R-08-15 Resolution Adopting Finance Policies and Procedures Resolution No.
A Resolution Adopting Finance Policies and Procedures
WHEREAS, the Village of Lemont adopted certain Finance Policies and Procedures in
2011;
WHEREAS, the Village of Lemont updates these policies and procedures on a regular
basis;
WHEREAS, the President and Board of Trustees find that adopting the attached Village
of Lemont Finance Policies and Procedures ("Financial Policies") is in the best interest of the
public.
NOW THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND VILLAGE
BOARD OF TRUSTEES OF THE VILLAGE OF LEMONT, COOK, WILL & DU PAGE
COUNTIES,ILLINOIS that:
Section 1: That the Village of Lemont Finance Policy and Procedures, attached as
Exhibit A hereto is herby adopted.
Seciton 2: The Village Administrator shall have the authority to make any and all non-
material amendments to Financial Policies as determined to be necessary by the Village
Administrator, Village Attorney and the Village Finance Director without further action from the
Village Board.
Section 3: This Resolution shall be in full force and effect on March 1, 2015. All prior
resolutions and policies in conflict herewith are hereby repealed,to the extent of such conflict.
PASSED AND APPROVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF LEMONT,C UNTIES OF COOK, WILL AND DUPAGE,
ILLINOIS on this day of l[bvi,[Q , 2015.
PRESIDENT AND VILLAGE BOARD MEMBERS:
AYES: NAYS: ABSENT: ABSTAIN
Debby Blatzer ✓
Paul Chialdikas
Clifford Miklos
Ron Stapleton ✓
Rick Sniegowski ✓
Jeanette Virgilio
A07
` -U RIAN K. '1' . 1
President
•
ATTEST:
C ARLENE M. S OLLEN � ���
Village Clerk
Village of Lemont
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Effective
March 2015
2
VILLAGE OF LEMONT FINANCE
POLICIES & PROCEDURES
Effective March 2015
TABLE OF CONTENTS
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Village of Lemont
Budget Policy
Adopted: March 2015
TABLE OF CONTENTS
A. Village Mission Statement 1
B. Budget Principles 1
C. Budget Process 2-3
D. Revenue Policies 4
E. Operating Expenditures Policies 5
F. Capital Investment Policies 5
G. Investment and Debt Policies 6
H. Reserve Policies 7
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Village of Lemont
Budget Policy
Adopted: March 2015
A. Village Mission Statement
The Village of Lemont is dedicated to promoting and preserving the character of the community
and ensuring a high quality of life through professional public service provided in a friendly,
consistent, and fiscally responsible manner, emphasizing the best interest of the community as a
whole.
B. Budget Principles
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The Village of Lemont Budget Policy is based on a set of fundamental principles designed to
maintain an organization with a strong financial condition and a proactive approach to serving the
needs of its citizens. Adherence to these principles will enable the Village to provide services in a
cost-effective manner in both good times and in periods of sustained economic downturn and
uncertainty. These principles include:
1. The Village budget shall reflect a long-term perspective and incorporate policies and
management strategies to achieve the Village's long-term goals.
2. The Village budget process shall identify broad organizational goals and link the
departmental spending plans directly to the accomplishment of these goals.
3. The Village shall publish an annual budget which serves as a communication tool,
demonstrating the Village's accountability for the sources and uses of public funds and
providing an operations guide to assist personnel in the responsible management and
application of these resources.
4. The focus of budget decisions will be on results and outcomes. The Village will
continually monitor its financial condition, performance relative to the adopted budget,
and stakeholder satisfaction with programs and services and make adjustments as needed.
5. The budget shall be designed to promote involvement from citizens, staff, local businesses
and other interested stakeholders. The annual budget shall be provided in its entirety on
the Village's web-site, and the Village will annually exceed statutory requirements for
public discussion and deliberation on the budget.
6. The budget will be prepared on the current financial resources measurement focus for all
funds, using the modified accrual basis of accounting for governmental funds and the
accrual basis of accounting for enterprise and internal service funds.
C. Budget Process
The Village of Lemont has adopted the budget system for managing Village finances in
accordance with Illinois Compiled Statutes 65 ILCS 5/8-2-9.1-10 as documented in Ordinance 0-
23-11. The budget process consists of activities that encompass the development,
implementation and evaluation of the budget process, including:
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Village of Lemont
Budget Policy
Adopted: March 2015
1. Strategic Plan—The Mayor, Village Board and Village Administrator will establish broad
goals that provide overall direction for the government. This will be completed at the
beginning of each budget cycle. These goals will serve as a framework for decision
making. The strategic plan shall include the identification of opportunities and challenges
for government services, capital assets, and management.
2. Budget Preparation — in accordance with Illinois Compiled Statutes, the Mayor shall
appoint a Budget Officer. The Budget Officer is responsible for coordinating the overall
preparation and administration of the Village budget. The Department Heads have
primary responsibility for formulating budget proposals that support the priorities and
direction provided by the Village Board. The Budget Officer will assist the Department
Heads in identifying budget problems, formulating solutions and alternatives, and
implementing any necessary corrective actions.
3. Balanced Budget—the Village shall adopt a balanced operating budget, which is defined
as a budget where projected revenues are equal to budgeted expenditures within the
current fiscal period. Capital projects funds and other projects funded from existing
resources (e.g., fund balances)are excluded from this policy.
4. Performance Budgeting — performance measures will be utilized and reported in
department budgets. The Village will prepare historical trends and comparisons to other
municipalities, and use other financial management tools to monitor and improve Village
services.
5. Budget Calendar — the Village Board of Trustees shall adopt a Budget Ordinance,
including a budget for all funds utilized by the Village, within the first quarter of each
fiscal year, in accordance with the following timeframe:
a. Strategic Planning Session- the Mayor, Village Board of Trustees, Village
Administrator, and Department Heads will attend a strategic planning session to
outline long-term goals and provide overall direction for the Village. This will be
held in December.
b. Department Head Budget Memo- the Budget Officer prepares a Department Head
Budget Memo, outlining the Village's strategic goals and informing the departments
of the upcoming budget requirements. This will be distributed to the Department
Heads by December 31.
c. Budget Kick-Off Meeting- the Finance Department hosts a budget kick off
meeting.. The meeting includes instructions on entering in estimates for current
budget year and department requests. Additionally, new personnel forms are
distributed. Completed forms and budget entries are due to the Finance by early
January.
d. Capital Planning Meeting- An access database has been created for the Village of
Lemont 5 year capital plan. The Finance Department sends out the updated Access
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Village of Lemont
Budget Policy
Adopted: March 2015
file to all departments. Departments entered their requests for Capital over the next
five years. The Budget Officer meets with the Village Engineer, the Building
Department staff, Planning and Economic Development staff and Public Works
staff to review the proposed capital projects for the next fiscal year and as well as
the 5 year capital project plan. This meeting will be held by January 31.
e. Committee of the Whole Meeting (Budget Guidance)- the Budget Officer and
Finance Director will present the initial budget estimates, revenue projections, and
capital project plans for discussion by the committee at the February meeting.
f. Department Head Budget Session- in February the Budget Officer will meet with
the Department Heads to review initial budget projections and seek input from
Department Heads.
g. Finance Committee Meeting-the Budget Officer presents the tentative budget to the
Finance Committee for review by early March.
h. Committee of Whole Meeting (Tentative Budget)- the Budget Officer presents the
tentative budget for discussion at the Committee of the Whole meeting in March.
i. Public Inspection- the Village will announce that the tentative budget is available
for public inspection, available on the Village website in mid March. The Village is
required to make this available for public review for a minimum of 10 days.
j. Public Hearing- the Village will conduct a public hearing on the budget in early
April. Notice of this hearing will be published at least 10 days prior to the hearing.
k. Board Approval- the Budget Officer will present the final budget to the Board of
Trustees by April 30 for approval.
1. County Clerk Filing- the Village shall file a certified copy of the budget with the
County Clerk's office for the counties of Cook, DuPage, and Will within 30 days of
the adoption of the budget ordinance.
6. Budget Monitoring — the Finance Department will maintain a system for monitoring the
Village's budget performance. Interim financial reports comparing actual experience
against budgeted revenues and expenditures in the current fiscal period shall be distributed
and reviewed with the Village Board on a quarterly basis. The Finance Department will
also provide monthly reports comparing actual experience against budgeted revenues and
expenditures in the current fiscal period to Department Heads. The Department Heads
have primary responsibility for ensuring their departments stay within their annual
adopted budget.
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Village of Lemont
Budget Policy
Adopted: March 2015
7. Budget Adjustments and Amendments — during the course of the year, the Village may
determine that a significant individual purchase or other unplanned event may cause a
budgeted account to exceed the budgeted amount. The Village may adjust the original
budget using one of the following methods:
a. Budget adjustment — this involves a reallocation of existing appropriations and
does not change the Fund's overall budget. In accordance with the budget officer
ordinance adopted by the Village, the Department Heads are authorized to delete,
add to, change or create subclasses within object classes budgeted previously to the
department, subject to the prior approval of the Budget Officer and the Village
Administrator, or the Mayor, in the event the Village Administrator is the Budget
Officer.
b. Budget amendment — this provides an addition to or reduction of existing budget
authority which results in a change to the Fund's bottom line. This type of change
requires an ordinance that amends the original budget and states the sources of
funding for the incremental for the change. At least quarterly, the Budget Officer
will prepare a formal resolution for filing with the County Clerk which will include
all of the quarter's amendments passed by motions and presented to the Village
Board for approval.
8. Distinguished Budget Presentation — the Village will seek to prepare its budget based on
the requirements of the Government Finance Officers Association's (GFOA) Budget
Presentation Award program.
D. Revenue Policies 1
The Village must be sensitive to the balance between the need for services and the Village's
ability to raise fees, charges, and taxes to support those services. The Village revenue estimates
are to be conservatively forecasted and include the following principles:
1. Mix of revenues - the Village should strive to maintain a stable and diverse mix of
revenues in order to balance the sources of revenue and protect against short-term
fluctuations in any one revenue source.
2. Charges for services - the Village shall have fees for services that benefit specific users
established in such a manner which fully support all direct and indirect costs associated
with providing the service. Departments that impose fees or service charges should
prepare and periodically(i.e., annually)update cost-of-service studies for such services.
3. One-time revenues - the Village shall avoid the use of one-time or otherwise intermittent
revenues to support on-going operational costs.
4. Grant Agreements - the Village shall explore the award of various local, State and/or
Federal grants to support one-time capital or non-recurring expenditures. Prior to
application and again prior to acceptance, the Village will review the grant agreement to
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Village of Lemont
Budget Policy
Adopted: March 2015
ensure matching requirements are reasonable and attainable, and ensure compliance with
regulatory requirements is possible.
5. Monitoring changes-the Village will monitor changes in key revenues on, at a minimum,
a quarterly basis, and report on significant changes in collections or emerging trends.
E. Operating Expenditure Policies'
It is important that the Village maintain an adequate and effective cost analysis and containment
program.
1. Public Stewardship—the Village shall maintain a level of expenditures which will provide
for the public well being and the safety of the residents of the community.
2. Current resources — the Village shall strive to pay for current operating expenses from
available operating revenues.
3. Full cost allocation — the Village budget shall reflect the full cost of providing services
and avoid practices which balance current costs at the expense or detriment of future
years, such as deferring or postponing necessary expenses.
4. New programs and services — the Village should avoid the implementation of new
programs or services without the identification of a dedicated revenue stream to pay for
them.
5. Employee Staffing — the Village shall allocate staff and resources necessary to safely,
effectively and efficiently meet the needs of its citizens. Any changes to staffing and
resource levels shall be consistent with the overall goals and priorities of the Village
Board.
6. Employee pension plans—the Village shall provide for the responsible and timely funding
of required employee pension plans in accordance with accepted actuarial standards and
practices.
F. Capital Investment Policies'
The capital assets of the Village and their condition are critical to the quality of services provided
and are therefore an important part of determining whether the needs and priorities of
stakeholders can be met. The Village maintains a 5 year capital improvement plan which serves
as an integral part of budget preparation.
1. Capital replacement - the budget shall provide a systematic approach for the replacement
of Village equipment and infrastructure which include funding replacement of these assets
over their anticipated useful life. The Village should assess the issues, challenges and
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Village of Lemont
Budget Policy
Adopted: March 2015
opportunities affecting the provision of capital assets in the future, including community
needs and priorities, the impact of deferred maintenance, funding issues, changes in
technology, and any legal or regulatory changes.
2. Capital project proposals — the Village should include project cost estimates for the
Capital Budget that are based upon a thorough analysis of the project and are expected to
be as reliable as the level of detail known about the project.
3. Operating cost impact - Proposals shall include all reasonable attainable cost estimates for
operating and maintenance costs necessary for the life cycle of the asset.
4. Comprehensive resource plan—the plan should include the amount and type of resources
required, a timeline, and financing strategies to be employed. The resources should be
differentiated by phase of the project,where applicable.
5. Budget cost—capital projects will be budgeted at the full estimated cost of completing the
project, or unique phase for larger projects, in the year the project is expected to be started.
6. Contingencies —the Village shall include a reasonable amount for contingencies for each
project award in the budgeted amount. The amount set aside shall correspond with
industry standards and shall not exceed 10%.
7. Multi year projects — capital projects that are not expensed during the budget period may
be re-budgeted or carried over to the next fiscal period. Multi-year projects with
unexpended funds will be carried over to the next fiscal period.
8. Capital project funding - A capital project will not be budgeted unless there is a
reasonable expectation that funding is available.
G. Investment and Debt Policies'
The Village investment and debt issuance policies are designed to maintain a strong financial
condition and incorporates the following principles:
1. Asset Preservation — Preservation and safety of assets is a higher priority than return on
investments. Therefore, the Village will seek a reasonable return on its investments while
also preserving the original capital investment. The Village maintains an Investment
Policy, approved by the Village Board of Trustees and updated annually.
2. Debt Issuance — the Village will strive to keep a strong bond rating by monitoring and
improving its financial stability. Before debt is issued, consideration will be given to:
a. Whether the revenue stream is available to repay debt.
b. Alternate methods of financing.
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Village of Lemont
Budget Policy
Adopted: March 2015
c. Whether it would not be cost effective to delay issuing debt.
H. Reserve Policies1
The Village will maintain adequate reserves in order to reduce the potential need to borrow to
fund operations or abruptly reduce services during periods of economic downturn or other
emergencies. It will also place resources into reserve for long-term capital needs and pension
obligations. To accomplish these goals, the Village has specified specific reserve requirements in
several funds. These detail requirements are incorporated in the Village Fund Balance Policy.
FOOTNOTES:
1. See the following Village Policies at www.lemont.il.us:
a. Village Revenue and Cash Management Policy
b. Village Purchasing Authority Policy
c. Village Capital Asset Policy
d. Village Investment Policy
e. Village Debt Policy
f. Village Fund Balance Policy
g. Police Pension Fund- Investment Policy
h. Police Pension Fund-Actuarial Funding Policy
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Village of Lemont
Purchasing Authority Policy and Procedures
Adopted: March 2015
TABLE OF CONTENTS
A. Purpose 1
B. Code of Ethics 1
C. Conflict of Interest 2
D. Gifts and Gratuities—Village Guidelines for Accepting 3
E. General Purchasing Procedure and Responsibilities 3
F. Pricing Requirements 4
G. Purchase Orders 5
H. Budget Amendments 5
I. Emergency Purchases 6
J. Payroll 6
K. Manual Checks 6
L. Petty Cash 7
M. Village Purchase Card 8
N. On-Line Purchasing 8
O. Mileage and Toll Reimbursement 8
P. Signing of Contracts 8
Q. Year End Accrual Calculations and Procedures 8
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The Village of Lemont
Purchasing Authority Policy and Procedures
Adopted: March 2015
A. Purpose
The purpose of this policy is to provide the Village of Lemont staff with guidelines and directions
for the acquisition of goods and services. When used with good judgment and common sense, the
policies and procedures conveyed within will allow the Village to obtain required supplies and
services efficiently and economically.
Employees are expected to read this policy and provide the Finance Department with feedback
regarding the policies and procedures contained within. This policy is designed to be a fluid
document and will be modified from time to time to conform with changes in legislation,
technology and actual practice. Although it may not answer every question related to purchasing
practices, it does provide general guidelines for purchasing activities. Employees who need help
dealing with specific situations not covered by the manual should contact the Village Treasurer for
assistance.
The Village Administrator, or his/her designee, shall be the final authority with regards to
enforcement of any of the provisions of this policy. Failure to follow the procedures outlined in this
policy may lead to disciplinary action.
B. Code of Ethics
All Village personnel engaged in purchasing and related activities shall conduct business dealings
in a manner above reproach in every respect. Transactions relating to expenditure of public funds
require the highest degree of public trust to protect the interests of the Village and the residents of
Lemont. Village employees shall strive to:
- Ensure that public money is spent efficiently and effectively and in accordance with
statutes, regulations and Village policies.
- Maintain confidentiality at all times.
- Not accept gifts or favors from current or potential suppliers, which might compromise the
integrity of their purchasing function.
- Specify generic descriptions of goods wherever possible in lieu of brand names when
compiling specifications.
- Never allow purchase orders for identical goods or services to be split or variations to
Village Board approvals to be made in order to circumvent established policy.
- Purchase without favor or prejudice.
- Ensure that all potential suppliers are provided with adequate and identical information
upon which to base their offer or quotation and that any subsequent information is made
available to all bidders.
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The Village of Lemont
Purchasing Authority Policy and Procedures
Adopted: March 2015
- Establish and maintain procedures to ensure that fair and equal consideration is given to
each offer or quotation received and selection is based upon the lowest total cost compliant
bid.
- Offer a prompt and courteous response to all inquiries from potential or existing suppliers.
It shall be the responsibility of the Village Administrator to determine if a violation of this Code of
Ethics has occurred and if disciplinary action is necessary.
C. Conflict of Interest Policy
Except as may be disclosed to and permitted by the Village Board, it shall be a breach of ethical
standards for any employee to participate directly or indirectly in the purchasing process when the
employee knows that:
1. The employee is contemporaneously employed by a bidder, vendor or contractor involved
in the procurement transaction; or
2. The employee, the employee's partner, or any member of the employee's immediate family
holds a position with a bidder, offeror or contractor such as an officer, director, trustee,
partner or the like, or is employed in a capacity involving personal and substantial
participation in the procurement transaction, or owns or controls an interest in the
company; or
3. The employee, the employee's partner, or any member of the employee's immediate family
has a financial interest arising from the procurement transaction; or
4. The employee, the employee's partner, or any member of the employee's immediate family
is negotiating, or has an arrangement concerning, prospective employment with a bidder,
vendor or contractor.
