state aid finance accounting manual

State Aid Finance Accounting Manual

for Counties

Updated: February 2021

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Table of Contents

i

Table of Contents Table of Contents ................................................................................................................................. i

Introduction 1

PURPOSE ................................................................................................................................................................. 1 UPDATES ................................................................................................................................................................. 1 QUESTIONS .............................................................................................................................................................. 1

State Aid Task Force Members ............................................................................................................ 1

State Aid Finance Team ....................................................................................................................... 1

Chart of Accounts Overview ................................................................................................................ 2

FUND ...................................................................................................................................................................... 2 DEPARTMENT ........................................................................................................................................................... 2 OBJECT .................................................................................................................................................................... 2 HIGHWAY ACCOUNTING ............................................................................................................................................. 2

Administration Department ......................................................................................................................... 3 Engineering/Construction Department ........................................................................................................ 3 Road Maintenance ....................................................................................................................................... 4 Shop and Equipment .................................................................................................................................... 7 Inventory ...................................................................................................................................................... 7

Chapter 1 Annual Allotments ........................................................................................................ 9

REGULAR MAINTENANCE ALLOTMENT ........................................................................................................................... 9 REGULAR CONSTRUCTION ALLOTMENT .......................................................................................................................... 9 MUNICIPAL MAINTENANCE ALLOTMENT ...................................................................................................................... 10 MUNICIPAL CONSTRUCTION ALLOTMENT ..................................................................................................................... 10 TOWN BRIDGE ALLOTMENT ....................................................................................................................................... 10 TOWN ROAD ALLOTMENT ......................................................................................................................................... 11

Example ...................................................................................................................................................... 13

Chapter 2 Regular and Municipal Maintenance Accounts ........................................................... 14

NARRATIVE ............................................................................................................................................................ 14 REGULAR MAINTENANCE ACCOUNT ............................................................................................................................ 14

Accounts Needed ....................................................................................................................................... 14 SEQUENCE OF EVENTS .............................................................................................................................................. 15

1st Advance Payment ................................................................................................................................. 15 2nd Advance Payment ................................................................................................................................ 15 Final Maintenance Payment ....................................................................................................................... 15 Year-End Entries ......................................................................................................................................... 15 Final Maintenance Payment ....................................................................................................................... 19 Examples ..................................................................................................................................................... 20

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MUNICIPAL MAINTENANCE ACCOUNT ......................................................................................................................... 23 Accounts Needed ....................................................................................................................................... 23

SEQUENCE OF EVENTS .............................................................................................................................................. 23 1st Advance Payment ................................................................................................................................. 23 2nd Advance Payment ................................................................................................................................ 23 Final Maintenance Payment ....................................................................................................................... 24 Year-End Entries ......................................................................................................................................... 24 Final Maintenance Payment ....................................................................................................................... 27 Examples ..................................................................................................................................................... 28

Chapter 3 Regular and Municipal Construction Accounts ............................................................ 31

NARRATIVE ............................................................................................................................................................ 31 SPECIAL CONSIDERATIONS ........................................................................................................................................ 31


Project Is Approved .................................................................................................................................... 32 95% Payment Is Received For The Project ................................................................................................. 32 Work Begins On The Project ....................................................................................................................... 33 Project Is Finalized ...................................................................................................................................... 34 Project Is Completed Exactly As Estimated ................................................................................................ 34 Project Overruns Original Estimate ............................................................................................................ 34 Project Underruns Original Estimate Without An Overpayment ............................................................... 35 Project Underruns Original Estimate With An Overpayment .................................................................... 35 Final Payment To Contractor ...................................................................................................................... 36 Revocation of A State Aid Road .................................................................................................................. 36

EXAMPLES ............................................................................................................................................................. 38

Chapter 4 Town Bridge Accounts ................................................................................................ 42

TOWN BRIDGE ALLOTMENT ....................................................................................................................................... 42 NARRATIVE ............................................................................................................................................................ 42

Accounts Needed ....................................................................................................................................... 42 SPECIAL CONSIDERATIONS ........................................................................................................................................ 42 SEQUENCE OF EVENTS .............................................................................................................................................. 43

Project Is Awarded ..................................................................................................................................... 43 95% Payment Is Received For The Project ................................................................................................. 43 Work Begins On The Project ....................................................................................................................... 44 Project Is Finalized ...................................................................................................................................... 44 Project Is Completed Exactly As Estimated ................................................................................................ 45 Project Overruns Original Estimate ............................................................................................................ 45 Project Underruns Original Estimate Without An Overpayment ............................................................... 45 Project Underruns Original Estimate With An Overpayment .................................................................... 46 Final Payment To Contractor ...................................................................................................................... 46

EXAMPLES ............................................................................................................................................................. 48

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special town bridge allotment ........................................................................................................... 52

NARRATIVE ............................................................................................................................................................ 52 Accounts Needed ....................................................................................................................................... 52

SEQUENCE OF EVENTS .............................................................................................................................................. 52 Notification of Special Town Bridge Allocation .......................................................................................... 52 Recognize Special Town Bridge Allocation ................................................................................................. 53 Special Considerations................................................................................................................................ 53 Project Is Awarded ..................................................................................................................................... 53 95% Payment Is Received For The Project ................................................................................................. 53 Work Begins On The Project ....................................................................................................................... 54 Project Is Finalized ...................................................................................................................................... 55 Project Is Completed Exactly As Estimated ................................................................................................ 55 Project Overruns Original Estimate ............................................................................................................ 55 Project Underruns Original Estimate Without An Overpayment ............................................................... 56 Project Underruns Original Estimate With An Overpayment .................................................................... 56 Reduction of Special Bridge Allotment ....................................................................................................... 57 Final Payment To Contractor ...................................................................................................................... 57

EXAMPLES ............................................................................................................................................................. 58

Chapter 5 Special Construction Accounts .................................................................................... 62

STATE TRANSPORTATION BONDS (BRIDGE, LRIP, & DISASTER) ......................................................................................... 62 NARRATIVE ............................................................................................................................................................ 62


Project Is Awarded ..................................................................................................................................... 63 Work Begins On The Project ....................................................................................................................... 63 Partial Reimbursement Is Requested ......................................................................................................... 63 Project Is Finalized ...................................................................................................................................... 64 Final Payment To Contractor ...................................................................................................................... 65

EXAMPLES ............................................................................................................................................................. 66 STATE TRANSPORTATION BONDS (OPTIONAL ENTRY METHOD) ........................................................................................ 69 NARRATIVE ............................................................................................................................................................ 69


Project Is Awarded ..................................................................................................................................... 69 Work Begins On The Project ....................................................................................................................... 69 Partial Reimbursement Is Requested ......................................................................................................... 70 Project Is Finalized ...................................................................................................................................... 71 Project Is Completed Exactly As Estimated ................................................................................................ 71 Project Overruns Original Estimate ............................................................................................................ 71 Project Underruns Original Estimate .......................................................................................................... 72 Final Payment To Contractor ...................................................................................................................... 72

EXAMPLES ............................................................................................................................................................. 73

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STATE PARK CONSTRUCTION ACCOUNT ....................................................................................................................... 76 NARRATIVE ............................................................................................................................................................ 76


Project Is Awarded ..................................................................................................................................... 76 95% Payment Is Received For The Project ................................................................................................. 76 Work Begins On The Project ....................................................................................................................... 77 Project Is Finalized ...................................................................................................................................... 77 Project Is Completed Exactly As Estimated ................................................................................................ 78 Project Overruns Original Estimate ............................................................................................................ 78 Project Underruns Original Estimate Without An Overpayment ............................................................... 79 Project Underruns Original Estimate With An Overpayment .................................................................... 79 Final Payment To Contractor ...................................................................................................................... 79

EXAMPLES ............................................................................................................................................................. 81 COUNTY DISASTER ACCOUNT ..................................................................................................................................... 85 NARRATIVE ............................................................................................................................................................ 85


Disaster Committee Estimate Approved .................................................................................................... 86 Project Is Awarded ..................................................................................................................................... 86 95% Payment Is Received For The Project ................................................................................................. 86 Work Begins On The Project ....................................................................................................................... 86 Project Is Finalized ...................................................................................................................................... 87 Project Is Completed Exactly As Estimated ................................................................................................ 87 Project Overruns Original Estimate ............................................................................................................ 87 Project Underruns Original Estimate Without An Overpayment ............................................................... 88 Project Underruns Original Estimate With An Overpayment .................................................................... 89 Final Payment To Contractor ...................................................................................................................... 89 Historic Disaster Projects Prior To 2013 ..................................................................................................... 89

DISASTER COMMITTEE ESTIMATE APPROVED ................................................................................................................ 90 WORK BEGINS ON THE PROJECT ................................................................................................................................. 90 PROJECT IS FINALIZED .............................................................................................................................................. 90 STATE AID PAYMENT REQUEST (SAPR) ......................................................................................................................... 91 TURNBACK CONSTRUCTION ACCOUNT ......................................................................................................................... 91 NARRATIVE ............................................................................................................................................................ 91


Project Is Awarded ..................................................................................................................................... 92 95% Payment Is Received For The Project ................................................................................................. 92 Work Begins On The Project ....................................................................................................................... 93 Project Is Finalized ...................................................................................................................................... 93 Project Is Completed Exactly As Estimated ................................................................................................ 93 Project Overruns Original Estimate ............................................................................................................ 94

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Project Underruns Original Estimate Without An Overpayment ............................................................... 94 Project Underruns Original Estimate With An Overpayment .................................................................... 95 Final Payment To Contractor ...................................................................................................................... 95 TURNBACK – LUMP SUM METHOD (PAYMENT IN LIEU) ............................................................................ 95 TURNBACK ALLOCATION – TRANSFER ........................................................................................................ 96 TURNBACK CASH PAYMENT ....................................................................................................................... 96

SEQUENCE OF EVENTS .............................................................................................................................................. 97 Work Begins On The Project ....................................................................................................................... 97 Project Is Finalized ...................................................................................................................................... 97

Chapter 6 Federal Aid Delegated and Traditional Contract Process ............................................. 98

NARRATIVE ............................................................................................................................................................ 98 Delegated Contract Process (County Administers Contract) ..................................................................... 98 TRADITIONAL PROJECTS (MnDOT ADMINISTERS CONTRACT) ................................................................... 99 Delegated Contract Process (County Administers Contract) ..................................................................... 99

