HomeMy WebLinkAboutOSA Audit Request Letters II " STATE OF MINNESOTA
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OFFICE OF THE STATE AUDITOR
SUITE 500
525 PARK STREET (651) 296-2551 (Voice)
(651) 296 -4755 (Fax)
SAINT PAUL, MN 55103 -2139
PATRICIA ANDERSON state.auditor @state.mn.us (E -Mail)
STATE AUDITOR 1- 800 -627 -3529 (Relay Service)
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October 28, 2004 �`�� "I
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Ms. Judy Holst
City of Oak Park Heights
14168 Oak Park Boulevard
PO BOX 2007
Oak Park Heights, Minnesota 55082 -3007
Dear Ms. Judy Holst:
As part of this Office's oversight responsibility, we are doing an in -depth review of city
audits. The State Auditor's Office has viewed your year ended December 31, 2003 audit
report received by this Office.
However, we did not receive a copy of the management letter, and/or schedule of
findings and recommendations. Therefore, please forward these documents and any
other written comments or concerns prepared by your auditor to this Office by November
8, 2004. You may email a copy to auditor(a,osa.state.mn.us or fax a copy to me at (65 1)
297 -3674.
In the future, you will be required to submit these documents along with your audit. If
you have any questions, you may contact me at (651) 297 -3673 or Kathy Docter at (65 1)
282 -2388. Thank you for your assistance.
Sincerply,i'�
Carla Hey
Deputy State Auditor
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157 post- consumer waste An Equal Opportunity Employer
CITY
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OAK PARK HELG.HTS
14168 Oak Park Boulevard No. P.O. Box 2007 + Oak Park Heights, MN 55082 -2007 • Phone: 651/439 -4439 • Fax: 651/439 -0574
- November 4, 2004
Carla Heyl
- Deputy State Auditor .
State.of Minnesota
Office of the State Auditor
Suite 500
525 Park St.
St. Paul,'MN. 55103 -2139
Dear Ms. Heyl:
Per your request, enclosed is a copy: of the Independent Auditor's Report on Compliance
and on Internal Control over Financial Reporting Based on ari Audit of Financial
Statement Performed in Accordance with Government Auditing'Standard letter and a
copy of the Audit Management' Letter for December 31, 2003:
Please let me know if you require additional information.
Siacerely,
udy L. Hoist
Deputy Clerk/Finance Director
Tree City U.S.A.
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PATRICIA ANDERSON
STATE AUDITOR 1 -800- 627 -3529 (Relay Service)
January 19, 2005
The Honorable David Beaudet
Mayor
City of Oak Park Heights
14168 Oak Park Boulevard
P.O. Box 2007
Oak Park Heights, Minnesota 55082 -3007
Dear Mayor Beaudet:
Thank you for the assistance of your staff in providing your City's audit and other
requested information to this office.
We have completed our review of your City's 2003 audit and related documents. We
urge the City to work with its auditor and take appropriate action to comply with your
auditor's comments and recommendations. I am providing an article from my office
relating to your contracting issue, which will provide you with guidance on that subject.
Thank you again for your City's assistance. We look forward to reviewing your 2004
audit next year. If you have any questions, please contact my office.
Sincerely ,
Patricia Anderson
State Auditor
Cc: Ms. Judy Holst, Finance Director ✓
HLB Tautges Redpath, & Co., White Bear Lake, City Auditor
Enclosure
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F j 15% post - consumer waste An Equal Opportunity Employer
Vp[TOR STATE OF MINNESOTA
o OFFICE OF THE STATE AUDITOR
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. ... (651) 296 -2551 (Voice)
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PATRICIA ANDERSON SAINT PAUL, MN 55103 -2139 state. auditor(d),state.mn.us (E -mail)
STATE AUDITOR 1- 800 -627 -3529 (Relay Service)
Statement of Position
City Bidding and Contract Requirements
December 2004
City officials and employees often face difficult decisions related to city contracts. In
addition to finding the right products at the right prices, they must follow various state
laws that govern the bidding and contracting process. The State Auditor's Office has
found that confusion exists about some of the required procedures and other legal
requirements applicable to city contracts. This article provides general information on
bidding and contract requirements for the benefit of city officials and employees.
I. Uniform Municipal Contracting Law
Most city officials and employees recognize that some contracts must be awarded based
on formally solicited bids. Because the legislature has altered the bid law in recent years,
we have prepared the following up -to -date overview.
The Uniform Municipal Contracting Law sets out procedures that cities must follow for
contracts to sell, purchase or rent supplies, materials, or equipment, or to construct, alter,
repair or maintain real or personal property. The procedures to follow depend on the
estimated amount of the contract. Of course, estimates should be reasonable. For
example, if a city asks for quotations because it estimates the value of a contract will be
below the bid threshold but all of the quotations are substantially over the threshold, the
city should solicit formal bids.
