as othersecurities.

National Council on Governmental Accounting (NCGA):

The immediate predecessor of the GASB as the authoritative accounting and financial reporting standard‐ setting body for state and local governments. The NCGA issued seven statements and 11 interpretations prior to its dissolution in June 1984. These statements and interpretations remain in effect unless superseded by a subsequent GASB pronouncement.

Negotiated Sale:

What the price to be paid for land and improvements is mutually agreed upon by buyer and seller.

Net Asset Value:
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The market value of one share of an investment company, such as a mutual fund. This figure is calculated by totaling a fund’s assets which include securities, cash, and any accrued earnings, subtracting this from the fund’sliabilities and dividing thistotal by the number ofshares outstanding. Thisis calculated once a day based on the closing price for each security in the fund’s portfolio.

Net Income:

Proprietary fund excess of operating revenues, non‐operating revenues, operating transfers‐ in over operating expenses, non‐operating expenses, and operating transfers‐out.

Nominal Yield:

The stated rate of interest that a bond pays its current owner, based on per value of the security. It is also known as the “coupon”, “coupon rate”, or “interest rate.” Non‐Operating Revenues:

Proprietary Fund revenues which are directly related to the funds primary service activities. They consist primarily of user charges for services.

Number of Funds Principle:

The principle that only the minimum number of funds consistent with legal and operating requirementsshould be established, since unnecessary funds result in inflexibility, undue complexity, and inefficient financial administration.

Offer:

An indicated price at which market participants are willing to sell a security or commodity. Also referred to as the “Ask Price.”
Operating Activities:

Term used in connection with cash flowsreporting. Operating activities generally result from providing services and producing and delivering goods, and include all transactions and other events that are not defined as capital and related financing, non‐capital financing, or investing activities.

Operating Income:

The excess of proprietary fund operating revenues over operating expenses.

Operational Accountability:

Governments’ responsibility to report the extent to which they have met their operating objectives efficiently and effectively, using all resources available for this purpose, and whether they can continue to meet their objectives for the foreseeable future.

Original Budget:

The first complete appropriated budget. The original budget may be adjusted by reserves, transfers, allocations,supplemental appropriations, and otherlegally authorized legislative and executive changes before the beginning of the fiscal year. The original budget should also include actual appropriation amounts automatically carried over from prior years by law. For example, a legal provision may require the automatic rolling forward of appropriations to cover prior‐year encumbrances.

Ordinance:

A formal legislative enactment by the governing board of a municipality. If it is not in conflict with any higher form of law, such as a statute or a constitutional provision, it has the full force and effect of law within the boundaries of the municipality to which it applies. The difference between an ordinance and a resolution is 132
the latterrequireslesslegal formality and has a lower legalstatus. Ordinarily, the statutes or charter willspecify or imply those legislative actions which must be by ordinance and those which may be by resolution. Revenue raising measures such as the imposition of taxes, special assessments, and service charges universally require ordinances.

Other Financing Source:

An increase in current financial resourcesthat isreported separately from revenuesto avoid distorting revenue trends. The use of the other financing sources category is limited to items so classified by GAAP.

Other Financing Use:

A decrease in current financial resources that is reported separately from expenditures to avoid distorting expenditure trends. The use of the other financing uses category is limited to items so classified by GAAP.

Outcome Measures:

Term used in connection with service efforts and accomplishments reporting. Indicators that measure accomplishments or results that occur (at least partially) because of services provided. Results also include measure of public perceptions of outcomes.

Output Measures:

Term used in connection with service efforts and accomplishments reporting. Indicators that measure the quantity of services provided. Output measures include both measures of the quantity of service provided and measures of the quantity of a service provided that meets a certain quality requirement.

Parcel Tax:

Special non ad valorem tax on parcels of property generally based on either a flat per‐parcel rate or a variable rate depending on the size, use and/or number of units on the parcel.

Pass Through Agreements:

Agreements entered into by the former redevelopment agency (RDA) whereby some or all of the tax increment originating from a particular taxing agency is refunded.

Pension Plan:

An arrangement for the provision of pension benefits in which all assets accumulated for the payment of benefits may legally be used to pay benefits, including refunds of member contributions, to any of the plan members or beneficiaries, as defined in the terms of the plan.

Pension Trend Data:

Actuarially based data over time concerning the funding progress of a defined benefit pension plan and employer’s actual and annual required contributions to the plan.

Performance Audit:

Auditing designed to evaluate the effectiveness or efficiency of an organization, program, or activity.

Performance Measurement:

Commonly used term for service efforts and accomplishmentsreporting.

Portfolio:

Collection of investment securities held by the City of Lindsay.

