PURCHASING BASICS FOR NEW DIRECTORS New Jersey State

PURCHASING BASICS FOR NEW DIRECTORS New Jersey State Library February 28, 2018 Karen Brodsky, MLS, QPA Director, Library of The Chathams Based on Original Presentation by Victoria Rosch

Disclaimer Do not rely on this presentation in determining what is legally required for your library. Purchasing is an inexact science and I do not know all the variables for your library. This is a general overview of the Purchasing Process and how I implemented it at Library of The Chathams with the approval of that library auditor and attorney. I live by this creed: What is approved today may be a violation tomorrow. I offer you a framework to start developing your own processes for your own library. - Karen Brodsky

Always Be Aware 1. Purchasing is time-consuming and complicated even when you know what you’re doing. 2. Purchasing can be very interpretative. 3. Need to check all sources every time you take action because laws and regulations change.

Starting Point For Each Purchase Determine the Rough Cost Determine one-time cost (if a one-time purchase) or Aggregate cost (if purchase more than once in a 12 -month period). With this estimated number: 1. Determine if your purchase meets the threshold for: • Bidding Process (or Competitive Contracting), • Quote Process, or • Use of Sound Business Judgment 2. Prevailing Wage Threshold - $15, 444 3. Pay to Play Required - $17, 500 4. NJ Business Registration Certificate required --15% of bid threshold.

Thresholds and Qualified Staff • Thresholds change every 5 years (in years ending in 0 and 5) • Designation as a Qualified Purchasing Agent (QPA) requires a certificate issued by the Division of Local Government Services as well as ongoing training • Many libraries do not have a QPA and must meet the threshold standards for those local government units without a QPA

The Thresholds * Without QPA/With QPA: • Less than $2, 625/$6, 000 Use sound business judgment or follow your purchasing manual • $2, 625 -$17, 500/$6, 000 -$40, 000 (or to whatever limit is authorized by resolution of governing body up to $40, 000) Get at least 2 quotes for services from 15% of bid threshold up to the bid threshold • More than $17, 500/$40, 000 (or to whatever limit is authorized by resolution of governing body up to $40, 000) Requires the bidding process or an alternative, often-complicated procedure *current as of 2 -18 -2018

Lowest Responsible and Responsive Bidder New Jersey LPCL and Regular Reference Manual definitions: “Responsible means able to complete the contract in accordance with its requirements, including but not limited to requirements pertaining to experience, moral integrity, operating capacity, financial capacity, credit , and workforce, equipment, and facilities availability. ” “Responsive means conforming in all material respects to the terms and conditions, specifications, legal requirements and other provisions of the request. ”

How to Calculate Thresholds For Purchasing Method – Commodity-Based • Based on aggregation of all purchases and anticipated purchases for the year (or contract period) for the provision or performance of any goods or services (whether one or more vendors) Pay-To-Play – Vendor-Based • Threshold ($17, 500*) is based on the aggregation of a single vendor’s cumulative contracts in any 12 -month period. *current as of 02 -18 -2018

Note: An older document, link doesn’t work. Working link at: http: //www. nj. gov/dca/divisions/dlgs/resources/poli_docs/decision_tree. pdf

From State Library Website Threshold Amount (reflects both the 7. 1. 10 and 1. 1. 11 changes. Bid Threshold Without Qualified Purchasing Agent (most libraries) $17, 500 With Qualified Purchasing Agent (QPA) Aggregation Basis Aggregation based on the provision or performance of any goods or services (whether one or $40, 000 multiple vendors) Library Materials Status NOTES NJSL recommends that the library work closely with a QPA as this is a very complex process. There are two exceptions: (1) Emergencies Library materials/services exempt affecting public health, safety and from bidding* (NJSA 40: 54 -1 and welfare: adopt resolution and file NJSA 40 A: 11 -5 (1 )(q)) but subject report with DLGS OR (2) Single to Pay-To-Play and Business Source: apply for State Treasurer Registration Certificate thresholds. approval through DLGS.