SHARED FEDERAL REVENUE ....................................................................................................................................... 99 ADVANCE OF STATE AID FUNDS FOR FEDERAL PROJECTS ................................................................................................. 99 ADVANCE RESOLUTION ........................................................................................................................................... 100

State Aid Funding On Delegated Contract Process .................................................................................. 101 Accounts Needed ..................................................................................................................................... 101

SEQUENCE OF EVENTS ........................................................................................................................................... 101 Project Is Approved .................................................................................................................................. 101 Advance Payment For State Aid Funds Received For The Project ............................................................ 102 Project Development, Right of Way Reimbursement, Etc. ...................................................................... 102 Work Begins On The Project ..................................................................................................................... 102 Recognize the construction expense ........................................................................................................ 102 Recognize Revenue earned ...................................................................................................................... 102 Reimbursement of Federal and State Bond Funds .................................................................................. 103 Final Payment To Contractor .................................................................................................................... 103

PROJECT IS FINALIZED ............................................................................................................................................ 104 Project Is Completed Exactly As Estimated .............................................................................................. 104 Project Overruns Original Estimate .......................................................................................................... 105 Project Underruns Original Estimate Without An Overpayment ............................................................. 106 Project Underruns Original Estimate With An Overpayment .................................................................. 106

EXAMPLES ........................................................................................................................................................... 108 Example B ................................................................................................................................................. 109

TRADITIONAL PROJECTS (MNDOT ADMINISTERS CONTRACT) ....................................................................................... 111 Accounts Needed ..................................................................................................................................... 111

SEQUENCE OF EVENTS ............................................................................................................................................ 111 Local Obligation ........................................................................................................................................ 111 State Aid Transfer Notice ......................................................................................................................... 111 Project Development, Right of Way Reimbursement, Etc. ...................................................................... 112 COSTS WITH FEDERAL AID FUNDS ............................................................................................................ 112

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COSTS WITHOUT FEDERAL AID FUNDS (STATE AID FUND) ...................................................................... 113 YEAR-END ADJUSTMENTS ....................................................................................................................................... 113 PROJECT IS FINAL .................................................................................................................................................. 115

Project Is Completed Exactly As Estimated .............................................................................................. 115 Project Overruns Original Estimate .......................................................................................................... 116 Underrun – Initial Transfer Less Than Final Contract Amount ................................................................. 117 Underrun – Initial Transfer More Than Final Contract Amount ............................................................... 118

EXAMPLES ........................................................................................................................................................... 119

Chapter 7 Local Agency Bonds and Local Transportation Revolving Loan Fund ......................... 123

LOCAL AGENCY BONDS ........................................................................................................................................... 123 NARRATIVE .......................................................................................................................................................... 123

Accounts Needed ..................................................................................................................................... 124 SEQUENCE OF EVENTS ............................................................................................................................................ 124

Bond Issue ................................................................................................................................................ 124 Invested Funds ......................................................................................................................................... 125 Contract Payments Are Processed ........................................................................................................... 126 Annual Principal and Interest Payments .................................................................................................. 126 GENERAL OBLIGATION BONDS (G.O.) ...................................................................................................... 126 LOCAL AGENCY BONDS (L.A.) ................................................................................................................... 127 ALLOTMENT SET ASIDE ............................................................................................................................. 127 State Aid Releases Bond Principal and Interest ........................................................................................ 128 County Makes Bond Principal and Interest Payment ............................................................................... 128 Applying Bond Funds ................................................................................................................................ 129 Refunding Bonds ...................................................................................................................................... 129 Year End Reporting ................................................................................................................................... 129

Transportation Revolving Loan Fund ............................................................................................... 129

NARRATIVE .......................................................................................................................................................... 130 Accounts Needed ..................................................................................................................................... 130

SEQUENCE OF EVENTS ............................................................................................................................................ 130 Trlf Loan Proceeds Are Received .............................................................................................................. 130 State Aid Funds Received ......................................................................................................................... 131 Loan Payment Made ................................................................................................................................. 132

Chapter 8 Advanced Encumbrance ........................................................................................... 133

STATE AID ADVANCE .............................................................................................................................................. 133 NARRATIVE .......................................................................................................................................................... 133

Accounts Needed ..................................................................................................................................... 133 SEQUENCE OF EVENTS ............................................................................................................................................ 133

Resolution On File .................................................................................................................................... 133 Project Is Approved .................................................................................................................................. 134 Funds Are Advanced ................................................................................................................................. 134 95% Payment Is Received For The Project ............................................................................................... 134

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Work Begins On The Project ..................................................................................................................... 134 Project Is Finalized .................................................................................................................................... 135 Funds Are Transferred From Maintenance .............................................................................................. 136 Funds Are Advanced For Final Payment ................................................................................................... 136 Final Payment Is Received ........................................................................................................................ 136 Another Project Is Final With An Overrun ................................................................................................ 136

YEAR-END REVENUE REDUCTION FOR STATE AID ADVANCES .......................................................................................... 137 Begin New Year – Allotment and Reversing Entries ................................................................................. 137

EXAMPLES ........................................................................................................................................................... 139

Chapter 9 Reconciling State Aid Accounts ................................................................................. 142

RECONCILING ACCOUNTS TO STATE AID STATUS REPORTS ............................................................................................. 142 NARRATIVE .......................................................................................................................................................... 142

csah regular construction ......................................................................................................................... 143 csah municipal construction ..................................................................................................................... 143 county turnback ....................................................................................................................................... 143 state park construction ............................................................................................................................ 143 special Town Bridge .................................................................................................................................. 144 Town Bridge .............................................................................................................................................. 144 town road ................................................................................................................................................. 144 csah regular maintenance ........................................................................................................................ 144 csah municipal maintenance .................................................................................................................... 144 county disaster ......................................................................................................................................... 145

RECONCILING THE UNEARNED REVENUE ACCOUNTS .................................................................................................... 145 NARRATIVE .......................................................................................................................................................... 145

Regular Maintenance ............................................................................................................................... 145 Municipal Maintenance ............................................................................................................................ 145 Regular, Municipal, Special Town Bridge and Town Bridge ..................................................................... 145

STATE AID STATUS REPORT (NEW EXAMPLE)............................................................................................................... 147

Chapter 10 Unallocated Cost Distribution ................................................................................... 149

NARRATIVE .......................................................................................................................................................... 149 ADMINISTRATIVE COSTS ......................................................................................................................................... 149 FRINGE BENEFIT RATE CALCULATION ......................................................................................................................... 150

Example .................................................................................................................................................... 150 CONSTRUCTION COSTS ........................................................................................................................................... 151 MAINTENANCE COSTS ............................................................................................................................................ 151 SHOP AND EQUIPMENT COSTS ................................................................................................................................. 152 NON-HIGHWAY RELATED COSTS ............................................................................................................................... 153

Chapter 11 Fixed Assets .............................................................................................................. 154


RENTAL RATES VERSUS ACTUAL UNIT EXPENSES .......................................................................................................... 155

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MODIFYING RENTAL RATES TO REFLECT ACTUAL UNIT EXPENSES MORE CLOSELY ............................................................... 155 PURCHASES .......................................................................................................................................................... 156

Equipment Purchases Over Multiple Years .............................................................................................. 158 BUY BACKS ........................................................................................................................................................... 158 LEASES ................................................................................................................................................................ 159 RENTAL RATES ...................................................................................................................................................... 160 BETTERMENTS ...................................................................................................................................................... 161 PRESENTATION IN ANNUAL REPORT .......................................................................................................................... 161 USEFUL LIFE – RECOMMENDED GUIDELINES SUMMARY ................................................................................................ 161

Costrite Procedures New Equipment ....................................................................................................... 163 Costrite Procedures – Capital Improvements .......................................................................................... 166 Costrite Procedures – Traded, Sold, and Scrapped Equipment ............................................................... 167 NewRoads Procedures New Equipment .................................................................................................. 167 NewRoads Procedures – Capital Improvements .................................................................................... 170 NewRoads Procedures – Traded, Sold, and Scrapped Equipment ........................................................... 170

Chapter 12 Infrastructure Capitalization (Gasb 34) ..................................................................... 171

REPORTING CAPITAL ASSETS .................................................................................................................................... 171 REPORTING GENERAL INFRASTRUCTURE ASSETS AT TRANSITION ..................................................................................... 171 INITIAL CAPITALIZATION OF GENERAL INFRASTRUCTURE ASSETS ..................................................................................... 172

Determining Major General Infrastructure Assets ................................................................................... 172 Establishing Capitalization At Transition .................................................................................................. 172 Estimated Historical Cost – Current Replacement Cost ........................................................................... 172 Example: Estimated Historical Cost – Current Replacement Cost ........................................................... 173 Estimated Historical Cost – Existing Information ..................................................................................... 173 Example: Estimated Historical Cost – Existing Information ..................................................................... 173 Methods of Calculating Depreciation ....................................................................................................... 173 Example: Calculating Depreciation ........................................................................................................... 173 Composite Methods ................................................................................................................................. 173

MODIFIED APPROACH FOR REPORTING INFRASTRUCTURE ............................................................................................. 174 ANNUAL INFRASTRUCTURE REPORTING ..................................................................................................................... 176

Right of Way: ............................................................................................................................................ 176 Roads: ....................................................................................................................................................... 176 Bridges: ..................................................................................................................................................... 176

Chapter 13 Inventory Management ............................................................................................ 177


INVENTORY STRUCTURE ......................................................................................................................................... 177 INVENTORY CONTAINMENT ..................................................................................................................................... 178 INVENTORY CONTROL ............................................................................................................................................ 178 INVENTORY VALUATION METHODS ........................................................................................................................... 178

Fifo ............................................................................................................................................................ 179 Lifo ............................................................................................................................................................ 179

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Averaging .................................................................................................................................................. 179 INVENTORY EXPENSES VERSUS EXPENDITURES ............................................................................................................ 179 SEQUENCE OF EVENTS ............................................................................................................................................ 179

Chapter 14 Maintenance Costing ................................................................................................ 181

ROUTINE MAINTENANCE ........................................................................................................................................ 181 Definition .................................................................................................................................................. 181