Positive Yield Curve:

A chart formation that illustratesshort‐term securities having lower yieldsthan long‐term securities. 133
Possessory Interest:

Taxable private ownership of interest in tax‐exempt public property.

Primary Government:

Term used in connection with defining the financial reporting entity. A state government or general purpose local government such as the City of Lindsay is a primary government.

Prime Rate:

A preferred interest rate charged by commercial banksto their most creditworthy customers. Many interest rates are keyed to this rate.

Principal:

The face value or par value of a debt instrument. Also may refer to the amount of capital invested in a given security.

Private‐Purpose Trust Funds:

A Fiduciary Trust Fund Type used to report all trust arrangements, other than those properly reported in Pension Trust Funds or Investment Trust Funds, under which principal and income benefit individuals, private organizations, or other governments.

Program:

Group activities, operations or organizational units directed to attaining specific purposes or objectives.

Project Area:

The area which is designated in the redevelopment plan for redevelopment and revitalization.

Property Related Fee:

A levy imposed on a parcel or upon a person as an incident of property ownership for property‐related service.

Property Tax:

An ad valorem tax imposed on real property (land and permanently attached improvements) and tangible personal property (movable property).

Property Tax In Lieu of Vehicle License Fee (VLF):

Property tax shares and revenues allocated to cities and counties beginning in FY2004‐2005 as compensation for Vehicle License Fee (VLF) revenues previously allocated to cities and counties by the state.

Proposition 1A (2004):

Voter approved state constitutional amendment protecting most major city, county and special district revenues from reduction or shifting by the State Legislature.

Proposition 1A (2006):

Voter approved Constitutional amendment protecting the local allocation of state transportation sales tax revenues under Proposition 42 from reduction or shifting by the State Legislature.

Proposition 4 (1979):

Also called the Gann Initiative. This initiative is now Article XIIIB of the State Constitution, was drafted to be a companion measure to Proposition 13, Article XIIIA of the Constitution. Article XIIIB limits growth in government spending to changes in population and inflation. 134
Proposition 8 (1978):

An amendment to Proposition 13, passed in November 1978 to allow County Assessors to recognize declines in value for property tax purposes. Revenue and Taxation Code Section 51 requires the Assessor to annually enroll either a property’s Proposition 13 base year value factored for inflation, or its market value as of January 1st, whichever is less.

Proposition 13 (1978):

Article XIIIA of the California Constitution, commonly known as Proposition 13, which limits the maximum annual increase of any ad valorem tax on real property to 1% of the full cash value of such property.

Proposition 42 (2002):

Voter approved measure that directsthe State Legislature to allocate revenues derived from the taxable sales of gasoline to certain transportation programs including cities and counties.

Proposition 98 (1990):

This measure establishes a minimum level of funding for public schools and community colleges and provides that any state revenues in excess of the appropriations limit be spent on schools.

Proposition 111 (1994):

Voter approved measure that increased the state Motor Vehicle Tax by $0.09 per gallon and made certain adjustments to the spending limits under Proposition 4 (1979).

Proposition 172 (1993):

A 1993 measure which places a one‐half cent sales tax for local public safety in the Constitution effective January 1, 1994. The tax is imposed by the state and distributed to cities and counties.

Proposition 218 (1996):

A voter approved state Constitutional amendment, self‐titled “Right to Vote on Taxes Act” expanded restrictions on local government revenue‐raising, allowing votersto repeal or reduce taxes, assessments, fees, and charges through the initiative process; reiterating the requirement for voter approval for both “special taxes” and “general taxes,” and imposing procedural and substantive limitations on assessments of real property and on certain types of fees.

Proprietary Funds:

Funds that focus on the determination of operating income, changes in net assets (or cost recovery), financial position, and cash flows. There are two different types of Proprietary Funds: Enterprise Funds and Internal Service Funds.

Prudent Person Rule:

An investment standard. In some states, the law requiresthat a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state—the so‐called—“legal list”. In other states, the trustee may invest in a security if it is one which would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital.

Principal:
“Face or “par value” of an instrument. It does not include accrued interest.

Rate of Return:
135
The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity; on a bond, the current income return.

Real Property:

Land and permanently attached improvements.

Redevelopment:

Planning, development, re‐planning, redesign, clearance, reconstruction, or rehabilitation of all or part of a project area.

RDA ‐ Redevelopment Agency:

The former legislative body of the City of Lindsay designated to act on behalf of the City to direct the redevelopment of designated areas of the City of Lindsay in order to remove urban blight and enhance economic development.

Recognized Obligation:

Under AB1X 26, a Recognized Obligation is an obligation listed on the Recognized Obligation Payment Schedule.

