INTRODUCTION
This manual establishes the accounting policies, procedures, and internal controls of the City of Erlanger, Kentucky.
City of Erlanger is incorporated in the state of Kentucky. The City of Erlanger is exempt from Federal income taxes. The City of Erlanger’s mission is to
Perform collectively to provide exemplary services for our community with integrity and pride.
This manual shall document the financial operations of the City. Its primary purpose is to formalize accounting policies and selected procedures for the accounting staff and to document internal controls.
All City of Erlanger staff are bound by the policies herein, and any deviation from established policy is prohibited.
GENERAL POLICIES
FINANCE DEPARTMENT OVERVIEW
Organization
The Finance Department manages the City’s financial operations and reporting and compliance functions. The department consists of:
Finance/HR Director
Assistant Finance/HR Director
Accountant
Other officers and employees of the City of Erlanger who have financial responsibilities are as follows:
Mayor
City Administrator
Department Heads
City Clerk
Assistant City Clerk
Human Resources
Administrative Assistants
Responsibilities
The primary responsibilities of the Finance Department consist of:
General Ledger
Budgeting
Cash and Investment Management
Asset Management
Purchasing
Accounts Payable
Cash Disbursements
Financial Statement Processing
External Reporting of Financial Information
Bank Reconciliation
Reconciliation of Sub-Ledgers
Compliance with Government Reporting Requirements
Annual Audit
Disciplinary Action
Failure to comply with this policy may result in disciplinary action, up to and including termination,
restitution, or referral for criminal prosecution. Employees will be afforded due process consistent with
City personnel policies. Disciplinary action may apply to employees who:
- Violate this policy;
- Fail to report known violations; or
- Retaliate against individuals reporting violations.
INTERNAL CONTROL, FRAUD PREVENTION AND SECURITY POLICY
The City of Erlanger shall maintain a system of internal controls designed to safeguard City assets, ensure the accuracy and reliability of financial records, promote operational efficiency, and encourage compliance with applicable laws, regulations, and management policies.
Internal controls include policies, procedures, approvals, security measures, and monitoring activities designed to reduce the risk of fraud, errors, misuse of assets, and unauthorized activity.
The City Administrator, Finance/HR Director, and all Department Heads share responsibility for establishing, maintaining, and enforcing effective internal controls within their respective areas of responsibility.
The City’s Accounting Policies and Procedures Manual serves as the primary guide for financial procedures and internal control expectations.
Fraud Reporting and Whistleblower Protection
The City is committed to preventing, detecting, and reporting fraud, waste, abuse, and other improper activity. Employees, officials, vendors, and citizens are encouraged to report concerns through supervisory channels, the Finance/HR Department, the City Administrator, or the anonymous reporting box located at City Hall.
Reports will be handled confidentially to the extent permitted by law. Retaliation against any individual who, in good faith, reports concerns or participates in an investigation is prohibited and may result in disciplinary action, up to and including termination. Individuals may also report concerns to external auditors, City Council, or other oversight authorities. Allegations shall be reviewed promptly and investigated when warranted.
Disaster Recovery and Business Continuity
The City shall maintain disaster recovery and business continuity procedures to protect financial operations, systems, and data. Financial and operational data shall be routinely backed up and securely stored in offsite or cloud-based environments when feasible.
The City shall maintain procedures to support continuity of essential functions, including payroll, accounts payable, and revenue collection, during operational disruptions. Cybersecurity incidents, including ransomware or data breaches, shall be reported immediately to the Finance/HR Director and City Administrator, with appropriate containment, recovery, and notification measures implemented as necessary.
Ethics and Conflict of Interest
Employees and officials shall avoid actual or perceived conflicts of interest and disclose any financial or personal relationships that could influence official duties.
Physical and Electronic Security
Administrative offices and sensitive records shall remain secured outside normal business hours, with access limited to authorized personnel. Access credentials shall be promptly disabled upon employee separation or role changes.
The City shall utilize password protection, user permissions, and other security controls to safeguard financial systems and electronic data. Employees are responsible for maintaining password confidentiality, following cybersecurity procedures, and reporting suspected security incidents. Where feasible, the City shall utilize multi-factor authentication, role-based access controls, periodic user access reviews, and secure backup and recovery procedures.
Third-party vendors providing hosted financial systems shall maintain commercially reasonable security and data protection measures consistent with applicable laws and industry standards.
GENERAL LEDGER AND CHART OF ACCOUNTS
The general ledger is defined as a group of accounts that supports the information shown in the major financial statements. The general ledger is used to accumulate all financial transactions of the City of Erlanger, and is supported by subsidiary ledgers that provide details for certain accounts in the general ledger. The general ledger is the foundation for the accumulation of data and reports.
Chart of Accounts Overview
The chart of accounts is the framework for the general ledger system, and therefore the basis for the City of Erlanger’s accounting system. The chart of accounts consists of account titles and account numbers assigned to the titles. General ledger accounts are used to record and accumulate the financial effects of transactions on assets, liabilities, deferred inflows and outflows of resources, net position/fund balance, revenues, expenditures/expenses, and other financing sources and uses in accordance with GASB standards.
The City of Erlanger’s chart of accounts consists of the following account classifications:
- Assets
- Liabilities
- Deferred Outflows of Resources
- Deferred Inflows of Resources
- Fund Balance/Net Position
- Revenues
- Expenditures/Expenses
- Other Financing Sources and Uses
Accounts are classified as either permanent or temporary. Permanent accounts include assets, liabilities, deferred outflows, deferred inflows, and fund balance/net position accounts and are reported on the balance sheet or statement of net position. Temporary accounts include revenues, expenditures, expenses, and other financing sources and uses and are reported in the applicable operating statements. Temporary accounts are closed at fiscal year-end, while permanent accounts carry forward from year to year.
Each account number shall be preceded by a three-digit fund number, a two-digit department or category number, a four-digit line-item code and a two-digit subcategory code.
Control of Chart of Accounts
The City of Erlanger’s chart of accounts is monitored and controlled by the Finance/HR Director. Responsibilities include the handling of all account maintenance, such as additions and deletions. Any additions or deletions of accounts shall be approved by the Finance/HR Director, who ensures that the chart of accounts is consistent with the organizational structure of the City of Erlanger and meets the needs of each division and department.
Account Definitions
General Ledger
Account Range Category Definition
1000 – 1999 Assets
Assets are resources owned or controlled by the City. Assets of the City of Erlanger are classified as current assets, fixed assets, contra-assets, and other assets.
Current assets are cash and other assets expected to be converted to cash, consumed, or used within one year. Some examples are cash, temporary investments, and receivables that will be collected within one year of the statement of financial position date.
Fixed assets are tangible assets with a useful life of more than one year that are acquired for use in the operation of the organization and are not held for resale with a cost above $10,000 per individual item and having at least a two year useful life.
Contra-assets are accounts that reduce asset accounts, such as accumulated depreciation and reserves for uncollectible accounts receivable.