REPAIRS AND REPLACEMENTS .................................................................................................................................. 182 Definition .................................................................................................................................................. 182

BETTERMENTS ...................................................................................................................................................... 183 Definition .................................................................................................................................................. 183

SPECIAL WORK ...................................................................................................................................................... 184 Definition .................................................................................................................................................. 184

Chapter 15 Construction Costing ................................................................................................ 185

HIGHWAYS ........................................................................................................................................................... 185 ENGINEERING (ALL INCLUDING PRELIMINARY AND CONSTRUCTION) ............................................................................... 185

Chapter 16 Other Accounting Issues ................................................................................................ 187

CONSTRUCTION OF MAINTENANCE FACILITIES ............................................................................................................ 187 Approval Process ...................................................................................................................................... 187 Partial Payment Process – Using Construction Funds (Preferred Method) ............................................. 188 Final Payment Process .............................................................................................................................. 188 Payment Process – Using Maintenance Funds ......................................................................................... 188

DISASTER ISSUES ................................................................................................................................................... 188 FEMA/Disaster Receipts After Maintenance Costs Have Been Reported ................................................ 188 Disaster Assistance Contingency Account ................................................................................................ 189 DISTRIBUTION: .......................................................................................................................................... 189 PROCESS: .................................................................................................................................................. 189

NON-STATE AID BONDS .......................................................................................................................................... 190 Bonds Accounted For In Debt Service Fund ............................................................................................. 190 Bonds Accounted For In Highway Fund .................................................................................................... 190

SHARED FEDERAL REVENUE ..................................................................................................................................... 193 ADVANCE OF STATE AID FUNDS FOR FEDERAL PROJECTS ............................................................................................... 193

Advance Resolution .................................................................................................................................. 194 TRANSFER FOR HARDSHIP CONDITION OR OTHER LOCAL USE ......................................................................................... 194

Hardship ................................................................................................................................................... 194 Other Local Use ........................................................................................................................................ 194

REVISION OF COUNTY MAINTENANCE APPORTIONMENTS ............................................................................................. 195 FEDERAL FUND EXCHANGE PROGRAM (FUND SWAPS) .................................................................................................. 196 FLEXIBLE HIGHWAY ACCOUNT (FLEX) EXCESS SUM FUNDS ACCOUNTS ............................................................................. 197

Accounts Needed ..................................................................................................................................... 198 LOCAL OPTION SALES TAX (LOST) AND WHEELAGE TAX ................................................................................................. 198

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Chapter 17 Year End Adjustments .............................................................................................. 200

NARRATIVE .......................................................................................................................................................... 200 SEQUENCE OF EVENTS ............................................................................................................................................ 200

Inventory Adjustments ............................................................................................................................. 200 Current and Delinquent Taxes Receivable ............................................................................................... 200 Salaries and Wages Payable ..................................................................................................................... 201 Benefits Payable ....................................................................................................................................... 201 Long Term Compensated Absences Payable ............................................................................................ 202 VACATION PAYABLE ................................................................................................................................. 202 VESTED SICK LEAVE PAYABLE ................................................................................................................... 203 COMP TIME PAYABLE ............................................................................................................................... 203 Fund Balance Non-Spendable For Inventory ............................................................................................ 204 Restricted Funds For State Aid Projects ................................................................................................... 204 FUND BALANCE RESTRICTED FOR CSAH REGULAR PROJECTS .................................................................. 204 FUND BALANCE RESTRICTED FOR CSAH MUNICIPAL PROJECTS .............................................................. 205 FUND BALANCE RESTRICTED FUNDS TOWN BRIDGE PROJECTS .............................................................. 205 Fund Balance Restricted Funds For Bond Principal and Interest ............................................................. 206 Fund Balance Committed For County Projects/Purposes ........................................................................ 206 Assigned Fund Balance ............................................................................................................................. 206 Residual Fund Balance .............................................................................................................................. 207

Chapter 18 Annual Report – Sample & Instructions .................................................................... 208

INSTRUCTIONS ...................................................................................................................................................... 208 COVER PAGE ........................................................................................................................................................ 208 LETTER OF TRANSMITTAL ........................................................................................................................................ 210 SUMMARY OF COUNTY HIGHWAY INFORMATION ........................................................................................................ 211 BRIEF OF ACTIVITIES, COMMENTS AND RECOMMENDATIONS ......................................................................................... 212 FINANCIAL STATEMENT .......................................................................................................................................... 213 ASSETS ............................................................................................................................................................... 213

Cash and Pooled Investments .................................................................................................................. 213 Petty Cash and Change Funds .................................................................................................................. 213 Taxes Receivable ...................................................................................................................................... 213 Non-apportioned Taxes ............................................................................................................................ 213 Delinquent Taxes ...................................................................................................................................... 213 Accounts Receivable ................................................................................................................................. 213 Accrued Interest Receivable ..................................................................................................................... 213 Due from Other Funds .............................................................................................................................. 214 Due from Other Governments ................................................................................................................. 214 Due from Townships/Municipalities ........................................................................................................ 214 Due from Counties ................................................................................................................................... 214 State Aid Regular and Municipal Maintenance Receivable...................................................................... 214 State Aid Regular, Municipal and Town Bridge Receivables .................................................................... 214 Bridge Bonding Construction Receivable ................................................................................................. 214

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State Aid Allotments ................................................................................................................................. 214 Inventories ................................................................................................................................................ 215

LIABILITIES ........................................................................................................................................................... 215 Accounts Payable ..................................................................................................................................... 215 Salaries Payable ........................................................................................................................................ 215 Contracts Payable ..................................................................................................................................... 215 Due to Other Funds .................................................................................................................................. 215 Due to Other Governments ...................................................................................................................... 215 Due to Townships/Municipalities ............................................................................................................. 215 Due to Counties ........................................................................................................................................ 215 Due to State Aid - Overpayments ............................................................................................................. 216 Unearned Revenue ................................................................................................................................... 216 State Aid Allotments ................................................................................................................................. 216 Delinquent Taxes ...................................................................................................................................... 216 Prepaid Taxes ........................................................................................................................................... 216 Compensated Absences ........................................................................................................................... 216

FUND BALANCE .................................................................................................................................................... 216 Reserved ................................................................................................................................................... 216 Unreserved ............................................................................................................................................... 216 Designated ................................................................................................................................................ 217 Undesignated ........................................................................................................................................... 217

RECEIVABLES ........................................................................................................................................................ 218 Taxes Receivable ...................................................................................................................................... 218 Non-apportioned Taxes ............................................................................................................................ 218 Delinquent Taxes ...................................................................................................................................... 218 Accounts Receivable ................................................................................................................................. 218 Accrued interest Receivable ..................................................................................................................... 218 Due from Other Funds .............................................................................................................................. 218 Due from Other Governments ................................................................................................................. 219 Due from Townships/Municipalities ........................................................................................................ 219 Due from Counties ................................................................................................................................... 219 State Aid Regular and Municipal Maintenance Receivables .................................................................... 219 State Aid Regular, Municipal and Town Bridge Receivables .................................................................... 219 Bridge Bonding Construction Receivable ................................................................................................. 219

RECEIVABLES ADDENDUM ....................................................................................................................................... 221 TOWN ROAD ALLOTMENT ....................................................................................................................................... 222 INVENTORY OF MATERIALS AND SUPPLIES .................................................................................................................. 223 LIABILITIES AND FUND BALANCE RESERVES ............................................................................................................... 225 LIABILITIES ........................................................................................................................................................... 225

Accounts Payable/Other Liabilities .......................................................................................................... 225 Accounts Payable ..................................................................................................................................... 225 Salaries Payable ........................................................................................................................................ 225 Due to Other Funds .................................................................................................................................. 225

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Due to Other Governments (Goods and Services) ................................................................................... 225 Contracts Payable ..................................................................................................................................... 225 Due to Other Governments – (Other) ...................................................................................................... 226 Due to State Aid - Overpayments ............................................................................................................. 226 Unearned Revenue ................................................................................................................................... 226 State Aid Allotments ................................................................................................................................. 226 Delinquent Taxes ...................................................................................................................................... 226 Prepaid Taxes ........................................................................................................................................... 226 Compensated Absences ........................................................................................................................... 226

FUND BALANCE .................................................................................................................................................... 226 Reserved ................................................................................................................................................... 226 Designated ................................................................................................................................................ 227 Undesignated ........................................................................................................................................... 227

LIABILITIES AND FUND BALANCE RESERVES ADDENDUM (OPTIONAL PAGE) ....................................................................... 228 FIXED ASSETS ....................................................................................................................................................... 229

The Twelve Column Headings Are Briefly Described Below. ................................................................... 229 Equipment Number .................................................................................................................................. 229 Equipment Description ............................................................................................................................. 229 Date Acquired ........................................................................................................................................... 229 Original Cost ............................................................................................................................................. 229 Estimated Life ........................................................................................................................................... 230 Status Code ............................................................................................................................................... 230 Beginning Net Book Value ........................................................................................................................ 230 Current Year Costs .................................................................................................................................... 230 Current Year Rental Earned ...................................................................................................................... 230 Adjustment to Equalize Depreciation ....................................................................................................... 230 Current Year Depreciation ........................................................................................................................ 230 Ending Net Book Value ............................................................................................................................. 231

FIXED ASSETS BETTERMENTS ........................................................................................................................... 232 Land and Buildings .................................................................................................................................... 232 Land and Building Description .................................................................................................................. 232 Date Acquired ........................................................................................................................................... 232 Original Cost ............................................................................................................................................. 233 Beginning Accumulated Value .................................................................................................................. 233 Current Year Betterment .......................................................................................................................... 233 Type of Betterment .................................................................................................................................. 233 Ending Accumulated Value ....................................................................................................................... 234

STATEMENT OF REVENUES AND EXPENDITURES .......................................................................................................... 234 REVENUES ........................................................................................................................................................... 235

Taxes ......................................................................................................................................................... 235 Previous Year Accruals ............................................................................................................................. 235 Current Year Accruals ............................................................................................................................... 235 Intergovernmental Revenue .................................................................................................................... 235