Recognized Obligation Payments Schedule (ROPS):

The Recognized Obligation Payment Schedule (ROPS) is the document that sets forth the minimum payment amounts and due dates of payments required by Enforceable Obligations for each six‐month period. This Recognized Obligation Payment Schedule (ROPS) must be approved by the Oversight Board. Each January 16 and June 1, the County Auditor‐Controller allocatesrevenue from the Redevelopment Property Tax Trust Fund (RPTTF) back to each Successor Agency for payments listed on the Recognized Obligations Payment Schedule (ROPS).

Redevelopment Obligation Retirement Fund:

Accounting Fund created by the Successor Agency to the dissolved Redevelopment Agency that contains all of the assets of the former Redevelopment Agency.

Redevelopment Property Tax Trust Fund (RPTTF):

The Dissolution Act requires the County Auditor‐ Controller to allocate moneys in the Redevelopment Agency Property Tax Fund (RPTTF) for each Redevelopment Agency to (1) pay pass‐through payments to affected taxing entities in the amounts that would have been owed had the former Redevelopment Agency not been dissolved, (2) to enable the Successor Agency to pay enforceable obligations for the former Redevelopment Agency, including bonds, (3) to pay for administrative costs under the administrative budget approved by the Oversight Board and (4) pay schools and other taxing entities any remaining fund balance.

Rehabilitation:

To improve, alter, modernize or modify an existing structure to make it safe, sanitary, and decent and/or bring it up to building code standards.

Reimbursement Grant:

A grant for which a potential recipient must first incur qualifying expenditures to be eligible. Reimbursement grants are also referred to as “expenditure‐driven grants.” Reimbursement for State Mandated Costs:

Article XIIIB, Section 6 of the California Constitution which requires the state to reimburse local agencies for the cost of state‐imposed programs. Process is commonly called “SB 90” after its original 1972 legislation. 136
Regulatory Fee:

A charge imposed on a regulated action to pay for the cost of public programs or facilities necessary to regulate a business or other activity or mitigate the impacts of the fee payer on the community. A regulatory fee does not include a charge on a property or a property owner solely due to property ownership.

Reliability:

The principle that financial information should be verifiable, free from bias, and faithfully represent what it purports to represent.

Rents:

Revenuesreceived through the rental of public properties to private parties such as convention space, sports fields, Sweet Brier Plaza, and library facilities.

Reserved Fund Balance:

The portion of a Governmental Fund’s net assetsthat is not available for appropriation.

Resolution:

A special or temporary order of the legislative body requiring lessformality than an ordinance.

Restricted Assets:

Assets whose use is subject to constraints that are either (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation.

Restricted Net Assets:

A component of net assets calculated by reducing the carrying value of restricted assets by the amount of any related debt outstanding.

Retained Earnings:

Equity resulting from provision of goods and services. Proprietary fund equity is divided into “contributed capital” and “retained earnings.”
Revenue Bonds:

Bonds whereby the principal and interest are payable exclusively from the earnings of an Enterprise Fund. In addition to a pledge of revenues, such bonds sometimes contain a mortgage on the Enterprise Fund’s property.

Revenues:

Increases in governmental fund type net current assets from other than expenditures refunds and residual equity transfers. Under NCGA Statement 1, general long‐term debt proceeds and operating transfers‐in are classified as “other financing sources” rather than revenues. Increases in proprietary fund type net total assets from otherthan expense refunds, capital contributions, and residual equity transfers. Under NCGA 1, operating transfers‐in are classified separately from revenues.

Safekeeping:

A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection.

Sales Tax:

A tax imposed on the total retail price of any tangible personal property. 137
Secured Property:

As the property tax is guaranteed by placing a lien on the real property, secured property is that real property in which the value of the lien on the real property and personal property located thereon is sufficient to assure payment of the tax.

Secured Roll:

That property tax list containing all assessed property secured by land subject to local taxation.

Securities:

Investment instrumentssuch as bonds,stocks and otherinstruments of indebtedness or equity.

Serial Bond:

A bond issue, usually of a municipality, with various maturity dates scheduled at regular intervals until the entire issue is retired.

Service Charges:

Charges imposed to support services to individuals or to cover the cost of providing such services. The fees charged are limited to the cost of providing the service or regulation required (plus overhead).

Short‐Term Financing Methods:

Techniques used for many purposes, such as meeting anticipated cash flow deficits, interim financing of a project, and project implementation. Using these techniques involves issuance of short‐term notes. Voter approval is not required.

Sinking Fund:

Money accumulated on a regular basis in a separate custodial account that is used to redeem debt securities or preferred stock issues.