Other assets include long-term assets that are assets acquired without the intention of disposing them in the near future. Some examples are security deposits, property and long-term investments.
2000 – 2990 Liabilities
Liabilities are probable future sacrifices of economic benefits arising from present obligations of the organization to transfer assets or provide services to other entities in the future as a result of past transactions or events. Liabilities of the City of Erlanger are classified as current or long-term.
Current liabilities are probable sacrifices of economic benefits that will likely occur within one year of the date of the financial statements or which have a due date of one year or less. Common examples of current liabilities include accounts payable, accrued liabilities, short-term notes payable, and deferred revenue.
Long-Term Liabilities are probable sacrifices of economic benefits that will likely occur more than one year from the date of the financial statements. Examples include the non-current portion of bonds, leases, and loans payable.
2990-2999 Fund Balance
Fund Balance is the difference between fund assets-current financial resources and fund liabilities-obligations payable from current financial resources. See the next section for City of Erlanger’s policies on classifying fund balance.
3000-3999 Revenues
Revenues are inflows resulting from the City’s ongoing operations, including taxes, licenses, permits, intergovernmental revenues, charges for services, interest income, and miscellaneous revenues. A proprietary fund recognizes revenue on an accrual basis, meaning that revenue is considered realized when (1) the earnings process is complete or virtually complete and (2) an exchange has taken place. Revenues of the City of Erlanger include taxes, licenses & permits, fines & penalties, intergovernmental transfers, charges for services including the enterprise funds, interest, and miscellaneous revenues.
4000-4999 Expenditures
Expenditures are outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the City’s ongoing major or central operations.
5000-5999 Gains and Losses
Gains are increases in net position resulting from transactions and other events that are not classified as revenues or contributions.
Losses are decreases in net position resulting from transactions and other events that are not classified as expenses or expenditures.
Gains or losses occur when the City sells a fixed asset or writes off as worthless a fixed asset with remaining book value.
Classification of Fund Balance
Fund balance classifications are based on the level of constraint placed on resources reported in governmental funds, in accordance with GASB Statement No. 54.
Nonspendable
Includes amounts that are not in spendable form or are legally/contractually required to remain intact, such as inventories, prepaid items, and long-term receivables.
Restricted
Amounts constrained for specific purposes by external parties, legal requirements, constitutional provisions, or enabling legislation.
Committed
Amounts formally committed by City Council for specific purposes through official action prior to fiscal year-end. Commitments may only be modified or removed by Council action. Examples include capital projects and equipment replacement funds.
Assigned
Amounts intended for specific purposes that do not meet the criteria for restricted or committed classification. Assignments may be made by the Finance/HR Director or designee under Council authority. Examples include encumbrances, planned capital purchases, departmental carryforwards, and subsequent-year budget uses.
Unassigned
Residual classification for the General Fund representing amounts not otherwise classified. In other governmental funds, negative balances may be reported as unassigned when applicable.
Changes to the Chart of Accounts
Additions to, deletions from, or any other changes to the City’s standard chart of accounts shall only be done with the approval of the Finance/HR Director.
Fiscal Year of Organization
The City of Erlanger shall operate on a fiscal year that begins on July 1 and ends on June 30. Any changes to the fiscal year of the City must be promulgated by the General Assembly of the Commonwealth of Kentucky.
Journal Entries
All non-standard journal entries shall be supported by adequate documentation and explanation. Examples of such journal entries include:
1. Recording of noncash transactions;
2. Corrections of posting errors; and
3. Non-recurring accruals of income and expenses.
Certain journal entries, called recurring journal entries, occur in every accounting period. These entries may include, but are not limited to:
1. Depreciation of fixed assets;
2. Amortization of prepaid expenses;
3. Amortization of bond discounts/premiums and gains or loss from defeasance;
4. Monthly maintenance and gas usage;
5. Accruals of recurring expenditures; and
6. Amortization of deferred revenue.
PROCEDURES ASSOCIATED WITH REVENUES AND CASH RECEIPTS
REVENUE
Revenue Recognition Procedure
The City of Erlanger recognizes revenue based on the nature of the transaction and the applicable accounting standards. Revenue classifications include the following:
Licenses and Permits issued by the City
- Intergovernmental Revenues – Revenues received from other governments, including grants, entitlements, shared revenues, and payments in lieu of taxes.
- Use of Property – Revenues generated from the sale, rental, or use of City-owned property.
- Charges for Services – Fees charged for specific services, programs, or activities, including enterprise fund operations.
- Fines and Forfeitures – Revenues assessed for violations of laws, ordinances, or regulations, or for neglect of official duty.
- Interest Income – Earnings on cash and investments, including bank accounts, certificates of deposit, U.S. Treasury securities, and other authorized investments.
- Miscellaneous Revenues – Minor or infrequent revenues that do not meet the definition of another revenue classification.
Refunds
The following policies apply to refunds associated with revenue collected by the City:
Tax Refunds, Exonerations, and Abatements:
- Refunds of taxes will only be made in the event of an overpayment or a duplicate payment. All requests for refunds must be accompanied with complete documentation indicating the name and complete address of the person or entity requesting the refund.
- Tax exonerations will only be authorized whenever the request is accompanied by supporting documentation from the Kenton County Property Valuation Administrator.
BILLING/INVOICING PROCEDURES
Overview
The following is a partial list of items billed and/or accrued and received by the City of Erlanger and the frequency with which each is billed:
Annual Billings
1. Property tax billings,
2. Occupational license renewals, and
3. Alcoholic Beverage Licenses.
Quarterly Billings
1. Quarterly occupational license (payroll tax) billings
Monthly Billings
1. Grants and contracts, and
2. Leases and/or subleases
Daily (“as needed”) Billing
1. Charges for services rendered
Responsibilities for Billing and Collection
The City of Erlanger Finance Department is responsible for the invoicing of goods and services as well as the collection of outstanding receivables. (Note: Cash receipts, credit memos, and collection policies will be discussed in subsequent sections).
Accounts Receivable Entry Policies
Posting of customer invoices to the accounts receivable subsidiary ledger shall be performed by individuals independent of the cash receipts function of the City of Erlanger.
Classification of Revenues and Net Position
All revenues received by the City of Erlanger are classified as unrestricted unless restricted under applicable GASB standards by external parties, constitutional provisions, or enabling legislation.
The following are classified as restricted:
- Grants, contributions, and other awards received from federal, state, or other grantor agencies that contain externally imposed restrictions regarding the purpose or timing of use. Such amounts are reported as restricted net position once eligibility requirements have been met. Amounts received in advance of meeting eligibility requirements are reported as unearned revenue (liability) or deferred inflows of resources, as applicable under GASB standards.
- Donor-restricted contributions, including endowments or other gifts in which the donor specifies that the principal be maintained in perpetuity or that resources be used for a specific purpose or time period. These amounts are classified as restricted net position consistent with donor-imposed restrictions.
From time to time, the City may receive contributions or grants that include conditional requirements (such as required matching, incurrence of allowable costs, or performance requirements). Such resources are not recognized as revenue until the conditions are satisfied and are recorded as a liability or deferred inflow of resources until that time.
