Every organization must identify those who have authority to sign contacts on its behalf.
Strictly speaking, a distinction must be drawn between signing authority and authority to authorize expenditure, although often the two expressions are used as if they were synonymous.
Such a practice is to be frowned upon as it causes unnecessary confusion.
The “signing authority” describes the authority to sign or execute documents or agreements on behalf of a municipality, so as to create a contract binding on the municipality.
Municipal staff are under much the same rules as the officers of a business corporation.
The general rule is that while officers of a municipality may be given authority to enter contracts on its behalf, they have no inherent power to bind the municipality without express authority from the council.
Consequently, it is prudent for any contactor proposing to enter into a contract with a municipality to inquire into the authority to execute an agreement which will bind the municipality.
The contractor may legitimately require the municipality to demonstrate that signing authority has been conferred on a particular person and the circumstances in which that authority may be exercised and any condition applicable to its exercise.
Often, this is done by insisting that a certificate to this effect be provided by the municipal clerk.
By the same token, when delegating “signing authority,” council should specify under what conditions the authority applies.
At least among Ontario municipalities, the most common arrangement with respect to signing authority is for that authority to be held jointly by mayor and clerk.
In other words, the signatures of both of these officers are required for the contract to be properly executed.
It would be highly unusual for a municipality to dispute the proper execution of a contract which carried both of these signatures, especially where the municipal seal is affixed.
Indeed, on its face, such a document would seem to offer fairly convincing evidence of a binding contract.
Where a proposed contract is approved by a council in a recommendation that is placed before it, it is not uncommon for the council to authorize one or more senior members of staff to execute the contract themselves.
There are both advantages and disadvantages in such an approach.
Delegation of signing authority may facilitate the contract formation process.
However, the creation of the odd “special” rule will often tend to confuse both staff and outsiders who deal with the municipality as to who has authority to sign on its behalf. Therefore, a municipality should be guarded in permitting the creation of such an ad hoc signing authority, unless there are genuine circumstances that make this truly necessary or advisable in a given case.
One obvious exception applies with respect to the authority to sign contracts for the purchase of goods or services in low dollar transactions or routine purchases that are likely to be necessary on a day-to-day basis (e.g., for the supply of gas to the police motor pool).
Most municipalities provide that under a certain limit, any purchase made in accordance with the appropriate procurement policies and procedures and approved under the municipal budget, may be signed by a specified officer or officers of the municipality.
Unfortunately, it is in this area that the confusion between signing authority and expenditure authority is most likely to emerge.
The latter does not imply the former.
Authority to spend funds, or to authorize an expenditure, is an internal control.
Internal mechanisms may be described in administrative or corporate policies.
This type of authority may be reflected in the requisition for the purchase of a widget as outlined in the approved budget in the general terms.
Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.
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