Enacts provisions of law relating to enhanced accountability and transparency by and mandate relief for local governments

Part B authorizes municipal use of credit cards for municipal purchases with mandated Safeguards.

Part C relates to purchase contracts involving expenditures not in excess on $25,000 may.be awarded by the appropriate officer, board or agency of a political subdivision or district, there into a minority owned or women-owned business enterprise without advertising for compet- itive bids.

Part D would correct a technical error in Chapter 341 of the Laws of 2007.

Summary of specific provisions

Part A The Part would amend section 34 of the General Municipal Law to authorize the State Comptroller to examine into the financial affairs of local government subsidiary organizations. The term "local government subsidiary organization" would mean any organization, other than an entity already subject to audit by the Comptroller, that is controlled by one or more municipal corporations or other local government entities subject to audit by the Comptroller pursuant to the General Municipal Law. The circumstances under which an organization is considered to be under the control of one or more municipal corporations or other local government entities would include, but not be limited to, any situation where municipal or local government officials select or serve as either a majority of the organization's highest policy making body or the organization's chief executive officer.

Part B

Section one of Part B adds a new Section 5-c to the General Municipal Law relating to the acquisition and use of credit cards by local govern-

ments. Establishes no credit card may be used by or on behalf of any local government unless the governing board of the local government by local law, ordinance or resolution, determines that it is in the public interest. Additionally, it permits school districts and BOCES to adopt policies and procedures that allow them to act cooperatively in procur- ing credit card services by either entering into a cooperative procure- ment agreement with local governments within and outside of this state or through use of an existing cooperative procurement agreement entered into among local governments within and outside of this state where the governing board has determined that engaging credit card services pursu- ant to or through a cooperative procurement agreement will result in a cost savings.

Section two of this Part B amends Section 20.00 of the Local Finance Law to state that nothing in such section shall be construed to prevent a municipality, school district or district corporation from entering into an agreement with one or more financing agencies or card issuers for the issuance of a credit card or cards in the name of the municipality, school district or district corporation or from using such credit card or cards for the procurement of commodities, services and expenses in accordance with section 5-c of the General Municipal Law.

Part C

Sections 1 of Part C amends subdivision 5 of section 103 of the General Municipal Law, relating to standardization, to conform to the new thres- holds established by this part.

Section 2 of Part C adds a new subdivision 13 to section 103 of the General Municipal Law to authorize political subdivisions to award purchase contracts not exceeding $25,000 to minority or women-owned businesses (MWBE's) without advertising for competitive bids.

Section 3 of Part C amends section 104 of the General Municipal Law to repeal an obsolete reference to section 1555 of the Federal Acquisition Streamlining Act of 1994, which has been repealed, and to authorize local governments, as an exception to competitive bidding, to make purchases under federal procurement programs established by section 211 of the e-Government Act of 2002, and section 1122 of the National Defense Authorization Act of 1994.

Section 4 of Part C amends paragraph b of subdivision 2 of section 104-b of the General Municipal Law to exempt purchases from certified MWBEs pursuant to new subdivision 13 of section 103 from the general require- ment in section 104-b that alternative proposals or quotes be sought and to correct an obsolete reference to the State Finance Law.

Section 5 Part C amends subdivision 2 of section 314 of the Executive Law to add political subdivisions and their contractors and potential contractors to the existing statutory list of users of the New York State Directory of Certified Minority and Women-Owned Business Enter- prises.

Part D

Section 1 of Part D would amend Finance Law to delete the phrase "within fifteen days after receipt of any such recommendations".

Justification

Part A In recent years, municipal corporations and there local govern- ment entities have relied on a variety of separate and legally distinct organizations to perform various functions (e.g. local development corporations organized under section 1411 of the Not-For-Profit Corpo- ration Law; a limited liability company organized under the Limited Liability Company Law; a for-profit corporation apparently organized under the Business Corporation Law). Under current law, when a munici- pal corporation or other local government entity has a financial or business relationship with another legally distinct organization, the Comptroller may examine that relationship, but only as part of an audit of the municipal corporation or other local government entity. Even in the context of such an audit, there is no authority for the Comptroller to look beyond the financial or business relationship, to examine the organizations overall finances and operations. Similarly, there is no express authority for the Comptroller to separately audit the overall finances or operations of such an organization. This bill would expand the Comptroller's express audit authority to include audits of such organizations having a financial or business relationship with a munici- pal corporation or other local government entity, but only when the organization is under the control of one or more municipal corporations or other local government entities. This expansion of the Comptroller's audit authority is necessary promote and increase transparency in munic- ipal and local government finances and operations because an organiza- tion that is under the control of a municipal corporation or local government entity functions as an instrumentality of that municipal corporation or local government entity. Thus, in order to fully under- stand the financial condition and operations of a municipal corporation or other local government entity, it is necessary to examine the finances and operation operations of organizations controlled by the municipal corporation or local government entity. To avoid creating incentives or disincentives to the use of any particular type of organ- ization that is under the control of a municipal corporation or other local government entity, except an organization already subject to audit by the Comptroller.