A. Contracting Procedures
Contracts estimated to have a value over $50,000 must be made by sealed bids, solicited
by public notice, and awarded to the lowest responsible bidder. Bids should be retained
for the period specified in the city's records retention schedule.
Minn. Stat. §§ 471.345, subd. 3 (2004); Minn. Stat. 412.311 (2004). As an alternative, the law now
allows electronic reverse auction purchases and electronic sales, if certain conditions are met. See Minn.
Stat. § 471.345, subds. 16, 17 (2004).
2 The General Records Retention Schedule for Cities (2002) provides a ten -year retention period for
accepted bids. Rejected bids should be kept for at least the period during which a disappointed bidder
could challenge the city council's contract award.
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The requirement that the successful bidder be "responsible" protects cities from having to
choose unqualified or unscrupulous low bidders. It allows a city council to consider
factors such as the bidder's financial responsibility, integrity, skill and ability, and the
likelihood that the bidder will do satisfactory work. A city can even include evaluation
criteria for "responsible" bidders in the bid specifications.
Contracts estimated to be worth more than $10,000, up to $50,000, can be made either by
sealed bids or by direct negotiation based on quotations. Two or more quotes must be
obtained if possible, and the quotations must be kept on file for at least one year.
Contracts with estimated values of $10,000 or less may be made either upon quotation or
in the open market. If quotations are used, at least two quotations must be obtained if
practicable, and the quotations must be kept on file for at least one year.
B. Notice of Solicitation of Bids
The notice that bids are being solicited must be published once in the city's official
newspaper at least ten days before the last day for the submission of bids. Instead of
publishing the notice in a newspaper, a city may put them on its website or in a
recognized industry trade journal if certain steps are followed. If a city designates one of
these alternative methods, the city must continue to publish solicitations in the newspaper
for six months in addition to the alternative method, and the publication in the newspaper
must indicate where to find the notice. In addition, notices must be put on the website or
industry trade journal in substantially the same format and for the same time period as
required for newspaper publication.
II. The Cooperative Purchasing Venture ("State Contract ")
As part of marketing, vendors sometimes say cities can purchase from them without
bidding because they are on the "state contract" or they will sell at the state contract
price. Cities should beware of this approach. The real name of the state contract is the
Cooperative Purchasing Venture. It is a members -only joint powers program operated by
the Minnesota Department of Administration. To purchase through it, cities must join
and pay a $500 annual membership fee. Cities cannot avoid the normal bidding
requirements by simply purchasing at the state contract price or from a state contract
vendor without joining the program and following its requirements. For additional
information, visit the Cooperative Purchasing Venture website at
littn://www.mmd.admin.state.mii.us/cl)v
III. Prompt Payment to Subcontractors
City contracts that involve a prime contractor must require the prime contractor to pay
subcontractors within ten days of the prime contractor's receipt of payment from the city
s Kelling v. Edwards, 134 N.W. 221 (1912).
4 Westra Constr. v. City of Minnetonka, A03 -50, December 30, 2003 (unpublished).
'Minn. Stat. §§ 412.311(2004) (published notice), 331A.03, subd. 3 (2004) (alternative methods).
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for undisputed services provided by the subcontractor. The contract must require the
prime contractor to pay interest of 1.5 percent per month or any part of a month to the
subcontractor on any undisputed amount not paid on time.
IV. Performance and Payment Bonds
For come contracts, cities must require contractors to provide a performance bond and a
payment bond. This requirement applies to contracts over $ 75,000 for the performance
of public work. The required performance bond benefits the city by ensuring that the
work is completed according to the terms of the contract, while the required payment
bond benefits subcontractors and people who provide labor and materials, by seeing that
their claims for labor and materials are paid.
V. Withholding Certificates
Before a city makes the final payment to a contractor under a contract requiring the
employment of employees for wages, it must make sure the contractor and any
subcontractors have complied with withholding tax laws. Contractors and
subcontractors show compliance by filing Form IC 134, "Withholding Affidavit for
Contractors," with the Minnesota Department of Revenue. If a contractor or
subcontractor has withheld taxes as required, the Department of Revenue will sign and
return the form, certifying compliance.
For more detailed information, please refer to the cited statutes or the Minnesota Legal
Compliance Audit Guide for Local Government, available at the State Auditor's website:
www. auditor. state.mn.us.
'Minn. Stat. § 471.425, subd. 4a (2004).
7 Minn. Stat. § 574.26 (2004).
8 Minn. Stat. § 290.97 (2004).
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