The City Council may designate resources for specific purposes or future projects. Because these designations are internally imposed and may be modified or removed by the City Council, they do not meet the definition of restricted net position under GASB standards. Accordingly, these amounts are reported as unrestricted net position in the government-wide financial statements and may be identified as:
- Committed Net Position (if formally approved by City Council action), or
- Assigned Net Position (if designated by management under delegated authority).
Such designations are disclosed or presented separately to enhance financial transparency but do not restrict the City’s ability to redirect resources through appropriate governing body action.
CASH RECEIPTS PROCEDURES
Overview
Cash (including checks payable to the City) is the most liquid asset an organization has. Therefore, it is the objective of the City of Erlanger to establish and follow the strongest possible internal controls in this area.
Use of Lockbox
It is the policy of the City of Erlanger that payments for ad valorem taxes and insurance premium license fees be mailed directly to designated lockboxes. Accordingly, all invoices and customer forms shall include the appropriate lockbox mailing address.
Processing of Lockbox Receipts
Ad Valorem Tax Lockbox
The bank provides the Revenue and Collections Clerk with the previous day’s deposit information and an electronic file of paid invoices. The file is downloaded into the City’s property tax software, and a reconciliation report is prepared. Once reconciled to the bank report, the deposit is recorded in the cash receipts system and posted to the general ledger.
Insurance Premium License Fee Lockbox
The bank provides a daily report of prior-day receipts along with filed tax returns. The Assistant Finance/HR Director records payments using the business tax module in the financial software, and deposits are entered directly into the cash receipts system and posted to the general ledger cash and revenue accounts.
In-House Cash Receipts Processing
Cash receipts received directly at the City of Erlanger Administrative Offices are centralized to ensure funds are properly safeguarded, recorded, and deposited timely.
Cash receipts shall be processed under segregated duties and reviewed prior to deposit. All payments are entered into the cash receipts system, and receipts are issued to customers. At the end of each day, cash drawers are balanced and, together with the cash balancing report, submitted to the Assistant City Clerk.
The Assistant City Clerk prepares the deposit ticket and daily cash receipts report. The daily cash receipts report, cash balancing report, and deposit ticket are reconciled for accuracy. The complete deposit package is then reviewed by another Finance Department employee. Once verified, receipts are posted to the general ledger and the deposit is released to the courier for delivery to the bank.
Endorsement of Checks
It is the policy of the City of Erlanger that all checks received that are payable to the City shall immediately be restrictively endorsed by the individual who prepares the daily receipts listing. The restrictive endorsement shall be a rubber stamp that includes the following information:
1. For Deposit Only
2. City of Erlanger, KY
3. The bank name
4. The bank account number of the City of Erlanger
Timeliness of Bank Deposits
It is the policy of the City of Erlanger that bank deposits will be made on a daily basis. Deposits are picked up daily by the bank courier Monday through Friday.
Reconciliation of Deposits
On a periodic basis, the Finance/HR Director or a designated employee of the Finance Department who does not prepare the initial cash receipts listing or bank deposit, shall reconcile the listings of receipts to bank deposits reflected on the monthly bank statement. Any discrepancies shall be immediately investigated.
Processing of Credit Cards
The City of Erlanger accepts Visa, Mastercard and Discover credit cards for payment, all of which are authorized through the participating credit card company. This is done by following the credit card authorization instructions from the participating credit card company.
For all credit card payments, the City of Erlanger will document the following information:
1. Customer/Organization name, address and phone number,
2. Name of credit cardholder,
3. Address of cardholder,
4. Credit card number, and
5. Expiration date
6. CVV code
All credit card processing shall be performed by individuals whose job functions are primarily cash collections. These deposits are processed daily and independent of cash receipts paid in cash or by check.
PROCUREMENT POLICY
Overview
The City of Erlanger shall conduct all purchasing activities in an ethical, responsible, and cost-effective manner in compliance with applicable Kentucky Revised Statutes (KRS), internal control standards, and applicable GASB and GAAP requirements. All employees involved in purchasing activities are required to follow these policies and procedures.
Use of Purchase Orders
The City utilizes a centralized purchase order system for the procurement of goods and services. Approved purchase orders are required prior to purchases unless specifically exempted, including utilities, employee benefits, and approved fuel purchases.
Purchase orders shall be generated through the City’s financial system, properly documented, and approved by authorized personnel prior to commitment of City funds. A properly completed purchase order shall be required for all purchases of goods and services except health benefits, fuel charges processed through WEX, and utilities.
Purchase orders shall be numbered and assigned by the City of Erlanger computerized accounting programs, and issued to an authorized purchaser.
Use of Credit Cards
City credit cards are issued only to authorized employees for official City business. Personal use is prohibited. All transactions must include itemized receipts and supporting documentation and are subject to monthly Finance Department review for compliance with procurement policies and internal controls.
Lost or stolen cards must be reported immediately. Cards assigned to terminated employees or employees no longer requiring purchasing authority shall be canceled promptly.
Purchasing Authority
Department Heads may initiate purchases within approved budgets and may delegate purchasing responsibilities as appropriate. All purchase orders shall be processed through the Finance Department.
Purchases require approval by the preparer and Department Head. Final approval authority rests with the City Administrator or designee.
Contracts and Agreements
All contracts and agreements with outside parties shall be reviewed and approved in accordance with City policy and Kentucky law. Only authorized officials may execute contracts on behalf of the City.
Contracts meeting statutory bidding thresholds shall comply with applicable competitive bidding requirements.
Procurement and Vendor Quotes
Purchases shall be made using competitive procurement practices whenever practical.
- Purchases exceeding $1,000 but less than $5,000 require quotations from at least three vendors when practical.
- Purchases exceeding $5,000 but below statutory bidding thresholds require written quotations from at least three vendors when practical.
- Purchases meeting statutory bidding thresholds shall follow formal bidding requirements established by Kentucky law.
Vendor evaluations may consider pricing, qualifications, responsiveness, service history, and ability to meet specifications.
Evaluation of Vendors
It is the policy of the City of Erlanger to request verbal proposals from at least three vendors for all purchases that will exceed $1,000 but be less than $5,000. It is the policy of the City of Erlanger to request written proposals from at least three vendors for all purchases that will exceed $5,000 but be less than $40,000. Vendors may be evaluated based on experience, pricing, responsiveness, financial stability, and ability to meet specifications.
Not all of the preceding criteria may apply in each purchasing scenario. However, in each situation requiring consideration of vendors, the department responsible for the purchase shall establish the relative importance of each criterion prior to requesting proposals and shall evaluate each proposal on the basis of the criteria and weighting that have been determined.
Special Purchasing Conditions
Emergency Purchases
Quotation requirements may be waived for emergency purchases necessary to protect public health, safety, welfare, or City property. Emergency purchases shall be documented and approved as soon as practical.
Annual Pricing Agreements
The City may utilize annual pricing agreements or approved vendor lists when determined to be in the best interest of the City.
