Ordinance No. 10-03

Introduced: March 4, 2010
Public Hearing: March 25, 2010
Status: Adopted

An ordinance adding Chapter 81 of the code of the Township of Vernon, County of Sussex, State of New Jersey entitled “Payroll” establishing municipal payroll account and authorizing the use of third-party disbursement organizations for payroll services

NOW, THEREFORE, BE IT ORDAINED by the Mayor and the Council of the Township of Vernon, County of Sussex, and State of New Jersey, as follows:

SECTION I The following Chapter is hereby added to the Code of the Township of Vernon:

CHAPTER 81 PAYROLL

ARTICLE I: Payroll Account.

81-1 Establishment. At the first meeting of the governing body in January of each year, there shall be approved an account to be designated the “Township of Vernon Payroll Account,” and from time to time the Treasurer, upon receipt of a warrant for the amount due such payroll account, shall deposit the same to the credit of the payroll account, charging the appropriate budgetary accounts therewith.

81-2 Chief Financial Officer to draw checks. The Chief Financial Officer shall thereafter draw checks on said payroll account to the employees to payment therefrom.

81-3 Approval. At each regular meeting of the governing body, the Chief Financial Officer shall submit for approval or ratification, as the case may be, the necessary payrolls for the amount due the employees for compensation. The payroll shall be approved by the governing body if correct.

81-4 Errors or adjustments. In case of error or adjustment in the payroll, the Chief Financial Officer shall, and it shall be his duty to, see that such error or adjustment is properly corrected and appropriate record made thereof.

ARTICLE II: Third Party Payroll.

81-5 Authorization and Services. The Council of the Township of Vernon hereby authorizes the use of a third- party disbursement service organization for payroll and payroll tax services. Services to be performed by the third party disbursement organization shall include:

  1. Preparing the necessary documentation and executing disbursements from the local unit’s bank account on behalf of the local unit;
  2. Use of electronic means for the disbursing of funds;
  3. Data collection, agency report preparation, calculation of withholding or direct deposit of payroll disbursements.

81-6 Transfer of Funds. All disbursements on behalf of the local unit shall be made directly from the local unit’s bank account to the appropriate governmental agency. The transfer of Township funds to any other account, including one maintained by the third-party disbursement organization, shall be prohibited.

81-7 Renewal. The governing body shall, by Resolution, approve any renewal or extension of a contract with the third-party disbursement organization.

ARTICLE III. Local Unit Requirements.

81-8 Approval Officer. The Chief Financial Officer of the Township of Vernon is hereby designated as the Approval Officer to be responsible for authorizing and supervising the activities of the third-party disbursement organization. In addition to such other statutory responsibilities of the Approval Officer, the Chief Financial Officer shall reconcile and analyze all general ledger accounts affected by the activities of the third-party disbursement organization.

81-9 Notification. The third-party disbursement organization shall provide the governing body with notification in the event:

  1. The disbursing organization detects irregularities that may indicate potential fraud, non-compliance with appropriate laws, common dishonesty, or gross incompetence on the part of the Approval Officer; or
  2. The disbursing organization experiences circumstances that could jeopardize its ability to continue operations or otherwise interrupt the services provided to the local unit.

81-10 Qualifications. The Chief Financial Officer shall qualify disbursing organizations pursuant to the requirements set forth in N.J.A.C. 5:30-17.5.

81-11 Contract Review. Prior to the execution of any Contract for the provision of third-party disbursement services, the Contract shall be reviewed and approved by the Chief Financial Officer of the local unit as to terms, including satisfaction of the requirements set forth in N.J.A.C. 5:30-17.5 and 17.6.

81-12 Contract Renewal. Prior to the execution or renewal of a Contract, the Chief Financial Officer shall complete a review of the services rendered under the Contract. Such review shall be conducted in compliance with N.J.A.C. 5:30-17.5.

ARTICLE IV. Eligibility Requirements for Disbursing Organizations.

81-13 Eligibility Requirements. Disbursing organizations shall meet the following conditions and/or requirements:

  1. The disbursing organization shall provide evidence of satisfactory internal control, evidence of which shall be required by the Chief Financial Officer. Such evidence may be:
    1. The disbursing organization’s Report on Policies and Procedures Placed in Operation and Tests of Operating Effectiveness, performed pursuant to AICPA (American Institute of Certified Public Accountants) Statement on Auditing Standards No. 70;
    2. A completed SysTrust™ examination with an unqualified report on Availability, Security, Integrity and Maintainability completed in accordance with AICPA/CICA (Canadian Institute of Chartered Accountants) SysTrust™ Principles and Criteria for Systems Reliability; or
    3. 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.

81-14 Location of Offices. All disbursing organizations shall have offices within a distance acceptable to the Chief Financial Officer of the local unit such that the physical delivery and receipt of documents and records can occur in a manner that assures the delivery of paychecks on regularly scheduled paydays.

ARTICLE V. Contract Terms and Conditions.

81-15 Contracts. Third-party disbursement organizations performing services for the Township shall be required to enter into a written agreement for such services consistent with the terms and conditions set forth herein and in accordance with requirements established by the statutes and regulations of the State of New Jersey. All contracts between a local unit and disbursing organization shall:

  1. Contain adequate provisions to indemnify the local unit against any losses incurred as a result of the actions or inactions of the disbursing organizations;
  2. 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 local unit from being made, including penalties, finds, interest, and damages; and
  3. In those cases where the disbursing organization takes possession of local unit 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 30-day period and shall not include moneys that the disbursing organization cannot divert to its own benefit.

81-16 Complaint Procedure. 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 local unit for inspection.

81-17 Independent Auditor. Upon reasonable notice, the disbursing organization shall allow an independent auditor compensated by the local unit to examine its internal controls applying SAS 70 standards, SysTrust™ 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 Chief Financial Officer and governing body and shall be for internal use only.

81-18 Disputes. 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 shall have appropriate provisions for:

  1. Dispute resolution between the parties;
  2. The service of process to the disbursing organization in New Jersey; and
  3. Application of New Jersey law.

81-19 Reports of Disbursements. Within five working days of each disbursement on behalf of a local unit, the disbursing organization shall provide to the Chief Financial Officer, reports and documentation supporting the disbursements. The contract shall also specify the information required by the local unit to enable it to reconcile its books and records.

81-20 Corrections and Adjustments. All corrections and adjustments must be completed and provided to the local unit promptly. All adjustments and reports of adjustments resulting in disbursements must be reported consistent with the provisions of Section 81-19 above.

81-21 Notices and Communications. Copies of notices, memoranda, complaints or other correspondence received by the disbursing organization regarding local unit accounts shall be forwarded to the local unit within 48 hours or receipt.

81-22 N.J.S.A. 40A:11-15(5) and 18A:18A-42(d). Contracts for third-party disbursement services are not data processing service contracts under N.J.S.A. 40A:11-15(5) and 18A:18A-42(d).

81-23 Contract Termination. 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.

81-24 Contract Execution. All contracts entered into between local units 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.

81-25 Demand for Payment Requirements. 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 Ordinance.

SECTION II This Ordinance supersedes Ordinance #09-25 adopted by the Vernon Township Council on December 10, 2009. All Ordinances or parts of Ordinances inconsistent with this Ordinance are hereby repealed to the extent of such inconsistencies.

SECTION III If any article, section, subsection, paragraphs, phrase or sentence is, for any reason, held to be unconstitutional or invalid, said article, section, subsection, paragraph, phrase or sentence shall be deemed severable.

SECTION IV This Ordinance shall take effect immediately upon final publication as provided by law.