From State Library Website Threshold Amount (reflects both the 7. 1. 10 and 1. 1. 11 changes. Quote Without Qualified Purchasing Agent (most libraries) $2, 625 - $17, 499 With Qualified Purchasing Agent (QPA) Aggregation Basis Aggregation based on the provision or performance of any goods or services (whether one or $6, 000 - $39, 999 multiple vendors) Library Materials Status NOTES Library materials/services exempt Quote equals 15% of the bid from bidding* (NJSA 40: 54 -1 and threshold. If practicable, solicit at NJSA 40 A: 11 -5 (1 )(q)) but subject least two competitive quotations to Pay-To-Play and Business from vendors for goods and/or Registration Certificate thresholds services.

From State Library Website Threshold Amount (reflects both the 7. 1. 10 and 1. 1. 11 changes. Use Of Sound Business Judgment Without Qualified Purchasing Agent (most libraries) Less than $2, 625 With Qualified Purchasing Agent (QPA) Aggregation Basis Library Materials Status NOTES Aggregation based on the provision or Library materials/services exempt USBJ applicable to any amount less performance of any from bidding* (NJSA 40: 54 -1 and than 15% of the bid threshold. There goods or services NJSA 40 A: 11 -5 (1 )(q)) but subject to is no statutory requirement for (whether one or Pay-To-Play and Business solicitation of quotations. Follow the Less than $5, 400 multiple vendors) Registration Certificate thresholds library board's policies.

Sample Local Finance Notice (Page 1 only)

Policies for Municipal Libraries • Purchasing Manual • Purchase Requisitions • Purchase Orders • Vouchers • Cash Management Policy • Board Resolution Appointing Purchasing Agent (QPA or not) If you don’t have these, you can start with your town model.

Sample flow of paperwork when you need to purchase something AFTER the whole pay to play and price comparison process 1. Purchase Requisition / Encumber Funds 2. Purchase Order (with or without a vendor contract or agreement) – order the goods 3. Library Certifies Receipt of Goods (on Purchase Req copy works) 4. Issue a voucher – vendor certifies they supplied goods and you certify funds are available to pay the vendor 5. Now you can send the check

Voucher System Sample Process • Treasurer of the library board certifies to the board at the monthly meeting that sufficient funding is available in the budget for the purchases on the bills list (list of purchase orders) • Assuming the board approves the bills list, the treasurer countersigns the POs • POs are returned to the Purchasing Agent (may be municipality) for processing

Library of The Chathams Sample Voucher

Sample Purchase Request

You will encounter resistance to purchasing procedures

Your Level of Involvement Varies 5. 4. 3. 2. 1. Are you an association library? Does your municipality/county handle the purchasing function for your library? Does your municipality/county pay your bills? Do you use an automated purchasing system? Do you encumber funds before ordering?

Local Agency Procurement Laws • NJSA 40 A: 11 -1 governs the award of contracts for services for boards and public entities including municipal, joint and county libraries. • Association libraries (non-profits) do not have to comply, but may want to as a “best practice” since they accept public funding. • Resources: NJ Local Agency Procurement Laws http: //www. state. nj. us/dca/divisions/dlgs/programs/lpcl. html

All this is very nice but …how do you actually do this stuff?

Quotes

Sound Judgement I do exactly the same process as for quotes. Why? • Why not? • Might end up with higher number than anticipated – avoids redoing work.