Cooperative Purchasing
The City may utilize contracts or pricing agreements awarded by other governmental agencies when permitted by law.
Sole Source Purchases
Competitive quotations may be waived when only one vendor is available or when a specific product or service is required. Sole source purchases shall be documented and comply with applicable procurement laws.
Ethical Conduct in Purchasing
Ethical conduct in managing the City’s purchasing activities is an absolute essential. Staff must always be mindful that they represent the City of Erlanger and share a professional trust with other staff and the general citizenship.
Staff shall discourage the offer of, and decline, individual gifts or gratuities of value in any way that might influence the purchase of supplies, equipment, and/or services.
POLITICAL ACTIVITIES POLICY
Prohibited Expenditures
It is the policy of the City of Erlanger that the City shall not incur any expenditures for political activities. For purposes of this policy, political activities shall be defined as any activity associated with the direct or indirect support or opposition of a candidate for elective public office at the Federal, state or local level. Examples of prohibited political expenditures include, but are not limited to, the following:
1. Contributions to political action committees;
2. Contributions to the campaigns of individual candidates for public office;
3. Contributions to political parties;
4. Expenditures to produce printed materials (including materials included in periodicals) that support or oppose candidates for public office; and
5. Expenditures for the placement of political advertisements in periodicals.
Endorsements of Candidates
It is the policy of the City of Erlanger not to endorse any candidates for public office in any manner, either verbally or in writing. This policy extends to the actions of management and other representatives of the City, when these individuals are acting on behalf of, or are otherwise representing the City.
Prohibited Use of Organization Assets and Resources
It is the policy of the City of Erlanger that no assets or human resources of the organization shall be utilized for political activities, as defined above. This prohibition extends to the use of City assets or human resources in support of political activities that are engaged in personally by Council members, members of management, employees, or any other representatives of the City of Erlanger. Unless professional ethical restrictions exist, there is no prohibition against these individuals engaging in political activities personally (on their own time, and without representing that they are acting on behalf of the City). These individuals must at all times be aware that City resources cannot at any time be utilized in support of political activities.
ACCOUNTS PAYABLE MANAGEMENT PROCEDURES
Overview
The City shall maintain accounts payable procedures designed to ensure proper authorization, accurate recording, timely payment processing, and effective internal controls.
It is the policy of the City of Erlanger that the recording of assets or expenses and the related liability is performed by an employee independent of ordering and receiving. The amounts recorded are based on the vendor invoice for the related goods or services. The vendor invoice must be supported by an approved purchase order, and should be reviewed and approved by a Department Head prior to being processed for payment. Invoices and related general ledger account distribution codes are reviewed prior to posting to the subsidiary system.
The following controls shall govern accounts payable and cash disbursement
1. Disbursements are properly authorized,
2. Invoices are processed in a timely manner, and
3. Vendor credit terms and operating cash are managed for maximum benefit
Recording of Accounts Payable
All accounts payable transactions shall be valid, duly authorized, and supported by sufficient documentation, and shall be recorded in the accounting system in a timely and accurate manner. Each department shall be responsible for the review, approval, and submission of its respective invoices.
Accounts payable shall be processed on a bi-weekly basis with appropriate supporting documentation.
It is the policy of the City of Erlanger to process payments only upon receipt of original invoices. Duplicate invoices may be processed only after verification, through a review of vendor records, that the original invoice has not been previously paid. Vendor statements shall not be accepted or processed for payment.
Accounts Payable Cut-Off
For purposes of the preparation of the City’s annual financial statements, all vendor invoices that are received, approved and supported with proper documentation by the end of July shall be recorded as accounts payable as of the end of the immediately preceding fiscal year if the invoice pertains to goods or services delivered by year-end.
Invoice Batch Preparation
Prior to the submission of any accounts payable for payment, an “Invoice Batch” shall be prepared and entered into the accounting system for review by the accountant. Each invoice batch shall include the following required documentation:
1. Vendor invoice
2. Packing slip (where appropriate),
3. Receiving report (or other indication of receipt of merchandise and authorization of acceptance),
4. Purchase order, and
5. Any other supporting documentation deemed appropriate.
The “Invoice Batch” shall be submitted to the accountant by the established payment processing deadline. The City of Erlanger operates on a bi-weekly schedule, and all invoice batches are due by 12:00 PM EST on Tuesday of the designated week.
Processing of Invoice Batch
The following procedures shall be applied to each Invoice Batch:
- Check the mathematical accuracy of the vendor invoice.
- Compare the nature, quantity and prices of all items ordered per the vendor invoice to the purchase order, packing slip and receiving report.
- All invoices shall be entered accurately into the accounting system and coded to the appropriate account in accordance with the City’s chart of accounts.
- Invoices exceeding $5,000 must be electronically scanned and attached within the accounting system.
- All physical invoices shall be properly organized with the corresponding invoice batch documentation prior to submission to the accountant.
Approvals by Department Heads indicate their acknowledgment of satisfactory receipt of the goods or services invoiced, agreement with all terms appearing on the vendor invoice, agreement with the general ledger account and agreement to pay vendor in full.
Payment Discounts
To the extent practical, it is the policy of the City of Erlanger to take advantage of all prompt payment discounts offered by vendors. When availability of such discounts is noted, and all required documentation in support of payment is available, payments will be scheduled so as to take full advantage of the discounts.
Reconciliation of A/P Subsidiary Ledger to General Ledger
At the end of each annual accounting period, the total amount due to vendors per the accounts payable subsidiary ledger shall be reconciled to the total per the accounts payable general ledger account (control account). All differences are investigated and adjustments are made as necessary. The reconciliation and the results of the investigation of differences are reviewed and approved by the Finance/HR Director.
On a monthly basis, the accountant shall check the Purchase Order file for open P.O.’s that are more than 60 days old and follow up.
TRAVEL AND BUSINESS ENTERTAINMENT POLICY
General Travel Guidelines
Employees are expected to use the most economical and reasonable travel methods available. The City reserves the right to deny reimbursement for expenses that are unreasonable, insufficiently documented, or not related to official business.
Mileage and Transportation
Employees using personal vehicles for approved City business will be reimbursed at the current IRS standard mileage rate.
Reasonable parking fees and tolls associated with official travel are reimbursable.
Air travel shall be booked at coach/economy class rates. Rental vehicles shall be midsize or smaller unless business necessity requires otherwise.
Eligible Expenses
Employees may be reimbursed for reasonable and necessary business expenses, including lodging, meals or approved per diem, transportation, parking and tolls and registration fees.
Employees traveling more than 75 miles from the City may be reimbursed for actual lodging expenses. Meal reimbursement or per diem is limited to approved City rates. Meals provided by a conference or event are not separately reimbursable. Alcoholic beverages are prohibited.
Same-day travel without an overnight stay requires itemized receipts and is limited to approved meal reimbursement or per diem rates.