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State Aid Regular Maintenance ................................................................................................................ 235 State Aid Municipal Maintenance ............................................................................................................ 235 State Aid Regular Construction ................................................................................................................ 236 State Aid Transfers (State Aid portion of funding for a federal construction project) ............................ 236 State Aid Municipal Construction ............................................................................................................. 236 Town Bridge .............................................................................................................................................. 236 Bridge Bonding Construction.................................................................................................................... 236 Federal Aid Construction .......................................................................................................................... 236 Town Road Allotment ............................................................................................................................... 236 Charges for Materials and Services .......................................................................................................... 237 Miscellaneous Revenue ............................................................................................................................ 237 Other Financing Sources ........................................................................................................................... 237

EXPENDITURES ..................................................................................................................................................... 239 Unallocated Expenditures ........................................................................................................................ 239 Intergovernmental Expenditures ............................................................................................................. 239 Debt Service .............................................................................................................................................. 239 Other Financing Uses ................................................................................................................................ 239 Personal Services ...................................................................................................................................... 239 Services and Supplies ............................................................................................................................... 239 Capital Outlay ........................................................................................................................................... 239

YEAR-END CASH RECONCILIATION ............................................................................................................................ 241 YEAR-END FUND BALANCE RECONCILIATION ............................................................................................................... 241

Summary of Expenditures ........................................................................................................................ 242 Snow and Ice Control ............................................................................................................................... 242 Right of Way ............................................................................................................................................. 242 Engineering ............................................................................................................................................... 242 Construction ............................................................................................................................................. 242 Building and Equipment (Capital Outlay) ................................................................................................. 243

SUMMARY OF MAINTENANCE COSTS BY FUNDS .......................................................................................................... 243 DETAILED MAINTENANCE COSTS BY FUNDS ................................................................................................................ 245 SUMMARY OF MAINTENANCE COSTS BY ROADS - CSAH REGULAR ................................................................................... 246 DETAILED ROUTINE MAINTENANCE COSTS BY ROADS - CSAH REGULAR (OPTIONAL PAGE) ................................................... 247 SUMMARY OF MAINTENANCE COSTS BY ROADS - CSAH MUNICIPAL ................................................................................ 248 DETAILED ROUTINE MAINTENANCE COSTS BY ROADS - CSAH MUNICIPAL (OPTIONAL PAGE) ................................................. 249 SUMMARY OF MAINTENANCE COSTS BY ROADS - COUNTY ROADS ............................................................................... 250 DETAILED ROUTINE MAINTENANCE COSTS BY ROADS - COUNTY ROADS (OPTIONAL PAGE) .................................................. 251 SUMMARY OF CONSTRUCTION COSTS - CSAH REGULAR ................................................................................................ 252 STATEMENT OF CONSTRUCTION COSTS - CSAH REGULAR .............................................................................................. 253 SUMMARY OF CONSTRUCTION COSTS - CSAH MUNICIPAL ............................................................................................. 256 STATEMENT OF CONSTRUCTION COSTS - CSAH MUNICIPAL ............................................................................................ 257 SUMMARY OF CONSTRUCTION COSTS - COUNTY ROADS ............................................................................................... 259 STATEMENT OF CONSTRUCTION COSTS - COUNTY ROADS ............................................................................................. 260 STATE AID BONDS .................................................................................................................................................. 263

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ESTIMATED BUDGET .............................................................................................................................................. 264

Chapter 19 Annual Summary of Highway Information Sample ................................................... 265

INSTRUCTIONS ...................................................................................................................................................... 266 Total Mileage ............................................................................................................................................ 266 Construction ............................................................................................................................................. 266 Allocation .................................................................................................................................................. 266 MAINTENANCE ......................................................................................................................................... 267 UNALLOCATED COSTS .............................................................................................................................. 267 ADJUSTMENT TO EQUALIZE DEPRECIATION ............................................................................................ 267

Appendix 268

NOTICE OF ANNUAL APPORTIONMENT ...................................................................................................................... 268 AGENCY FUND LEDGER – FEDERAL AID PROJECTS ........................................................................................... 269 AGENCY FUND LEDGER .................................................................................................................................... 270

Introduction

1

INTRODUCTION

PURPOSE The purpose of this manual is to provide consistent cost accounting procedures for reporting purposes.

The manual is divided into sections that generally start with a short narrative describing the funds or accounts within the section. The narrative is followed by any special considerations that you should be aware of, a list of accounts required to make the necessary accounting entries and a description of the events that take place within the accounts. Lastly each section contains a worksheet which enables the user to see all the required accounting entries at a glance. The last section of the manual, the Appendix, contains the forms that are referenced throughout the manual.

UPDATES The State Aid Finance office, along with the members of the Accounting Task Force, will update the Accounting Manual as changes occur or updates are necessary.

QUESTIONS Please feel free to contact the individuals on either of these links, when necessary.

STATE AID TASK FORCE MEMBERS http://www.dot.state.mn.us/safinance/saas.html

STATE AID FINANCE TEAM http://www.dot.state.mn.us/safinance/contactus.html

http://www.dot.state.mn.us/safinance/saas.html

http://www.dot.state.mn.us/safinance/contactus.html

Chart of Accounts Overview

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CHART OF ACCOUNTS OVERVIEW County Governments, generally, have a chart of accounts set up based on the guidance of the Unified Chart of Accounts found in the Minnesota County Accounting and Financial Reporting Standards (COFARS). It usually follows a Fund, Department, Object format; sometimes adding a program and/or service code to further detail a department’s financial information. Ultimately it is the specifics of the county’s operations and policies that will drive the Chart of Accounts, but these are guidelines that are widely used.

FUND Funds are set up by the county based on statute or the county’s need to track specific activities or revenues. The Road and Bridge or Highway Fund is a Special Revenue Fund. This type of fund consists of a set of self-balancing accounts restricted in use for the specific purpose of tracking expenditures and revenues related to the county’s system of roads and bridges. Under the Unified Chart of Accounts these funds are to be a two-digit number from 02 – 29. Since the entire highway department will be contained in a single fund this number rarely is used in the departmental cost accounting systems.

DEPARTMENT Departments are the second division of county funding. The highway department is most often broken into Administration, Engineering, Road Maintenance, and Shops & Equipment. Additional departments of Highway Construction, Traffic Control, and Other may also be utilized. Under the Unified Chart of Accounts these are to be a three-digit number from 300-389. They are used in the departmental cost accounting system to assign costs to specific areas and are usually part of the cost account codes.

OBJECT Object codes vary widely between counties and are used to track specific expenditure types and revenue streams. The Unified Chart of Accounts has set ranges and examples of what can be put into them. It is prescribed that they are a four-digit number with expenditures in the 6000’s and revenues in the 5000’s. For further guidance, you can reference the Minnesota State Auditor’s office webpage at and search for “COFARS”.

HIGHWAY ACCOUNTING There are many activities that the highway departments are required to track for annual state reporting and others that each county tracks for their own purposes. Most counties utilize a cost accounting system that allocates the costs to different construction projects, roads, shops, or units of equipment. Regardless of the type of accounting software the county uses the general layout of the chart of accounts should be similar but will rarely be identical.

http://www.osa.state.mn.us/


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ADMINISTRATION DEPARTMENT This area catches all the costs that are not able to be allocated to a cost center such as a road, unit of equipment or construction project. Some of these costs can be related to the road system, construction projects, or all equipment units. Some of these costs are spread at the end of the year to better show the costs incurred.

Examples of the object costs that are generally found in the Administration Department are:

Engineer’s Salary Administrative Salaries Miscellaneous Employee Benefit Time Office Supplies Commissioner’s Expense’s Utilities Admin Training Admin Travel Expense’s (Meals, Mileage, Lodging)

ENGINEERING/CONSTRUCTION DEPARTMENT In the Engineering Department costs are gathered that can be tied to specific construction projects. Some accounting software includes construction costing that incorporates the contracting spec item listing so engineer’s estimates can be entered in the software. This creates the need for a more detailed list of activities under this department.

Examples of some of the project related object costs are:

Grading

Clearing and Grubbing Drainage and Structures Seeding & Sodding Excavation

Graveling

Pit Stripping Crushing, Screening, and Loading Hauling Aggregate Materials Checking Spreading

Culverts

Excavation Concrete Removal of Old Structure Temporary By-Pass Steel

Bridges

New Structure Removal of Old Structure Temporary By-Pass

Stabilized Base

Gravel Material Binder Soil Material Shaping and Compacting Gravel Pit Stripping Binder Soil Pit Stripping Loading Binder Soil Hauling Binder Soil Stabilizing Water Hauling Gravel Crushing, Screening, and Loading Gravel


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Bituminous Surfacing

Bituminous Material for Prime Bituminous Material for Mix Bituminous Material for Seal Mineral Aggregate for Mix Mineral Aggregate for Seal Mixing and Laying

Other

Inspection – Construction Inspection – Bridges Damages ROW - Permanent ROW - Temporary Preliminary Engineering Construction Engineering Construction Permits Property - Other Than ROW

There will also be costs in this department that are not directly related to a specific project. In some counties these are grouped together in the Administration Department and some are spread back to the projects at the end of the year. Examples of some of the object costs that are not project related are:

Engineer’s Salary Engineering Salaries Research - Not Project Engineering Field Supplies Engineering Office Supplies Engineering Training Eng. Travel Expense’s (Meals, Mileage, Lodging) Miscellaneous

ROAD MAINTENANCE This department tracks the cost of maintaining the roads through the year so these costs can be tied to specific roads and bridges within the county. Annual reporting to the State of Minnesota requires that this information be broken down by the road systems Regular County State Aid Highway (CSAH), Municipal State Aid Highway (CSAH Municipal), and County Roads. Many counties also track costs by road surface type for historical cost reference as well.

Historically maintenance costs have been separated into four major categories with the object costs under them. These were not set up in the program or service code format as described in the current COFARS, but their origination is in an early version of the document. Because COFARS no longer references this set up a new chart of accounts would not be required to follow it. However, since it is in place in several counties and works fine there is no need to amend this system if it exists. The format is two letters, “M” for Maintenance and then A, B, C, and D indicating the sequence only.