The employee's immediate family shall be defined as a spouse, children, parents, brothers and
sisters and any other person living in the same household as the employee.
It shall be the responsibility of the Village Administrator to determine if a violation of this Conflict
of Interest policy has occurred and if disciplinary action is necessary.
D. Gifts and Gratuities—Village Guidelines for Accepting
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The Village of Lemont
Purchasing Authority Policy and Procedures
Adopted: March 2015
Village personnel should be aware that offers of gratitude from vendors could be designed to
compromise objective judgment in product or service selection. Accordingly, it is Village policy
to observe the highest standards of ethics and to shield the employee, the Village and the vendor
from any suggestion or appearance of conflict of interest.
No employee shall permit any influence by vendors, which could conflict with the best interest of
the Village, or prejudice the Village's reputation. Expenditures of Village funds to vendors shall
not by intention personally benefit any person employed with the Village. Employees are bound
by the gift ban section of the Lemont Illinois Municipal Code. To the extent there is no violation
of this code employees shall strive to follow the following guidelines:
1. Tangible gifts or gratuities shall not be accepted where their value suggests something
more than merely a social gesture. Such gifts should be returned with a statement of
Village policy. Promotional or advertising items of nominal value such as key chains,
pens, coffee mugs, calendars and holiday candy are acceptable. Promotional gifts that are
capable of being shared, such as a box of chocolates, shall be shared within the office or
section where the recipient works.
2. Association with vendor representatives at business meals or business organization
meetings is occasionally necessary and is neither questionable nor unethical, provided the
individual keeps himself/herself free of obligation.
3. Personal loans of money or equipment are not to be accepted from a vendor or an
individual associated with a vendor doing business with the Village.
4. Solicitation of vendors for merchandise or certificates to serve as door prizes or favors is
normally prohibited. However, the Village Administrator may approve exceptions.
5. Corporate discounts granted to Village employees are acceptable only if they are offered to
all Village employees and other corporate clients of the vendor.
If in any doubt about the propriety of accepting a gift, the matter should be referred to the
Department Head who will, if necessary, discuss the matter with the Village Administrator or
his/her designee.
E. General Purchasing Procedure and Responsibilities
I. The Village Board adopts a budget for the fiscal year.
2. Purchases of goods/services for budgeted items may be ordered by Department Heads
provided that expenditures do not exceed the amount available in the budget. Exceptions to
this general rule will occur when a purchase order is required (Section G), pricing requires
Board action (Section F), or a budget amendment is required (Section H).
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The Village of Lemont
Purchasing Authority Policy and Procedures
Adopted: March 2015
3. The level of budget authority (the level at which expenditures cannot legally exceed the
budget) granted to the Village Treasurer is established at the individual fund level.
4. Approved invoices are forwarded by Departments to the Finance Department for inclusion
in the Village's Payment Register approval process. Invoices should be submitted to
Finance on a regular basis as received.
5. The Finance Department sends any invoices received directly by the Finance Department to
appropriate departments for review and signature of Department Head on invoice. Certain
recurring invoices (e.g., contract amounts, utilities) do not need to be returned to the
individual department for approval. In these instances, a memo from the Department Head
with the appropriate coding will be maintained in the vendor file as evidence of approval
and coding.
6. Checks are processed on a bi-weekly basis. Those checks not requiring specific board
approval can be mailed 30 days from date of invoice or earlier if a discount is allowed.
7. All properly approved invoices are then compiled by the Finance Department on a Payment
Register for Board approval. The Warrant List is included in the agenda packet for the
Board Meeting.
8. The Board approves the Payment Register at the Board Meeting
F. Pricing Requirements
The Village's policy is to obtain the most cost effective price available for purchases through
competitive pricing. Pricing should generally be obtained from at least three vendors except as
noted in the following guidelines or as otherwise required by law. The following guidelines will
determine the level of pricing required for purchases.
1. Purchase total less than $2,500 — One verbal quote is sufficient. If the nature of the
purchase is repetitive (i.e. monthly), pricing does not need to be obtained every time, but
should be reviewed annually. Employees are encouraged to seek additional pricing when
possible.
2. Purchase total $2,500- $4,999—Three verbal quotes required.
3. Purchase total $5,000- $9,999—Three written quotes required.
4. Purchase total $10,000 - $19,999 - Authorization required by purchase order which must be
approved by the Village Administrator. Written price quotes are required. Purchase Orders
are discussed further in Section G.
5. Purchases $20,000 or more - Must be authorized by the Village Board prior to Purchase
Order approval. Formal bid or RFP process required.
Exceptions to the pricing requirements include single source vendors, repetitive purchases,
requirements by State statute or local ordinance, purchases thru the State of Illinois Joint
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The Village of Lemont
Purchasing Authority Policy and Procedures
Adopted: March 2015
Purchasing program or other state cooperatives, financially advantageous joint purchases with other
units of government, emergency purchases, contractual obligations, professional associations,
professional services for legal, engineering, architect, insurance, medical, accounting, auditing,
technology, surveying or any other unusual purchasing situation.
G. Purchase Orders
The policy intends to limit the use of purchase orders. Departments will be required to file
purchase orders only if one of the following criteria is met:
1. Purchase is for$2,500 or more.
2. Vendor requires a purchase order in order to deliver the good or service and invoice for the
item at a later date.
3. A significant time period is anticipated between the ordering of an item and the payment of
such item. Examples include capital projects which take place over several months,
commodities used over several months (e.g. road salt) and items ordered well in advance of
delivery(e.g. fire engine).
In order to expedite purchasing throughout the year, blanket purchase orders may also be prepared
on a fiscal year basis if authorized by the Village Administrator. Blanket purchase orders are for
vendors that require a purchase order amount for small item or per unit purchases.
H. Budget Amendments
If a department determines that a significant individual purchase will cause a budgeted account
number to go over budget, the department should submit a budget amendment request. Approval
of a budget amendment request is as follows:
1. If the amount is less than $10,000 and can be transferred from another account where a
positive budget variance is anticipated, the Village Treasurer has the authority to approve
the request.
2. If the amount is $10,000 or greater and can be covered by another account, the Village
Administrator has the authority to approve the request.
3. If the amount cannot be offset by a reduction in spending from another account, then the
budget amendment request will be presented to the Board for approval. The preferred
method of presentation to the Board is for the Department Head to include the preparation
of a budget amendment request along with an agenda item. However, the Department Head
can also prepare a written memorandum to the Village Administrator requesting inclusion of
an amendment on the board agenda should the purchase itself(e.g. contract approval) not
require prior Board approval. Such inclusion must be approved by the Village
Administrator.
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The Village of Lemont
Purchasing Authority Policy and Procedures
Adopted: March 2015
I. Emergency Purchases
Emergencies are defined as events that could not have been foreseen where immediate action is
necessary to safeguard the public's health and safety. In the event of an emergency affecting the
public health and safety, the Public Works Director shall have additional authority up to $10,000
for emergency purchases for the following items:
• Services/maintenance to maintain vehicles.
• Services/materials to maintain wells.
• Services/materials to maintain streets.
• Services/materials to maintain sewer system.
• Services/materials to maintain water system.
Documentation of the emergency and the need for immediate action shall be presented to the
Village Board, together with an itemized account of all expenditures. Reporting to the Board
would be handled through the first warrant list process immediately following the emergency
expenditure.
J. Payroll
The Mayor and Board of Trustees authorize the Village Treasurer on a fiscal year basis to pay
wages and salaries of Village employees in accordance with the rates of compensation established
by the Board along with the payment of all payroll taxes, pension contributions, and such other
obligations according to Federal, State, local, or pension fund requirements.
K. Manual Checks
Occasionally, a need will arise for a check to be prepared manually outside of the normal claims list
process. These manual checks are needed when a check has to be remitted prior to the next Board
Meeting Payment Register process. The Village's policy is to keep requests for manual checks at a
minimum. Common items for which manual checks can be prepared include 1) Payroll related
checks; 2) Late notification of seminar registrations or late decisions to attend; 3) Unavoidable cash
on delivery transactions; 4) Board approved contractual obligations requiring check; 5) Emergency
purchases, 6) Agreed to arrangements pre-approved by the Village Administrator with vendors, 7)
Situations which will significantly impair the Village financially if a check is not prepared; and 8)
Situations which would significantly impair the Village's operations if a check is not prepared.
The Finance Department will process manual checks no more frequently than weekly. The Finance
Director may authorize a non-emergency related check between weekly cycles in situations where
immediate issuance of the check is needed to prevent an adverse impact on the Village. The
Department Head must submit a written request for a manual check to the Village Treasurer. All
manual checks are to be approved by the Department Head and Village Treasurer. In the Village
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The Village of Lemont
Purchasing Authority Policy and Procedures
Adopted: March 2015
Treasurer's absence either the Village Administrator may approve manual checks. Departments
will have to demonstrate that a manual check fits one of the above criteria.
Once a check is prepared, reporting to the Board including invoice approval, will take place through
the first following payment register process which corresponds to the manual check date.
L. Petty Cash
The Village Board has approved two petty cash funds within the Village as follows: Village Hall
Cashier-$500; Police Chief Secretary- $500. Responsibility for custody and safeguarding of each
fund and for all fund disbursements rests with the appropriate Department Head. The Department
Head may designate an employee in their department as custodian of the petty cash fund.
Petty cash is to be used to reimburse employees for Village expenses which the employee incurs up
front and for small purchases which are handled most efficiently by utilizing petty cash. The
following restrictions apply:
1. Individual petty cash purchases are limited to a maximum of$75.00.
2. Employee must prepare a petty cash voucher which is approved by the Department Head.
3. Receipts documenting the expense must be attached to the petty cash voucher.
Disbursements from petty cash funds cannot be ultimately approved without receipts. If cash is
provided in advance of the purchase, the employee must return the unused cash along with the
receipt. If an employee cannot provide a receipt, alternative verification approved by the
Department Head must be attached.
Each department is responsible for balancing and reconciling its own petty cash fund. Departments
replenish petty cash funds by submitting a request to the Finance Department. The request is then
processed through the Warrant List procedure. The request for replenishment must be supported by
petty cash vouchers/receipts which agree to the amount of the request. The fund must be at least
50% depleted for the Finance Department to process a check to replenish. The fund must be
replenished at fiscal year-end for all expenses at that point in time.
Departments can request an increase to their petty cash fund amount through the regular warrant list
process. Approval of such a request by the Village Board will also constitute approval of amending
this policy to reflect the increased amount.
M. Village Purchase Card
The Village purchase card is administered under a separate Purchase Card Policy. See that policy
for applicable guidelines.
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The Village of Lemont
Purchasing Authority Policy and Procedures
Adopted: March 2015
N. On-Line Purchasing
The Internet may be utilized for on-line purchasing as a tool for obtaining favorable pricing,
preferred products/services and securing expedited procurement.
On-line purchasing is subject to all requirements of this policy and is not to be used for means other
than allowed by this policy. On-line purchasing shall be subject to the pricing requirements of
purchasing procedures Section F.
On-line purchases are to be made preferably utilizing a Village issued purchase card which is
subject to the procedures as discussed in the Village Purchase Card Policy. Situations when an
employee utilizes their own credit card to make a purchase on behalf of the Village are subject to
pre-approval of the employee's Department Head. Such pre-approved purchases will be reimbursed
directly to the employee through the Village's regular payment register process. The employee
must obtain a receipt or other form of documentation substantiating the on-line purchase. Should
an employee make an on-line purchase without pre-approval, reimbursement of that purchase can
be denied by the Village.
O. Mileage& Toll Reimbursement
Reimbursement for the mileage for non-overnight travel when driving a personal vehicle for
Village business and for related tolls incurred shall be made to employees on a monthly basis.
Employees shall complete the Monthly Mileage & Toll Reimbursement form and submit the form
for payment thru the Village's regular claims list process. The form is attached as Exhibit B. It is
the Village's policy to reimburse employees for every business mile driven with a personal vehicle
at the Internal Revenue Service (IRS) standard mileage rate. The form will be modified by the
Finance Department each time the IRS adjusts the rate; typically on a calendar year basis.
Employees will be reimbursed for actual toll expenses. Employees using personal vehicles on
Village business must have adequate automobile insurance coverage.
P. Signing of Contracts
All contracts in excess of $10,000 and under $19,999.99 must be signed by the Village
Administrator. Additionally, all contracts in value of$20,000 or more any documents requiring the
signature of the Mayor and/or Village Administrator, and/or any other person designated by the
Village Board must be executed accordingly.
Q. Year-End Accrual Calculations and Procedures
The Village shall calculate all year-end accruals with a goal of preparing complete, fully-adjusted
trial balances at April 30 each year reflecting all purchase related accruals. Each year in March, the
Treasurer shall issue a memorandum to the Village's department directors detailing the year end
accrual calculations and procedures. The memorandum should include, but not be limited to items
such as the year end accounts payable accrual, unbilled goods or services at year end, year-end
purchase order procedures and the manual check cut-off date.
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Village of Lemont
Purchase Card Policy and Procedures
Adopted: March 2015
TABLE OF CONTENTS
A. Introduction 1
B. Policy 2
C. Procedures 2
1. Issuance 2
2. Card Profiles 3
3. Cancellation of Card 4
4. Changes 4
5. Purchasing Card Security 4
6. General Requirements for Card Use 5
7. Ordering Procedures 5
8. Charge Card Statement Reconciliation 7
9. Charge Card Statement Payment Guidelines 8
D. Management Information 9
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The Village of Lemont
Purchase Card Policy& Procedures
Adopted:March 2015
A. Introduction
The Purchase (Credit) Card Program is intended to streamline and simplify purchasing and
payment procedures by consolidating supplier invoices and eliminating form processing. The
Payment Settlement Entity(PSE) is selected by Village personnel to process vendor payments on
the Village's behalf. The Purchase Card Program is not intended to avoid or bypass appropriate
procurement or payment procedures. Rather, the Program complements the existing processes
available. The Purchase Card also gives personnel an opportunity to make practical decisions in
obtaining products or services for which they are knowledgeable and reduces administrative
burdens. Management information reports are available, enabling the Department Heads to
improve management control and decision-making.
This Policy provides information about the process, the types of purchases that can and cannot be
made, records that must be maintained and reconciled for each cycle, and a variety of other
Program information.
The cardholder needs to remember that he/she is committing Village funds each time the
purchasing card is used. This is a responsibility that should not be taken lightly. The cardholder
is the person responsible for all charges made to the card. Intentional misuse or fraudulent abuse
may result in disciplinary action up to and including dismissal and recovery of all unauthorized
purchases.
The card has no impact on the cardholder's personal credit. Although the card lists an
individual's name, the card is actually issued to the Village of Lemont.
The Finance Department is responsible for implementing the Purchase Card Program within the
Village. The Treasurer (Program Administrator) is the Village's primary representative to the
purchasing card vendor. This individual is responsible for card issuance, card cancellation and
communicating to the purchasing card vendor, who, within the Village, receives the cards,
monthly billings, additional statements and management reports.
Outline of Purchase Card Procedures:
1. Cardholder orders product or service directly from supplier.
2. Supplier processes the order.
3. The PSE checks for compliance with applicable limits.
4. The supplier delivers the product or service.
5. The PSE arranges payment to the supplier in as few as three business days.
6. The Program Administrator download reports from the PSE website.
7. The Cardholder reviews the purchases and codes them correctly.
8. Supervisor or Department Head signs Statement of Account
9. Reports are sent to the Program Administrator
10. The Village sends a single payment to the PSE.
11. The Village uses various management information reports to review and analyze spending.
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The Village of Lemont
Purchase Card Policy& Procedures
Adopted:March 2015
B. Policy
The current small purchases The current monthly limit for each card is $5,000, unless there is
a definite need for an increase. The Village of Lemont is liable for authorized charges made
using the card.
Purchase cards shall be used
• Official Village of Lemont purchases only.
• Use of the card for personal items is not permitted even if it is with the intention of
reimbursement
• Efforts should be made to use vendors who accept the purchasing card where appropriate
in order to maximize administrative cost savings.
• Sales tax should not be charged
If the employee has questions on the appropriate use of the Purchasing Card, the employee should
contact the Finance Director.
C. Procedures
1. Card Issuance
Purchasing Cards will be issued to individuals who have a need as determined by their
Department Head and approved by the Village Administrator. Examples of individuals
requiring a Purchasing Card are:
• Anyone with authority to order supplies and materials.
• Anyone who reconciles and resolves procurement problems.
• Anyone who has a demonstratable need for the card to avoid spending
personal funds on Village business and later being reimbursed by the
Village.
• Anyone who needs to make frequent purchases while away from their usual
work location.
The ideal Cardholder will meet all four criteria. Former employees, non-employees such as
contractors, are not eligible to obtain purchasing cards.
To obtain a Purchasing Card:
1. The employee must complete the application including the Department Head's
signature.
2. Send the completed application with original signatures to the Village
Administrator.
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The Village of Lemont
Purchase Card Policy& Procedures
Adopted:March 2015
3. Attend a training orientation and receive the Purchasing Card. The Purchasing
Cards are issued with the name of the Cardholder and the Village of Lemont names
embossed on the front.
2. Card Profiles
1. Dollar limits per Cardholder: This limit allows Department Heads to
designate the total amount an employee can spend during the monthly billing
cycle. A running balance is maintained by the PSE that increases with each
authorized charge until the Cardholder reaches the assigned monthly limit.
If the limit is reached before the end of the billing cycle, new attempts for
authorization are denied.
3. Cancellation of Card
• Cardholders must return the Purchase Card to the Village Program
Administrator immediately upon request or upon termination of
employment.
• It shall be the responsibility of the Department Heads to ensure all cancelled
cards are collected from the employee prior to the employee leaving and
forwarded to the Program Administrator to be destroyed.
• It is imperative the Cancellation Form Appendix A-4 (obtained from
Program Administrator) be processed in an expedited manner.
4. Changes
The Village Program Administrator must be contacted when changes need to be made to
existing purchasing cards. If a new purchasing card needs to be issued, the Cardholder
should receive the replacement card in 7-10 business days. The old card, unless it is lost,
must be turned in to the Program Administrator before the replacement card will be issued.
The Department Head should utilize the Program Maintenance Worksheet ( located at
Appendix A-2)to:
• Make name changes,
• Change mailing address,
• Increase or decrease spending limit/restrictions,
• Card replacement, or
• Change accounting information contained on the card's magnetic tape.