Single Audit:

An audit performed in accordance with the Single Audit Act of 1984 (as amended) and the Office of Management and Budget (OMB) Circular A‐133, Audits of States, Local Governments and Non‐Profit Organizations. The Single Audit Act allows or requires governments (depending on the amount of federal assistance received) to have one audit performed to meet the needs of all federal grantor agencies. The Single Audit Act was amended in 1996.

Special Assessment:

A compulsory levy made against certain properties to defray all or part of the cost of a specific capital improvement or service deemed to benefit primarily those properties.

Special Assessment District (SAD):

A geographic area established by notice of the City Council and with public approval for the purpose of making capital improvementssuch asthe construction ofstreets orsidewalks, orto accomplish some other public good through the financial participation and assessment of property owners within the area. The former Lindsay Improvement District (LID) fell in this category.

Special Revenue Fund:

A fund used to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or for major capital projects) that are legally restricted to expenditures for specified purposes. Under NCGA Statement 1, the use of Special Revenue Fundsisrequired only when legally mandated. 138
Special Tax:

A tax that is collected and earmarked for a special purpose and deposited into a separate account. A two‐ thirds vote of the electorate is required to impose, extend or increase any special tax.

Standby Charge:

A compulsory charge levied upon real property to defray in whole or in part the expense of providing operating or maintaining public improvements. The charge is “exacted forthe benefit which accruesto property by virtue of having water [or other public improvements] available to it, even though the water might not be used at the present time.” Proposition 218 classifies standby charges as “assessments” which must be imposed in compliance with Section 4.25 of Article XIIIB of the State Constitution.

Street Lighting Act of 1919:

Act authorizing citiesto fund the maintenance and operation ofstreet lights.

Successor Agencies:

Successor Agencies assumed all obligations, books, assets, properties, contracts and leases of the former Redevelopment Agency on February 1, 2012. Except for the provisions of the Community Redevelopment Law (CRL) that are repealed, restricted or limited by AB1X 26 (the Dissolution Act), all authority, rights, powers, duties and obligations of the former Redevelopment Agencies are vested in the Successor Agencies.

Subventions:

Subsidy or financialsupport received from county,state or federal government. The state and county currently levy certain taxesthat are “subvened” to cities, including motor vehicle license fees, state mandated costs and motor vehicle fuel tax, and Supplemental Law Enforcement Services Fund (SLESF).

Supplemental Property Tax:

In the event a property changes ownership, the county collects a supplemental property tax assessment in the current tax year by determining a supplemental value. In future tax periods, the property carries the full cash value.

Swap:

Trading one asset for another.

Tangible Personal Property:

Movable property.

Tax Allocation Bond:

A bond or financial obligation issued by the agency in orderto generate fundsto implement the redevelopment plan. The bond is repaid with tax increment flowing to the agency as a result of the agency’s revitalization of the project area.

Taxes:

Compulsory charges levied by a government for the purpose of financing services performed for the common benefit. This term does not include specific charges made against a particular person or property for current or permanent benefits such as special assessments. Neither does the term include charges for services rendered on those paying such charges as, for example, sewer service charges.

TCAG – Tulare County Association of Governments:
139
A JPA of Tulare County member cities and the Tulare County Board of Supervisors, which serves as the Tulare County Transportation Authority, to oversee projects using Measure R funds and to act as the oversight and pass‐thru agent for Local Transportation funds generated at the state level.

Tax‐Anticipation Notes:

Short‐term, interest‐bearing note issued by a government in anticipation of tax revenues to be received at a later date. The note is retired from the tax revenues to which it is related.

Tax Base:

The objects or transactions to which a tax is applied (e.g., parcels of property, retail sales, etc.). State law or local ordinances define the tax base and the objects or transactions exempted from taxation.

Tax Increment:

The increase in property taxes within the redevelopment project area that result from increases in the project area assessed value that exceeds the base year assessed value.

Tax‐Increment Financing:

Financing secured by the anticipated incremental increase in tax revenues, resulting from the redevelopment of an area.

Tax Rate:

The amount of tax applied to the tax base. The rate may be flat, incremental or a percentage of the tax base, or any other reasonable method.

Teeter Plan:

Enacted in 1949, an alternative method for allocating delinquent property tax revenues, authorized by Revenue and Taxation Code Section 4701, in which the County Auditor allocates property tax revenues based on the total amount of property taxes billed, but not yet collected. The county government then collects and keeps the delinquency, penalty and interest payments.

Timeliness:

The principle that financial statements must be issued soon enough after the reported events to affect decisions.

