[HISTORY: Adopted by the Mayor and Council of the Borough of Palisades Park as indicated in article histories. Amendments noted where applicable.]
[Adopted 2-16-2010 by Ord. No. 1544]
The governing body does hereby authorize the use of a third party disbursement service organization for payroll, including:
Preparation of the necessary payment documentation and execution of disbursement of the local unit's bank account on behalf of the local unit;
Preparation of payment documentation, taking possession of local unit funds and making such disbursement itself on behalf of the Borough; and
The following words and terms, as used in this article, shall have the following meanings, unless the context clearly indicates otherwise:
- CHIEF FINANCIAL OFFICER (CFO)
- The individual statutorily responsible for supervising the accounts and finances of a local unit, including any certifying and approval officer appointed pursuant to N.J.S.A. 40A:5-17, Subdivision a, or such individual in similar capacity legally appointed by the governing body of the Borough.
- Any written agreement entered into by a local unit and a disbursing organization for the purposes authorized in this article.
- DEDICATED CASH ACCOUNT
- A demand deposit bank account owned by the local unit and funded solely for use by a disbursing organization in performing its duties and responsibilities in accordance with the contract.
- Any payment of moneys, including any transfer of funds, by any means, to the dedicated cash account established for use by a disbursing organization.
- GOVERNING BODY
- The Mayor and Council.
- LOCAL UNIT
- The Borough of Palisades Park.
- PAYMENT DOCUMENTATION
- Includes transmittals, remittance forms, tax returns, releases, filings, reports, and tapes supporting the disbursement of funds.
- The object and result of all preparations and calculations for, and the disbursement of salaries and wages, all withholdings therefrom, and additional liabilities related thereto.
- THIRD-PARTY DISBURSEMENT SERVICE
- Such service or services of the type describe in this article. Such service or services may include the processing and disbursing payroll and payroll agency obligations.
- THIRD-PARTY DISBURSEMENT SERVICE ORGANIZATION OR DISBURSING ORGANIZATION
- An organization engaged, either directly or indirectly, to perform any of the services indicated in this article.
- Any activity that, in accordance with sound fiscal practices, affects the general books of entry, ledgers, records, or logs of a local unit.
The governing body shall by a resolution approve any renewal or extension of a Contract for third party disbursement service organization.
Prior to the execution of a contract with a disbursing organization the governing body shall approve the use of disbursing organizations for the payment of claims pursuant to N.J.A.C. 5:30-17.3(a). Such approval must describe the specific tasks to be performed by a disbursing organization, including specific authorization to use electronic means for the disbursing of funds. The Contract may include, and is not limited to, data collection, agency report preparation, calculation of withholdings, direct deposit of payroll disbursements, all Borough transfers of funds to disbursing organizations, and account for subsequent payment.
The governing body does, pursuant to N.J.S.A. 40A:5-17a(1), designates the Chief Financial Officer to be responsible for authorizing and supervising the activities of the disbursing organization. The Chief Financial Officer shall be the approval officer to authorize and oversee the activities of the third party disbursing organization.
The approval officer shall be responsible and shall include the reconciliation and analysis of all general ledger accounts affected by the activities of the disbursing organization.
After the governing body has initially approved the use of the disbursing organization pursuant to N.J.A.C. 5:30-17.3 and N.J.A.C. 5:30-17.4(a), the CFO shall qualify disbursing organizations pursuant to the requirements of Section 17.5; and shall review and approve the contract of the Borough as to the terms, including satisfaction of the requirements of N.J.A.C. 5:30-17.5 through N.J.A.C. 5:30-17.7. The CFO shall complete a review of the services under the contract in compliance with N.J.A.C. 5:30-17.5 of the rule.
The Borough must meet the following terms and conditions prior to executing a contract with a disbursing organization. Prior to the execution of a contract with a disbursing organization, the Governing Body shall approve the use of the disbursing organization for the payment of claims pursuant to N.J.A.C. 5:30-17.3(a). Such approval must describe those tasks to be performed by disbursing organization to meet the governing body's objectives including specific authorization to use electronic means for the disbursing of funds. The Borough may permit and include and is not limited to data collection, agency report preparation, calculation of withholding, direct deposit of payroll disbursements or Borough transfer of funds to disbursing organizations account for subsequent payment.
Pursuant to N.J.S.A. 40A:5-17a(1) or N.J.S.A. 18A:19-4.1, the governing body shall designate an approval officer to be responsible for authorizing and supervising the activities of the disbursing organization. For authorities operating under N.J.A.C. 5:31-4.1, the governing body shall designate an approval officer to authorize and oversee the activities of disbursing organizations.