The Program Maintenance Worksheet should be provided to the Village Program
Administrator to effect the changes. The approximate time to complete a change is 3 to 5
business days after receipt by the PSE.
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The Village of Lemont
Purchase Card Policy& Procedures
Adopted:March 2015
5. Purchasing Card Security
Authorized use of the Purchasing Card is limited to the person whose name appears on the
face of the card. The Purchasing Card must not be loaned to another person or given to
another employee.
The Purchasing Card, or any document containing the card account number, should be kept
in an accessible but secure location. The account number on the purchasing card should not
be posted or left in a conspicuous place. The account number must not be faxed to
vendors.
If the Purchasing Card is lost or stolen, the Cardholder must immediately notify the
Village's Program Administrator and the PSE.
The Village is liable for the use of the Purchasing Card by authorized users, provided that
the use is within the single per transaction dollar limit. The Village of Lemont does not
accept liability for the following:
• Unauthorized use of the Purchasing Card.
• Account numbers that are fraudulently used.
• Purchases made with stolen or lost cards that are beyond the maximum limit
of$50, and after discovery and reporting to the PSE of card loss or theft.
Exception: If the PSE investigation finds the employee used the card for
personal gain the Village becomes liable and the employee would be
subject to termination.
6. General Requirements for Card Use
Please see the Village's Procurement Card Usage Guide for specific requirements.
7. Ordering Procedures
• Information to provide a supplier:
-- Provide the vendor with Cardholder name and card number.
-- Expiration date of the Card.
-- Remind the supplier that the Village is exempt from Sales Tax. The
vendor will verify the account number with the PSE. The spending limit
will be checked electronically for compliance with applicable limits.
-- Business ship-to address.
-- Preferred methods of shipment, i.e., FOB Destination, freight prepaid
and allowed.
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The Village of Lemont
Purchase Card Policy & Procedures
Adopted:March 2015
-- Please Note: The purchasing card number should not appear
anywhere on the exterior of the package. This number is
CONFIDENTIAL!
• Information to obtain from supplier:
-- Order confirmation or tracking number.
-- Base cost of purchase.
-- Anticipated delivery date.
-- Freight cost, if available.
• Retain all documentation pertaining to the purchase. When the vendor
delivers the order, or the order is picked up, documentation of the purchase
(such as sales receipt or packing slip) should accompany the order. The
documentation must be kept on file by the Cardholder for reconciliation to
the charge card statement.
• Returns, Credits and Disputed Items
In most cases, disputes can be resolved directly between the Cardholder
and the vendor that provides the goods and services. The Cardholder must
use the following guidelines when returning an item or for other disputed
items such as sales tax charged:
-- If an item needs to be returned for any reason, the Cardholder
should send the item back to the vendor in the manner agreed
upon.
-- Returns of material to suppliers must be handled as credits and
treated as separate transactions.
-- Returns are not to be handled as exchanges or combined with
other purchases.
-- A separate transaction must be placed to re-order the correct
material.
-- Cash refunds are not allowed under any circumstances!!
-- Call the supplier as soon as possible. Promptness is important.
-- Obtain supplier's Return Authorization Number, i.e. approval to
return.
• Information to give to supplier:
- Card Number
- Name
- Phone number
- Confirmation number/packing slip number
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The Village of Lemont
Purchase Card Policy& Procedures
Adopted:March 2015
-- The vendor should issue a credit for items that are returned or
for sales tax inadvertently charged. This credit will appear on a
subsequent charge card statement.
- Confirm that the supplier will issue the credit to the
purchase card.
-- If the cardholder and the vendor cannot resolve an issue, the
Cardholder should dispute the charge in writing to the PSE by
faxing a completed dispute form (Appendix A-5) with a copy to
the Finance Department. The PSE will process and investigate
the dispute on the Cardholder's behalf and assist in the
resolution. A temporary credit will be issued pending final
resolution.
-- If there is still a problem, contact the department head or the
Finance Department.
8. Charge Card Statement Reconciliation
• Department Procedures
1. Overview:
• The Purchasing Charge Card billing cycle is approximately 30 days in
length.
• The PSE mails Cardholders statements approximately three to four days
after the cut-off date. Given mail cycles, the statement can be received
as late as the 7th of the month.
• Department Head forwards the Worksheet and supporting documentation
to Finance Department. Each week after the download is sent to the
departments.
2. Reconciliation Procedures:
The department is responsible for retaining documentation of purchases and
returns and reconciling them to the Worksheet that is downloaded. The
following guidelines are recommended for reconciliation:
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The Village of Lemont
Purchase Card Policy& Procedures
Adopted:March 2015
• The Cardholder shall be required to retain a receipt, invoice or other
appropriate supporting documentation for each and every purchase made
on the credit card.
• The Cardholder will match and attach all such receipts to the Worksheet
in the same order as the transactions appear on the statement and sign
and date the statement, and notate on the report, "okay to pay."
• The department head will review the cardholder's Worksheet, make the
appropriate changes (account numbers), initial with authorized signature
and forward all information to the Finance. Continued delinquencies in
forwarding statements to the Finance Department shall result in the loss
of credit card privileges.
- The Cardholder's Transaction Log Worksheet must be signed by
the Cardholder; reviewed, approved and signed by the a
supervisor.
• If at any point a Cardholder, Department Head or Finance Department
employee identifies an issue that would otherwise cause the Village to be
paying the wrong amount to the PSE, it is imperative that
communication be initiated to all appropriate personnel involved in the
process.
• All supporting documentation pertaining to the purchases and returns on
the statement should be kept on file until disposition in accordance with
Village policies.
3. Discrepancies
• Discrepancies should be noted on the Worksheet for subsequent
resolution. It is the Cardholder's responsibility to first work with the
applicable vendor, then directly with the PSE in order to resolve the
issue with temporary credits issued during pending investigation by the
PSE.
- All unresolved issues should be brought to the attention of the
Department Head and if necessary, then to the Finance
Department.
9. Charge Card Statement Payment Guidelines
• Finance Procedures
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The Village of Lemont
Purchase Card Policy& Procedures
Adopted:March 2015
The Finance Department is responsible for processing payments to the PSE. The
following guidelines must be observed when processing payments:
-- Upon receipt of the monthly invoice from the PSE the Finance
Department will reconcile all of the Worksheets to the master
statement received from the PSE.
-- Upon receipt of supporting documentation and reconciliation to the
invoice (completeness, accuracy), the supporting documentation will
be attached to the invoice and filed accordingly.
-- Such supporting documentation should be received_by the 5th of the
month the statement is received. For those departments that do not
meet such timelines, appropriate follow-up should be conducted by
the Program Administrator with continued delinquencies of the
department resulting in the loss of credit card privileges.
-- An annual analysis will be performed by the Program Administrator
that will compile the following information using the PSE reports as
appropriate detail.
• Total volume of transactions and dollar amount of
transactions for which a credit card was used.
• Top vendors by volume of transactions report generated (to
be used to identify vendors that may be subject to credit card
purchases).
• Comparison of credit card purchases to non-credit card
purchases analysis by volume of transactions and by dollar
of transactions with trend analysis performed in subsequent
years.
-- The payment due date is established by the terms of the contract with
the PSE. The due date will be based upon the cycle date selected by
the Village. The PSE must receive payment within 21 days after
the statement cycle date. Do not adjust due date for holidays or
weekends. Example: If the charge card billing cutoff date is 3/01/11
the due date is 3/21/11.
D. Management Information
Management Information Reports
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The Village of Lemont
Purchase Card Policy& Procedures
Adopted:March 2015
The PSE provides Departments detailed management information reports that
enable the Village to monitor Cardholder usage, policy compliance, and frequency
of vendor usage. Over 30 reports are available. Some of the Management
information reports currently available include:
Account Spending Analysis Detail Account Statement
Account Spending Analysis Cost Allocation Detail
Card Program Analysis Account Status
Merchant Category Monthly Summary Line Item Detail
Merchant Detail Merchant Exception
Merchant Supplier Summary Account Activity Exception
• Internal Controls
Department Heads must develop and document internal control procedures to
ensure that all approved monthly statements are turned into Finance by the 5th of
each month. The department procedures must:
• Ensure the Transaction Log Worksheets have been reviewed and
approved by the Cardholder's supervisor and that the appropriate
expense accounts have been charged.
• Ensure unacceptable materials and incomplete services are documented
on the Purchasing Log Worksheet and the purchaser took the appropriate
corrective action with the vendor, and
• Ensure the original payment processing documents are sent to the
Finance Department and a copy is maintained in a department file for
audit purposes.
• The Finance Department will perform "spot" post-audits of charge card
transaction activity to ensure compliance with the procedures contained
herein
• Records Retention
Records should be maintained for a period of seven years after final payment.
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33
Village of Lemont
Capital Asset Policy and Procedures
Adopted: March 1,2015
TABLE OF CONTENTS
A. Purpose 1
B. Definitions l
C. Capitalization Threshold 2
D. Depreciation Method 2
E. Useful Lives 3
F. Intangibles 3
G. Improvement, Repairs and Maintenance Expenses .....................................-' 4
H. Department Responsibilities 4
I. Capital Asset Additions ...........................................—........................... ..— 4
J. Sales and/or Retirement of Assets — ................. ........ ........ ...... ........ -.--.'4
K. Physical Inventory ........
L. Small Inventory Asset Procedures ...........................—......... ...... ....... ...... —..5
M.Year End Accounting 5
34
Village of Lemont
Capital Asset Policy and Procedures
Adopted: March 1,2015
A. Purpose
The Capital Asset Policy and Procedures provides guidelines to establish and maintain capital
asset records that comply with governmental financial reporting standards, provides for adequate
stewardship over Village resources, and provides centralized documentation for insurance and
asset management purposes.
B. Definitions
1. Accumulated Depreciation—the total reduction in value over time of an asset since its
acquisition,which is recorded for financial statement purposes.
2. Acquisition Costs - assets should be recorded and reported at historical costs, which include
the vendor's invoice, initial installation cost, modifications, attachments, accessories or
apparatus necessary to make the asset usable and render it into service. Historical costs also
include ancillary charges such as site preparation costs and professional fees.
3. Capital Assets - capital assets are tangible and intangible assets acquired for use in
operations that will benefit the Village for more than a single fiscal period.
4. Construction in Progress - an asset that is comprised of the substantially incomplete
construction costs of, typically, a road, water system or building. Depreciation is not
applied to construction in progress.
5. Depreciation—a method for allocating the acquisition cost of capital assets over time.
Generally Accepted Accounting Principles (GAAP) requires that the value of capital assets
must be written off as an expense over the useful life of the asset.
6. Disposition - the final status of an asset when it is removed from the capital asset account
and is no longer physically located on the Village's property. This can be upon sale, scrap
or donation.
7. General Capital Asset Group - general fixed assets are those capital assets which are
acquired or constructed through governmental fund resources and used to provide general
government services. As a result of GASB 34 pronouncement,these assets which meet the
minimum capitalization threshold are capitalized and depreciated over the estimated useful
lives.
8. Infrastructure - infrastructure shall include roads (including curbs and gutters), bridges,
water and sewer mains, pumping stations, lift stations, traffic lights, streetlights,
stormwater,right of ways, easements, etc.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: March 1,2015
9. Leased Equipment- leased equipment should be capitalized if the lease agreement meets
any one of the following criteria:
a. The lease transfers ownership of the property to the Village by the end of the
lease.
b. The lease contains a bargain purchase option.
c. The lease term is 75 percent or more of the estimated economic life of the leased
property.
d. The present value of the minimum lease payments at the inception of the lease,
excluding executor costs, equals at least 90 percent of the fair value of the leased
property.
10. Net Book Value —the difference between the acquisition cost and accumulated
depreciation.
11. Proprietary Capital Assets - assets acquired or constructed by proprietary funds (Water
and Sewer Fund, Parking Fund) and meet the minimum capitalization threshold, are
capitalized and depreciated over their estimated useful lives. Depreciation is computed
using the straight-line method.
12. Surplus equipment—An item or items that are no longer needed or required.
13. Useful Life—The period over which a capital asset has utility to the Village in performing
the function for which it was purchased.
C. Capitalization Threshold
The capitalization threshold or minimum value of an asset at the time of acquisition is
established at $50,000 for infrastructure and easements and $10,000 for all other assets. The
threshold is applied on an individual basis. All tangible and intangible capital assets that
exceed the threshold will be capitalized and depreciated over the asset's useful life.
D. Depreciation Method
All capital assets are depreciated using the straight line method. All assets are depreciated based
on the date the asset is placed in service with the exception of infrastructure, which is
depreciated with a full year of depreciation in the year the asset is placed in service. If an asset
is not fully depreciated upon disposal,the depreciation is calculated to the date of disposal for all
assets other than infrastructure, for which no depreciation is recorded in the year of disposal.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: March 1,2015
E. Useful Lives
Useful lives will be reviewed annually by the Finance Department. The Village depreciates
over the following useful lives:
Assets Years
Buildings and improvements 50
Water, sewer&stormwater infrastructure 65
Bridges 50
Other infrastructure 10-20
Land improvements 20
Machinery and equipment 5 - 30
Computer software 5 - 20
Vehicles 5 - 7
Water and sewerage systems 20 - 50
F. Intangibles
The Village is in possession of assets that may be considered intangibles assets, including
computer software and easements. The Village will account for intangibles in accordance with
GASB Statement No. 51,Accounting and Financial Reporting for Intangible Assets. Computer
software will be capitalized if the acquisition cost meets the capitalization threshold.
Easements will be accounted for as follows:
1. A temporary easement will not be recognized as a capital asset.
2. A permanent easement will be recognized as a capital asset subject to all the following
conditions:
a. The easement is evidenced by a final plat of subdivision and acceptance of
related improvements, if appropriate. Any final plat of subdivision should
include the total acreage of easements accepted by the Village.
b. A permanent easement will be valued at 10% of the current land-cash fee rate
for improved land of equivalent acreage.
c. A permanent easement will be capitalized if it has a value of$50,000 or more.
Easements will be aggregated within a general area (e.g., a subdivision) for the
purposes of determining whether the $50,000 threshold is met.
d. A permanent easement associated with a proprietary fund activity will be
recorded in the appropriate proprietary fund. Other permanent easements will
be recorded in the general fixed asset account group for inclusion in the
Village's government-wide financial statements.
e. The value of a permanent easement will not be amortized.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: March 1,2015
G. Improvement.Repair and Maintenance Expenses
Routine repair and maintenance costs will be expensed as incurred and will not be capitalized.
Street regrinding, patching, etc. is considered maintenance and will not be capitalized. Repairs
of water and sewer assets will not be capitalized unless the repairs materially extend the life of
the original asset.
H. Department Responsibilities
Departments are responsible for protecting and controlling the use of Village assets assigned to
their department. The department will be responsible for completing an Asset Control Sheet
upon acquisition, disposition or transfer of an asset. All Asset Control Sheets must be
submitted to the Finance Department with supporting documentation.
I. Capital Asset Additions
The Village may acquire assets through purchase, lease or donation. When an asset is purchased
or leased, the department will forward a copy of the invoice to the Finance Department for
payment. The Finance Department will identify assets that meet the capitalization requirements.
The Finance Department will assign a unique inventory control number to the asset, assign an
inventory ID tag (if applicable) and start an Asset Control Sheet which will be forwarded along
with the inventory tag to the responsible department for completion. The Department is
responsible for completing the Asset Control Sheet and returning to the Finance Department.
The Finance Department will then enter the information into the capital asset software system.
Individual assets as well as infrastructure are included as entries in the capital asset software.
The Village may also acquire assets through donations (e.g., developer conveyance). Prior to
acceptance, the Village must obtain documentation of the value of the asset being donated.
When a donation is accepted through the Village ordinance or resolution process, the Finance
Department will obtain the supporting documentation and enter the information into the capital
asset software system.
Inventory tags are to be used when feasible. The tags should be placed on the principal body of
the asset and removed only when the item is sold, scrapped, or otherwise disposed of.
F. Sales and/or Retirements of Assets
Disposal, sale or retirement of an asset may only occur after the asset is declared surplus and
approved by the Village Board. When a capital asset is disposed of, its cost and accumulated
depreciation are removed from the Village's books and a gain or loss, if any, is recognized.
The department head will document the disposal on the Asset Control Sheet and forward to the
finance department. The finance department will remove the item from the capital asset
software system and record the disposal in the general ledger.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: March 1,2015
G. Physical Inventory
The Village and each department will conduct a physical inventory at least once per year at
fiscal year-end. The Finance Department will provide each department with an inventory
worksheet identifying all capital assets under their control. Each department will be
responsible for completing the physical inventory of the items, verifying the existence and
condition of each item on the worksheet, and making note of any additions, deletions, or leases
of property that are not reflected on the list. The final list will be reviewed by the department
head, who will sign as acknowledgement of their approval and then returned to the Finance
Department. The inventory should be performed by a team including at least one
representative from the department and one individual from an independent department not
responsible for the safeguarding of assets.
The Finance Department will perform a sample verification of the physical inventory items and
reconcile the listings to the capital asset software system.
H. Small Inventory Asset Procedures
Assets that do not meet the capitalization requirements,but qualify as a small asset for inventory
tracking, shall be expensed when purchased. Small assets include all computer equipment,
office equipment, and any other department specific items that are designated as small asset
items by the Department Head. These items will be maintained in the capital asset software for
inventory tracking purposes only. The item will be noted on a Small Inventory Asset Control
Sheet for processing. The department heads will be responsible for completing a Small
Inventory Asset Control Sheet and submitting this to the Finance Department along with the
invoice for payment. The Finance Department will enter the information into the capital asset
software, but designate the item as a non-capital asset inventory item. The departments will
maintain control over their small inventory asset listing.
Year End Accounting
At year-end the Finance Department will generate the following reports from the capital asset
software system:
1. Property Accounting Summary— this report summarizes the original cost, accumulated
depreciation and book value in a summarized format. Separate reports are generated for
the governmental funds and proprietary funds.
2. Net Changes Summary—this report summarizes the additions and disposals in a
summarized format.
3. Depreciation Detail—this report includes the beginning accumulated depreciation,
current year depreciation and ending accumulated depreciation in detail.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: March 1,2015
The Finance Department will prepare the necessary journal entries to record changes
in capital assets and depreciation. In addition, the Finance Department will prepare
all journal entries necessary to present the general fixed asset account group in the
government-wide financial statements, in accordance with GASB Statement No. 34.