Most counties have a maintenance chart of accounts with the four major categories and the accounts that fall under them are those used by each county that fits the brief descriptions that follow:

Routine Maintenance (MA)

• Smoothing Surface (MA1) Blading or dragging the earth or gravel roads Scarifying for purpose of mixing gravel with binder & removing washouts

• Minor Surface Repair (MA2) Bituminous patching Crack filling Repair concrete pavement and crack sealing


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Patch sealing Repair sand pockets

• Roadside and Drainage (MA3) Clean/thaw culverts Minor ditch cleaning except for brush Repair to tile lines on ROW Lower/raise culverts Marking culvert ends Pick rock off roadside & roadbed

• Brush and Weed Control (MA4) Mowing of grass and weeds on roadsides, around guard rails and bridge ends Spraying weeds and brush All clearing and grubbing not in connection with construction work (where clearing and

grubbing is done in advance of a grading project then this work should be given a project number and charged to Construction.)

• Snow and Ice control (MA5) Erecting, removing, repairing snow fence, including cost of new fence, posts, and tie wire Snow plowing and winging Sanding and application of salt and calcium chloride for ice control, including the cost of

material used Cleaning snow from bridges and around guardrails

• Traffic Services (MA6) Erecting and repairing signs and markers, including cost of signs and posts, and erecting and

removing signs for road restrictions Traffic signals, maintenance, and repair work Installation of new traffic signals and railroad grade crossing signals should be a construction

item Traffic guidelines, center line, stripping Flag men on maintenance work Road inspection, looking for washouts, etc. Road patrol for load restrictions

Repairs and Replacements (MB)

• Reshaping (MB1) Cutting shoulders and shoulder slopes Reshaping roadbed, backsloping, where no appreciable amount of material is added to the

roadbed and ditch bottoms are not changed or deepened appreciably • Resurfacing (MB2)

All re-graveling of gravel roads, whether spot graveling or a continuous coat Gravel for newly graded roads shall be charged to construction, this may be applied in two

coats in succeeding years, but should be charged to construction, including the cost of materials

Includes addition of clay or binder to the surface, this also can be an item under construction


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Includes water, rolling, spreading if gravel is stabilized, this work is included in some construction projects

• Culverts, Bridges, & Guard Rails (MB3) Includes replacement of deteriorated or damaged culverts by one of like diameter, this shall

include labor and materials, if a culvert is replaced with one of larger diameter, this should be under MC1, including labor and materials

Includes all bridge repairs and painting Repair of guard rails including labor and materials

• Washouts (MB4) Includes all washouts on shoulders, ditches, backslopes and roadbed. If a culvert is washed out

and a new culvert is installed, the cost of the culvert should be under MB3 or MC1, labor and backfilling under washouts

Betterments (MC)

• New Culverts, Guard Rails & Tiling (MC1) Includes new culvert installation where culvert was not previously in place, include labor and

material Replacement of old culvert with a culvert of larger diameter, include labor and material Includes new guard rail, labor, and materials Includes new tile, labor, and materials Rip Rap, labor, and materials Erosion control structures, labor, and materials New approaches and driveways fill material and culvert

• Cuts and Fills (MC2) Includes reshaping work where the road grade and ditch bottoms are materially changed Correction of sight distance Swamp fills or embankment construction not under contract

• Sodding and Seeding (MC3) Includes labor and materials on all sodding and seeding Tree Planting

• Bituminous Treatment (MC4) Includes spot treatments, complete retreatments, and seal coating

Special Work (MD)

• Dust Treatments (MD1) Calcium Chloride or other applications to settle dust

• Prospecting for Gravel (MD2) • Mud Jacking and Frost Boils Mud Jacking

Frost boils include sub-grade excavation, sand and gravel backfill

There will also be costs in this department that are not directly related to a specific road. In some counties these are grouped together in the Administration Department and some are spread back to the roads at the end of the year. Examples of some of the object costs that are not related to a specific road are:


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Maintenance Superintendent Salaries Maintenance Worker Salaries Maintenance Road Supplies Maintenance Office Supplies Maintenance Training Miscellaneous Maintenance Travel Expense’s (Meals, Mileage, Lodging)

SHOP AND EQUIPMENT Capital outlay and equipment for all departments is generally tracked and accounted for in this area, as well as costs associated with the purchase and maintenance of equipment. Examples of some of the equipment and capital improvement related object costs are:

Equipment Buildings & Grounds Purchases Purchase Repair Labor Additions and Betterments Repair Service Gas & Diesel Repair Parts (may break out major parts such as tires to better track)

There will also be costs in this department that are not directly related to a specific equipment unit. In some counties these are grouped together in the Administration Department and some are spread back to the units at the end of the year. Examples of some of the object costs that are not related to a specific unit are:

Shop Supplies Shop Maintenance Shop Office Supplies Shop Training Shop Utilities Mechanic/Building Maintenance Salaries Shop Travel Expense’s (Meals, Mileage, Lodging) Miscellaneous

INVENTORY Highway departments generally purchase their major materials used and keep them in a separate set of accounts. The cost to purchase the inventory is a budget item but does not enter the actual departmental costs until it is utilized. Each county varies widely in what and how they inventory materials. A few things to consider when determining inventory items are:

• Unit Cost: Each unit under an inventory number should be valued the same to provide an accurate value of the total item’s quantity x cost = total value (example: headlights can vary widely in unit price). This does not refer to a price increase for all units under a number.

• Item Value: There should be a cost benefit to tracking the cost item by item. Nuts & bolts would be an example. Does the cost of tracking the quantity monthly and the labor to do an annual count add value or should they be shop supplies?

• Usage History: Is this item something you will want to know how many were used and where? Cutting edges come in sets and each unit will use a predetermined number of edges at each change, will you want to be able to investigate inventory and determine when a unit had the edges changed?

• Availability: If you keep a supply on hand it should be inventoried, but if you have a readily available source you may want to charge each one to the unit as purchased to reduce overhead.

• Urgency: If this is an item that may be needed immediately if it fails or wears out and provides little notice of pending failure you may want to inventory the item. (Flat tire on a plow truck at 3:00 a.m.)


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When deciding if there is merit in keeping inventory of an item it is good practice to talk to the end users and have some of these questions addressed.

Chapter 1 – Annual Allotments

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CHAPTER 1 ANNUAL ALLOTMENTS In compliance with the Department of Transportation State Aid Rules Chapter 8820.1200, Subp.2, the Commissioner shall certify the annual apportionment to each respective county or urban municipality no later than January 25th of each year. The Commissioner’s Order and Annual Distribution Letters are available at the State Aid Finance Website:

Commissioner’s Order

Distribution Letters

Example A

REGULAR MAINTENANCE ALLOTMENT The Notice of Annual Apportionment will show the amount of the current year's Regular Maintenance Allotment. If your county receives Trunk Highway Turnback Maintenance, the amount is included in the allotment amount.

Trunk Highway Turnback Maintenance information is available at the State Aid Finance website. Examples of these entries:

Accounting Entry: To Post Annual Apportionment

Date: MM/DD/YYYY

Explanation: YYYY Regular Maintenance - Allotment

Debit Account: (asset) Regular Maintenance - Allotment

Credit Account: (liability) Regular Maintenance - Unearned Revenue

Amount: From Notice of Annual Apportionment

REGULAR CONSTRUCTION ALLOTMENT The Notice of Annual Apportionment will show the allotment amount for the current year’s Regular Construction. This allotment is not considered receivable or current revenue at this time. The funds will become a receivable when they are requested from the state to fund a Regular Construction Project and current revenue will be recognized when the actual work is completed on the project. Examples of these entries:


Date: MM/DD/YYYY

Explanation: YYYY Regular Construction - Allotment

Debit Account: (asset) Regular Construction - Allotment

Credit Account: (liability) Regular Construction - Unearned Revenue

http://www.dot.state.mn.us/safinance/apportionments.html




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MUNICIPAL MAINTENANCE ALLOTMENT The Notice of Annual Apportionment will show the amount of the current year's Municipal Maintenance Allotment. If your county receives Trunk Highway Turnback Maintenance, the amount is included in the allotment amount.

Trunk Highway Turnback Maintenance information is available at the State Aid Finance website: Example of these entries:


Date: MM/DD/YYYY

Explanation: YYYY Municipal Maintenance - Allotment

Debit Account: (asset) Municipal Maintenance - Allotment

Credit Account: (liability) Municipal Maintenance - Unearned Revenue


MUNICIPAL CONSTRUCTION ALLOTMENT The Notice of Annual Apportionment will show the allotment amount for the current year’s Municipal Construction. This allotment is not considered a receivable or current revenue at this time. The funds will become a receivable when they are requested from the state to fund a Municipal Construction Project and current revenue will be recognized when the actual work is completed on the project. Example of these entries:


Date: MM/DD/YYYY

Explanation: YYYY Municipal Construction - Allotment

Debit Account: (asset) Municipal Construction - Allotment

Credit Account: (liability) Municipal Construction - Unearned Revenue


TOWN BRIDGE ALLOTMENT The Town Bridge Allotment should be accounted for in the same way as CSAH/MSAH Construction Allotment. This means the Town Bridge Allotment (asset), Town Bridge Unearned Revenue (liability), Town Bridge Receivable (asset), and Town Bridge Revenue (revenue) Accounts should be used in the same manner as the Regular and Municipal Accounts. You may need to set these four accounts up in your Chart of Accounts. Examples of these entries:



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Date: MM/DD/YYYY

Explanation: YYYY Town Bridge - Allotment

Debit Account: (asset) Town Bridge - Allotment

Credit Account: (liability) Town Bridge - Unearned Revenue


TOWN ROAD ALLOTMENT The Town Road Allotment represents funds specifically earmarked for use by Minnesota townships. The Notice of Annual Apportionment will show the allotment amount for the current years Town Road Allotment. The total allotment is sent to each county at the beginning of each year per State Aid Rules Chapter 8820.1400, Subp. 5A. The County is responsible to apportion these funds to each township per M.S. 162.081, Subp. 2 and 4. The county is required to distribute the funds to each township annually by March 1, per M.S. 162.081, Subp. 3.

If the money is receipted into the General Revenue Fund, it is up to the County Auditor to record it. If the money is receipted into the Road and Bridge Fund, the following entries should be made to reflect both the receipt and the disbursements. Examples of these entries:

When the Notice of State Aid Annual Apportionment is received:

No entry is really needed at this time. You may wait until the money is received from the State.