Pay to Play documents and more on State Library Website https: //www. njstatelib. org/services_for_libraries/resour ces/library_law/

Exceptions To Parts of This Process • Emergencies affecting public health, safety and welfare – adopt a • • resolution and file a report with the Division of Local Government Services Single Source (rare) – apply for State Treasurer approval through the Division of Local Government Services Professional services Extraordinary unspecifiable service Acquisition of artifacts of other items of unique intrinsic, artistic or historical character Insurance Library and educational good and services Expenses for travel, conferences More

Purchases Exempted By NJSA 40: 54 -12. 1 and NJSA 40: 33 -8. 1 • The board of trustees (The county library commission…) … may, within the limits of funds appropriated, purchase the following without advertising for bids: 1. 2. 3. Library materials including books, sound recordings, videos, and audiovisual materials; Necessary rebinding; and Specialized library services (NJSA 40: 54 -12. 1) • “Specialized library services” must be determined cautiously – digitization may qualify, but an integrated library system does not – seek the advice of a QPA or the Division of Local Government Services

Pay-To-Play Applies to Exceptions • Chapter 271, P. L. 2005 and Chapter 19, P. L. 2004 (as amended by P. L. 2005, c. 51); N. J. S. A. 19: 44 A-20. 4 et seq. • Applies to any aggregate amount per vendor of $17, 500 or more per year or contract period and this includes library materials • For information see: http: //www. state. nj. us/dca/divisions/dlgs/resources/poli_docs/ p 2 pguide. pdf

Books Annual Pricing Investigation

Music Annual Pricing Investigation

Common Library Challenges / Ideas • Cleaning services • Integrated Library System (ILS) • HVAC work • Third party provider of utilities (utilities are exempt from bid process but not if you • • • use a third party) The donation, sale, installation or maintenance of equipment or facilities for use of the contracting unit is one of many Concessions – so is a public copy machine. The granting of a right to act for or on behalf of the contracting unit or to …. . May involve a payment or exchange. …. Vending machines excluded. Before you accept a donation of old computers, for example, have to pass a resolution authorizing the procurement of a concession. See Page 103 of LPCL manual. Can purchase at 10% less than a state cooperative contract price if you jump through some hoops Community Room Chairs – order from a state contract Office Supplies – Staples has a plan on state contract Amazon. com issues

Ineligible Expenditures • Gifts, scholarships, donations • Debt service • Lease payments on equipment or software exceeding five years • Costs that exceed the actual or fair market value of the goods or services provided • Rent paid to the municipality for library use of municipal facilities or equipment • Capital expenses not meeting the criteria as defined in N. J. A. C. 15: 21 -12. 5 (c)

Hiring Professionals • Attorneys, engineers, architects, etc. must all file a Business Registration if the professional services are over the 15% bid threshold • Bidding is not required (NJSA 40 A: 11 -5 (1)(a)(i)), but it is best to use the Competitive Contracting procedure as found in NJSA 40 A: 11 -4. 1 for hiring professionals (also see the administrative code at NJAC 5: 34 -4. 1 et seq. ) • Pay-to-Play laws must be followed if not using a bid process and if spending above the $17, 500 threshold

Resolution for Hiring Professionals "The governing body shall in each instance state supporting reasons for its action in the resolution awarding each contract and shall forthwith cause to be printed once, in the official newspaper, a brief notice stating the nature, duration, service and amount of the contract, and that the contract is on file and available for public inspection in the office of the clerk. . . "

Sample Newspaper Notice for Contract Award The following is a sample resolution for publishing Notices of Contract Award for Professional Services - Local Notice of Contract Award The (name of the local government unit) has awarded a contract without competitive bidding as a professional service pursuant to N. J. S. A. 40 A: 115(1)(a)(i). The contract and the resolution authorizing it are on file and available for public inspection in the office of (municipal clerk/library director) Awarded to: _______________________ Duration: _______________________ Nature and type of contract: _________________ Amount of Contract*: _________________ *Indicate by dollar value of contract, per hour/per occurrence, pursuant to schedule of rates/fees contained in the contract

State Contract and State Cooperative Purchasing • A good place to start is Treasury’s FAQ on this subject (http: //www. state. nj. us/treasury/purchase/coop_faq. shtml) • You may search by vendor or specific product or service • If a vendor states they are on State contract, check to make sure this is true for the item you are purchasing • Using this method eliminates the need for the library to obtain bids, quotes, the business registration but often comes with a higher cost than you can get yourself.