Total Return:

The sum of all investment income plus changes in the capital value of the portfolio. For mutual funds, return on an investment is composed of share price appreciation plus any realized dividends or capital gains. This is calculated by taking the following components during a certain time period. (Price Appreciation) + (Dividends Paid) + (Capital Gains) = Total Return.

Transactions and Use Tax:

Also known as an “add‐on local sales tax,” a tax imposed on the total retail price of any tangible personal property and the use or storage of such property when sales tax is not paid.

Transient Occupancy Tax (TOT):

Tax levied by cities on persons staying 30 days or less in a room(s) in a hotel, inn, motel, tourist home, non‐ membership campground or other lodging facility. Also called “Transient Lodging Tax” or “Hotel Tax.” The TOT rate for the City is currently 8%.

Treasury Bills (T‐Bills):
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A non‐interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year.

Treasury Bond:

Long‐term U.S. Treasury securities having initial maturities of more than ten years. Treasury Notes:

Intermediate‐term coupon bearing U.S. Treasury securities having initial maturitiesfrom one year to ten years.

Triple Flip:

A mechanism used to repay state fiscal recovery bonds pursuant to Proposition 57 of 2004. Under the triple flip, the local sales and use tax rate is reduced from 1% to 0.75% with the 0.25% diverted to repay state fiscal recovery bonds. Cities and counties are reimbursed for the lost revenue from a shift of property tax revenue.

Understandability:

The principle that information in financial reportsshould be expressed assimply as possible.

Undesignated Unreserved Fund Balance:

Available expendable financial resources in a Governmental Fund that are not the object of tentative management plans (i.e., designations).

Unearned Revenue:

A type of deferred revenue account used in connection with resourcesthat have not yet been earned.

Unfunded Actuarial Accrued Liability:

The excess of the actuarial accrued liability over the actuarial value of assets. This value may be negative, in which case it may be expressed as a negative unfunded actuarial accrued liability, the excess of actuarial value of assets over the actuarial accrued liability, or the funding excess.

Unqualified Opinion:

An opinion rendered without reservation by the independent auditor that financial statements are fairly presented.

Unrealized Revenues:

Termused in connection with budgeting. The difference between estimated revenues and actual revenues.

Unrestricted Net Assets:

That portion of net assetsthat is neither restricted nor invested in capital assets(net of related debt).

Unsecured Property:

As the property tax is guaranteed by placing a lien on the real property, unsecured property is that real property in which the value of the lien is not sufficient to assure payment of the property tax.

Use Tax:

A tax imposed on the use orstorage of tangible personal property when salestax is not paid.

User Fee:

Fees charged for the use of a public service or program such as for recreation programs or public document retrieval. User fees for property‐related services are referred to as property‐related fees.

Utility Connection Fee:
141
Utility connection fees or capacity fees are imposed on the basis of a voluntary decision to connect to a utility system or to acquire the right to use additional capacity.

Utility User’s Tax (UUT):

A tax imposed by the city on water, sewer, trash, electricity, gas, and cable to generate general fund revenues used primarily to fund the public safety department. The City of Lindsay’s UUT rate is 6%.

Vehicle License Fee—Property Tax Swap:

The trade of most city and county vehicle license fee (VLF) revenue for additional property tax share and revenue.

Volatility:

A degree of fluctuation in the price and valuation ofsecurities.

Voter Approved Property Tax for Indebtedness:

Includes ad valorem property taxes levied in addition to the 1% rate for voter approved debt, approved prior to July 1, 1978 or after July 1, 1986.

Yield:

The total amount of revenue a government expects to receive from a tax, determined by multiplying the tax rate by the tax base. Also, the annual rate of return on an investment, expressed as a percentage of the investment. 142
DISCLOSURE: If State and Federal laws change, the City will adhere to the new law and update the Finance Policies and Procedures.
143

STAFF REPORT
TO: Lindsay City Council
MEETING DATE: December 9, 2025
DEPARTMENT: City Manager
FROM: Kuyler Crocker, City Manager
Agenda Title: Adoption of Resolution No. 25-43 Approving Wages and Related Benefits for MidManagement Employees (January 1, 2026 – June 30, 2026)

ACTION & RECOMMENDATION
Staff recommends that the City Council adopt Resolution No. 26-04, approving the wages, benefits, and conditions of employment for the Mid-Management employee group for the period of January 1, 2026, through June 30, 2026.

BACKGROUND | ANALYSIS
The City Council has the authority to set compensation and benefits for all unrepresented employee groups, including Mid-Management employees. Staff has worked with the Mid-Management group to update and clarify the terms and conditions of employment in a single, consolidated resolution.