Non-Reimbursable Expenses
The following expenses are not reimbursable: alcoholic beverages, personal entertainment, expenses for spouses or guests, travel upgrades, flight insurance, airline club memberships, personal travel expenses, avoidable late or cancellation fees, room service or in-room entertainment, and laundry expenses for trips under seven days.
Documentation Requirements
Reimbursement requests must include a business purpose, required receipts, and approval from the appropriate Department Head. Itemized receipts are required for all travel. Credit card slips alone are not sufficient documentation.
Air Travel
Air travel shall be booked at the lowest reasonable coach/economy fare available. Any exception to this policy requires prior approval from the City Administrator or Mayor.
Spouse or Companion Travel
The City will not reimburse travel or related expenses incurred by spouses, partners, family members, or other companions unless specifically authorized for an official business purpose.
Limitations
Employees, elected officials, or appointed officials are not eligible for reimbursement of travel expenses incurred within sixty (60) days prior to:
- Retirement;
- Separation from employment;
- Expiration of term of office without re-election; or
- Announcement of resignation, unless specifically approved by the Mayor or City Administrator.
CASH DISBURSEMENTS (CHECK-WRITING) PROCEDURES
Check Preparation
It is the policy of the City of Erlanger to print vendor checks and expense reimbursement checks on a bi-weekly basis. Checks shall be prepared by the accountant.
All vendor and expense reimbursement checks shall be produced in accordance with the following guidelines:
1. Expenditures must be supported in conformity with the purchasing, accounts payable, and travel and business entertainment policies described in this manual.
2. Timing of disbursements should generally be made to take advantage of all early-payment discounts offered by vendors.
3. Generally, all vendors shall be paid within 30 days of submitting a proper invoice upon delivery of the requested goods or services.
4. Total cash requirements associated with each check run is monitored in conjunction with available cash balance in the bank prior to the release of any checks.
5. All supporting documentation is attached to the corresponding check prior to forwarding the entire package to an authorized check signer.
6. Checks shall be utilized in numerical order (unused checks are stored in a secured area in the Finance Department).
7. Checks shall never be made payable to “bearer” or “cash”.
8. Checks shall never be signed prior to being prepared.
Check Signing
Checks of any amount require two authorized signatures: the Finance/HR Director, City Clerk, City Administrator, or Mayor.
Checks shall not be signed unless fully completed. Blank checks are strictly prohibited.
Check stubs shall not be prepared or dated without complete supporting documentation or when questions exist regarding the validity of a disbursement.
Signature stamps are prohibited unless secured and used under controlled procedures approved by management.
ACH disbursements are subject to the same authorization and review controls as checks.
The City shall use positive pay or comparable fraud prevention tools where available.
Mailing of Checks
After review and approval, checks are returned to the accountant, who then mails checks immediately.
Voided Checks and Stop Payments
Checks may be voided due to processing errors by making proper notations in the check register and defacing the check by clearly marking it as “VOID”. All voided checks shall be retained to aid in preparation of bank reconciliations.
Stop payment orders may be made for checks lost in the mail or other valid reasons. Stop payments are processed by telephone instruction and written authorization to the bank by accounting personnel with this authority. A journal entry is made to record the stop payment and any related bank fees.
Record-Keeping Associated with Independent Contractors
The City of Erlanger shall obtain a completed Form W-9 from all vendors to whom payments are made. A record shall be maintained of all vendors to whom a Form 1099 is required to be issued at year-end. Payments to such vendors shall be accumulated over the course of a calendar year.
PAYROLL AND RELATED PROCEDURES
Classification of Workers as Independent Contractors or Employees
The City shall follow IRS guidance in determining whether a worker qualifies as an employee or independent contractor. The Finance/HR Director and Human Resources shall review classifications as necessary to ensure compliance with federal and state regulations
If an individual qualifies for independent contractor status, the individual will be sent a Form 1099 if total compensation paid to that individual for any calendar year, on the cash basis, is $600 or more. The amount reported on a Form 1099 is equal to the compensation paid to that person during a calendar year (on the cash basis) pursuant to IRS guidelines and regulations.
If an individual qualifies as an employee, a personnel file will be created for that individual and all documentation required by the City of Erlanger personnel policies shall be obtained. The policies described in the remainder of this section shall apply to all workers classified as employees.
Payroll Administration
The City of Erlanger operates on a bi-weekly payroll schedule. For all City employees, a personnel file is established and maintained with current documentation, as described throughout this section and more fully described in the City’s Personnel Manual.
Changes in Payroll Data
It is the policy of the City of Erlanger that all of the following changes in payroll data are to be authorized in writing:
1. New hires,
2. Terminations,
3. Changes in salaries and pay rates,
4. Voluntary payroll deductions,
5. Changes in income tax withholding status, and
6. Court-ordered payroll deductions.
New hires, terminations, and changes in salaries or pay rates shall be authorized in writing by the appropriate Department head, Finance/HR Director and with final authorization by the City Administrator.
Voluntary payroll deductions and changes in income tax withholding status shall be authorized in writing by the individual employee.
Documentation of all changes in payroll data shall be maintained in each employee’s personnel file.
Payroll Taxes
The Finance Department is responsible for ensuring all required tax forms are properly completed and submitted, and that all required taxes are withheld and paid. The City may utilize the services of an outside payroll service center for the processing of payroll, as determined by the Finance/HR Director.
Preparation of Payroll
Each Department Head shall submit a completed departmental payroll approved timesheets for all employees to the Finance/HR Department no later than 12:00 p.m. on the Monday following the close of each pay period.
Timesheets shall:
- Timesheets shall accurately reflect all hours worked during the pay period (time actually spent performing assigned duties), whether compensated or not.
- Employees shall classify hours worked based on the nature of the work performed. Compensated absences shall be clearly identified.
Department Heads are responsible for reviewing and approving all employee timesheets for accuracy and completeness prior to submission to the Finance/HR Department.
Review of Payroll
The City of Erlanger uses direct deposit for all payroll. Employees access pay information through the payroll provider’s website.
Finance/HR shall review payroll registers and reports for accuracy prior to processing. Discrepancies shall be resolved with the applicable department before payroll is finalized.
An independent review and approval of the payroll register shall be completed prior to payment.
Payroll Internal Controls
The following controls shall be maintained to ensure accuracy and proper segregation of duties:
- Payroll processing shall be performed by staff independent of hiring, termination, and payroll approval functions.
- Payroll change reports shall be reviewed each pay period for accuracy and proper authorization.
- Terminated employees shall be reviewed each pay period to ensure timely removal from payroll.
- The payroll master file shall be periodically audited for accuracy, including pay rates and employee data integrity.
Distribution of Payroll
Payroll entries shall be recorded by accounting personnel who are independent of payroll approval and personnel authorization functions.
PROCEDURES PERTAINING TO SPECIFIC ASSET AND LIABILITY ACCOUNTS
CASH AND CASH MANAGEMENT PROCEDURE
Cash Accounts
General Checking Account (operating account):
The primary operating account is used for routine disbursements. All cash and credit card deposits, whether received in person or through lockboxes, are deposited into this account.