When the money is received from the State:


Date: MM/DD/YYYY

Explanation: YYYY Town Road - Allotment

Debit Account: (asset) Cash

Credit Account: (revenue) Town Road - Allotment

Amount: Amount of State Warrant

When the money is apportioned and sent to the townships:

Accounting Entry: (one entry per township)

Date: MM/DD/YYYY

Debit Account: (expense) Town Road Expense

Credit Account: (asset) Cash

Vendor Number 1: Vendor number you use for each township

Voucher Number 1: Voucher or Warrant number used to pay


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Accounting Entry: (one entry per township)

Contract Number 1: No entry needed

Quantity Purchased 1: No entry needed

Amount: Dollar amount sent to this township

1 The entry above may be made through adjustment or purchase channels; however, use of a purchase entry will allow the system to keep track of each of these disbursements by township and warrant number for a better audit trail.

NOTE: The annual report should include a page with the amount of Town Road money sent to each township.


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EXAMPLE

Chapter 2 – Regular & Municipal Maintenance Accounts

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CHAPTER 2 REGULAR AND MUNICIPAL MAINTENANCE ACCOUNTS

NARRATIVE The Maintenance Allotment is used to fund county performed maintenance activities on State Aid highways. Annually, each Minnesota County Highway Department is issued a Notice of Annual Apportionment that shows the new year allotment amount for each maintenance account. The Annual Apportionment Letters are available at the State Aid Finance Website:

There are two maintenance accounts that have specific purposes.

County State Aid Highway (CSAH Regular) or Regular Maintenance which means activity performed on rural roads.

Municipal State Aid Highway (CSAH Municipal) or Municipal Maintenance which means activity performed on roads within the city limits of cities with a population of less than 5,000.

The state will only reimburse the county for actual maintenance Expenses incurred. The state does, however, advance maintenance funds to the county based on the payment schedule as described in the State Aid Operations Rules, Chapter 8820.1400, Subp. 5 to 8. A portion of the maintenance allotment is withheld pending a completed Annual Summary of Highway Information Report. Example

If a county has State Aid bond (Chapter 7) interest obligations due in the current year, the amount will be deducted and reserved for that purpose prior to advancing maintenance funds.

Many counties will spend their entire maintenance allotment. If a county does not spend their entire allotment, the remaining balance in their account is transferred to their respective construction account. In some cases, the county may be overpaid, in these cases the overpayment will be applied to the next construction project that is requested.

REGULAR MAINTENANCE ACCOUNT

ACCOUNTS NEEDED (revenue) Regular Maintenance - Revenue (asset) Cash (asset) Regular Maintenance - Receivable (asset) Regular Maintenance - Allotment (asset) Regular Construction - Allotment (liability) Regular Maintenance - Unearned Revenue (liability) Regular Construction - Unearned Revenue (liability) Due to State Aid - Overpayments

NOTE: It is not necessary to use separate accounts to distinguish between regular and municipal funds. One general account may be used to account for the two funds, if desired.

http://www.dot.state.mn.us/safinance/commorder/apportionments.html


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SEQUENCE OF EVENTS Payments from the state are received in the form of an EFT (Electronic Fund Transfer). Notice of the EFT is received by the County Auditor/Treasurer office. If you have authorization to view payments received from the state, you may access the information at Vendor Payments.

1ST ADVANCE PAYMENT In accordance with the State Aid Operations Rules Chapter 8820.1400, Subp. 5, the county is advanced 50% of its current year’s Regular Maintenance Allotment at the earliest practical date after the allotments have been determined. The 50% is calculated after reducing the allotment by any State Aid Bond Interest due that year.

Accounting Entry: 1st State Aid Regular Maintenance Payment


Credit Account: (asset) Regular Maintenance - Allotment

2ND ADVANCE PAYMENT In accordance with the State Aid Operations Rules Chapter 8820.1400, Subp. 6, the county is advanced the remaining 40% of the Regular Maintenance Allotment minus any State Aid Bond Interest due that year, this payment will be received the end of the first week in July. To adjust the percentage to 50%, a request must be submitted to State Aid Finance prior to January 1st. The Annual Summary of Highway Information report must be filed by August 1st of the following year.

Accounting Entry: 40% State Aid Regular Maintenance Payment



FINAL MAINTENANCE PAYMENT In the following calendar year, if State Aid owes the county money from its previous year’s Allotment Account, the money will be sent as soon as the Annual Summary of Highway Information Report has been submitted and approved.

YEAR-END ENTRIES Three different situations can occur at year-end. They are described below:

• Actual Regular Maintenance Expenses, including State Aid Bond Interest charges, are GREATER THAN the original allotment amount. (Example A)

• Recognize revenue earned during the current year for Regular Maintenance.

http://www2.mainserver.state.mn.us/vendorpmts/login.html


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Accounting Entry: For Total Amount Of State Aid Allotment

Debit Account: (liability) Regular Maintenance - Unearned Revenue

Credit Account: (revenue) Regular Maintenance - Revenue

NOTE: The amount recognized as revenue may not exceed the Regular Maintenance Unearned Revenue Account.

Recognize unpaid balance of Regular Maintenance from State Aid for the original allotment amount.

Accounting Entry: For Amount Currently Remaining In The County's Regular Maintenance Allotment Account

Debit Account: (asset) Regular Maintenance - Receivable


NOTE: After these entries, the county's Regular Maintenance Allotment and Regular Maintenance Unearned Revenue Accounts should be 0, while its Regular Maintenance Receivable Account should be the amount of the unpaid State Aid Regular Maintenance funds.

Actual Regular Maintenance Expenses, including State Aid Bond Interest charges, are LESS THAN the original allotment amount, BUT GREATER THAN the cash already received from State Aid. (Example B)

Recognize revenue earned during the current year for Regular Maintenance including bond interest charges.

Accounting Entry: For Revenue Based On Regular Maintenance Expenses Plus Bond Interest Charges.



Recognize unpaid balance of Regular Maintenance from State Aid.

Calculate the amount owed to the county:

Calculation: Actual Regular Maintenance Expenses

Plus: Bond Interest Expense

Minus: State Aid Payments Received

Minus: Bond Interest Received (if any)

Equals: Amount owed to County from State Aid

For amount owed to the county as calculated above

Accounting Entry: For Amount Owed To The County As Calculated Above

Debit Account: (asset) Regular Maintenance - Receivable



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NOTE: After these entries, the county should have the same amount in both its Regular Maintenance Allotment Account and its Regular Maintenance Unearned Revenue Account. These amounts represent the unused Regular Maintenance Allotment which needs to be transferred to the Regular Construction Accounts as shown.

Transfer the unused balance of Regular Maintenance from the Regular Maintenance Accounts to the Regular Construction Accounts.

Calculate the amount to be transferred to the construction account:

Calculation: Original Regular Maintenance Allotment

Minus: Bond Interest Expenses

Minus: Actual Regular Maintenance Expenses

Equals: Amount of remaining Regular Maintenance Allotment

To reduce regular maintenance accounts

Accounting Entry: To Reduce Regular Maintenance Accounts



To increase regular construction accounts

Accounting Entry: To Increase Regular Construction Accounts



Actual Regular Maintenance Expenses, including State Aid Bond Interest charges, are LESS THAN the original allotment amount, AND LESS THAN the cash already received from State Aid. Thus, the state has made an OVERPAYMENT to the county for Regular Maintenance. (Example C)

Recognize revenue earned during the current year for Regular Maintenance including bond interest charges.

Accounting Entry: For Revenue Based On Regular Maintenance Expense Plus Bond Interest Charges



Recognize State Aid OVERPAYMENT of Regular Maintenance and transfer the OVERPAYMENT amount to the Regular Construction Allotment Account to be used on future construction projects.

Calculation: State Aid Payments Received

Plus: Bond Interest Received

Minus: Bond Interest Expenses

Minus: Actual Regular Maintenance Expenses


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Equals: Overpaid Amount Regular Maintenance - Allotment

For amount overpaid to county as calculated as above

Accounting Entry: For Amount Overpaid To County As Calculated Above


Credit Account: (liability) SA Regular Construction - Overpayments



NOTE: After these entries, the county should have the same amount in both its Regular Maintenance Allotment Account and its Regular Maintenance Unearned Revenue Account. These amounts represent the unused Regular Maintenance Allotment which needs to be transferred to the Regular Construction Accounts. The state does not recognize this overpayment or transfer until they receive the Annual Summary of Highway Information Report.

Transfer the unused balance of Regular Maintenance from the Regular Maintenance Accounts to the Regular Construction Accounts.


Calculation: Original Regular Maintenance Allotment

Minus: Amount Received from State Aid (Includes Bond Interest)

Equals: Balance to Transfer to Regular Construction

To reduce regular maintenance accounts

Accounting Entry: To Reduce Regular Maintenance Accounts



To increase regular construction accounts

Accounting Entry: To Increase Regular Construction Accounts




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FINAL MAINTENANCE PAYMENT If State Aid owes the county money from its previous year's Allotment Account, the money will be sent as soon as the Annual Summary of Highway Information Report has been submitted and approved. This assumes the county made the correct year-end adjustment entries as outlined in steps above.

Accounting Entry: For Amount Of State Aid Payment


Credit Account: (asset) Regular Maintenance - Receivable

If dollars remain in the Regular Maintenance Account, State Aid (upon receipt of the county’s Annual Summary of Highway Information Report) will transfer the funds from the Regular Maintenance Allotment to the Regular Construction Allotment. This transfer will appear on the Status Report in the SAAS (State Aid Accounting System).

NOTE: Since the county has already made these transfers during its year-end adjustment entries (see previous accounting entries), no additional entries are needed at this time. The state transfer notice should be verified against the money transferred at year-end by the county.


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EXAMPLES

Example A


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Example B


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Example C


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MUNICIPAL MAINTENANCE ACCOUNT

ACCOUNTS NEEDED (revenue) Municipal Maintenance - Revenue (asset) Cash (asset) Municipal Maintenance - Receivable (asset) Municipal Maintenance - Allotment (asset) Municipal Construction - Allotment (liability) Municipal Maintenance - Unearned Revenue (liability) Municipal Construction - Unearned Revenue (liability) Due to State Aid – Overpayments

SEQUENCE OF EVENTS Payments from the state are received in the form of an EFT (Electronic Fund Transfer). Notice of the EFT is received by the County Auditor/Treasurer office. If you have authorization to view payments received from the state you may access the information at Vendor Payments.