Alternate Methods of Purchase: Competitive Contracting (NJSA 40 A: 11 -4. 1 ) • Law states CC can be done only by a QPA, Attorney or Administrator. Opinion obtained from a purchasing consultant in February 2018 was that a library director could be considered the administrator of the organization. If you want to do CC and are not a QPA, recommend you get your own opinion from your own attorney or auditor. • Purchasing integrated library system which would exceed the bid threshold. • Concessions – for example, receiving funding from a book rental service in an amount exceeding the bid threshold might use competitive contracting.

Before and After • Two Easy Actions (or are they …. )

Business Registration Program • PL. 2004, c. 57 affects purchasing of goods and services over $2, 625 without a QPA* (vendor’s cumulative contracts not aggregation by type of goods or services) • Library materials are not exempt • Only required to obtain one time unless business address changes or institute a bidding process For instructions on implementing the law see: http: //www. state. nj. us/dca/divisions/dlgs/programs/lpcl. html#1 * As of 2 -19 -2018

Sample Business Registration Certificate

Business Registration Information

1099 s • Run report of all cumulative payments $600 or more in any calendar year. • Send W-9 to vendors (if not already obtained) -- get newest form off IRS website • Issue to: • • LLCs (unless treated as S or C corp – check with your auditor***) Attorneys Performers / speakers Labor charges over $600 (materials or items exempt) • If the vendor is a corporation (Inc. , PA) they don’t need one. • Issue no later than January 31 each year • Send forms to IRS • If you have tons of these to do (like performers) software does all for you is less time-consuming – you can get from Staples or another office supply source. • https: //www. irs. gov/pub/irs-pdf/i 1099 msc. pdf for full information.

I checked with my auditor. Response used with permission. Great question!! I’ve had several conversations with the IRS over the years about this topic and the following has been relayed to me: Each state has different laws governing the creation and structure of LLCs. In some states, the structure and tax reporting of an LLC mirrors that of an S or C corporation. For these entities, a Form 1099 would not be required unless they were providing legal services (or one of the other listed exemptions in the IRS Code). In New Jersey, however, LLCs operate and report similarly to a sole-proprietor or partnership entity in the sense that they either file a Form 1040 or 1065 at year end, and not a Form 1120 like an S or C Corporation. Therefore, the IRS treats these entities as if they were a sole-proprietor or partnership and would require 1099 s be issued to them assuming it was for a service and over the $600 threshold. Later verbal comment: Clear as mud.

Purchasing Essentials: Summing Up • Local Public Contracts Law governs the award of contracts for materials and services for boards and public entities (NJSA 40 A: 11 -1) • Know the legal thresholds for when to use the sound business judgment, quote, or bid procedure • Be aware that the municipality/county may have a cooperative agreement in which the library may participate and/or that there may be a state contract available for the particular goods you seek http: //www. state. nj. us/treasury/purchase/pricelists. shtml • You can join coops by Board resolution • Library materials and specialized library services are exempt from the bid and quote process (NJSA 40: 54 -12. 1), but not the Business Registration Program • Note that the purchase of an Integrated Library System requires the competitive contracting procedure or bid

2 Useful Tools • 1 to get rid

Procurement/Purchasing Card • Municipal, county and joint municipal libraries may accept credit cards as a form of payment, but may not use a credit card, debit card, in-house or store credit card to pay vendors. • Procurement cards are permitted but difficult to obtain. • Local Finance Notice 2013 -17 at http: //www. state. nj. us/dca/divisions/dlgs/lfns/13/2013 -17. pdf • Requires a resolution, training of personnel, appointment of program manager, controls in accordance with law and policies and procedures must be in place • A workaround may be permitted by your auditor if the intent of the law is respected.

Policy Approved by Library Attorney and Auditor Library of The Chathams Procurement Card Policy Revised March 5, 2014 The library debit/procurement card will be used only for online purchases, such as recurring charges that cannot be paid for in another acceptable manner. A separate account will be maintained for purposes of making online purchases in this manner. At no time will more than $500 be available in the account.