Funds are transferred from the operating account to short-term investments or higher-yield cash equivalents on an as-needed basis. Transfers are made to ensure sufficient liquidity for disbursements while minimizing idle cash.
Bank Reconciliations
Responsibilities for authorization, custody, recordkeeping, and reconciliation shall be segregated where practicable.
Bank statements are received monthly and reviewed unopened by the City Administrator for unusual or unexplained activity.
Reconciliations are prepared by an employee not authorized to sign checks and reviewed by a second Finance Department employee. All reconciliations shall be completed by the 10th of each month.
The Finance/HR Director reviews and approves all bank reconciliations and related adjusting journal entries on a monthly basis.
Cash Flow Management
The Finance/HR Director monitors cash flow monthly to ensure sufficient funds for obligations while minimizing idle balances. Transfers between accounts are made as needed.
Stale Checks
Checks outstanding for more than six months shall be investigated and the payee contacted when possible. If unresolved, checks may be written off.
- If written off in the same fiscal year, the entry is credited to the original expense or asset account.
- If written off in a subsequent fiscal year, the credit is recorded to miscellaneous income.
Cash
All cash and checks received shall be safeguarded, recorded promptly, and deposited daily.
Access to cash and related records shall be restricted to authorized personnel.
Minimum controls include:
- Cash receipts reconciled daily to the cash register or system reports.
- Deposits made daily.
- Cash stored in a secure location until deposit. Receipts issued for all transactions.
- Cash drawers secured whenever not in use.
Wire Transfers
The Finance/HR Director is the only authorized employee to initiate wire transfers. Supporting documentation must be prepared and independently reviewed by Finance staff prior to submission.
The City Administrator shall be notified of all wire transfers.
PREPAID EXPENSES PROCEDURE
Accounting Treatment
It is the policy of the City of Erlanger to treat payments of expenses that have a time-sensitive future benefit as prepaid expenses and to amortize these items over the corresponding time period.
Prepaid expenses with future benefits that expire within one year from the date of the financial statements shall be classified as current assets. Prepaid expenses that benefit future periods beyond one year from the financial statement date shall be classified as non-current assets.
Procedures
As part of the account coding process performed during the processing of accounts payable, all incoming vendor invoices shall be reviewed for the existence of time-sensitive future benefits. If future benefits are identified, the payment shall be coded to a prepaid expense account code.
The Finance Department shall maintain a schedule of all prepaid expenses. The schedule shall indicate the amount and date paid, the period covered by the prepayment, and the purpose of the prepayment. This schedule shall be reconciled to the general ledger balance as part of the annual closeout process.
INVESTMENT POLICY
Purpose
The purpose of this policy is to establish guidelines for the investment of City of Erlanger funds in accordance with Kentucky Revised Statutes, including KRS 66.480 and KRS 41.240, and Government Finance Officers Association (GFOA) best practices. The City shall manage public funds with prudence, safety, liquidity, and accountability.
Investment Objectives
The primary objectives of the City’s investment activities, in order of priority, are:
- Safety
- Liquidity
- Yield
Delegation of Authority
The Erlanger City Council delegates authority for the administration of the investment program to the Finance/HR Director, who shall ensure compliance with this policy and applicable Kentucky law and provide periodic reports to the City Council.
Authorized Investments
In accordance with KRS 66.480 and KRS 41.240, the City may invest in:
- Obligations of the United States Treasury and U.S. government agencies and instrumentalities;
- Certificates of deposit and other interest-bearing accounts in financial institutions insured by the FDIC or properly collateralized;
- Bonds or obligations of the Commonwealth of Kentucky and its agencies;
- Securities of state and local governments rated within one of the three highest rating categories by a nationally recognized rating agency;
- Repurchase agreements collateralized by U.S. government obligations;
- Local government investment pools authorized by Kentucky law;
- Money market mutual funds consisting solely of authorized investments.
Collateralization
All uninsured deposits shall be collateralized in accordance with KRS 41.240.
Diversification and Maturity
The City shall diversify investments by institution, maturity, and investment type to minimize risk. Unless matched to a specific cash flow, investments shall generally not exceed five (5) years in maturity.
Prohibited Investments
The City shall not engage in:
- Margin transactions;
- Short selling;
- Commodities or derivatives trading;
- Cryptocurrency investments;
- Any investment not authorized by Kentucky law.
Safekeeping and Controls
All securities shall be held by an independent third-party custodian or financial institution in the name of the City of Erlanger. The Finance/HR Director shall maintain adequate internal controls over investment activities.
FIXED ASSET MANAGEMENT PROCEDURES
Capitalization Policy
Physical assets acquired with unit costs in excess of $10,000 and a useful life of at least two- years are capitalized as fixed assets on the financial statements. Items with unit costs below this threshold shall be expensed in the year purchased.
Capitalized fixed assets are accounted for at their historical cost and all such assets, except land and certain works of art and historical treasures, are subject to depreciation over their estimated useful lives, as described later.
Contributed Assets
Assets with fair market values in excess of $10,000 and having at least a two- year useful life that are contributed to the City of Erlanger shall be capitalized as fixed assets on the financial statements. Contributed items with market values below this threshold shall be expensed in the year contributed.
Contributed capital assets meeting capitalization thresholds shall be recorded at fair value at the date of donation.
Establishment and Maintenance of a Fixed Asset Listing
All capitalized fixed assets shall be recorded in the fixed asset listing. This fixed asset listing must include the following information with respect to each asset:
1. Date of acquisition,
2. Cost,
3. Description (including color, model, and serial number),
4. Location of asset,
5. Depreciation method,
6. Estimated useful life.
A physical inventory of all assets capitalized under the preceding policies will be taken on an annual basis by the City of Erlanger. This physical inventory shall be reconciled to the property log and adjustments made as necessary. All adjustments resulting from this reconciliation will be approved by the Finance/HR Director.
Receipt of Newly-Purchased Equipment and Furniture
At the time of arrival, all newly-purchased equipment and furniture shall be inspected for obvious physical damage. If an asset appears damaged or is not in working order, it shall be returned to the vendor immediately.
In addition, descriptions and quantities of assets per the packing slip or bill of lading shall be compared to the assets delivered. Discrepancies must be resolved with the vendor immediately.
Depreciation and Useful Lives
Capitalized assets are recorded in the fixed asset account group and are not treated as operating expenses. Depreciation is calculated using the straight-line method over the asset’s estimated useful life.
Depreciation begins in the month the asset is placed in service, with the month of acquisition counted as a full month.
Estimated useful lives are determined by the Finance Department in coordination with the department using the asset. The following schedules provide the estimated useful lives by asset category for depreciation purposes:
Furniture, and fixtures Up to 10 years
General office equipment 5 years
Computer hardware and peripherals 3-5 years
Computer software 3-5 years
Vehicles 5-10 years
Buildings 40–50 years
Sewers, streets other infrastructure 25-30 years
Leased assets life of lease
Leasehold improvements remaining lease term
Repairs of Fixed Assets
Expenditures to repair capitalized assets shall be expensed as incurred if the repairs do not materially add to the value of the property or materially prolong the estimated useful life of the property.