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
TABLE OF CONTENTS
A. Purpose and Goals 1
B. Debt Issuances 2
1. Authority and Purposes oft he Issuance of Debt 2
2. Types of Debt Issuances 2
3. Structure of Debt Issuances 2
4. Sale of Securities 2
5. Markets 2
6. Credit Enhancements 3
C. Legal Constraints 3
1. State Law 3
2. Authority for Debt 3
3. Debt Limitation 3
4. Methods of Sale 4
5. Credit Implications 4
D. Debt Administration 5
1. Financial Disclosures 5
2. Review of Financing Proposals 5
3. Investment of Bond Proceeds 6
4. Establishing Financing Priorities 6
5. Ratings Agency Relations 6
6. Investment Community Relations 6
7. Refunding Policy 6
8. Investment of Borrowed Proceeds 7
9. Federal Arbitrage Rebate Requirement 7
E. Governmental Obligation Alternate Revenue Source Bonds 7
F. Conduit Financing 8
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
A. Purpose and Goals
This Debt Management Policy sets forth comprehensive guidelines for the financing of
capital projects and infrastructure. It is the objective of the policy that the Village obtain
financing only when necessary; the process for identifying the timing and amount of debt
or other financing be as efficient as possible; and the most favorable interest and other
costs be obtained.
In following this policy,the Village shall pursue the following goals when issuing debt:
1. Maintain at least an Aa2 credit rating for each general obligation debt issue, and an
Aa credit rating for each revenue bond debt issue.
2. Take all practical precautions to avoid any financial decision which will negatively
impact current credit ratings on existing or future debt issues.
3. Effectively utilize debt capacity in relation to Village growth and the tax base, or
utility rate base to meet long-term capital requirements.
4. Consider market timing.
5. Determine the amortization (maturity) schedule which will best fit with the overall
debt structure of the Village's general obligation debt and related tax levy at the time
the new debt is issued. For issuance of revenue bonds, the amortization schedule
which will best fit with the overall debt structure of the enterprise fund and its
related rate structure will be considered. Consideration will be given to coordinating
the length of the issue with the lives of assets, whenever practical, while considering
repair and replacement costs of those assets to be incurred in future years as an offset
to the useful lives,and the related length oftime in the payout structure.
6. Consider the impact of such new debt on overlapping debt and the financing plans of
local governments which overlap,or underlie the Village.
7. Assess financial alternatives to include new and innovative financing approaches,
including, whenever feasible, categorical grants, revolving loans or other
state/federal aid.
8. Minimize debt interest costs.
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
B. Debt Issuances
1. Authority and Purposes of the Issuance of Debt
The laws of the State of Illinois authorize the issuance of debt by the Village. The
Local Bond Law confers upon municipalities the power and authority to contract
debt, borrow money, and issue bonds for public improvement projects as defined
therein. Under these provisions, the Village may contract debt to pay for the cost of
acquiring, constructing, reconstructing, improving, extending, enlarging, and
equipping such projects or to refund bonds.
2. Types of Debt Issuances
a. Short Term Debt (three years of less): The Village may issue short-term
debt which may include, but not be limited to, bond anticipation notes or
variable rate demand notes, those instruments which allow the Village to
meet cash flow requirements or provide increased flexibility in financing
programs.
b. Long Term Debt (more than three years): The Village may issue long-term
debt which may include, but not limited to, general obligation bonds,
certificates of participation, capital appreciation bonds, special assessment
bonds, self-liquidating bonds and double barreled bonds. The Village may
also enter into long-term leases for public facilities, property, and
equipment with a useful life greater than one year.
3. Structure of Debt Issuances
The duration of a debt issue shall not exceed the economic or useful life of the
improvement or asset that the issue is financing. The Village shall design the
financing schedule and repayment of debt so as to take best advantage of market
conditions and, as practical, to recapture or maximize its credit capacity for future
use,and moderate the impact to the taxpayer.
4. Sale of Securities
All debt issues shall be sold through a competitive bidding process based upon the
lowest offered True Interest Cost (TIC), unless the Village Board deems a negotiated
sale the most advantageous to the Village.
5. Markets
The Village shall make use of domestic capital markets when the conditions best fit
the Village's financing needs.
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
6. Credit Enhancements
The Village may enter into agreements with commercial banks or other financial
entities for the purpose of acquiring letters of credit, municipal bond insurance, or
other credit enhancements that will provide the Village with access to credit under
terms and conditions as specified in such agreements when their use is judged cost
effective or otherwise advantageous. Any such agreements shall be approved by the
Village Board.
C. Legal Constraints
1. State Law
30 ILCS 305/0.01,et. seq.:the short title is "The Bond Authorization Act."
2. Authority for Debt
The Village may, by bond ordinance, incur indebtedness or borrow money, and
authorize the issue of negotiable otiable obli ations including refunding g bonds, for any
capital improvement of property, land acquisition, or any other lawful purpose
except current expenses,unless approved by the Village Board.
3. Debt Limitation
Under Illinois Compiled Statutes the Village's general obligation bonded debt
issuances are subject to a legal limitation based on 8.625%of the total assessed
value of real estate property.
The Village is subject to debt limitations by Illinois Property Tax Extension
Limitation Law(PTELL). PTELL allows the issuance of an amount of general
obligation debt equal to the aggregate extension for principal and interest
payments for non-referendum bonds that the Village issued prior to January 1,
1997. Limited bonds are general obligation bonds that are issued without
referendum. These bonds must be identified as limited bonds at the time of
issuance. The following bonds are not subject to PTELL limitations:
-Alternate revenue bonds
-Refunding obligations issued to refund or to continue to refund operations
initially issued pursuant to referendum
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
4. Methods of Sale
All bonds shall be sold at a public sale via sealed proposal or live auction, except
that bonds may be sold at a private sale in accordance with 30 ILCS 350/10. The
Village may issue temporary notes by negotiated sale if the bond ordinance or
subsequent resolution so provides.
a. Bonds: All bonds will mature within the period or average period of
usefulness of the assets financed; and the bonds will mature in
installments, the first of which is payable not more than five years from
the dated date of the bonds. Term bonds may be allowable
if
recommended by the Village's financial advisor, in lieu of a fixed
maturity schedule,and approved by the Village Board.
b. Financial Advisor: As a matter of independence, the Financial Advisor
will not bid on nor underwrite any Village debt issues on which it is
advising.
5. Credit Implications
When issuing new debt, the Village should not exceed credit industry benchmarks
where applicable. Therefore, the following factors should be considered in
developing debt issuance plans:
a. Ratio of Net Bonded Debt to Estimated Full Value: The formula for this
computation is Net Bonded Debt, which is the total outstanding debt
divided by the current Estimated Full Value as determined by the
Township Assessors.
Current Ceiling Median
1.18 4.00 2.42
b. Net Bonded Debt Per Capita: The formula for this computation is Net
Bonded Debt divided by the current population as determined by the most
recent census information available.
Current Ceiling Median
$1,142 $2,000 N/A
c. Income Per Capita: The formula for this computation is income for all
households (the number obtained from the most current census data)
divided by the current population as determined by the most recent census
information available.
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
d. Ratio of Net Bonded Debt to Equalized Value: The formula for this
computation is Net Bonded Debt, which is the total outstanding debt
divided by the current Assessed Value as determined by the Township
Assessors.
Current Ceiling Median
3.54 6.00 N/A
e. Ratio of Annual Debt Service to General Government Expenditures: The
formula for this computation is annual debt service expenditures divided
by General Government (i.e., General, Special, and Debt Service Funds)
expenditures(excluding certain interfund transfers).
Current Ceiling Median
10.41 16.00 8.14
f. Rapidity of Debt Service Repayment: Exclusive of refunding and mini-
bond issues, the '
es
Villa general obligation bond issues g g sues shall be so
structured whereby at least twenty percent of the principal and interest for
each issue is repaid in five years,and fifty in ten years.
**Current ratio based on latest audited financials(4/30/10).Median values obtained
from Moody's 2009 US Local Government Medians. N/A indicates ratio was
not included as part of this data source.
D. Debt Administration
1. Financial Disclosures
The Village shall prepare appropriate disclosures as required by the Securities and
Exchange Commission,the federal government, the State of Illinois, rating agencies,
underwriters, investors, agencies, taxpayers, and other appropriate entities and
persons to ensure compliance with applicable laws and regulations.
2. Review of Financing Proposals
All capital financing proposals that involve a pledge of the Village's credit through
the sale of securities, execution of loans or lease agreements and/or otherwise
directly involve the lending or pledging of the Village's credit shall be referred to the
Village Administrator who shall determine the financial feasibility, and the impact on
existing debt of such proposal, and shall make recommendations accordingly to the
Village Administrator.
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
3. Investment of Bond Proceeds
The Village will invest bond proceeds in accordance with the Village's adopted
investment policy.
4. Establishing Financing Priorities
The Village Administrator shall administer and coordinate the Village's debt
issuance program and activities, including timing of issuance, method of sale,
structuring the issue, and marketing strategies. The Village Administrator along with
the Village's financial advisor shall meet, as appropriate, with the Village
Administrator and the Village Board regarding the status of the current year's
program and to make specific recommendations.
5. Ratings Agency Relations
The Village shall endeavor to maintain effective relations with the rating agencies.
The Village Administrator, Village Administrator, the Village Treasurer and the
Village's financial advisors shall meet with, make presentations to, or otherwise
communicate with the rating agencies on a consistent and regular basis in order to
keep the agencies informed concerning the Village's capital plans, debt issuance
program,and other appropriate financial information.
6. Investment Community Relations
The Village shall endeavor to maintain a positive relationship with the investment
community. The Village Administrator and the Village's financial advisor shall, as
necessary, prepare reports and other forms of communications regarding the
Village's indebtedness, as well as its future financing plans. This includes
information presented to the press and other media.
7. Refunding_Policy
The Village shall consider refunding outstanding debt when legally permissible and
financially advantageous. A net present value debt service savings of at least three
percent or greater must be achieved.
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
8. Investment of Borrowed Proceeds
The Village acknowledges its ongoing fiduciary responsibilities to actively manage
the proceeds of debt issued for public purposes in a manner that is consistent with
Illinois statutes that govern the investment of public funds, and consistent with the
permitted securities covenants of related bond documents executed by the Village.
The management of public funds shall enable the Village to respond to changes in
markets or changes in payment or construction schedules so as to (i) optimize
returns,(ii) insure liquidity,and(iii)minimize risk.
9. Federal Arbitrage Rebate Requirement
The Village shall maintain or cause to be maintained an appropriate system of
accounting to calculate bond investment arbitrage earnings in accordance with the
Tax Reform Act of 1986, as amended or supplemented,and applicable United States
Treasury regulations related thereto. Such amounts shall be computed annually and
transferred from the Bond Construction Fund (i.e., interest earnings revenue
account)to the Debt Service Fund escrow account, or other appropriate accounts, for
eventual payment to the United States Treasury.
In order to avoid arbitrage earnings on bond proceeds, Village staff shall recommend
issuance of debt based upon the cash flow needs of the capital improvement project
in which contracts for construction or other goods and services can reasonably be
expected to be awarded during the calendar year. Consideration shall be given to the
feasibility of obtaining rights-of-way, engineering services, or other matters which
may affect the completion of the project in a timely manner, before a
recommendation to issue debt is made.
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
E. Governmental Obligation Bonds Alternate Revenue Source Bonds
The Village may seek to finance the capital needs of governmental activities and its revenue
producing enterprise funds through the issuance of Alternate Revenue Source debt
obligations. These debt obligations are payable from various limited revenue sources.
1. Governmental Funds
Revenue sources pledged for governmental activities include income taxes, sales
taxes, use taxes and utility taxes. The Village may only pledge up to 50% of the
annual revenue received for debt service.
2. Enterprise Funds
Revenue sources pledged for enterprise funds include water and sewerage revenues.
In addition, the Village has pledged revenue from income taxes, sales taxes and use
taxes as additional funding for repayment of these obligations. The Village may
only pledge up to 50%of the annual revenue received for debt service.
Prior to issuing Alternate Revenue Source debt obligations, the Village Administrator and
Village Treasurer will develop financial plans and projections showing the feasibility of
the planned financing, required rates and charges needed to support the planned financing
and the impact of the planned financing on rate payers, property owners and the other
affected parties. On an annual basis, the Village will review the percent of revenue
stream that is pledged for repayment of debt for compliance with Village limitations. If it
is not feasible to issue an Alternative Revenue obligation, then a revenue- secured debt
obligation should be considered.
F. Conduit Financing
Under federal and state statutes the Village Board has the authority to issue tax-exempt
bonds for non-profit organizations organized under Internal Revenue Code 501 (c) (3), and
economic development revenue bonds, also known as private activity bonds, under the Tax
Reform Act of 1986. These tax-exempt bonds shall be collectively referred to as conduit
financings. The Village has no liability or responsibility for repayment of the debt
authorized under these statutes.
The following policy and procedures shall be followed prior to the issuance of any such
debt:
1. The applicant shall contact the Village Administrator or the Village
Treasurer and submit a formal application for the issuance of a conduit financing.
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
2. For private activity bonds (economic development revenue bonds), the application
shall include a written proposal which should include, but not be limited to, the
following information,where applicable:
a. A description of the project including original issuance, refinancing,
recollateralization or other action sought;
b. A statement indicating the amount of funding required for the project and
a description of the purpose for which such funding will be used;
c. A description of any proposed financing arrangement for the project (e.g.,
loan agreement,or Village to own the project and lease to applicant);
d. A statement of the public purpose to be served by the issuance of
economic development revenue bonds for the project;
e. An anticipated construction schedule and schedule for completing the
financing;
f. The name and address of the proposed purchaser of the economic
development revenue bonds proposed to be issued, if known;
g. A complete description, with such supporting exhibits as may be
appropriate,of the physical aspects of the project;
h. Projected number of vehicles entering the facility area per day;
i. Ability of the streets to carry additional load;
j. Drainage/storm sewer requirements;
k. Utility requirements;
1. Ability of the schools to accommodate possible enrollment increases;
m. Financial stability of the applicant;
n. Description of principal business of applicant;
o. Number of employees anticipated at the new facility;
p. Number of new jobs to be created;
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
q. Number of management level employees;
r. Types of skills required by the facility's employees;
s. Yearly payroll/average employee salary;
t. Projected appraised/assessed value of the facility's real personal property
in Lemont;
u. Number of years the prospective tenant has been in business;
v. Number of plant relocations since 1960, if applicable w. Civic Awareness
3. For the issuance of 501 (c) (3) bonds the proposal shall include all of the
information listed in section 2. above as well as the following, as applicable:
a. A statement of the public purpose to be served by the issuance of 501 (c)
(3)revenue bonds for the project;
4. The information submitted by the applicant should be reviewed by the Village
Administrator and the Village's financial and legal advisors and a summary of
such information, together with an evaluation thereof and the recommendation of
the staff should be presented to the Village Board as promptly as practicable
thereafter. In addition, the Village may retain the services of qualified legal
counsel to act as special counsel or the Village's financial advisor to do a study
of the economic viability of the project. The applicant shall be responsible for all
fees of the financial and legal advisors and shall deposit with the Village a sum
sufficient to cover such costs and fees as determined from time to time by the
Village Administrator.
5. The Village Board shall review the report presented to them by the Village staff
as promptly as practicable after receipt thereof and shall take one of the following
actions:
a. Notify the applicant in writing that its proposal has been rejected and
refund to the applicant any uncommitted balance of the deposit, if any.
b. Adopt a resolution of intent to proceed with the project and refund to the
applicant any uncommitted balance of the deposit, if any.
6. If a resolution of intent is adopted by the Village Board, the financing,
refinancing, or recollateralization may proceed pursuant to the provisions of this
policy. All costs of issuance associated with such financing, including any
expenses attributable to the Village, shall be borne by the applicant.
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Village of Lemont, Illinois
Debt Management Policy
Adopted March 2015
G. TIF Debt
Tax Increment Financing debt is excluded from this policy as it is governed by the specific
TIF redevelopment agreement.
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52
Village of Lemont, Illinois
Fund Balance Policy
Adopted March 2015
TABLE OF CONTENTS
A. Purpose and Scope 1
B. Definition 1
C. Minimum Unrestricted/ Unassigned Fund Balance Levels 2
1. General Fund 2
2. Working Cash Funds 2
3. Special Revenue Funds 2
4. Debt Service Fund 3
5. Capital Project Funds 4
D. Flow Assumptions 4
E. Authority 4
F. Minimum Targets 4
G. Exceptions to the Policy 5
53
Village of Lemont, Illinois
Fund Balance Policy
Adopted March 2015
A. Purpose and Scope
Fund Balance is defined as the excess of assets over liabilities. This Fund Balance Policy
establishes a minimum level (target range) at which the projected end-of-year fund
balance should be maintained to provide financial stability, cash flow for operations, and
the assurance that the Village will be able to respond to emergencies with fiscal strength.
The purpose of this policy is to establish fund balance classifications that establish a
hierarchy based on the extent to which the Village must observe constraints imposed upon
use of the resources that are reported by the governmental funds. More detailed fund balance
financial reporting and the increased disclosures will aid the user of the financial statements
in understanding the availability of resources.
The fund balance will be composed of three primary categories: 1) Nonspendable Fund
Balance,2)Restricted Fund Balance and 3)Unrestricted Fund Balance.
B. Definitions
1. Governmental Funds - are used to account for all or most of the Village's general
activities, including the collection and disbursement of earmarked monies (special
revenue funds), the acquisition or construction of general capital assets (capital
projects funds) and the servicing of general long-term debt (debt service funds). The
General Fund is used to account for all activities of the Village not accounted for in
some other fund.
2. Fund Balance — the difference between assets and liabilities in a Governmental
Fund.
3. Nonspendable Fund Balance —the portion of a Governmental Fund's net assets that
are not available to be spent, either short-term or long-term, in either form or
through legal restrictions(e.g,prepaid items)
4. Restricted Fund Balance — the portion of Governmental Fund's net assets that are
subject to external enforceable legal restrictions(e.g.,property tax levies).
5. Unrestricted Fund Balance—is made up of three components:
a. Committed Fund Balance—the portion of a Governmental Fund's net assets
with self-imposed constraints or limitations that have been placed at the
highest level of decision making
b. Assigned Fund Balance—the portion of a Governmental Fund's net assets to
denote an intended use of resources
c. Unassigned Fund Balance — available expendable financial resources in a
governmental fund that are not the object of tentative management plan (i.e.,
assignments). Positive unassigned fund balance can only be reported in the
general fund. Any residual fund balance in all other governmental funds is
assumed at a minimum to be assigned for the purpose of the fund.