Discarding/Selling Government Property Rule of Thumb: Discard the same way you acquired. Estimated fair value of the property or group of items to be sold at the same time is: • Below 15% of the bid threshold, item(s) may be disposed of as deemed appropriate for a government entity - trash, recycle, given to association library or sold at private sale without advertising for bids (NJSA (40 A: 11 -36 (6)). • Equal to or over 15% of the bid threshold and the purchaser is another government entity, a mutually agreeable price is negotiated and both units pass resolutions verifying the sale. • Equal to or over 15% of the bid threshold and the purchaser is NOT another government entity, publically offer the item/s through a sealed bid or auction process by live auction or an on-line auction. • https: //www. govdeals. com/

https: //www. govdeals. com/

Solves the problem of patrons / staff / board asking for equipment • • Library Van Card Catalog Community Room Chairs (100) Copy Machine

Deposits/Investments/Banking • Follow Cash Management laws (NJSA 40 A: 5 -14 and 15) • Deposit all funds paid to local unit within 48 hours of receipt • Investments limited by law and may not risk principal (NJSA 40: 54 -19. 3 and NJ Cash Management Fund) • CDs, checking, savings permitted only at GUDPA approved banks (Governmental Unit Deposit Protection Act see (http: //www. state. nj. us/dobi/division_banking/depositories/gu dpa. htm) • Always check for updated information.

Statutory Requirements for the Position of Treasurer (NJSA 40: 54) • Board must elect from its members a president, treasurer and secretary (54 -11) • Treasurer must be bonded (54 -13) • The board shall, by its treasurer, upon its warrant signed by its president, receive (municipal funding) from the disbursing officer of the municipality…(54 -13)

Statutory Requirements for the Position of Treasurer (NJSA 40: 54) • Oversees the recording keeping and reports to the board regarding investments of the board (54 -19. 4) • The treasurer does not make investment decisions for the board • … authorization to invest funds …shall be by resolution adopted by a majority vote of all the members of the board of trustees at any regular or special meeting of the board (54 -19. 3)

Office of Treasurer County Library System • The county treasurer shall be the custodian of the county library tax collected and of all other funds or moneys of the commission, and upon receipt of bills properly authorized by the commission, payment thereof shall be made if sufficient funds are on hand. (NJSA 40: 33 -12) • Use municipal law as guidelines to assure proper authorization by the commission.

Office of Treasurer Commonly Performed Duties • Certifies that payroll is accurate • Presents and certifies the monthly financial report to the Board • Presents and certifies the monthly bills list • Certifies that funds are available in support of any resolution before the Board

Office of Treasurer Commonly Performed Duties • Co-signs checks upon authorization by the board • Oversees any funds held outside of the municipality if the municipality holds municipal funding for the library • Reviews the annual audit and presents it to the board • Trustees may authorize treasurer and/or director to transfer funds between subaccounts

Resources • NJ Local Agency Procurement Laws http: //www. state. nj. us/dca/divisions/dlgs/programs/lpcl. html • http: //www. njstatelib. org/services_for_libraries/resources/library_law/ Part 6: Purchasing • Every director should be a member of the State Library’s listserv - njpublibs. Accept the invitation. http: //lists. njstatelib. org/cgibin/dada/mail. cgi/list/njpublibs If not invited contact Robert Keith rkeith@njstatelib. org

Purchasing Manual New Jersey Local Public Contracts Law and Regulation Reference Manual With Related and Supporting Information N. J. S. A. 40 A: 11 -1 et seq. and N. J. A. C. 5: 34 Current as of April 1, 2014 Prepared by: Bloustein Local Government Research Center, Rutgers, the State University and New Jersey Division of Local Government Services http: //www. nj. gov/dca/divisions/dlgs/programs/lpcl_docs/Full%20414%20 LPCL-NJAC%20 Reference%20 Handbook. pdf Two parts to the handbook

Questions? Karen Brodsky kbrodsky@chathamlibrary. org 973 -635 -0680