This proposed agreement supersedes all previous resolutions and incorporates current benefits, wage adjustments, special pays, and leave provisions. The positions covered under the Mid-Management group include:
• Public Safety Lieutenant
• Administrative Supervisor
• HR Manager/City Clerk
• Maintenance Senior III
• City Services Manager/Inspector
The proposed Resolution standardizes benefits and codifies compensation updates in alignment with market conditions, City Personnel Rules and Regulations, and operational needs.

FISCAL IMPACT
The fiscal impact of the proposed wage and benefit adjustments has been evaluated and included in the City’s approved budget. Costs are primarily derived from:
• The 4% base wage increase
• Benefit contributions
• Longevity pay adjustments
• Uniform and boot allowances
Budget adjustments are not required at this time. If future adjustments are needed, staff will return with recommended budget amendments.

ATTACHMENTS

1. A Resolution of the City Council of the City of Lindsay Authorizing Wage and Related Benefits for Employees of the Mid-Management Group
Reviewed/Approved: ______
Item #: 16.7
Action Items

AGREEMENT BETWEEN

THE CITY OF LINDSAY
&

LINDSAY MID-MANAGEMENT
JANUARY 1, 2025 - JUNE 30, 2026
Page | 2

AGREEMENT BETWEEN THE CITY OF LINDSAY AND CITY OF LINDSAY MID-MANAGEMENT RESOLUTION NO. 26-04

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LINDSAY

AUTHORIZING WAGE AND RELATED BENEFITS

FOR EMPLOYEES OF THE MID-MANAGEMENT GROUP
WHEREAS, the City Council of the City of Lindsay ("City" or "City Council") is authorized to set the terms and conditions of employment for unrepresented employees; and WHEREAS, the City Council desires to memorialize in a single Resolution the benefits and compensation currently provided to Mid-Management employees ("Mid-Management"); and
WHEREAS, this Resolution is intended to and does supersede all previous resolutions and terms and conditions of employment for Mid-Management employees; and WHEREAS, this Resolution may be modified, amended, terminated, or superseded by the City Council at any time; and
WHEREAS, this Resolution shall apply to all Mid-Management employees, which include the following positions:
• Public Safety Lieutenant,
• Administrative Supervisor
• HR Manager/City Clerk
• Maintenance Senior III
• City Services Manager/Inspector
NOW, THEREFORE, IT IS HEREBY RESOLVED, that the City Council adopts this Resolution, which shall be effective December and will remain in effect until it is modified, amended, terminated, or superseded by further resolution of the City Council.

SECTION I - INCORPORATION
In the event of a conflict between this Resolution and the City of Lindsay Personnel Rules and Regulations ("Personnel Rules and Regulations), this Resolution shall prevail. Unless otherwise specified in this Resolution or made inapplicable by the terms of the Personnel Rules and Regulations, the Personnel Rules and Regulations are incorporated in this Resolution.

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AGREEMENT BETWEEN THE CITY OF LINDSAY AND CITY OF LINDSAY MID-MANAGEMENT

SECTION II - HOURS OF WORK AND OVERTIME
SECTION 2.1 HOURS OF WORK
The provisions in this section govern the hours of work for employees. These provisions shall not interfere with essential services of any department.

Shifts vary as required to meet the operational requirements of the department where the employee works. When desirable, the City Manager or other working hours for employees whose specific duties require it.

SECTION 2.2 OVERTIME
All Mid-Management employees are classified as exempt employees and are ineligible for overtime pay.

SECTION III - LEAVES
SECTION 3.1 HOLIDAYS
Holiday leave shall be provided in accordance with Rule X of the Personnel Rules and Regulations.

SECTION 3.2 VACATION
Vacation leave shall be provided as follows:

Years of Service Accrual Hours per pay period Hours Days 0-4 3.08 80 10
5-6 3.39 88 11
7-9 4 104 13
10+ 4.62 120 15
However, accruals will cap at 300 hours accrued and will cease to accrue until the employee has used vacation and is under the 300-hour cap.

SECTION 3.3 SICK LEAVE
Sick leave shall be provided in accordance with Rule XI of the Personnel Rules and Regulations, 80 hours of sick leave per year, 3.08 hours per pay period for a total of 10 sick days per fiscal year.

SECTION 3.4 ADMINISTRATIVE LEAVE
Mid-Management employees receive 80 hours of administrative leave per year, 3.08 hours per pay period, which is accrued bi-weekly
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AGREEMENT BETWEEN THE CITY OF LINDSAY AND CITY OF LINDSAY MID-MANAGEMENT SECTION 3.5 OTHER LEAVES
Other leaves, including jury leave, military leave, and medical and family leaves shall be provided in accordance with Rule XI of the Personnel Rules and Regulations.