Part B

In recent years, there has been increased interest among local govern- ments in using credit cards to procure commodities and services. This trend reflects what has become a standard operating procedure in the private sector and at the State government level. Often, it credit card is required for transactions such as rental of real and personal proper- ty, ordering commodities through the internet or catalogs, or enrolling in conferences and other training opportunities. In 1996, the Legisla- ture amended GML §5 to provide express authority for local governments to choose to accept credit cards as a means of payment. Currently,

however, there is no statute addressing the use of credit cards by local governments for procurement and other purposes. A 1979 Comptroller's opinion concluded that, if a credit card company would comply with mandatory certification of claims requirements, a municipality could obtain credit cards for town employees' and officers' use for among' other things, reimbursable travel expenses (1979 Opns St Comp No. 79-202, p 36). The same opinion re-examined earlier opinions and concluded that the use of a credit card did not constitute an illegal financing mechanism within the intent of Local Finance Law §§ 20.00 and 176.00. This bill ensures that appropriate safeguards are in place for the proper use of credit cards.

Part B provides that no credit card may be used by or on behalf of a local government unless the governing board of the local government has authorized an agreement with one or more card issuers and has adopted an internal credit card policy. The governing board of the local government is required to set forth in its credit card policy what documentation will be required of an officer or employee using a, credit card to procure commodities or services or for travel and other actual and necessary expenses in order to facilitate an appropriate audit. Addi- tionally the bill requires timely payments so that no interest becomes payable to the financing agency or credit card issuer. Since it is intended that payments of claims arising from credit card transaction~ are to be made in the same manner as payments of other claims. The bill expressly precludes the use of debit cards. Unlike the extension of credit with the use of a credit card, when a debit card is used. Money is automatically deducted from a specific account of the card owner. The statutes governing local governments permit only a few exceptions to the general requirement that no claim may be paid without first being audit- ed and allowed by the auditing body or official (see e.g. Town Law .. 118,176; Village Law .5-524; County Law .369; Education Law 1724,2524). Permitting local governments to use debit cards would have, the effect of significantly broadening the purposefully narrow exception created by the Legislature.

Also, Part B expressly states that all procurements of commodities and services by credit card are subject to the laws applicable to municipal procurements. The governing board, purchasing agent or other officer or body authorized to make procurements must comply with either the compet- itive bidding requirements set forth in GML § 103 or, when competitive bidding is not required by law, the provisions of the local government's internal procurement policies and procedures adopted in accordance with GML § 104-b. Officers and employees incurring costs associated with travel and other actual and necessary expenses for which a credit card is used would be required to comply with existing law applicable to such expenditures (see. e.g., GML §77-b. requiring advance approval by the governing board for expenses incurred in connection with conventions conferences and schools).To ensure that competition is sought among card issuers and financing agencies, Part C requires the underlying contract between the local government and the financing agency or credit card issuer to be awarded after the solicitation of competitive proposals or quotations.

The use of credit cards is no longer novel or experimental. Decades of use in the private and public sectors have revealed the strengths and weaknesses of credit card use. This bill establishes a statutory frame- work for continuing the use of credit cards by local governments while providing for sufficient safeguards on the expenditures of public money.

Part C - there.is no exception from bidding requirements if political subdivisions purchase from federal vendors. Access to available federal purchase contracts would save localities money by lowering purchase costs, as welt as administrative expenses. To provide opportunities for savings to localities, the bill authorizes political subdivisions to purchase through two federal' programs available to local governments (by a "piggyback" on the federal contract) as an exception to bidding requirements. The two programs are the federal "e-Government Act of 2002" (including information technology items, such as data processing equipment and software) and the National Defense Authorization Act of 1994 (including law enforcement items such as night vision devices, radios and cameras).

Part D is a technical amendment to Chapter 341 of the Laws of 2007 which added section 10.10 to the Local Finance Law. Section 10.10 provides uniform requirements applicable to municipalities and school districts that are authorized by general or special law to contract indebtedness to finance the liquidation of operating deficits. Paragraph d of section 10.10 sets forth a procedure for the submission of the proposed budget of the municipality or school district to the State Comptroller (and, in the case of a school district, the Commissioner of Education) for review and recommendation. Among other things, paragraph d provides that "no later than five days prior to the adoption of the budget" the municipality or school district must review those recommendations and either make adjustments to the proposed budget consistent the recommen- dations or explain in writing the reasons for the rejection of any recommendation. Later in the same sentence as the quoted provision, the phrase "within fifteen days after receipt of any such recommendations" appears, creating a potential ambiguity as to the proper timeframe for the municipality or school district to act. It is apparent that the inclusion of this phrase in paragraph d was inadvertent and likely a carryover from an earlier version of the bill that was enacted. The phrase "within fifteen" days after the receipt of any such recommenda- tions" is inconsistent with the budget review timeframe otherwise set forth in paragraph d of section 10.10 of the Local Finance Law and should be deleted so that the statute is consistent and clear.

The Comptroller urges passage of this legislation.

Effective date

This act shall take effect immediately provided, however, that the applicable effective dates of Parts A through D of this act shall be specifically set forth in the last section of such parts.