Expenditures to repair capitalized assets shall be capitalized if the repairs increase the value of property, prolong its estimated useful life, or adapt it to a new or different use. Such capitalized repair costs shall be depreciated over the remaining estimated useful life of the property. If the repairs significantly extend the estimated useful life of the property, the original cost of the property shall also be depreciated over its new, extended useful life.
Dispositions of Fixed Assets
In the event a non-expendable asset is sold, scrapped, donated or stolen, adjustments need to be made to the fixed asset listing and property log. If money is received for the asset, then the difference between the money received and the “book value” (purchase price less depreciation) of the asset will be recorded as a loss if the money received is less than the book value and a gain if the money received is more than the book value.
Write-Offs of Fixed Assets
The Finance/HR Director approves the disposal of all capitalized fixed assets that may be worn-out or obsolete. Property that is discovered to be missing or stolen will be reported immediately to the Finance/HR Director. If not located, this property will be written off the books with the proper notation specifying the reason.
LEASES
Classification of Leases
The City of Erlanger accounts for leases in accordance with applicable provisions of Governmental Accounting Standards Board Statement No. 87, Leases.
A lease is a contract that conveys control of the right to use a nonfinancial asset for a period of time in an exchange or exchange-like transaction. At contract inception, the City evaluates whether a lease exists. Leases are classified as either short-term leases or long-term leases.
Short-Term Leases
Leases with a maximum possible term of 12 months or less, including renewal options regardless of likelihood of exercise, are considered short-term. Short-term leases are recognized as lease expense in the period incurred and do not result in a lease asset or liability.
Long-Term Leases
For all leases within the scope of GASB Statement No. 87 that are not short-term leases, the City recognizes:
- A lease liability, and
- An intangible right-to-use lease asset at the commencement of the lease term.
The lease liability is measured at the present value of expected lease payments, discounted using the interest rate implicit in the lease, if known, or otherwise the City’s incremental borrowing rate. The right-to-use asset is initially measured as the lease liability plus applicable initial costs and prepayments, less incentives received.
Lease liabilities are reduced as payments are made, with interest expense recognized. Right-to-use assets are amortized on a straight-line basis over the shorter of the lease term or useful life of the underlying asset.
ACCRUED LIABILITIES
Identification of Liabilities
The Finance Department shall accrue expenses at the end of the fiscal year. Some of the expenses that shall be accrued by the City of Erlanger at the end of a fiscal year are:
Salaries and wages,
Payroll taxes,
Vacation pay (see policy below),
Rent, and
Interest on notes payable.
Accrued Leave
Personnel policies of the City of Erlanger permit employees to carry forward up to twice the total amount credited annually of unused paid vacation from fiscal year to fiscal year. Such accrued paid vacation is payable to an employee upon termination of employment.
Personnel policies of the City of Erlanger permit full-time employees working a 24-hour on/72-hour off schedule to accrue up to 288 hours of paid time off (PTO). Full-time employees working all other schedules may accrue up to 192 hours of PTO. Any unused PTO exceeding these limits at fiscal year-end shall be forfeited.
Accordingly, it shall be the policy of the City of Erlanger to record a liability for accrued leave to which employees are entitled. The total liability at the end of an accounting period shall equal the total accrued hours of paid leave, multiplied by each employee’s current hourly pay.
NOTES PAYABLE
Record-Keeping
It is the policy of the City of Erlanger to maintain a schedule of all notes payable, mortgage obligations, lines of credit, and other financing arrangements. This schedule shall be based on the underlying loan documents and shall include all of the following information:
1. Name and address of lender,
2. Date of agreement or renewal/extension,
3. Total amount of debt or available credit,
4. Amounts and dates borrowed,
5. Description of collateral, if any,
6. Interest rate,
7. Repayment terms,
8. Maturity date,
9. Address to which payments should be sent, and
10. Contact person at lender.
Accounting and Classification
An amortization schedule shall be maintained for each note payable. Based upon the amortization schedule, the principal portion of payments due with the next year shall be classified as a current liability in the statement of financial position of the City of Erlanger. The principal portion of payments due beyond one year shall be classified as long-term/non-current liabilities in the statement of financial position.
Demand notes and any other notes without established repayment dates shall always be classified as current liabilities.
Unpaid interest expense shall be accrued as a liability at the end of each accounting period.
A detailed record of all principal and interest payments made over the entire term shall be maintained with respect to each note payable. Periodically, the amounts reflected as current and long-term notes payable per the general ledger shall be reconciled to these payment schedules and the amortization schedules, if any, provided by the lender. All differences shall be investigated.
Non-Interest-Bearing Notes Payable
The City may from time to time enter into financing arrangements that do not require the payment of interest or that provide for below-market interest rates. Such arrangements shall be recorded at their present value using an appropriate market interest rate for similar obligations.
For notes issued at below-market rates, the difference between the cash proceeds and the present value of the future payments shall be recorded as a subsidy (or other financing source) in the period the obligation is incurred.
For demand notes or obligations without fixed repayment schedules, the liability shall be recorded at the outstanding principal balance and remeasured as necessary based on the terms of the agreement.
Subsequent accounting shall recognize interest expense using the effective interest method, with periodic accretion of the liability to its repayment value over time.
PROCEDURES ASSOCIATED WITH FINANCIAL AND TAX REPORTING
FINANCIAL STATEMENTS
Standard Financial Statements of the Organization
The City shall prepare financial statements in accordance with GASB and applicable reporting requirements. The City of Erlanger shall include for each City fund:
- Balance sheet – reflects assets, liabilities and current fund balance;
- Statement of revenues, expenditures and changes in fund balance – presents revenues, expenses, and other changes in fund balance of each fund;
- Schedule of revenues – reports the cash inflows for each fund during the reporting period with a comparison to budget and the prior fiscal year.
- Schedule of expenditures – reports the cash outflows for each fund during the reporting period with a comparison to budget and the prior fiscal year.
Frequency of Preparation
The objective of the Finance Department is to prepare accurate financial statements in accordance with generally accepted accounting principles and distribute them in a timely and cost-effective manner. In meeting this responsibility, the following policies shall apply:
A standard set of financial statements described in the preceding section shall be produced on a monthly basis, within 45 days of the close of the reporting period.
Review and Distribution
All financial statements and supporting schedules shall be reviewed and approved by the Finance/HR Director prior to being issued by the Finance Department. After approval by the Finance/HR Director, a complete set of monthly financial statements shall be distributed to the following individuals:
Mayor, Members of the Erlanger City Council, City Administrator, and Department Heads and any other employee with budget-monitoring responsibilities.
Annual Financial Statements
A formal presentation of the City’s annual financial statements shall be provided by the Independent Auditor to the Erlanger City Council at a City Council meeting (see separate policies regarding the annual audit under “Financial Management Policies”).