SECTION IV - SPECIAL PAYS
SECTION 4.1 BILINGUAL PAY
The City will provide $18.46 bi-weekly in compensation for certified translators who utilize their bilingual skills as determined by the City.

SECTION 4.2 LONGEVITY PAY
Mid-Management employees to receive longevity pay asfollows:
a. Upon the anniversary of the completion of ten (10) consecutive years ofservice with the City, each employee covered by this Resolution will be given 5% longevity compensation.
b. Upon the anniversary of the completion of fifteen (15) consecutive years of service with the City, each employee covered by this Resolution will be given 2.5% longevity compensation.
c. Upon the anniversary of the completion of twenty (20) consecutive years of service with the City, each employee covered by this Resolution will be given 2.5% longevity compensation.
d. Upon the anniversary of the completion of twenty-five (25) consecutive years of service with the City, each employee covered by this Resolution will be given 2.5% longevity compensation.

SECTION 4.3 CELL PHONE STIPEND
Employees may request to receive a $60 monthly stipend to be used towards payment of their personal cellular telephone account if they agree to allow the City to use their personal cellular telephone number to contact them regarding work related issues. Employees who chose to decline the monthly stipend will be provided a City issued cell phone.

SECTION 4.4 UNIFORM ALLOWANCE
Lieutenants shall receive Public Safety Uniforms.
a. Upon hire, Lieutenants shall be provided a public safety uniform.

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AGREEMENT BETWEEN THE CITY OF LINDSAY AND CITY OF LINDSAY MID-MANAGEMENT b. After six months of employment, Lieutenants covered by this resolution will receive a uniform allowance of $38.46 per payroll period.

City Services Department Mid-Management Group shall receive a Boot Allowance. a. Mid-Management Group Managers in the City Services Department who perform field duties shall be eligible for a boot allowance to support compliance with workplace safety requirements.
b. Eligible managers shall receive a boot allowance of $150 once every twelve (12) months, to be used for the purchase of approved safety footwear meeting department safety standards.

SECTION V - RETIREMENT BENEFITS
SECTION 5.1 CalPERS DEFINED BENEFIT PLAN
Mid-Management employees are subject to the following retirement contributions based on the appropriate CalPERS contract:
a. Safety Classic employees who are not defined as "new members" will pay the entire nine percent (9%) employee contribution.
b. Miscellaneous Classic employees who are not defined as "new members" will pay the entire eight percent (8%) employee contribution.
c. Employees who are defined as "new members" under PEPRA will be subject to all applicable PEPRA provisions. New members will contribute fifty percent (50%) of the total normal cost of the retirement benefit, as determined by CalPERS.

SECTION 5.2 DEFINED CONTRIBUTION PLAN
The defined contribution deferred compensation plan is a voluntary retirement program. MidManagement employees determine how much of their pay is to be contributed to the deferred compensation plan. The City will match the employee's contribution up to 6% of the employee's total annual income.

SECTION VI- HEALTH AND WELFARE BENEFITS
SECTION 6.1 HEALTH, VISION, AND DENTAL
During the period this Resolution remains in effect, the City will contribute 100% of the premium for health, vision, and dental for the employee-only plan and 50% of the premiums for health, vision, and dental for dependents.

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AGREEMENT BETWEEN THE CITY OF LINDSAY AND CITY OF LINDSAY MID-MANAGEMENT Mid-Management employees who retire from the City with 15 or more years of continuous service with the City will receive a 3.5% employer contribution of the employee-only premium for each year of service in the plans offered by the City until the retiree reaches the age of Medicare eligibility. For example, an employee with 16 years of continuous service will receive a contribution of 56% of the employee-only premium. The retiree will no longer receive any contribution upon reaching Medicare eligibility. The City may modify, amend, or terminate the retiree benefit at any time.

SECTION 6.2 LIFE INSURANCE
City employees are covered under the term life insurance program. An optional employee paid group supplemental life insurance program is also available to City employees. The employee paid term life insurance policy covers the employee and dependents and is portable (may be continued after individual is not employed by the City).

The City of Lindsay has also adjusted the benefit associated with the Basic Life benefit. MidManagement employees receive one and one-half of the employee's salary up to $225,000.

SECTION 6.3 EMPLOYEE ASSISTANCE PROGRAM
The City offers an Employee Assistance Program ("EAP").

SECTION 6.4 OTHER BENEFITS
Mid-Management employees are eligible to participate in all City-wide employee benefit and assistance plans. Please see the relevant plans and the Benefits Summary for additional information.

SECTION VII - IRC SECTION 125 PLAN
SECTION 7.1 The City offers an IRC Section 125 plan to employees.