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Village of Lemont, Illinois
Fund Balance Policy
Adopted March 2015
C. Minimum Unrestricted Fund Balance Levels
This policy applies to the Village's governmental funds as follows:
1. General Fund—The General Fund is a major fund and the general operating fund of
the Village. It is used to account for all financial resources except those that are
accounted for in another fund. Each year a portion of the spendable fund balance
will be determined as follows:
a. Restricted - A portion of the fund balance may be restricted through external
legal requirements.
b. Committed — A portion of the fund balance may be committed through
formal action of the Village's Board of Trustees through a resolution or
ordinance adopted before the end ofthe fiscal year.
c. Assigned—A portion of the fund balance may be committed by action of the
Village Administrator/Budget Officer. The amount will represent the funds
the Village intends to use for a specific purpose. This will be adjusted
annually.
d. Unassigned—The unassigned fund balance will be reviewed annually during
the budget process. This unassigned fund balance will be maintained at a
target level of 30% of annual budgeted operating expenditures.
Operating Expenditures does not include one-time capital equipment and
transfer of funds. Balances in excess of 40% of annual budgeted
expenditures may be transferred to the Capital Project Fund to support
future capital projects.
2. Working Cash Fund— The working cash fund is a permanent fund. The Working
Cash fund provides the Village with a source for internal borrowing to meet short-
term liquidity needs. Working cash revenues are restricted by Illinois state statute
(65 ILCS 5/). Therefore,no specific target range is established for this fund
3. Special Revenue Funds— Special revenue funds are used to account for and report
the proceeds of specific revenue sources that are legally restricted to expenditure for
specified purposes other than debt services or capital projects. Financing for most
special revenue funds is provided by a specific annual property tax levy. In some
cases, financing is received from a motor fuel tax imposed by the state. These
proceeds are devoted exclusively to the purposes for which the special tax was
authorized.
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Village of Lemont, Illinois
Fund Balance Policy
Adopted March 2015
a. Motor Fuel Tax Fund — this is a fund established to account for revenues
derived from a specific motor fuel allotment and expenses of these monies
for the highways and streets throughout the Village. Per state statute, Motor
Fuel Tax Fund program revenue is legally restricted to the purpose of the
fund. Therefore, the entire balance of the fund will be restricted.
Furthermore, the fund balance of the Motor Fuel Tax Fund is 100%
committed for maintenance and construction. Increases and decreases in
fund balances are associated with the specific projects planned. Therefore,
no specific target range is established for this fund.
b. IMRF Fund - The IMRF Fund accounts for the activities resulting from the
Village's participation in the Illinois Municipal Retirement Fund. Revenues
are provided by a specific annual property tax levy which produces a
sufficient amount to pay the Village's contributions to the Fund on behalf of
the Village's employees. Fund balances in this fund are derived from
property taxes and are therefore legally restricted to the purpose of the fund.
The fund balance should represent no less than three months (25%) with a
target range of 3 to 6 months (50%) of operating expenditures. This fund
will be monitored and the taxes levied to support the expenditures will be
adjusted to ensure that the Fund operates within the target range. It may take
more than one levy cycle to ensure that the funds are operating in the proper
range.
c. Social Security Fund — The Social Security Fund accounts for all activities
resulting from the Village's contributions for social security. Revenues are
provided by a specific annual property tax levy which produces a sufficient
amount to pay the Village's contributions on behalf of the Village's
employees. Fund balances in this fund are derived from property taxes and
are therefore legally restricted to the purpose of the fund. The fund balance
should represent no less than three months(25%)with a target range of 3 to
6 months(50%)of operating expenditures. This fund will be monitored and
the taxes levied to support the expenditures will be adjusted to ensure that
the Fund operates within the target range. It may take more than one levy
cycle to ensure that the funds are operating in the proper range.
4. Debt Service Fund — This fund was established to account for financial resources
that are restricted, committed, or assigned to payment of principal and interest owed
on debt. The Village budgets an amount of approximately the principal and interest
that is anticipated to be paid. Any fund balance accumulation should be minimum
and less than 5%.
The Debt Service Fund's fund balance is 100%restricted for debt service.
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Village of Lemont, Illinois
Fund Balance Policy
Adopted March 2015
5. Capital Project Funds — These funds are established to account for and report the
financial resources that are restricted, committed, or assigned to expenditure for
capital outlays including the acquisition or construction of capital facilities and other
capital assets, excluding those types of capital related outflows financed by
proprietary funds.
The Capital Project Fund's fund balance will be considered restricted,committed,or
assigned depending on the intended source/use of the funds.
D. Flow Assumptions
Some projects (funds) are funded by a variety of resources, including both restricted and
unrestricted(committed, assigned and unassigned). When restricted funds exist, those funds
are used first, then unrestricted. For unrestricted funds, committed funds are used first,then
assigned,then unassigned.
E. Authority
1. Committed Fund Balance—A self-imposed constraint on spending the fund
balance must be approved by ordinance or resolution of the Village Board. Any
modifications or removal of the self-imposed constraint must use the same action
used to commit the fund balance.
Formal action to commit fund balance must occur before the end of the fiscal
year. The dollar amount of the commitment can be determined after year-end.
2. Assigned Fund Balance—A self-imposed constraint on spending the fund balance
based on the Village's intent to use fund balance for a specific purpose. The
authority may be delegated to the Village Administrator.
F. Minimum Targets
Management will monitor the major revenue collections and the amount of cash available
by reviewing the monthly financial reports. During the year, if revenue projections
suggest that revenue will not meet expectations and the fund targets will not be met by
the end of the year, the Village Administrator will take the following actions to reach the
goals established in the adopted budget:
• Review expenses with management,
• Reduce capital asset expenditures,
• Reduce operational expenditures,where appropriate,while maintaining the
adopted budget goals,
• Present to the Village Board other expenditure control options, including those
that might modify the goals established in the adopted budget.
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Village of Lemont, Illinois
Fund Balance Policy
Adopted March 2015
G. Exceotions to the Policy
If the Village Board adopts a budget that does not meet the parameters of this policy,then
the budget will include a plan for adhering to this Policy within a five-year period.
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Village of Lemont, Illinois
Fund Balance Policy
Adopted March 2015
6
59
Village of Lemont
Investment Policy
Adopted: March 2015
TABLE OF CONTENTS
A. Scope 1
B. Objectives 1
1. Legality 1
2. Safety 1
3. Liquidity 3
4. Total Return 3
C. Standards of Care 3
1. Prudence 3
2. Ethics and Conflicts of Interest 4
3. Delegation of Authority 4
D. Safekeeping and Custody 4
1. Authorized Financial Dealers and Institutions 4
2. Internal Controls 5
3. Delivery vs Payment 6
4. Safekeeping 6
E. Suitable and Authorized Investments 6
1. Investment Types 6
2. Collateralization 7
F. Investment Parameters 8
1. Diversification 8
2. Maximum Maturities 8
G. Reporting 9
H. Performance Standards 9
I. Marking to Market 9
J. Policy Consideration 10
K. Approval of Policy 10
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The Village of Lemont
Investment Policy
Adopted: March 2015
A. Scope
This Policy applies to the cash management and investment activities of the Village of Lemont and
covers all Village funds other than those of the Police Pension Plan. It is the policy of the Village of
Lemont to invest public funds in a manner which will provide the highest investment return with the
maximum security while meeting the daily cash flow demands of the Village and conforming to all state
and local statutes governing the investment of public funds. With the exception of the Police Pension
Fund, all other funds of the Village shall be administered in accordance with the provisions of this
policy. The Police Pension Fund shall be administered in accordance with the contractual and statutory
requirements of that fund. Any monies received for the Police Pension Fund shall be administered by
the written order of the Board of Trustees of that Fund.
Pooling of Funds
Except for cash in certain restricted and special funds, the Village will consolidate cash and
investment balances from all funds to maximize investment earnings and to increase
efficiencies with regard to investment pricing, safekeeping and administration. Investment
income will be allocated to the various funds based on their respective participation and in
accordance with generally accepted accounting principles monthly.
B. Objectives
The primary objectives of investment activities, in priority order, shall be Legality, Safety,
Liquidity, and Total Return.
1. Legality
The Village's investments will be in compliance with all federal, state and other legal
statutes and requirements governing the investment of public funds.
2. Safety
Safety of principal, along with legality, are the foremost objectives of the investment
program. Investments shall be undertaken in a manner that seeks to ensure the preservation
of capital in the overall portfolio. The objective will be to mitigate credit risk, custodial
credit risk, and interest rate risk in the overall portfolio. The Village shall diversify its
investments to minimize risks regarding individual securities.
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Investment Policy
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a. Credit Risk
Credit Risk is the risk that an issuer or other counterparty to an investment will not fulfill
its obligations. The Village will minimize credit risk by:
• Limiting investments to the types of securities listed in Section E of this
Investment Policy.
• Pre-qualifying the financial institutions, broker/dealers, intermediaries, and
advisers with which the Village will do business in accordance with Section D.1.
of this policy.
• Diversifying the investment portfolio so that the impact of potential losses from
any one type of security or from any one individual issuer will be minimized.
b. Custodial Credit Risk
Custodial Credit Risk is the risk that, in the event of a bank or counterparty failure, the
Village's collateral securing uninsured deposits or investments may not be recovered.
The Village will minimize custodial credit risk over deposits with financial institutions by
ensuring that all deposits with financial institutions are insured or collateralized with
securities held by the Village's agent in the Village's name.—All investments shall be
conducted on a Delivery vs Payment(DVP)basis. Securities will be held by a third-party
securities custodian designated by the Village separate from where the investment was
purchased.
c. Interest Rate Risk
Interest Rate Risk is the risk that changes in interest rates will adversely affect the fair
value of an investment. The Village will minimize interest rate risk by:
• Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations,thereby avoiding the need to sell securities on
the open market prior to maturity.
• Investing operating funds primarily in shorter-term securities, money market
mutual funds, or similar investment pools and limiting the weighted average
maturity of the portfolio to no more than two years and limiting the maximum
maturity of any investment to three years from the date of purchase, unless
matched to a specific future cash flow need.
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Investment Policy
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3. Liquidity
The investment portfolio shall remain sufficiently liquid to meet all operating requirements
that may be reasonably anticipated. This is accomplished by structuring the portfolio so that
securities mature concurrent with cash needs to meet anticipated demands. Furthermore,
since all possible cash demands cannot be anticipated,the portfolio should consist largely of
securities with active secondary or resale markets. Alternatively, a portion of the portfolio
may also be placed in local government investment pools which offer same-day liquidity for
short-term funds.
4. Total Return
The investment portfolio shall be designed with the objective of attaining a market rate of
return throughout budgetary and economic cycles, taking into account the legality, safety
and liquidity objectives described above. Return on investments is of secondary importance
compared to the safety and liquidity objectives described above. The core investments are
limited to relatively low risk securities in anticipation of earning a fair return relative to the
risk being assumed.
C. Standards of Care
1. Prudence
The standard of prudence to be used by investment officials shall be the "prudent person,",
which states " Investments shall be made with judgment and care, under circumstances then
prevailing, which persons of prudence, discretion and intelligence exercise in the
management of their own affairs, not for speculation, but for investment, considering the
probably safety of their capital as well as the probable income to be derived" and shall be
applied in the context of managing the entire portfolio.
Investment officers acting in accordance with written procedures and exercising due
diligence shall be relieved of personal responsibility for an individual security's credit risk
or market price changes, provided deviations from expectations are reported in a timely
fashion and appropriate action is taken to control adverse developments.
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The Village of Lemont
Investment Policy
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2. Ethics and Conflicts of Interest
Officers and employees involved in the investment process shall refrain from personal
business activity that could conflict with the proper execution and management of the
investment program, or that could impair their ability to make impartial decisions.
Employees and investment officials shall disclose any material interests in financial
institutions with which they conduct business. They shall further disclose any personal
financial or investment positions that could be related to the performance of the investment
portfolio. Employees and officers shall refrain from undertaking personal investment
transactions with the same individual with whom business is conducted on behalf of the
Village.
3. Delegation of Authority
Authority to manage the investment program is granted to theVillage Administrator derived
from the following: 30 ILCS 235 et. seq. The Village Administrator or designee establishes
written procedures and internal controls for the operation of the investment program that is
consistent with the investment policy. Procedures should include references to safekeeping,
delivery vs. payment, investment accounting, repurchase agreements, wire transfer
agreements,and collateral/depository agreements. No person may engage in an investment
transaction except as provided under the terms of this policy and the procedures established by
the Village Administrator. The Village Administrator and Village Treasurer shall be
responsible for all transactions undertaken and shall establish a system of controls to regulate
the activities of subordinate officials, including outside investment managers.
D. Safekeeping and Custody
1. Authorized Financial Dealers and Institutions
A list will be maintained of financial institutions authorized to provide investment services.
In addition, a list also will be maintained of approved security broker/dealers selected by
creditworthiness (e.g., a minimum capital requirement of$10,000,000 and at least five years
of operation). These may include "primary" dealers or regional dealers that qualify under
Securities and Exchange Commission (SEC) Rule 15C3-1 (uniform net capital rule).
All financial institutions and broker/dealers who desire to become qualified bidders for
investment transactions must supply the following as appropriate:
• Audited financial statements.
• Proof of National Association of Securities Dealers(NASD)certification.
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The Village of Lemont
Investment Policy
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• Proof of state registration.
• Completed broker/dealer questionnaire.
• Certification of having read and understood and agreeing to comply with the
Village's investment policy.
An annual review of the financial condition and registration of qualified bidders will be
conducted by the Village Administrator.
2. Internal Controls
The Village Administrator is responsible for establishing and maintaining an internal
control structure designed to ensure that the assets of the entity are protected from loss, theft
or misuse. The internal control structure shall be designed to provide reasonable assurance
that these objectives are met. The concept of reasonable assurance recognizes that the cost
of a control should not exceed the benefits likely to be derived and the valuation of costs
and benefits requires estimates and judgments by management.
Accordingly, the Village Administrator shall establish a process for an annual independent
review by an external auditor to assure compliance with policies and procedures. The
internal controls shall address the following points:
• Control of collusion.
• Separation of transaction authority from accounting and recordkeeping.
• Custodial safekeeping.
• Avoidance of physical-delivery securities.
• Clear delegation of authority to subordinate staff members.
• Written confirmation of telephone transactions for investments and wire transfers.
• Dual authorizations of wire transfers.
• Development of a wire transfer agreement with the lead bank or third party
custodian.
See Attachment A: Village of Lemont Investment Procedures and Internal Controls Manual.
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The Village of Lemont
Investment Policy
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3. Delivery vs Payment
All trades of marketable securities will be executed by delivery vs. payment (DVP) to
ensure that securities are deposited in an eligible Village custodian prior to the release of
funds.
4. Safekeeping
Securities will be held by a f centralized] independent third-party custodian selected by the
Village as evidenced by safekeeping receipts in the Village's name and a written custodial
agreement. The safekeeping institution shall annually provide a copy of their most recent
report on internal controls(Statement of Auditing Standards No. 70, or SAS 70).
E. Suitable and Authorized Investments
1. Investment Types
Except as modified herein all investments purchased under this policy shall be guided by the
Public Funds Investment Act 30 ILCS 235 et seq. and all revisions thereto, as may be made by
the Illinois Legislature. Below is a summary of acceptable investments as determined by the
Village Administrator in compliance with the applicable statute:
a. U.S. government obligations, U.S. government agency obligations, and U.S.
government instrumentality obligations, which have a liquid market with a readily
determinable market value and are rated A or better by a nationally recognized
ratings agency.
b. Certificates of deposit and other evidences of deposit at financial institutions,
bankers' acceptances, and commercial paper, rated in the three highest tier (e.g.,
A-1, P-1,D-1, or F- 1 or higher)by a nationally recognized rating agency
c. Investment-grade obligations (rated A or better by a nationally recognized ratings
agency) of state, provincial and local governments and public authorities.
d. Money market mutual funds regulated by the Securities and Exchange
Commission and whose portfolios consist only of dollar-denominated securities.
e. Local government investment pools.
Investment in derivatives shall be prohibited without the approval of the Board of Trustees
of the above instruments shall require authorization by the appropriate governing authority.
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Investment Policy
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2. Collateralization
Monies held in depository accounts, time deposit accounts, or money market mutual funds,
or invested in the certificates of deposit of financial institutions (banks, savings and loan
associations, or credit unions) in excess of FDIC or SAIF insurance shall be secured by
some form of collateral. The Village will accept the following assets as collateral:
(a) U.S. Government securities.
(b) Obligations of federal agencies.
(c) Obligations of federal instrumentalities.
(d) General obligation bonds of any United States state or local government rated "A" or
better(i.e., at least upper medium quality) by Moody's Investors Service, Standard& Poor's
Rating Service, or Fitch Investors Service.
The chief investment officer may reject any form of collateral at any time.
The amount of the collateral provided by a financial institution will not be less than 110%of
the market value of the net amount of deposits and investments to be secured. The ratio of
market value of collateral to the amount of funds to be secured will be reviewed monthly by
the chief investment officer. Additional collateral will be requested of a financial institution
when the ratio declines below the required level. Collateral may not be released without the
signature of the chief investment officer. Pledged collateral will be held in safekeeping, by
an independent third-party depository, or the Federal Reserve Bank, as designated by the
chief investment officer, and evidenced by a safekeeping receipt.
The market value of collateral will be determined based upon quotations reflected in the
edition of The Wall Street Journal published on the first business day following the quarter
concerned. (This edition will report the market value of securities as of the last day of the
quarter concerned.) If a security provided as collateral is not listed in The Wall Street
Journal, its market value will be determined using a comparable source acceptable to the
chief investment officer.
Financial institutions pledging collateral will sign a collateral agreement that meets the
requirements of the Financial Institution Resource Recovery Enforcement Act (FIRREA)
acceptable to the chief investment officer.
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Investment Policy
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F. Investment Parameters
1. Diversification
The investments shall be diversified by:
• Limiting investments to avoid overconcentration in securities from a specific
issuer or business sector (excluding U.S. Treasury securities). No more than 10%
of the portfolio can be invested in any one investment.
• Limiting investment in securities that have higher credit risks.
• Investing in securities with varying maturities.