GOVERNMENT TAX AND INFORMATION RETURNS
Overview
The City of Erlanger shall comply with all applicable federal, state, and local tax and reporting requirements, including payroll tax filings, state withholding returns, retirement reporting, and other required governmental filings. The Finance/HR Director is responsible for ensuring timely and accurate compliance.
FINANCIAL MANAGEMENT PROCEDURES
BUDGETING
Overview
Budgeting is an integral part of managing any organization in that it is concerned with the translation of organizational goals and objectives into financial and human resource terms. A budget should be designed and prepared to direct the most efficient and prudent use of the organization’s financial and human resources. A budget is a management commitment of a plan for present and future organizational activities that will ensure survival. It provides an opportunity to examine the composition and viability of the City’s programs and activities simultaneously in light of the available resources.
Preparation and Adoption
It is the policy of the City of Erlanger to prepare an annual budget on the modified accrual basis of accounting. To prepare the City’s budget, the Finance/HR Director shall gather proposed budget information from all Department Heads and prepare the first draft of the budget.
The Finance/HR Director, City Administrator and Mayor will then meet with each Department Head for the purpose of discussing, revising and refining the proposed budget.
The revised budget draft is then submitted by the Mayor to City Council at a budget bootcamp meeting where the input of the elected officials is solicited. The budget is then finalized and resubmitted to the entire Erlanger City Council for adoption.
After adoption of the budget no City Department will be permitted to exceed their total departmental budget allocation without a formal budget amendment.
Monitoring Performance
It is the policy of the City of Erlanger to monitor its financial performance by comparing and analyzing actual results with budgeted results. This function shall be accomplished in conjunction with the quarterly financial reporting process described earlier.
On a quarterly basis, financial reports comparing actual year-to-date revenues and expenditures with budgeted year-to-date amounts shall be produced by the Finance Department and distributed to each employee with budgetary responsibilities.
In addition, any employee with access to the City’s accounting software can access a multitude of financial reports comparing budgeted amounts to actual results or actual results from fiscal period to fiscal period on an as needed basis.
Budget Adjustments
After a budget has been approved by the Erlanger City Council, any request for any reclassifications of budgeted expenditures or adjustments to any line item of any amount must be directed to the City Administrator or the Finance/HR Director who then will communicate these requests to the Erlanger City Council. Any amendments to the enacted budget must be approved by the Erlanger City Council. The frequency that the Erlanger City Council will approve any budget amendments will be annually.
ANNUAL AUDIT
Audit Committee
The City of Erlanger Audit Committee shall consist of the Mayor, the City Administrator and the Finance/HR Director.
Role of the Independent Auditor
It is the policy of the City of Erlanger to arrange for an annual audit of the City’s financial statements to be conducted by an independent certified public accounting firm. The independent certified public accounting firm selected by the City will be required to communicate directly with the City’s Audit Committee upon the completion of the audit. In addition, members of the Audit Committee members are authorized to initiate communication directly with the independent certified public accounting firm.
Audited financial statements, including the auditor’s opinion thereon, will be submitted and presented to the Erlanger City Council by the independent accounting firm at a City Council meeting, after the financial statements have been reviewed and approved by the Audit Committee.
How Often to Review the Selection of the Auditor
The City of Erlanger shall review the selection of its independent auditor in the following circumstances:
1. Anytime there is dissatisfaction with the service of the current firm,
2. When a fresh perspective and new ideas are desired,
3. Every 3-5 years to ensure competitive pricing and a high quality of service (this is not a requirement to change auditors every three years; simply to re-evaluate the selection).
Selecting an Auditor
The selection of an accounting firm to conduct the annual audit is a task that should be taken very seriously. The following factors shall be considered by the City of Erlanger in selecting an accounting firm:
1. The firm’s reputation in the governmental auditing community;
2. The auditor shall demonstrate experience with governmental accounting, GASB standards, Single Audit requirements, and Government Auditing Standards.
3. The firm’s demonstrated ability to provide the services requested in a timely manner.
4. The ability of firm personnel to communicate with City personnel in a professional and congenial manner.
Preparation for the Annual Audit
The City of Erlanger shall be actively involved in planning for and assisting with the City’s independent certified public accounting firm in order to ensure a smooth and timely audit of its financial statements. In that regard, the Finance Department shall provide assistance to the independent auditors in the following areas:
Planning – The Finance/HR Director is responsible for delegating the assignments and responsibilities to Finance Department staff in preparation for the audit. Assignments shall be based on the list of requested schedules and information provided by the independent certified public accounting firm.
Involvement – City staff will do as much work as possible in order to assist the auditors and, therefore, reduce the cost of the audit.
Interim Procedures – To facilitate the timely completion of the annual audit, the independent auditors may perform selected audit procedures prior to the City’s year-end. By performing significant portions of audit work as of an interim date, the work required subsequent to year-end is reduced. City staff will assist as much as possible in order to provide requested schedules and documents and to otherwise assist the auditors during any interim audit fieldwork that is performed.
Throughout the audit process, it shall be the policy of the City of Erlanger to make every effort to provide schedules, documents and information requested by the auditors in a timely manner.
Audit Committee Responsibilities
The Audit Committee will be responsible for, but shall not be limited to, the following:
1. Communication with the City’s independent auditors;
2. Review and approval of the annual, audited financial statements;
3. Discussion of internal control matters with the independent auditor;
4. Responding to any reported instances of fraud involving the City of Erlanger or its employees;
5. Making policy and other recommendations to the Erlanger City Council regarding matters arising out of the audit
In fulfilling these duties and responsibilities, the Audit Committee is entitled to examine any and all documents within the control of the City of Erlanger and its employees. In addition, the mayor shall have the final authority to contract with independent contractors in the fulfillment of the committee’s responsibilities.
INSURANCE
Overview
It is fiscally prudent to have an active risk management program that includes a comprehensive insurance package. This will ensure the viability and continued operations of the City of Erlanger.
It is the policy of the City of Erlanger to maintain adequate insurance against general liability, as well as coverage for buildings, contents, computers, fine arts, equipment, machinery and other items of value.
Coverage Guidelines
As a guideline, the City of Erlanger will arrange for the following types and levels of insurance as a minimum:
Type of Coverage Limits of Insurance
General Liability $5,000,000
Public Officials Liability $5,000,000
Law Enforcement Liability $5,000,000
Business Auto Coverage:
Liability $5,000,000
Physical Damage Comprehensive
and Collision Actual cash or stated value (less $1,000
deductible)
Employee Dishonesty: $500,000 for all City employees except the City Clerk, Finance/HR Director and Assistant Finance/HR Director all of whom hold bonds for higher amounts.
Workers’ Compensation: To the extent required by law, the City provides workers’ compensation coverage for all eligible employees.
RECORD RETENTION PROCEDURE
It is the procedure of the City of Erlanger to retain records as required by law and to destroy them when appropriate. The destruction of records must be approved by the City Clerk, and logged into the City’s Destroyed Records Log. The formal records retention policy of the City of Erlanger will be the same as the schedule recommended by the State of Kentucky.