SECTION VIII- COMPENSATION
SECTION 8.1 SALARY & COST OF LIVING INCREASE
The City agrees to adjust the current classification and salary schedule for all members of the bargaining unit as follows:
a. Effective the first day of the pay period following City Council approval of the agreement, a 4.0% base wage increase.

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AGREEMENT BETWEEN THE CITY OF LINDSAY AND CITY OF LINDSAY MID-MANAGEMENT The provisions of this Agreement between the City of Lindsay and Lindsay Mid-Management shall commence on the first day of the pay period following City Council approval and remain in effect through June 30, 2026, or until the new agreement is signed. _______________________________ _____________________________________ City Manager Date Public Safety Lieutenant Date
_____________________________________
Public Safety Lieutenant Date
_____________________________________
Administrative Supervisor Date
_____________________________________
Administrative Supervisor Date
______________________________________
Administrative Supervisor Date
______________________________________
HR Manager/City Clerk Date
______________________________________
Maintenance Senior III Date
_______________________________________
City Services Manager/Inspector Date

STAFF REPORT
TO: Lindsay City Council
MEETING DATE: January 13, 2026
DEPARTMENT: City Services
FROM: Dario Dominguez, Director of Public Works and Planning AGENDA TITLE: Approval of the City Engineer Contract with Precision Civil Engineering, Inc to obtain Professional Engineering Services.

ACTION & RECOMMENDATION
Approval of the City Engineer Contract with Precision Civil Engineering, Inc to obtain Professional Engineering Services
BACKGROUND | ANALYSIS
On November 18, 2025, City staff solicited a Request for Qualifications (RFQ) for Engineering Services, including State and Federally funded projects. The goal of this solicitation was to find a highly qualified firm who would be responsible for but not limited to:
• Storm Waste Master Planning and Design
• Sewer System Master Planning and Design
• Water System Master Planning and Design
• Flood Plain Modeling and Analysis
• Water and Wastewater Treatment
• Plan Checking
• Environmental Planning (CEQA/NEPA)
• Roadway Design and Construction
Management
• Development of Traffic Studies
• Topographic and Boundary Surveys
• Easement Documentation
• Right of Way Surveys
• Grant Management
• Construction and Project Management
Seven proposals were successfully submitted. The evaluation criteria summary was as follows:

1. Completeness of Response

2. Qualifications and Experience

3. Organization and Approach

4. Experience on Similar Projects

5. Staff Availability

6. Conflict of Interest Statement

7. References

8. Presentation by team

9. Q&A Response to panel questions
After evaluating the proposals and conducting multiple rounds of interviews to ensure adequate technical competency and availability to fulfill the City Engineer’s role, the panel determined Precision Civil Engineering Inc. to be the most qualified and best value to perform these services. The term of the contract is an initial 3 years, and based on annual review and satisfactory performance. There is an opportunity for a 2-year extension.

Item #: 16.8
Action Items
This action will authorize Precision Civil Engineering to proceed with tasks as identified in the RFQ.

Note: While the other firms were also highly qualified, the City intents to use them on an as needed basis in the near future as a secondary professional source and develop a separate on call engineering services contract.

FISCAL IMPACT
Expenses for these services have already been allocated in the current budget.

PUBLIC OUTREACH
Not applicable.

ATTACHMENTS

1. Scope of Services (RFQ)

2. Agreement

REQUEST FOR QUALIFICATIONS

FOR ON-CALL ENGINEERING SERVICES
Release Date: November 28, 2025
City of Lindsay
251 E Honolulu St
Lindsay, CA 93247
Proposals are due prior to 4:00 PM Friday, December 19, 2025 Request for Qualificationsfor
On-Call Engineering Services
Page ii

TABLE OF CONTENTS
Request for Qualifications for On-Call Engineering Services................................................................ 1 Project Description and Scope of Services..............................................................................................3 Appendix A: Submittal Requirements (including sealed hourly rate schedules) Appendix B: Proposal Evaluation
Appendix C: Required SOQ Forms
• Sample Cost Proposal
• Exhibit 10-I: Notice to Proposers DBE Information
• Exhibit 10-O1: Consultant Proposal DBE Commitment
• Exhibit 10-02: Consultant Contract DBE Commitment
• Exhibit 10-Q: Disclosure of Lobbying Activities
• Exhibit 10-U: Consultant in Management Support Role – Conflict of Interest and Confidentiality Statement
• Exhibit 15-H: Proposer/Contractor Good Faith Efforts
• Certification of Indirect Costs and Financial Management System • California Safe Harbor Indirect Cost Rate Program
Request for Qualificationsfor
On-Call Engineering Services