1ST ADVANCE PAYMENT In accordance with State Aid Operations Rules Chapter 8820.1400, Subp. 5, the county is advanced 50% of its current year Municipal Maintenance Allotment at the earliest practical date after the allotments have been determined. To adjust the percentage lower than 50%, a request must be submitted to State Aid Finance prior to January 1st.

Accounting Entry: 1st State Aid Municipal Maintenance Payment


Credit Account: (asset) Municipal Maintenance - Allotment

2ND ADVANCE PAYMENT In accordance with State Aid Operations Rules Chapter 8820.1400, Subp. 6, the county may be advanced 40% or the remaining 50% of the Municipal Maintenance Allotment, this payment will be received the end of the first week in July. To receive the remaining 50% a request must be submitted to State Aid Finance prior to January 1st and the Annual Summary of Highway Information Report must be filed by August 1st of the following year.

Accounting Entry: 2nd State Aid Municipal Maintenance Payment



http://www.dot.state.mn.us/safiance/resources.html


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FINAL MAINTENANCE PAYMENT In the following calendar year, if State Aid owes the county money from its previous year’s Allotment Account, the money will be sent as soon as the Annual Summary of Highway Information Report has been submitted and approved. This assumes the county made the correct year-end adjustment entries as outlined in steps above.

YEAR-END ENTRIES Three different situations can occur at year-end. They are described below:

Actual Municipal Maintenance Expenses are GREATER THAN the original allotment amount. (Example A)

Recognize revenue earned during the current year for Municipal Maintenance.

Accounting Entry: Total Amount Of State Aid Municipal Maintenance Allotment

Debit Account: (liability) Municipal Maintenance - Unearned Revenue

Credit Account: (revenue) Municipal Maintenance - Revenue

NOTE: The amount recognized as revenue may not exceed the Municipal Maintenance Unearned Revenue Account.

Recognize unpaid balance of Municipal Maintenance from State Aid for the original allotment amount.

Accounting Entry: For Amount Currently Remaining In The County's Municipal Maintenance Allotment Account

Debit Account: (asset) Municipal Maintenance - Receivable


NOTE: After these entries, the county's Municipal Maintenance Allotment and Municipal Maintenance Unearned Revenue Accounts should be zero, while its Municipal Maintenance Receivable Account should be the amount of the unpaid State Aid Municipal Maintenance funds.

Actual Municipal Maintenance Expenses are LESS THAN the original allotment amount, BUT GREATER THAN the cash already received from State Aid. (Example B)


Accounting Entry: For Revenue Based On Municipal Maintenance Expense



Recognize unpaid balance of Municipal Maintenance from State Aid.


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Calculate the amount owed to the county:

Calculation: Actual Municipal Maintenance Expenses

Minus: State Aid Payments Received

Equals: Amount owed to County from State Aid

Accounting Entry:

Accounting Entry: For amount owed to the county as calculated above.

Debit Account: (asset) Municipal Maintenance - Receivable


NOTE: After these entries, the county should have the same amount in both its Municipal Maintenance Allotment Account and its Municipal Maintenance Unearned Revenue Account. These amounts represent the unused Municipal Maintenance Allotment which needs to be transferred to the Municipal Construction Accounts as shown below in entry.

Transfer the unused balance of Municipal Maintenance from the Municipal Maintenance Accounts to the Municipal Construction Accounts.


Calculation: Original Municipal Maintenance Allotment

Minus: Actual Municipal Maintenance Expenses

Equals: Amount of remaining Municipal Maintenance Allotment

Accounting Entry:

Accounting Entry: To Reduce Municipal Maintenance Accounts



Accounting Entry:

Accounting Entry: To Increase Municipal Construction Accounts



Actual Municipal Maintenance Expenses are LESS THAN the original allotment amount, AND LESS THAN the cash already received from State Aid. Thus, the state has made an OVERPAYMENT to the county for Municipal Maintenance. (Example C)



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Accounting Entry: For Revenue Based On Municipal Maintenance Expenses



Recognize State Aid OVERPAYMENT of Municipal Maintenance and transfer the OVERPAYMENT amount to the Municipal Construction Allotment Account to be used on future construction projects.


Minus: Actual Municipal Maintenance Expenses

Equals: Overpaid Amount Municipal Maintenance Allotment

Accounting entries:

Accounting Entry: For amount overpaid to county as calculated above


Credit Account: (liability) SA Municipal Construction - Overpayments

AND -



NOTE: After these entries, the county should have the same amount in both its Municipal Maintenance Allotment Account and its Municipal Maintenance Unearned Revenue Account. These amounts represent the unused Municipal Maintenance Allotment which needs to be transferred to the Municipal Construction Accounts as shown. The state does not recognize this overpayment or transfer until they receive the Annual Summary of Highway Information Report.

Transfer the unused balance of Municipal Maintenance from the Municipal Maintenance Accounts to the Municipal Construction Accounts.


Calculation: Original Municipal Maintenance Allotment

Minus: Amount Received from State Aid

Equals: Balance to Transfer to Municipal Construction

To reduce municipal maintenance accounts

Accounting Entry: To reduce Municipal Maintenance Accounts




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To increase municipal construction accounts

Accounting Entry: To increase Municipal Construction Accounts



FINAL MAINTENANCE PAYMENT In the following calendar year, if State Aid owes the county money from its previous year's Allotment Account, as in examples 3A and 3B, the money will be sent as soon as the Annual Summary of Highway Information Report has been submitted and approved. This assumes the county made the correct year-end adjustment entries as outlined in steps above.



Credit Account: (asset) Municipal Maintenance - Receivable

If dollars remain in the Municipal Maintenance Account, as in examples above. State Aid (upon receipt of the county’s Annual Summary of Highway Information Report) will transfer the funds from the Municipal Maintenance Allotment to the Municipal Construction Allotment. This transfer will appear on the Status Report in the SAAS (State Aid Accounting System).

NOTE: Since the county has already made these transfers during its year-end adjustment entries (see previous accounting entries), no additional entries are needed at this time. The state transfer notice should be verified against the money transferred at year-end by the county.


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EXAMPLES

Example A


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Example B


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Example C

Chapter 3 – Regular & Municipal Construction Accounts

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CHAPTER 3 REGULAR AND MUNICIPAL CONSTRUCTION ACCOUNTS

NARRATIVE Construction Allotments are used to fund county construction projects on State Aid Highways. Annually, each Minnesota County Highway Department is issued a Notice of Annual Apportionment; this document shows the New Year allotments for each construction account. The Annual Apportionment Letters are available at the State Aid Finance Website.

There are two primary construction allotments for construction projects; this chapter will discuss these two allotments. Both allotments will be discussed together because the accounting rules are the same in each instance. The two allotments are, CSAH Regular Construction Allotment and CSAH Municipal Construction Allotment.

SPECIAL CONSIDERATIONS When reviewing the Examples on the following pages, please note the following special items that you might encounter from time to time.

The account used in our example is for a Municipal Construction situation. When accounting for a Regular Construction Project, the accounting would be identical; however, the Regular Construction accounts would be used instead of Municipal.

Note in Example D, regarding an Underrun with an Overpayment that we show the use of an account called Due to State Aid – Overpayments. Note the way in which this account is used to keep track of Overpayments due to project underruns from State Aid. Also note the awarding of Project 088-603-003 and how this account is affected when State Aid applies the overpayment to this newly let project.

Overpayment Report Website – Put in password to get at the report (which is reports1), then go to State Aid County and Municipality Reports and click on the SAAS Overpayments report.

ACCOUNTS NEEDED (const expense) Regular Construction Expenses (there may be numerous of these) (const expense) Municipal Construction Expenses (there may be numerous of these) (revenue) Regular Construction - Revenue (revenue) Municipal Construction - Revenue (asset) Cash (asset) Regular Construction - Receivable (asset) Municipal Construction - Receivable (asset) Regular Construction - Allotment (asset) Municipal Construction - Allotment (liability) Contracts Payable (liability) Due to State Aid Regular Construction - Overpayments

http://www.dot.state.mn.us/safinance/commorder/apportionments.html

http://www.dot.state.mn.us/safinance/saas.html


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(liability) Due to State Aid Municipal Construction - Overpayments (liability) Regular Construction - Unearned Revenue (liability) Municipal Construction - Unearned Revenue

The following accounts are needed only if there are allotment transfers between maintenance and construction accounts:

(asset) Regular Maintenance - Allotment (asset) Municipal Maintenance - Allotment (liability) Regular Maintenance - Unearned Revenue (liability) Municipal Maintenance - Allotment

SEQUENCE OF EVENTS

PROJECT IS APPROVED Your allotments are reduced throughout the year as construction contracts are let and payment requests are sent in for State Aid Funding Approval. When State Aid approves the funding, you will need to recognize the State Aid Receivable.

Recognize receivable from State Aid and reduce the allotment.

Accounting Entry: For Amount Of State Aid Construction Obligation ONLY

Debit Account: (asset) State Aid - Receivable

Credit Account: (asset) State Aid - Allotment

NOTE: Counties can request and receive Project Development (which includes Preliminary Engineering and/or Construction Engineering), Utility Relocation and ROW funds from State Aid Funds. Be sure the above entry is only in the amount of the State Aid Construction Obligation as stated on the State Aid Partial Payment Request Form. See the next step to post the amounts for Project Development, Utility Relocation and/or ROW.

95% PAYMENT IS RECEIVED FOR THE PROJECT After the State Aid Partial Payment Request has been approved you will receive the actual payment for the project. State Aid advances 95% of the total State Aid Construction Obligation. The remaining 5% is encumbered and will be paid to you when the project is complete, and all costs are verified. In addition, if requested, you will receive Project Development, Utility Relocation and/or ROW. Requests for actual Project Development costs are submitted along with the Report of Final Estimate.

Be sure to break up the entry as suggested below if you are being paid for Project Development, Utility Relocation and/or ROW.

Recognize the receipt of the State Aid Payment.


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Accounting Entry: For 95% Of State Aid Obligation Only


Credit Account: (asset) State Aid - Receivable

Recognize receipt of Project Development, Utility Relocation and/or ROW.

Accounting Entry: For The Project Development, Utility Relocation And/Or ROW, If Any


Credit Account: (asset) State Aid Construction - Allotment

Recognize revenue for Project Development, Utility Relocation and/or ROW.