• Continuously investing a portion of the portfolio in readily available funds such as
local government investment pools (LGIPs), money market funds or overnight
repurchase agreements to ensure that appropriate liquidity is maintained in order to
meet ongoing obligations.
g g g
2. Maximum Maturities
To the extent possible, the Village shall attempt to match its investments with anticipated
cash flow requirements. Unless matched to a specific cash flow, the Village will not directly
invest in securities maturing more than three (3) years from the date of purchase. The
Village shall adopt weighted average maturity limitations, consistent with the investment
objectives, as previously noted.
Reserve funds and other funds with longer-term investment horizons may be invested in
securities exceeding five (5) years if the maturity of such investments are made to coincide
as nearly as practicable with the expected use of funds. The intent to invest in these types of
securities shall be disclosed in writing to the Board of Trustees.
Because of inherent difficulties in accurately forecasting cash flow requirements, a portion
of the portfolio should be continuously invested in readily available funds such as local
government investment pools, money market funds, or overnight repurchase agreements to
ensure that appropriate liquidity is maintained to meet ongoing obligations.
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The Village of Lemont
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G. Reporting
The Village Treasurer shall prepare an investment report at least quarterly, including a management
summary that provides an analysis of the status of the current investment portfolio and the
individual transactions executed over the last quarter. This management summary will be prepared
in a manner which will allow the Village to ascertain whether investment activities during the
reporting period have conformed to the investment policy. The report should be provided to the
Village Administrator and the Village Board Finance Officer. The report will include the
following:
• Listing of individual securities held, by fund, at the end of the reporting period reporting
original cost and current market value of each security.
• Average weighted yield to maturity of portfolio on investments as compared to applicable
benchmarks.
• Listing of investments by maturity date.
• The purchase and safekeeping institutions.
H. Performance Standards
The investment portfolio will be managed in accordance with the parameters specified within this
policy. The portfolio should obtain a market average rate of return during a market/economic
environment of stable interest rates. Portfolio performance should be compared to appropriate
benchmarks on a regular basis. The benchmarks shall be reflective of the actual securities being
purchased and risks undertaken, and the benchmark shall have a similar weighted average maturity
as the portfolio.
I. Marking to Market
The market value of the portfolio shall be calculated at least quarterly and a statement of the market
value of the portfolio shall be issued at least quarterly. This review of the investment portfolio, in
terms of value and price volatility, should be performed consistent with the GFOA Recommended
Practices on "Mark-to-Market Practices for State and Local Government Investment Portfolios and
Investment Pools". In defining market value, considerations should be given to the GASB
Statement 31 pronouncement.
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J. Policy Consideration
1. Exemption
Any investment currently held that does not meet the guidelines of this policy shall be
exempted from the requirements of this policy. At maturity or liquidation, such monies
shall be reinvested only as provided by this policy.
2. Amendments
This policy shall be reviewed on an annual basis. Any changes must be approved by the
Village board in consultation with the individuals charged with maintaining internal
controls.
K. Approval of Investment Policy
The investment policy shall be formally approved and adopted by the Village Board of the Village
of Lemont and reviewed annually.
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Investment Procedures and Internal Controls Manual —Attachment A
A. Introduction
The Finance Department and Village Administrator is responsible for conducting cash and
investment transactions for all funds (except the Police Pension Fund) held by or for the
benefit of the Village of Lemont. The responsibility for the administration of the investment
program has been delegated to the Village Administrator and Village Treasurer, who shall
implement the following investment procedures and internal controls, as prescribed by the
Investment Policy.
B. Objective
The Procedures and Internal Control Manual provides an outline for cash and investment
transactions. This manual shall be reviewed on a yearly basis for possible revisions by the
Village Administrator and Village Treasurer to ensure that the manual is current with
investment industry standards and practices.
C. Prudence and Standard of Prudence
The standard of prudence to be used by the investment staff shall be that of a "prudent
person" and shall be applied in the context of managing the overall portfolio. The Village
Treasurer, or persons performing the investment functions, acting in accordance with written
policies and procedures and exercising due diligence, shall not be responsible for an
individual security's credit risk or market price changes, provided that deviations from
expectations are reported in a timely fashion and appropriate action is taken to control or
mitigate adverse developments.
The"prudent person" standard is herewith understood to mean the following:
Investments shall be made with judgment and care, under circumstances then prevailing,
which persons of prudence, discretion and intelligence exercise in the management of their
own affairs, not for speculation, but for investment, considering the probable safety of their
capital as well as the probable income to be derived.
D. Investment Decisions
The investment staff, which includes the Village Administrator and Village Treasurer, shall
adhere to the guidelines of the Village of Lemont's Investment Policy regarding all
investment procedures or any other cash and investment transactions.
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Investment Procedures and Internal Controls Manual—Attachment A
E. Chain of Command
For the purpose of obtaining approval on investment matters not addressed in the
Investment Policy,the following chain of command is appropriate:
1. Village Board of Trustees
2. Village Administrator
3. Village Treasurer
F. Duties and Responsibilities
The Village Administrator and the Village Treasurer have specific duties and responsibilities
as stated in their respective position descriptions. The Village Administrator shall be
responsible for the management of the investment program and the Village Treasurer shall be
responsible for the daily operational duties (i.e., purchases, sells, bank transfers, wires, and
reports) with another finance department employee responsible for the accounting along with
monitoring compliance with the internal control procedures.
G. Ethics and Conflict of Interest
For the protection of the investment staff, it is imperative that full disclosure be made by
investment personnel and the Board of Trustees to the Village Administrator of any material
interests which they may hold in a financial institution (brokers/dealers, banks, etc.) which
conducts business with the Village.
H. Separation of Duties
Investment staff shall observe proper segregation of duties while engaged in investment
activities. Persons responsible for approving investment transactions should not be engaged
in activities relating to the recording of transactions in the financial records or the
reconciliation of cash and safekeeping account statements.
I. Reporting Requirements
A quarterly report shall be prepared and forwarded to the Village Administrator who in turn
shall forward to the Village Board. The report shall contain, but not be limited to, the
following information:
a) Security ID f) Par value
b) Purchase date g) Original cost value
c) Maturity date h) Coupon rate (if applicable)
d) Purchase institution i) Yield to maturity
e) Safekeeping institution j) System assigned account number
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Investment Procedures and Internal Controls Manual —Attachment A
A mark-to-market report shall be prepared on a quarterly basis. This report shall include the
market value, book value, and unrealized gain or loss of the securities in the portfolio. These
values should be obtained from a reputable and independent source.
J. Operations
"Operations" is defined as those necessary procedures and duties required to maintain a
properly working department on a daily basis.
1. Daily Investment Procedures
The following is a basic outline of routine daily procedures necessary to maintain
proper documentation on cash and investment transactions.
Each morning, the daily bank balances shall be obtained from the depository bank via
computer.
The Village Treasurer shall be responsible for providing the Village Administrator
with daily information regarding the cash requirements and required maturity dates
for all funds.
2. Daily Investment Worksheet("cash book")
On a daily basis, it is necessary to monitor cash activity within specific bank accounts
for the purpose of determining net cash available for investment. A "cash book" shall
be maintained by the Village Senior Fiscal g scal which shall include a summary of daily
cash inflows and outflows by bank account and corresponding book balances at the
end of each day.
A review of the "cash book" shall be conducted by the Village Treasurer and shall
consider net available cash for investment as well as future anticipated cash flows for
the purpose of determining the amount and duration in which funds might be
invested.
All cash and investment transactions shall be journalized, by bank account, and given
to the Village Treasurer before 2:00 p.m. each day.
Proper documentation and authorization shall be required before any cash or
investment transaction is executed.
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Investment Procedures and Internal Controls Manual —Attachment A
3. Authorized Wire Transfers
Only the Village Treasurer shall be authorized to originate the wiring Village funds
for investment and payment of debt service purposes to established Village bank
accounts. Wire instructions and personal identification numbers (PIN's) shall be
safeguarded by the authorized representatives.
All bank transfer requests shall be in writing and approved by an authorized
representative and all requests shall be filed with the investment work-up documents.
Al bank transfers will require two signatures, the Village Treasurer and the Village
Administrator. Phone wire transfers may be performed provided such requests are
made over recorded lines and a written confirmation of the transfer is prepared by the
bank. The purpose of the bank transfer
must be noted as t art of the transfer
ansfer
information.
Wire transfers shall be confirmed by a third party independent of the authorization
function.
4. Securities' Confirmations
The processing of securities' confirmations, including the filing and reconciling, shall
be reviewed by an individual who did not execute the purchase or sale. All
confirmations for securities, including certificates of deposit, shall be attached to the
daily investment work-up documentation. The original confirmations are not
permitted to leave the Finance Department, and only copies will be provided upon
request.
Upon receipt, the safekeeping account listing shall be reconciled against the
appropriate investment reports.
5. Coupon Notices
Securities which periodically pay coupons will require that the amount of the coupon
payments be transferred to the appropriate bank account and a journal entry prepared
and given to the Village Treasurer.
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Investment Procedures and Internal Controls Manual —Attachment A
6. Safekeeping Procedures
All securities purchased for the Village shall be received by "delivery vs. payment"
(DVP) to the Village's designated custodian for safekeeping. The Village's
designated safekeeping institution shall be notified of the trade prior to or on the day
of settlement. Confirmation of the delivery will include the type of security
purchased/sold, CUSIP, coupon rate (if applicable), maturity, purchase and settlement
dates, par value and purchase price.
Nonnegotiable Certificates of deposit are permitted to be safekept at the issuing bank
provided they are fully collateralized and pledges are held at an independent third
party institution. Negotiable certificates of deposit should be on a DVP basis as noted
above. All certificates of deposit confirmations must be verified against the
appropriate investment reports and general ledger account on a monthly basis.
Additional requirements and procedures are outlined in the Third-Party Custodial
Safekeeping Agreement regarding safekeeping procedures.
K. Accounting for Investment Transactions
Investments shall be recorded in the financial records at original cost. Interest income will be
recognized at maturity or amortized as of the last day of the fiscal year according to the
effective interest method of amortization.
L. Investment Information
1. Internal Investment Reports
Investment reports are generated by the Village Treasurer. Each report shall be
checked against the original documentation and the appropriate general ledger
accounts to ensure the accuracy of the reports on a monthly basis. Furthermore, the
investment reports shall be safekept by the Finance Department.
2. Market Values
Market values shall be calculated on a quarterly basis by the Village Treasurer and a
report provided to the Village Administrator and the Board of Trustees.
3. Trust Statements
Original statements for the Village's investment accounts which are held by a
custodian shall be reconciled by the Village Treasurer on a monthly basis.
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Investment Procedures and Internal Controls Manual —Attachment A
M. Selection of Dealers and Bankers
As stated in the Village of Lemont's Investment Policy, the Village Treasurer shall only
purchase securities from financial institutions which are qualified as public depositories by
the Village of Lemont or from broker/dealers that were selected based on credit worthiness
that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital
rule).
The Finance Department shall provide each authorized dealer a copy of the Village's
Investment Policy and each dealer shall be required to submit, in writing, a statement that
they have received, read and understand the Village's investment policy. This statement
shall be submitted to the Village Administrator.
Once all requirements are met, the Finance Department will provide the dealer with a list of
staff members who are authorized to conduct cash and investment transactions.
N. Security Selection Process
When purchasing or selling securities, the Finance Department shall select the security which
provides both the highest rate of return within the established parameters of the Investment
Policy and satisfies the current objectives and needs of the Village's portfolio. These
selections shall be made based on a minimum of two (2) bids/quotes (unless securities are
being purchased at the FED window) being obtained from banks and/or broker/dealers on the
securities in question.
Two bids/quotes are not necessary in the following situations:
1. When time constraints due to unusual circumstances preclude the use of the
competitive bidding process.
2. When no active market exists for the issue being traded due to the age or depth of the
issue.
3. When a security is unique to a single dealer, for example, a private placement.
4. When the transaction involves new issue or issues in the"when issued"market.
When using the competitive bid process, all bids shall become part of the record of the
specific security involved.
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Village of Lemont
Revenue and Cash Management Policy
Adopted: March 2015
TABLE OF CONTENTS
A. Scope 1
B. Internal Controls 1
C. Accounting Procedures 1
D. Invoicing Procedures 2
1. General Accounts Receivable 2
2. Water and Sewerage Receivable 2
E. Receipt of Funds 3
F. Remote Sites 3
G. Collections 4
H. Returned Checks 4
I. Bad Debt 5
J. Budgetary Review 5
K. Escrowed Funds 6
L. Bond Payable Funds 6
M.Asset Forfeiture Proceeds 6
N. Records Retention 7
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Village of Lemont
Revenue and Cash Management Policy
Adopted: March 2015
A. Scope
The Revenue and Cash Management Policy applies to all revenue collected, except where state or
federal laws supersede. Major revenue sources for the Village of Lemont include real estate
taxes, franchise revenues, state shared revenues, utility usage, licenses and permits, fines, and
charges for services. Proper controls over revenue are essential to maintaining strong financial
management practices.
B. Internal Controls
All aspects of cash receipts and accounts receivable shall be subject to proper internal controls.
Management of each department shall be familiar with the Revenue and Cash Management Policy
and established internal controls that are properly documented and followed by staff members.
Internal controls include:
1. Segregation of duties for authorization, recording and custodian functions.
2. Daily processing of cash receipts and accounts receivable transactions.
3. Timely deposit of funds.
4. Timely reconciliation to the general ledger and other supporting ledgers.
5. Establishment of physical security procedures.
6. Notification of management upon suspicion of fraud. Management shall then notify the
appropriate authorities (e.g., law enforcement, state agencies) in a timely manner for further
investigation.
See Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
for additional documentation of procedures and controls.
C. Accounting Procedures
All receipts and receivables shall be recorded in keeping with current authoritative standards and
practices, including:
1. Revenue shall be recorded in the proper general ledger account by fund and revenue source.
2. Revenue shall be recorded in the proper fiscal accounting period in accordance with the
modified accrual basis of accounting for governmental funds and the accrual basis of
accounting for enterprise and internal service fund and governmental and business type
activities. The Village will strive to minimize differences in revenue recognition for
governmental funds and governmental activities.
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Village of Lemont
Revenue and Cash Management Policy
Adopted: March 2015
D. Invoicing Procedures
1. General Accounts Receivable
Accounts receivables shall be established for services provided in advance of payment. The
Village maintains accounts receivable for business licenses, liquor licenses, cigarette licenses,
scavenger licenses, health inspection licenses and amusement licenses. These accounts are
invoiced in advance on an annual basis covering the period May 1 to April 30, with the
exception of liquor licenses which are invoiced on a semi-annual basis. In addition,the Village
invoices for Police Special Details. The Police Special Details bills represent reimbursements
for services performed and are billed when incurred.
a) All initiated bills shall have a due date of 30 days from the bill date, unless otherwise
stated per ordinance or resolution. Invoices for license renewals shall be generated by
April 1, allowing 30 days for payment prior to due date of May 1. Police Special Detail
bills shall be generated within 30 days after the payroll date that identifies the special
detail assignment.
b) All invoices for license renewals and Police Special Details shall be produced and
maintained by the Finance Department.
c) Bills shall be generated in the accounting system software accounts receivable module.
The accounts receivable module automatically updates the general ledger upon
generation
2. Water and Sewerage Receivable
The Village maintains accounts receivable for water and sewerage services. The Village is
divided into two sections. Each section is invoiced every other month for a two month billing
period. The sections are rotated to allow for monthly billing process representing half of the
households.
a) All initiated bills are dated the 1st day of the month, covering usage for the two months
ended the last day of the prior month. Bills have a due date on the 20th day of the
month.
b) An accounts receivable aging for all water and sewer billings is maintained by the
Water Billing Supervisor.
c) Bills shall be generated using the accounting system software utility billing module.
The meter readings automatically update the utility billing module. The utility billing
module automatically updates the general ledger.
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Village of Lemont
Revenue and Cash Management Policy
Adopted: March 2015
E. Receipt of Funds
The Finance Department shall serve as primary recipient for all revenue collection sites. Each
department with remote collection responsibility shall utilize a separate cash register and establish
and maintain an adequate system of internal controls for receipts. Controls shall include, at a
minimum,the following:
1. The method of payment (e.g., cash, check or credit card) shall be indicated on the receipt.
This is entered into the accounting system software at time of transaction.
2. Identification of the individual receiving payment on receipt. The accounting system
software identifies the Finance Department Clerk who is logged onto the computer to
process the receipts.
3. Wherever possible, the receipt shall allow for immediate revenue account classification in
conformance with the established chart of accounts. If not possible, the department and
fund shall be indicated.
4. Restrictively endorsement (stamped for deposit only) of checks at the point and time of
collection.
5. Reconciliation of collections by an individual not involved in the receipting or posting
process or establishment of mitigating controls.
6. Recording of receipts in the financial accounting system on a timely basis.
7. Timely posting of adjustments with supervisory approval required
8. Timely reconciliation and deposit of funds received.
See Attachment A: Revenue and Cash Management Procedures and Internal Control Manual
for additional documentation of current procedures and controls.
F. Remote Sites
Remotes sites for the Village include the Police Department. In addition, customers may pay
for vehicle stickers at the local bank. Controls shall include, at a minimum,the following:
1. Dollar Threshold: At any such point a remote collection site accumulates in the
aggregate over$1,000 in cash and/or$2,500 in checks, such funds shall be deposited by
the beginning of the next business day.
2. Timely Threshold: All collections shall be deposited within five business days of
receipts.
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Village of Lemont
Revenue and Cash Management Policy
Adopted: March 2015
3. Un-deposited funds will be secured in a locked drawer or the safe.
4. Any differences in the cash reconciliation process will be investigated and resolved.
5. Personnel are prohibited from using change drawer to cash personal checks.
G. Collections
Each department shall establish and maintain an adequate system of internal control to provide
for timely collection of receivables.
1. All accounts receivable shall be recorded in the accounting system software. The Water
Billing Supervisor will maintain the Water and Sewerage Aged Trial Balance and the
Village Treasurer will maintain the General Accounts Receivable Aged Trial Balance. The
Village Treasurer will reconcile each subsidiary ledger to the general ledger on a monthly
basis.
2. For those accounts that become past due, proper delinquent notice shall be provided to the
payee.
3. For those accounts that are greater than 270 days past due and over $1,000, notice and
supporting detail shall be provided to the appropriate collection division for further
collection efforts.
4. Assignment to a collection agency shall be considered. When cost effective, the
government-wide selected collection agency shall be utilized to assure maximum
collections.
H. Returned Checks
Each department shall establish and maintain an adequate system of internal controls for
returned checks.