The governing body shall supplement the duties of the approval officer established in accordance with N.J.S.A. 40A:5-17a(2) and N.J.S.A. 18A:19-4.1 to include the reconciliation and analysis of all general ledger accounts affected by the activities of the disbursing organization.
If the terms of the contract between the disbursing organization and the local unit provide that the disbursing organization will hold funds of the local unit pending transmittal of those funds to a payee, the governing body must specifically authorize the disbursing organization to hold the funds pending transmittal.
The governing body shall require the disbursing organization to provide the governing body with notification in the event:
The disbursing organization detects irregularities that may indicate potential fraud, noncompliance with appropriate laws, dishonesty, or gross incompetence on the part of the approval officer; or
The disbursing organization experiences circumstances that could jeopardize its ability to continue operations or otherwise interrupt the services provided to the local unit.
A transfer of the Borough's funds between Borough accounts to a dedicated cash account or to an account owned or controlled by a disbursing organization:
Disbursing organizations shall meet the following conditions and/or requirements:
The disbursing organization must provide evidence of satisfactory internal control, evidence for which shall be required by the CFO. Such evidence may be:
The disbursing organization's report on policies and procedures placed in operation and tests of operating effectiveness, performed pursuant to American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 70; or
A completed SysTrustTM examination with an unqualified report on availability, security, integrity and maintainability completed in accordance with the AICPA/CICA SysTrustTM principles and criteria for systems reliability; or
Evidence of compliance with a mutually agreed upon external standard for determination of the sufficiency of a system of internal controls that support the work to be performed in accordance with the policies established by the local unit.
All disbursing organizations must have offices within a distance acceptable to the CFO of the local unit such that the physical delivery and receipt of documents and records can occur on the same day.
All contracts between the Borough and disbursing organization must:
Contain adequate provisions to indemnify the Borough against any losses incurred as a result of the actions or inactions of the disbursing organization;
Require the disbursing organization to be responsible for the errors and omissions of its employees or agents, particularly where those errors and omissions prevent timely disbursements on behalf of the Borough from being made, including penalties, fines, interest and damages; and
In those cases where the disbursing organization takes possession of the Borough's funds, require adequate insurance to cover such losses as may arise as a result of errors, omissions, failure to perform or dishonesty in amounts at least equal to the highest level of exposure to the local unit for 30 days. Such exposure as regards cash shall be based on at least the amount of money accessible by the disbursing organization during said thirty-day period and shall not include monies that the disbursing organization cannot divert to its own benefit.
All disbursing organizations shall have a written complaint procedure in existence. At a minimum, the complaint procedure shall require that a complaint log be maintained, which shall be available to the Borough for inspection.
Upon reasonable notice, the disbursing organization shall allow an independent auditor compensated by the Borough to examine its internal controls applying SAS 70 standards, SysTrustTM standards or other standards and procedures mutually agreed upon to ensure accurate, complete and timely work product. Upon completion, the independent auditor's report shall be provided to the CFO and governing body and shall be for internal use only.
All disputes between the parties and disputes concerning the contract or its operation shall be in writing and forwarded to the other party via registered mail. All contracts must have appropriate provisions for:
Within five working days of each disbursement on behalf of the Borough, the disbursing organization shall provide to the CFO reports and documentation supporting the disbursements. The contract shall also specify the information required by the Borough to enable it to reconcile its books and records.
All corrections and adjustment must be completed and provided to the Borough promptly. All adjustments and reports of adjustments resulting in disbursements must be reported consistent with the provisions of N.J.S.A. 5:30-17.6(e).
Copies of notices, memoranda, complaints, or other correspondence received by the disbursing organization regarding Borough accounts shall be forwarded to the Borough within four hours of receipt.
Contracts for third-party disbursement services are not data processing service contracts under N.J.S.A. 40A:11-15(5) and N.J.S.A. 18A:18A-42d.
All contracts for third-party disbursement services shall have appropriate provisions for termination of the contract, including, but not limited to, termination for failure to perform on the part of the disbursing organization.
All contracts entered into between the Borough and disbursing organizations for the provision of third-party disbursement services shall be in writing and executed by all parties, including intermediaries, such as banks providing payroll services as part of a compensating balance agreement.
The contract for third-party disbursement services must require that no disbursement is made unless the demand for payment meets the requirements of N.J.S.A. 40A:5-16, N.J.S.A. 18A:19-2 and this chapter.