City purchasing staff outlines encumbrance rules and credit-card visibility; council presses for contract controls

Brenda, purchasing agent for the city, explained the encumbrance process and approval workflow used to reserve funds before orders are issued. "An encumbrance is a commitment of funds set aside for future expenses ensuring that you have the proper budget allocation," Brenda said, summarizing the pre-encumbrance (purchase request) and full-encumbrance (purchase order) steps in the Finance Enterprise system.

Brenda described how departments enter purchase requests that pre-encumber funds and then route the requests to supervisors and purchasing for verification. "When that approval process is in place ... once the department head approves it, then it passes on to the final approver, which would be me," she said, and only after final approval are funds fully encumbered.

Staff and council discussed how the city handles credit-card charges. Brenda said the city maintains a large blanket purchase order (BPO) that includes each department’s account numbers and several object codes to act as an encumbrance placeholder for credit-card cycles. She explained the practical tradeoffs from earlier manual approaches and why the city imports credit-card transactions as journal entries: the current import reduces manual AP work but can limit a department’s visibility into a running encumbrance if the BPO is configured only for a single cycle. "It was easier to reduce a PO to free up some money than it is to go to council to ask for more money," she said, describing why staff sometimes over-encumber or maintain large placeholders.

Council members raised a specific concern about elevated credit-card processing costs tied to increased customer use of card payments for utility accounts and internal card-charge monitoring. Andy (staff) and other finance staff explained that customer-side processing fees post automatically and that increased use of card payments can push budgeted amounts past historical estimates before a manager notices.

The workshop also addressed an oversight in the procurement-to-agenda process: council members identified an item that appeared in an earlier Public Works Committee packet and on the city council agenda with a scope and price but without an executed contract. Council members pressed staff on why the item moved forward; staff acknowledged a process lapse and said a full contract with protections appears on that evening’s agenda to correct the omission. "That was a mistake that was made," one staff member said; council asked staff to review and fix the process so that contracts are vetted before items are posted for committee or council approval.

Council and purchasing staff agreed to these next steps: revisit purchasing manual and policy updates (Madison Smith in staff is working on updates), consider policy language to standardize how departments encumber recurring or annual charges, and explore giving department managers clearer visibility of encumbrance draws so they can track credit-card spending in near real time.

Ending: Staff committed to revise purchasing procedures and to return updated purchasing policy and encumbrance practices for council approval; council asked staff to investigate the contract-approval lapse and to take steps so future agenda items include fully vetted contracts when required.

Votes at a glance: No purchasing or contracting actions were finalized in the workshop; adjournment motion carried at the end of the session.