1. Unless otherwise stated per ordinance or resolution, all checks returned due to insufficient
funds shall be processed by the Finance Department with assistance from the Water Billing
Supervisor for those returned checks for water and sewerage billing.
2. Fees shall be charged for the returned check in accordance with applicable statutes or
established practices. Returned checks shall be processed at least twice through the
Village's financial institution.
4
81
Village of Lemont
Revenue and Cash Management Policy
Adopted: March 2015
Bad Debt
Each department shall maintain an adequate system of internal controls to provide for the
accurate and timely recognition of an allowance for doubtful account and bad debt expense.
1. The amount of the allowance for doubtful accounts shall be based upon the percentage of
receivable method.
2. The computation of the allowance for doubtful accounts shall be performed annually based
upon the aging of the receivables and recent history of write-offs at fiscal year end, subject
to concurrence by the external auditors.
3. For write-offs; accounts with balances less than $1,000, 360 days delinquent and with no
payment activity for 360 days shall be eligible for write-off upon approval by the Village
Board of Trustees.
4. For write-offs, balances greater than $1,000, collection efforts shall be performed for a
period equivalent to the statute of limitations or less if bankruptcy has been discharged for
an account, business no longer exists, or individual is deceased, at which point such
amounts shall be written-off upon department head's written concurrence.
5. For any account written-off, such customer information shall be retained for five years and
service denied on credit until previously written-off balances have been satisfied, unless
specifically approved by the Village Administrator.
J. Budgetary Review
Revenue collections and accounts receivable shall be monitored in a timely manner.
1. Revenue initiating departments shall have oversight in the formulation of revenue budgets.
2. Revenue budget estimates shall be supported with documented variable assumptions (base,
rate, etc).
3. Monitoring of revenue budget shall be performed in a timely manner throughout the fiscal
year and shall include an analysis of actual versus budgeted variances. Revised forecasts
shall be communicated to the Budget Officer on a timely basis.
4. Continued compliance of revenue with all laws and/or regulations shall be the
responsibility of the revenue initiating department.
5
82
Village of Lemont
Revenue and Cash Management Policy
Adopted: March 2015
K. Escrowed Funds
Funds received by the Village in advance of revenue recognition or funds anticipated to be
remitted back to the payee shall be recorded in an escrow liability account. The Village escrow
agreement does not provide for the establishment of interest bearing accounts. The Village
Planning Department maintains the Escrow Casetask File by Client, which includes an excel
summary of escrow account activity. The Village will not maintain a receivable balance for
developers. In the event of a net receivable, the developer will be required to replenish the
escrow fund within a 30 day time period. The Finance Department reconciles the detail to the
general ledger on a monthly basis.
Funds received as impact fees pursuant to a development will be reconciled on a monthly basis
and remitted to the appropriate governmental entity entitled to receive the fee within 30 days of
the reconciliation.
L. Bond Payable Funds
Funds received by the Village as insurance of performance and anticipated to be remitted back
to the payee shall be recorded in a bond payable account. The Village maintains a detail listing
of funds received and returned by permit number. The Finance Department reconciles the
detail to the general ledger on a monthly basis.
M. Forfeited Asset Proceeds
The Village shall maintain an adequate system of internal controls for proceeds from asset
forfeitures to ensure compliance with applicable laws and regulations.
1. A separate bank account will be maintained for forfeited asset proceeds. A separate
revenue general ledger account will be maintained for each type of forfeiture proceeds.
2. All interest income generated by forfeiture accounts must be deposited and recorded into
the corresponding bank and general ledger account on a timely basis.
3. The Finance Department and Police Department will maintain procedures to ensure
expenditures of proceeds are in accordance with applicable laws and regulations.
4. The Finance Department will reconcile the forfeiture general ledger accounts on a monthly
basis.
5. All required reports must be completed and filed with the appropriate authority on a timely
basis.
NOTE: See Asset Forfeiture Procedures Manual for additional documentation of procedures
and controls.
6
83
Village of Lemont
Revenue and Cash Management Policy
Adopted: March 2015
N. Record Retention
The Village shall retain all records related to revenue and cash management for a period of
seven years. All records sent for destruction will be documented and approved by the Village
Administrator prior to destruction.
7
LEMONT POLICE PENSION FUND 84
Statement of Investment Policy,Objectives and Guidelines
April 2014
Scope and Purpose
This investment policy applies to all assets of the Lemont Police Pension Fund. The Primary objective of the Lemont
Police Pension Fund is to provide eligible employees with retirement benefits and ensure appropriate funding.
II. Parties Associated with the Plan
A. Board of Trustees for the Lemont Police Pension Fund
1. Holds ultimate responsibility for the Fund and the appropriateness of its investment policy and its execution.
2. May retain consultants,money managers, and other advisors to implement and execute investment policy as it
relates to the Fund.
3. Reviews adequacy or need for change of this statement.
4. Meets quarterly and reviews reports concerning the Funds asset management.
5. Engages a custodian.
6. Defines investment policy,objectives,and guidelines for the Fund including risk tolerance.
7. Ensures administration of the Fund in accordance with the Illinois Pension Code, Illinois Compiled Statutes
Chapter 40 Act 5 Articles 1 and 3.
B. Custodian
1. Accepts possession of securities for safe keeping; collects and disburses income; collects principal of sold,
matured or called items; and provides accurate,timely market value pricing, including accrued interest, for all
securities under their care.
2. Provides timely monthly statements,which accurately detail all transactions in the accounts,as well as accurately
describe all of the securities owned.
3. Effects receipt and delivery following purchases and sales of securities on a timely and accurate basis.
4. Ensures that all cash is productively employed at all times.
5. Meets as required with the Board of Trustees,and provides reports relative to the status of the Plan.
C. Investment Consultant
1. Assists the Board of Trustees in developing investment policy guidelines, including asset class choices, asset
allocation targets and risk diversification.
2. Conducts money manager searches when requested by the Board of Trustees.
3. Provides the Board of Trustees with objective information on a broad spectrum of investment decisions, and
assists in evaluating the merits of each particular investment product,and money manager as to the track records,
management styles and quality.
4. Monitors the performance of the aggregate plan,investment managers,and provides regular quarterly reports to
the Board of Trustees,which aids them in determining the progress towards the investment objectives.
D. Money Managers
1. Will have full discretion in the management of the assets allocated to the investment managers,subject to overall
investment guidelines set by the Board of Trustees.
2. Serve as fiduciaries responsible,and will be held to the Prudent Expert Standard for specific securities decisions.
3. Will abide by the Illinois Pension Code which governs Illinois Downstate Police Pension Funds,Illinois Compiled
Statutes Chapter 40 Act 5 Articles 1-113.2, 1-113.3 and 1-113.4, and will abide by duties,responsibilities and
guidelines detailed in any specific investment manager agreement entered into by the manager and Board of
Trustees.
4. Will report at least quarterly the current investments held in their account, their current market value and all
transactions within the account.
5. Will communicate any major changes in economic outlook,investment strategy,or any other factors,which affect
implementation of their investment process,or the investment objective of the Plan.
6. Will inform the Board in writing of any qualitative change in the investment management organization: Examples
include changes in portfolio management personnel,ownership structure,investment philosophy,etc.
1
85
III. Investment Objectives and Guidelines
A. Policies
1. The primary policies of the fund,in order of priority are as follows:
a) Safety Investments shall be undertaken in a manner that seeks to ensure the preservation of capital. As
such, the Board of Trustees has consciously diversified the aggregate fund to ensure that adverse or
unexpected results will not have an excessively detrimental impact on the entire portfolio. Diversification is
to be interpreted to include diversification by asset type,by characteristic,by number of investments,and in
the case of investment managers,by investment style.
b) Liquidity The investment portfolio will remain sufficiently liquid to enable the pension fund to pay all
necessary benefits and meet all operating requirements,which might be reasonably anticipated.
c) Return on Investment Assets will be invested to achieve attractive real rates of return. Following the
Prudent Man Standard for preservation of capital,assets will be invested to achieve the highest possible rate
of return,consistent with the plans tolerance for risk as determined by the Board of Trustees in its role as a
fiduciary.
2. Investment management can be delegated to external professional organizations. The managers will operate within a
set of guidelines, objectives, and constraints,which are attached hereto. It is the judgment of the Board at this time
that there is no immediate need for liquidity with respect to those assets which are managed by money managers. In
the short term,the Board believes that the obligations of the fund will be met by other monies and should not be a
concern of any investment manager. The Board will periodically provide investment managers with an estimate of
expected net cash flows with sufficient advance notice to allow the orderly buildup of necessary liquid reserves.
3. The Board of Trustees will follow the policy that,except for established guidelines and unusual circumstances,the
fund's investment managers will place no restrictions on the selection of individual investments.
4. As a Downstate Police Pension Fund in the State of Illinois,the Illinois Pension Code, Illinois Compiled Statutes
Chapter 40 Act 5 Articles 1 and 3 restrict the Fund. These statutes are hereby incorporated into this policy statement
by reference herein.
5. Investments made in contracts and agreements of Life Insurance Companies licensed to do business in the State of
Illinois shall be rated at least A+by A.M. Best Company, Aa rated by Moody's, and AA+rated by Standard and
Poor's rating services. Notwithstanding, the portfolio of the general account of the Insurance Company shall not
invest more than 10%of the portfolio in real estate and/or more than 10%of the portfolio in bonds with ratings of less
than Baal by Moody's or BBB+by Standard and Poor's.
6. The total investment in the accounts described in paragraph 5 above shall not exceed 10%of the aggregate market
value of the Fund.
7. Investment grade general obligation debt issued by the State of Illinois or any county, township or Municipal
Corporation of the State of Illinois may be held in the portfolio. Issuers that are downgraded to less than investment
grade by one of the two largest rating services must be sold within 90 days.
8. Investment grade U.S. dollar denominated non-convertible corporate bonds may be held in the portfolio. Said
securities shall be rated investment grade by at least one of the two largest rating services at time of purchase. Said
securities shall be sold within 90 days if the issuer is downgraded to less than investment grade by any of the major
rating agencies.
9. Proxies shall be voted by the Board of Trustees unless investment advisors who have discretionary control over assets
of the plan are employed. Then the plans managers shall vote all proxies in the best interest of the pension plan.
Should voting issues or situations arise where an investment manager needs clarification;the Board of Trustees should
be considered as the source for such clarification.
10. Officers and employees involved in the investment process shall refrain from personal business activity that could
conflict with the proper execution and management of the investment program, or that could impair their ability to
make impartial decisions. Employees and investment officials shall disclose any material interests in financial
institutions with which they conduct business. They shall further disclose any personal financial or investment
positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain
from undertaking personal investment transactions with the same individual with whom business is conducted on
behalf of the Fund.
11. All trades of marketable securities will be executed by delivery vs. payment (DVP)to ensure that securities are
deposited in an eligible Pension Fund custodial account prior to the release of funds.
12. Except for pecuniary interest permitted under subsection(f)of Section 3-14-4 of the Illinois Municipal Code or under
Section 3.2 of the Public Officer Prohibited Practices Act,no person acting as Treasurer or Financial Officer or who
is employed in any similar capacity by or for a public agency may do any of the following:
2
a) Have any interest,directly or indirectly,in any investments in which the agency is authorized to inve .
b) Have any interest,directly or indirectly,in the sellers,sponsors,or managers of those investments.
c) Receive,in any manner,compensation of any kind from any investments in which the agency is not authorized
to invest.
13. It is the policy of the Pension Fund and in accordance with GFOA's Recommended Practices on the Collateralization
of Public Deposits(attachment 1),the Fund requires that funds held in depository accounts,time deposit accounts,or
money market mutual funds,or invested in the certificates of deposit of fmancial institutions(banks,savings and loan
associations,or credit unions)in excess of FDIC or SAIF insurance shall be secured by some form of collateral. The
Village will accept the following assets as collateral:
a) U.S.Government securities.
b) Obligations of federal agencies.
c) Obligations of federal instrumentalities.
d) General obligation bonds of any United States state or local government rated"A"or better(i.e.,at least upper
medium quality)by Moody's Investors Service,Standard&Poor's Rating Service,or Fitch Investors Service.
The Board may reject any form of collateral at any time.The amount of the collateral provided by a fmancial institution
will not be less than 110%of the market value of the net amount of deposits and investments to be secured. The ratio
of market value of collateral to the amount of funds to be secured will be reviewed monthly by the chief investment
officer. Additional collateral will be requested of a financial institution when the ratio declines below the required
level. Collateral will be released if the fair market value exceeds the required level. Collateral may not be released
without the signature of the Treasurer. Pledged collateral will be held in safekeeping,by an independent third-party
depository, or the Federal Reserve Bank, as designated by the Board, and evidenced by a safekeeping receipt. The
market value of collateral will be determined based upon quotations reflected in the edition of The Wall Street Journal
published on the first business day following the quarter concerned. (This edition will report the market value of
securities as of the last day of the quarter concerned.) If a security provided as collateral is not listed in The Wall
Street Journal, its market value will be determined using a comparable source acceptable to the chief investment
officer. Financial institutions pledging collateral will sign a collateral agreement that meets the requirements of the
Financial Institution Resource Recovery Enforcement Act(FIRREA)acceptable to Board.
14. The Board is responsible for establishing and maintaining an internal control structure designed to insure that the
assets of the Fund are protected from loss,theft,or misuse. The internal control structure shall be designed to provide
reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that(1)the cost
of the control should not exceed the benefits likely to be derived;and(2)the valuation of costs and benefits require
estimates and judgments by management.
Accordingly, the Board shall establish a process for annual independent review by an external auditor to assure
compliance with policies and procedures. The internal controls shall address the following points:
a) Control of collusion.
b) Separation of transaction authority from accounting and recordkeeping.
c) Custodial safekeeping.
d) Avoidance of physical-delivery securities.
e) Clear delegation of authority to subordinate staff members.
f) Written confirmation of telephone transactions for investments and wire transfers.
g) Dual authorizations of wire transfers.
h) Development of a procedure for making wire transfers.
B. Prohibited Transactions
1. Prohibited transactions are those transactions specifically prohibited in the Illinois Pension Code, Illinois Compiled
Statutes Chapter 40 Act 5 Sections 1-110, 1-111 and 3-135,as well as:
a) Short selling
b) Margin transactions
c) Transactions involving futures or options contracts
d) Reverse repurchase agreements
e) Repurchase agreements
1) Borrowing or lending of cash or securities
g) Derivatives
h) Collateralized Mortgage Obligation
3
87
i) American Depository Receipts(ADR's)
Nothing in this section shall prohibit the plan from owning eligible long only diversified open-end mutual funds that
may make use of the above strategies.
C. Portfolio Asset Allocation Guidelines
1. The Board of Trustees has adopted the asset allocation policy shown below for Plan assets. Target percentages have
been determined for each asset class along with allocations ranges. Equities shall not exceed 65%of the portfolio.
Percentage allocations are intended to serve as guidelines;the Board will not be required to remain strictly within the
designated ranges. The Fund will review the portfolio quarterly for rebalancing. Market conditions or an investment
transition may require an interim investment strategy and,therefore a temporary imbalance in asset mix.
Min Target Max
Cash 1% 2% 5%
Fixed Income 35% 43% 78%
Domestic Equities 21% 45% 60%
International Equities 0.0% 7% 15%
Real Estate 0.0% 3% 10%
2. Cash investments shall be defined as funds,which can be quickly liquidated without loss of principal.
3. Fixed income investments shall be defined as U.S. Government or U.S Government agency bonds, certificates of
deposit, investment grade Illinois municipal bonds, dollar denominated non-convertible investment grade corporate
bonds,fixed annuities or guaranteed investment contracts of any insurance company and commingled trust accounts,
which only invest in the above,described investment vehicles.
4. Equity securities shall be defined as preferred or common stocks created or existing under the laws of the United
States and are listed on a national securities exchange, board of trade or are quoted in the National Association of
Securities Dealers Automated Quotation System National Market System. Said issuers shall have been in existence
for at least 5 years and have not been in arrears of any payment of dividends on its preferred stock during the preceding
5 years. Domestic Equities shall also be defined as mutual funds managed by an investment company as defined and
registered under the Federal Investment Company Act of 1940 and registered under the Illinois Securities Law of
1953,have been in operation for at least 5 years,have total assets of$250 million or more and invest in a diversified
portfolio of common or preferred stocks,bonds,or money market instruments,and exchange traded funds which do
not employ inverse or leveraged strategies and invest in diversified portfolio of domestic equities.
5. International and real estate securities shall be defined as mutual funds managed by an investment company as defined
and registered under the Federal Investment Company Act of 1940 and registered under the Illinois Securities Law of
1953,have been in operation for at least 5 years,have total assets of$250 million or more,and invest in a diversified
portfolio of stocks,bonds,or money market instruments or pooled accounts managed,operated and administered by
a bank, subsidiaries of banks or subsidiaries of bank holding companies which invested in a diversified portfolio of
stocks, bonds or money market instruments and exchange traded funds which do not employ inverse or leveraged
strategies and invest in diversified portfolio of equities.
IV. Performance Objectives
1. Over a 5-year investment horizon it is the goal of the aggregate plan to meet or exceed a total rate of return of 7.0%.
This investment goal is not meant to be imposed on each investment manager. Specific investment goals and
constraints for each investment manager, if any, shall be incorporated as part of this statement. Each manager shall
receive a written set of manager guidelines outlining his specific goals and constraints as they may differ from those
objectives of the entire plan.
2. Meet or exceed the return of the blended market indices of 45%of the Barclays Capital Aggregate Index and 55%of
the S&P 500 index.
3. The Fund shall generally display an overall level of risk in the aggregate portfolio which is consistent with the risk
associated with the benchmarks specified in paragraph 2 above. Risk will be measured by the annualized standard
deviation of monthly returns.
4. The Board of Trustees understands that in order to achieve its objectives for the Plans assets,the Plan will experience
volatility of returns and fluctuations of market value as well as periods of losses. Losses will be viewed within the
context of appropriate market indices.
5. Performance will be reviewed for the following periods:
a) The most current quarter,year-to-date,one,three,and five years,and since inception.
4
88
V. Liability
1. The Board of Trustees,members and employees acting in accordance with prescribed procedures and exercising due
diligence shall be relieved of personal responsibility for the performance of any security as to price and/or earnings,
provided that deviations from expectations are reported promptly,and appropriate action is taken to minimize adverse
developments.
This Statement is adopted on Aria 1- 20 / 1 by the Board of Trustees of the Fund whose signatures
appear below.
