Focus on New Laws: Claims Declaration Process for Charter Cities

A new law changes the claims declaration process for charter cities and allows charter cities to make payments by electronic funds transfer.
(Published Aug 14, 2017)

A new law changes the claims declaration process in most charter cities for payments that need council approval. The procedure now more closely resembles what statutory cities have been authorized to do for several years.

Section 1 of the new law (Chapter 52) amends Minnesota Statutes, section 471.38 to revise the claims declaration process. Prior to the new law, whenever a claim (a request for payment) against a second, third, or fourth-class home rule charter city could be itemized, it had to be made in writing. It also was required to contain a declaration, signed by the vendor, that the claim is just and correct and that no part of it has been paid. It was then presented to the council for approval.

Under the new provision, the city council may allow a claim to be approved and paid—even if it is prepared by the clerk prior to this declaration—if a declaration is made on the check by which the claim is paid. In that case, the check that is used to pay the claim must have the following statement printed on its reverse side, above the space for endorsement by the payee:

“The undersigned payee, in endorsing this check, declares that the same is received in payment of a just and correct claim against the city and that no part of it has heretofore been paid.”

Electronic funds transfer
Section 1 also amends Minnesota Statutes, section 471.38, subdivision 3 to authorize use of a new procedure (electronic funds transfer) formerly only authorized for use by school districts. If the proper controls are in place, any county, town, local social services agency, school district, park district, or home rule charter city of the second, third, or fourth class may make electronic funds transfers for various types of claims, including payment of contributions to pension or retirement funds and vendor payments.

To make electronic funds transfers for the types of payments permitted, the city council must annually delegate its authority to a business administrator or chief financial officer or the officer’s designee. In addition, the city must have enacted an internal control policy that requires all of the following:

  • The bank must keep a certified copy of the delegation of authority on file.
  • The person initiating the electronic transfer must be identified.
  • The person initiating the electronic funds transfer must be required to get approval from the designated business administrator, chief financial officer, or officer’s designee before initiating the transfer.
  • Written confirmation of the transaction must be made no later than one business day after the transaction.
  • A list of all transactions made by electronic funds transfer must be submitted to the city council at its next regular meeting after the transaction.

This amended law should ease the process for claims declaration and payment approval with written checks for home rule charter cities of the second, third, or fourth class. While the law’s change on electronic funds transfers applies only to home rule charter cities, it is also a good reminder to all cities (home rule charter and statutory) that they should have internal control policies for paying claims.

History of the law
This declaration requirement, which has been included in state law in various forms since at least 1949, never anticipated the Internet and the online marketplace; the antiquated requirement has become problematic for purchases made from online vendors.

The law requiring such a declaration has been modified over the years. Originally, it applied to all municipalities. In 1951, the law was amended to apply to “second, third, and fourth class cities, including any city with a home rule charter.” In 1976, the law was amended to only apply to home rule charter cities of the second, third, and fourth class.

In 2001, the Legislature enacted Minnesota Statutes, section 471.381, which allows cities, counties, and townships to make purchases using “all forms of electronic and wire fund transfers.” However, the requirement that the vendor sign a claim declaration was not changed at that time.

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