11 i
` Pr- nt
F�� 1. .. VI c.e`11 R S , a P.y T
5
89
LEMONT POLICE PENSION FUND
Fixed Income Guidelines
April 2014
Investment Philosophy
1. The manager is expected to manage assets in a style similar to the one utilized over the past three years. Any significant
deviation from the managers stated style would require written approval from the Board of Trustees.
2. The manager is expected to earn the highest possible rate of return consistent with the risk tolerance of the Board of Trustees.
H. Fixed Income Guidelines
1. The following instruments are the only investment vehicles in which the manager shall be permitted to invest in.
a) In bonds, notes, certificates of indebtedness, Treasury bills or other securities now or hereafter issued, which are
guaranteed by the full faith and credit of the United States of America as to principal and interest. Bonds, notes,
debentures or other similar obligations of the following agencies of the United States of America:The Federal Housing
administration;Government National Mortgage Association;Public Housing Boards;Farmers Home Administration;
General Services Administration; Maritime Administration; Small Business Administration and Small Business
Administration Loan Pools;Tennessee Valley Authority;Washington Metropolitan Area Transit Authority;Federal
Land Banks; Federal Intermediate Credit Banks; Banks for Cooperatives; Federal Farm Credit Banks, and Federal
Home Loan Banks.
b) Up to 10%of the fixed account may be invested in investment grade general obligation bonds issued by the State of
Illinois,or any county,township or Municipal Corporation of the State of Illinois. Said securities shall be sold in 90
days if said issuer is downgraded to less than investment grade by any of the rating services.
c) Up to 30%of the fixed income portfolio may be invested in U.S.dollar denominated non-convertible corporate bonds
subject to the following restrictions. No single position shall be greater than 2%of the fixed income portfolio and no
single issuer shall carry a weight greater than 5%(at the time of purchase)of the fixed income portfolio. Further said
debt shall be rated investment grade by one of the two largest rating services. Said security shall be sold if said issuer
is downgraded to less than investment grade by any of the rating services.
d) FDIC insured certificates of deposit of any Federally Chartered Bank. Certificates of deposit in any Illinois Chartered
Bank are allowed so long as said bank certifies annually to the Board of Trustees that it does not engage in predatory
lending practices.
e) The original issue size of securities selected should be such to afford a high degree of marketability.
f) In money market mutual funds registered under the investment act of 1940, provided that the portfolio of any such
money market fund is limited to obligations described in paragraphs a,b,and c above.
III. Performance
1. Manager performance shall be measured using a three year moving average and shall:
a) Meet or exceed net of fees the returns of an unmanaged market index comprised of the Barclays Aggregate Bond
index. The return on the fund's investments shall include net income and appreciation.
b) Achieve a total rate of return,gross of fees of the top 50%of a peer group of active fixed income managers with like
investment constraints.
2. Performance will be reviewed for the following periods,the most recent calendar quarter,calendar year-to-date,trailing one,
three and five years,and since inception.
I have received the Policy Statement of the Lemont Police Pension Fund this day of 20 and agree
to comply with the provisions of this statement.
A)4'4 Investment Professional
J(� ignature
Printed Name and Title
6
90
LEMONT POLICE PENSION FUND
Domestic Equity Guidelines
April 2014
I. Investment Philosophy
1. The manager is expected to manage assets in a style similar to the one utilized over the past three years. Any significant
deviation from the managers stated style would require written approval from the Board of Trustees.
2. The manager is expected to earn the highest possible rate of return consistent with the risk tolerance of the Board of Trustees.
II. Common Stock Guidelines
1. Cash should not exceed 10%of the equity portfolio.
2. Equity securities shall mean diversified open-end mutual funds managed by an investment company as defined and registered
under the Federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953, have been in
operation for at least 5 years,and have total assets of at least$250 million. Equity securities shall also mean exchange traded
funds which do not employ inverse or leveraged strategies and invest in diversified portfolio of domestic equities.
3. Equity investment in any one company may not exceed 5%of the equity portfolio at time of purchase.
4. If the management firm has investments in equities of any one company that exceeds 5%of the company's equity outstanding,
it shall be brought to the immediate attention of Board of Trustees.
5. The manager is expected to prudently diversify the portfolio across industry and economic sectors. It is expected that at least
60%of the major industry sectors in the Russell 3000 index will be represented in the portfolio. Furthermore the manager is
to notify the Board of Trustees, with an explanation when any Russell 3000 industry or sector is overweighed by more than
120%.
6. Generally,the equity portfolio shall display an overall level of risk which is consistent with the level of risk associated with
the Russell 3000. Risk will be measured by the annualized standard deviation of monthly returns.
II. Performance
1. Manager performance shall be measured using a three-year moving average and shall:
a) Meet or exceed net of fees the returns of an unmanaged market index comprised of Russell 3000 equity index.
b) Achieve a total rate of return gross of fees of the top 45%of a peer group of active equity core managers. Returns
shall be evaluated in conjunction with the risk taken by the investment manager relative to the risk taken by the
universe of managers. These criteria shall be evaluated over longer market cycles of 3,5,7 and 10 years.
2. Performance will be reviewed for the following periods,the most recent calendar quarter Calendar Year-to-date,trailing one,
three and five years and since inception.
I have received the Policy Statement of the Lemont Police Pension Fund this, ' day of 4,04/4 20 d agree
to comply with the provisions of this statement.
c..
� `/
l Investment Professional
"T. attire
?AVM /416/( od�rte/
Printed Name and Title
7
91
LEMONT POLICE PENSION FUND
International Guidelines
April 2014
I. Investment Philosophy
1. The manager is expected to manage assets in a style similar to the one utilized over the past three years. Any significant
deviation from the managers stated style would require written approval from the Board of Trustees.
2. The manager is expected to earn the highest possible rate of return consistent with the risk tolerance of the Board of Trustees.
II. Common Stock Guidelines
1. Cash shall not exceed 5%of the equity portfolio.
2. Equity securities shall mean diversified open-end mutual funds managed by an investment company as defined and registered
under the Federal Investment Company Act of 1940 and registered under the Illinois Securities Law of 1953,have been in
operation for at least 5 years,and have total assets of at least$250 million. Equity securities shall also mean exchange traded
funds which do not employ inverse or leveraged strategies and invest in diversified portfolio of equities.
3. Invest in a diversified portfolio of common or preferred stocks,which are geographically diversified in a number of regions
including the Americas(U.S. and Canada),Greater Europe and Greater Asia. Said fund and shall not have more than a 15%
exposure in the United States and Canada.
4. The manager is expected to prudently diversify the portfolio across industry and economic sectors.
5. Generally,the equity portfolio shall display an overall level of risk which is consistent with the level of risk associated with
the MSCI EAFE index. Risk will be measured by the annualized standard deviation of monthly returns.
HI. Performance
1. Manager performance shall be measured using a three-year moving average and shall:
a) Meet or exceed net of fees the returns of an unmanaged market index comprised of the MSCI EAFE(net)total return
equity index.
b) Achieve a total rate of return net of fees of the top 45%of a peer group of active international fund managers. Returns
shall be evaluated in conjunction with the risk taken by the investment manager relative to the risk of the MSCI EAFE
index. Risk will be measured by the annualized standard deviation of monthly returns.These criteria shall be evaluated
over longer market cycles of 3,5,7 and 10 years.
2. Performance will be reviewed for the following periods,the most recent calendar quarter calendar year-to-date trailing one,
three and five years,and since inception.
I have received the Policy Statement of the Lemont Police Pension Fund this day of fLi L 20 / and agree
to comply with the provisions of this statement.
�westment Professional
P,(4,11Z1 . f
Signa
Printed Name and Title
8
LEMONT POLICE PENSION FUND 92
Real Estate Guidelines
April 2014
I. Investment Philosophy
1. The manager is expected to manage assets in a style similar to the one utilized over the past three years. Any significant
deviation from the managers stated style would require written approval from the Board of Trustees.
2. The manager is expected to earn the highest possible rate of return consistent with the risk tolerance of the Board of Trustees.
II. Common Stock Guidelines
1. Cash shall not exceed 5%of the equity portfolio.
2. Equity securities shall mean diversified open-end mutual funds managed by an investment company as defined and registered
under the Federal Investment Company Act of 1940 and Registered under the Illinois Securities Law of 1953,have been in
operation for at least 5 years, have total assets of at least $250 million, or collective trusts (commingled or pooled trusts)
administered and operated by a bank, subsidiaries of banks, or subsidiaries of bank holding companies, which invest in a
diversified portfolio of International (not to exceed 40% of the real estate portfolio) or U.S. publicly traded Real Estate
Investment Trusts. 75%of the company's total revenue must be derived from the ownership and operation of real estate assets
to be considered an eligible REIT. Equity securities shall also mean exchange traded funds which do not employ inverse or
leveraged strategies and invest in diversified portfolio of domestic equities.
3. The manager is expected to prudently diversify the portfolio across industry and economic sectors. It is expected that at least
75%of the major real estate sectors in the Dow Jones US Real Estate index will be represented in the portfolio.
4. Generally,the equity portfolio shall display an overall level of risk,which is consistent with the level of risk associated with
the Dow Jones US Real Estate index. Risk will be measured by the annualized standard deviation of monthly returns.
III. Performance
1. Manager performance shall be measured using a three-year moving average and shall:
a) Meet or exceed gross of fees the returns of an unmanaged market index comprised of the Dow Jones US Real Estate
index.
b) Achieve a total rate of return gross of fees of the top 33%of a peer group of active REIT managers. Returns shall be
evaluated in conjunction with the risk taken by the investment manager relative to the risk of the Dow Jones US Real
Estate index. Risk will be measured by the annualized standard deviation of monthly returns.These criteria shall be
evaluated over longer market cycles of 3,5,7 and 10 years.
2. Performance will be reviewed for the following periods: most recent calendar quarter,calendar year-to-date,trailing one,three
and five years,and since inception.
sr
I have received the Policy Statement of the Lemont Police Pension Fund this day of � 20 /Vand agree
to comply with the provisions of this statement.
Investment Professional
Sign e,
Printed Name and Title
9
93
Lemont Police Pension Fund
ACTUARIAL FUNDING POLICY STATEMENT
Originally Adopted April 30,2014
Effective May 1,2014
As Amended and Restated through May 1,2014
94
TABLE OF CONTENTS
Page
PURPOSE OF THE ACTUARIAL FUNDING POLICY STATEMENT
General Purpose
Goals and Objectives
Operation of the Policy 1
THE ACTUARIAL COST METHOD
General Purpose 2
Selection 2
UNFUNDED ACCRUED LIABILITY
General Purpose 3
UNFUNDED ACCRUED LIABILITY (CONTINUED)
Unfunded Liability—Existing at Implementation 3
Unfunded Liability Amortization Periods—New Changes Error! Bookmark not defined.
ACTUARIAL VALUE OF ASSETS
General Purpose 4
Selection 4
OPERATIONAL PROCEDURES
Funding Recommendations 5
State of Illinois Minimum Funding Requirement 5
Actuarial Assumptions 5
Monitoring the Funding Policy 5
ADDENDUM 1 —CURRENT ACTUARIAL ASSUMPTIONS
Economic Assumptions 6
Demographic Assumptions 6
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Actuarial Funding Policy Statement
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PURPOSE OF THE ACTUARIAL FUNDING POLICY STATEMENT
General Purpose
This Actuarial Funding Policy Statement sets forth the procedures that the Pension Board of Trustees
for the Lemont Police Pension Fund has adopted to make funding recommendations to the Village of
Lemont in compliance with the Illinois Pension Code. The policy identifies goals and objectives of
the Pension Board of Trustees and the Village of Lemont. The policy sets out the decision-making
process for handling various aspects of pension funding, and defines the ongoing items to be
reviewed in assessing the ongoing effectiveness of this policy.
Goals and Objectives
The key goals and objectives considered in the preparation of the investment policy are noted below:
-+ Make sure that benefits are secure for fund participants now and in the long-term.
--> Keep the recommended costs of the plan stable across generations of taxpayers.
- Develop recommendations that are more cost-effective in the long-term.
–+ Provide year-to-year contribution stability/budgeting for the Village.
- Address any transition items needed at the policy implementation.
Operation of the Policy
It is the intention of the Village and the Pension Board of Trustees to review the policy on an annual
basis. The intention is to review the effectiveness of the policy and determine if it continues to meet
the goals and objectives as set forth.
The Pension Board of Trustees retains the right to amend the policy as necessary to keep the policy in
line with the goals and objectives.
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THE ACTUARIAL COST METHOD
General Purpose
The intent of any Actuarial Cost Method is to set aside the appropriate amount of dollars during an
employee's working career so that the Pension Fund has the dollars necessary to make payments at
retirement. The Actuarial Cost Method will set the pattern by which contributions are made to the
Fund during the working career of the employee and provide two key measures for reporting:
—> Normal Cost — The amount of money to contribute for each active employee for the upcoming
year of service.
—> Accrued Liability — The amount of money that is expected to be in the Pension Fund already,
based on all past service already worked by members of the Fund.
Selection
The Entry Age Normal (EAN) Cost Method (Level Percent of Pay) has been chosen to measure the
Normal Cost and Accrued Liability for the Fund.
The EAN Method is a cost based actuarial method which focuses on budgeting annual costs during the
working career of an employee. The Normal Cost level is set with the expectation that it will increase
annually at the same rate as expected payroll increases during an employee's working career.
EAN Method (Level Percent of Pay) is used across the country to determine the amount of dollars that
should be in a pension fund and is widely accepted as the most equitable way to pass costs to taxpayers
who are receiving the services.
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UNFUNDED ACCRUED LIABILITY
General Purpose
The Actuarial Cost Method will provide a method for setting the annual contribution pattern for current
year services, as well as setting the expected level of assets needed to be on budget for past services
rendered by employees. When the Pension Fund actuarial assets do not match the expected assets under
the budget, an unfunded/overfunded liability exists.
Unfunded Liability
The Unfunded Actuarial Accrued Liability may be amortized over a period either in level dollar
amounts or as a level percentage of projected payroll.
In accordance with the Pension Fund's Funding Policy for the recommended contribution the unfunded
actuarial accrued liabilities are amortized by level percent of payroll contributions to 100% funding
target over 30 years beginning in 2011, ending with the municipality's fiscal year 2040.
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ACTUARIAL VALUE OF ASSETS
General Purpose
The Actuarial Value of Assets is the figure used annually to determine the level of underfunding in a
Pension Fund. The Actuarial Value of Assets does not necessarily equal the fair Market Value of
Assets. While the Actuarial Value of Assets does not represent dollars that are available on that day to
make benefit payments, use of an Actuarial Value of Assets recognizes that assets will not all be
distributed at a single point in time.
The objective of using an Actuarial Value of Assets that differs from the Market Value of Assets is to
redistribute contributions over the life of a Pension Fund in a manner that is less volatile. The overall
level of contributions over the life of the Fund is not expected to change. To achieve this, gains and
losses on the Market Value of Assets are recognized in the Actuarial Value of Assets over a period of
time. In order to be successful as part of long-term funding, the Actuarial Value of Assets should be
equally likely to fall above or below the market value of assets.
Key parameters:
—. Years—the number of years to smooth market value gains and losses.
—� Corridor — A limitation placed on the Actuarial Value of Assets. This parameter will limit the
Actuarial Value of Assets in relation to Market Value of Assets.
Selection
The Actuarial Value of Assets will be equal to the Market Value of Assets, with unexpected gains and
losses on the Market Value of Assets smoothed over a 5 year period.
It is anticipated that the Actuarial Value of Assets will not stray too far from the Market Value of
Assets with the 5 year smoothing parameter. Therefore no corridor has been set at this time.
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OPERATIONAL PROCEDURES
Funding Recommendations
The Pension Board of Trustees will use the policies and procedures set forth in this document to
recommend a contribution amount to be made by the Village to the Fund each year.
State of Illinois Minimum Funding Requirement
The State of Illinois provides funding policy parameters that must be used in determining the minimum
amount of money that should be contributed to the Fund on an annual basis. The Pension Board of
Trustees will review this amount each year. Notwithstanding anything else in this policy, in no event
will the Pension Board of Trustees recommend a contribution that is less than the minimum
contribution required under State law.
Actuarial Assumptions
The Pension Board of Trustees will review the actuarial assumptions used for determining Fund costs
at least every 3-5 years. The Pension Board of Trustees will use assumptions that are the best estimate
of the future anticipated experience under the plan. By getting the best estimate on actuarial
assumptions, short-term changes in unfunded liability are expected to offset over a long-term period of
time. Review of the assumptions every 3-5 years will help to minimize the impact of assumption
changes that have deviated from actual assumptions over a long period of time.
If any events occur that could impact assumptions immediately (for example, a change in the
Investment Policy or strategy)the Pension Board of Trustees will assess the associated assumption on a
more immediate basis and will not be limited by the 3-5 year cycle.
See Addendum I for current selections.
Monitoring the Funding Policy
The Pension Board of Trustees will review on an annual basis a report that is intended to monitor the
progress of the Funding Policy. This review will include but not be limited meted to:
Y
—* A review of the progress being made on the unfunded liability that exists at implementation.
- A review of the anticipated gains and losses that will be recognized in the upcoming actuarial
value of assets under the funding policy.
—a An analysis of cash flow to monitor the continuous ability of the fund to pay benefits.
- An analysis of the causes of any changes in unfunded liability over the preceding year.
—> An analysis of the actuarial expectations versus actual experience over the preceding year.
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ADDENDUM 1 — CURRENT ACTUARIAL ASSUMPTIONS
Economic Assumptions
Assumption p Selection Reason
Expected Rate of Return on Assets 7.00% Based on the current target
allocation in the Pension Fund and
discussion with the Investment
Consultant.
Pay Increase 4.50%+ %represents the long-term
Adjustments expectation for cost-of-living.
Adjustments are used to represent
higher pay increase rates early in
employees' working careers.
Total Payroll Increases 4.00% Based on the current employee
population.
Demographic Assumptions
Assumption Selection Reason
•
Mortality L&A 2012 Based on the study of the actual
experience for active and retired
police officers in the state of Illinois.
Termination Rates 100% L&A 2012 Long-term anticipated experience
for the Pension Fund.
Disability Rates 100% L&A 2012 Long-term anticipated experience
for the Pension Fund.
Retirement Rates 100% L&A 2012 Long-term anticipated experience
Cap Age 65 for the Pension Fund.
Percent Married 80% Represents the anticipated
percentage of time death benefits
will be paid by the Pension Fund.
Full detail for the assumptions can be found in
the Actuarial Assumption selection document. This is
intended to show a snapshot summary.
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