Accounting Entry: For The Project Development, Utility Relocation And/Or ROW, If Any

Debit Account: (liability) State Aid - Unearned Revenue

Credit Account: (revenue) State Aid Construction - Revenue

WORK BEGINS ON THE PROJECT Sometime after State Aid approval, work begins on the contract. Your county inspectors verify that the work is indeed done according to specifications and a partial payment is paid to the contractor. There are two things to be aware of:

Calculation: Amount Of Work Certified ($ Amount Of Work Actually Performed)

minus: Any retainage ($ withheld as an insurance factor)

equals: Cash paid to Contractor ($ amount of actual disbursement)

The following entries will need to be made to recognize the construction expense, the earned State Aid revenue, and the disbursement to the contractor.

Recognize the construction expense.

Accounting Entry: Recognize Expenses As Work Is Certified On Contract.

Debit Account: (const expense) Construction Expenses

Credit Account: (liability) Contracts Payable

Recognize the amount of the State Aid Allotment that can now be considered Current Year Earned Revenue.

Accounting Entry: Recognize Revenue For Amount Of Work Certified.



Recognize the disbursement to the contractor.


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Accounting Entry: For Amount Of Contractor Disbursement.

Debit Account: (liability) Contracts Payable


PROJECT IS FINALIZED Numerous partial payments may be made to the contractor following the same sequence as in the step above. When the contract is completed and a State Aid Final Payment Request is submitted, the State will issue a final payment. State Aid Finance - SAAS Reports

Select State Aid County and Municipality Reports/SAAS Payment Document - Construction to view the payment information on the project. This document outlines the total project costs and shows any increase or decrease to the Construction Allotment Account.

Four different situations can occur. These are:

• Project is completed exactly as estimated • Project overruns original estimate • Project underruns original estimate without an overpayment • Project underruns original estimate with an overpayment

Select State Aid County and Municipality Reports/SAAS Payment Document - Construction to view the payment information on the project. This document outlines the total project costs and shows any increase or decrease to the Construction Allotment Account. Four different situations can occur. These are:

PROJECT IS COMPLETED EXACTLY AS ESTIMATED The State will send the original encumbered amount to the county which we already have booked as a State Aid receivable. (Example A)

Accounting Entry: For Amount Of State Aid Receipt



PROJECT OVERRUNS ORIGINAL ESTIMATE The State will send the original encumbered amount to the county as well as additional State Aid allotment funds that are due and available in the allotment. The Final Notice will inform you of the total project costs. Remember costs that were not previously recorded against your allotment must be recorded at this time. (Example B)

Recognize overrun and reduce allotment

http://dotapp7.dot.state.mn.us/saasreports/Logon.aspx


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Accounting Entry: For Amount Of Overrun



Record receipt of the State Aid Obligation




Recognize receipt of Project Development (if requested)




Recognize revenue for Project Development (if requested)


Debit Account: (liability) State Aid Construction - Unearned Revenue


PROJECT UNDERRUNS ORIGINAL ESTIMATE WITHOUT AN OVERPAYMENT This means that State Aid has encumbered too much and will only reimburse the portion of the encumbered amount that covers the actual project costs. The Final Payment document will provide total project costs. Remember that the amount of the over-estimate will reduce your receivable and increase your allotment. (Example C)

Accounting Entry: For Amount Of Underrun

Debit Account: (asset) State Aid - Allotment






PROJECT UNDERRUNS ORIGINAL ESTIMATE WITH AN OVERPAYMENT This means that State Aid has encumbered too much and advanced too much cash to the county. As a result, the county owes State Aid a refund. State Aid usually does not request the money back. It is usually recorded as an


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overpayment and applied against the next construction project that is submitted for State Aid Funding. This money should be posted to a liability account (Due to State Aid – Overpayments) until you are notified of its use on another project. (Example D)

The allotment balance must be increased by both the overpayment and the original encumbered amounts.

Recognize the overpayment

Accounting Entry: For Amount Of Overpayment


Credit Account: (liability) Due to State Aid - Overpayments

Reduce the receivable and increase the allotment for the original encumbered amount.

Accounting Entry: For Amount Of State Aid Encumbered



FINAL PAYMENT TO CONTRACTOR When the project is FINALIZED, the county will pay the retainage withheld to the contractor and authorize the Certificate of Final Acceptance.

Recognize final disbursement to the contractor

Accounting Entry: For Amount Of Contractor Disbursement



REVOCATION OF A STATE AID ROAD When a county revokes a State Aid Route for which State Aid Construction Funds have previously been spent, the DSAE determines the remaining life of the project and computes the value of the items that were financed with State Aid Funds. This value is considered an overpayment to the county and will be subtracted from the next State Aid contract let by the county. The revenue from prior years must also be reduced due to the revocation.

Recognize State Aid Overpayment for revoked State Aid Road




Reduce Prior year Revenue due to revocation


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Debit Account: (equity) Fund Balance

Credit Account: (liability) State Aid Construction – Unearned Revenue


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EXAMPLES

Example A


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Example B


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Example C


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Example D

Chapter 4 – Town Bridge Construction Accounts

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CHAPTER 4 TOWN BRIDGE ACCOUNTS

TOWN BRIDGE ALLOTMENT

NARRATIVE There are grant monies available from State Aid which is specific to Town Bridge Construction. Each year the Minnesota County Highway Departments receive a Notice of Annual Apportionment which shows that year’s allotment for Town Bridge.

Township cost participation is required, an accounts receivable entry may be needed to recognize the township local funding obligation, or for more information refer to:

http://www.dot.state.mn.us/stateaid/local-bridge-replacement-program.html

The accounting procedures and spreadsheet examples are identical to the section for Municipal and Regular Construction. The account names have been changed to reflect Town Bridge Allotment Accounts.

ACCOUNTS NEEDED (const expense) Town Bridge Construction Expenses (there may be numerous of these) (revenue) Town Bridge - Revenue (asset) Cash (asset) Town Bridge - Receivable (asset) Town Bridge - Allotment (liability) Contracts Payable (liability) Due to State Aid - Overpayments (liability) Town Bridge - Unearned Revenue

SPECIAL CONSIDERATIONS It is recommended to keep Town Bridge overpayments segregated from other State Aid overpayments (Regular and Municipal), set up separate overpayment accounts. These might be set up as follows:

(liability) Due to State Aid - Regular Overpayments (liability) Due to State Aid - Municipal Overpayments (liability) Due to State Aid - Town Bridge Overpayments

http://www.dot.state.mn.us/stateaid/local-bridge-replacement-program.html


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SEQUENCE OF EVENTS

PROJECT IS AWARDED Your allotment is reduced throughout the year as construction contracts are let and sent in for Town Bridge Funding approval. Go to State Aid Finance – SAAS Reports:

Select State Aid County and Municipality Reports/SAAS Payment Document – Construction to view the payment information on the project. The appropriate entries need to be made to recognize the receivable from Town Bridge as well as the reduction to the Town Bridge Allotment. Only the Town Bridge Obligation amount should be used for the following entry. (Example A)

Accounting Entry: For Amount Of State Aid Obligation Only

Debit Account: (asset) Town Bridge - Receivable

Credit Account: (asset) Town Bridge - Allotment

95% PAYMENT IS RECEIVED FOR THE PROJECT After the State Aid Partial Payment Request has been approved, the county will receive the actual payment for the project. State Aid advances 95% of the total State Aid Construction Obligation; the remaining 5% is encumbered. In addition, if requested, Engineering, Force Account and/or ROW will be received. Requests for actual Engineering costs are submitted along with State Aid Final Payment Request.

Recognize the receipt of the Town Bridge payment

Accounting Entry: For The 95% Of Town Bridge Obligation Only


Credit Account: (asset) Town Bridge - Receivable

Recognize the receipt of Engineering, Force Account and/or ROW

Accounting Entry: For The Engineering, Force Accounting And/Or Right Of Way, If Any



Recognize revenue for Engineering, Fore Account and/or Right of Way

Accounting Entry: For The 95% Of Town Bridge Obligation Only

Debit Account: (liability) Town Bridge - Unearned Revenue

Credit Account: (asset) Town Bridge - Revenue



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WORK BEGINS ON THE PROJECT Sometime after State Aid approval, work begins on the contract. County inspectors verify that the work is indeed done according to specifications, and a partial payment is paid to the contractor.


minus: Any retainage ($ withheld as an insurance factor)

equals: Cash paid to Contractor ($ amount of actual disbursement)

- As work is certified on contract.

For actual work certified

Accounting Entry: For Actual Work Certified

Debit Account: (const expense) Town Bridge Construction Expenses


Recognize revenue earned.

Make the following adjustment entry to recognize the amount of the Town Bridge Allotment which can now be considered Current Year Earned Revenue (for work certified only).


Debit Account: (liability) Town Bridge - Unearned Revenue

Credit Account: (revenue) Town Bridge - Revenue

Recognize disbursement to contractor.

Accounting Entry: For Amount Of Contractor Disbursement.



PROJECT IS FINALIZED Numerous partial payments may be made to the contractor following the same sequence as in the step above. When the contract is completed and a State Aid Final Payment Request is submitted, the State will issue a final payment. Go to State Aid Finance – SAAS Reports.

Select State Aid County and Municipality Reports/SAAS Payment Document – Construction to view the payment information on the project. This document outlines the total project costs and shows any increase or decrease to the Town Bridge Allotment Account.

Four different situations can occur. These are:

• Project is completed exactly as estimated



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• Project overruns original estimate • Project Underruns original estimate without an overpayment • Project Underruns original estimate with an overpayment

PROJECT IS COMPLETED EXACTLY AS ESTIMATED The State will send the original encumbered amount to the county which has already been booked as a State Aid Receivable. (Example A)




PROJECT OVERRUNS ORIGINAL ESTIMATE The State will send the original encumbered amount to the county as well as additional Town Bridge allotment monies that are due and available in the allotment. (Example B)

Recognize overrun and reduce allotment


Debit Account: (asset) Town Bridge - Receivable






PROJECT UNDERRUNS ORIGINAL ESTIMATE WITHOUT AN OVERPAYMENT This means that State Aid has encumbered too much and will only reimburse the portion of the encumbered amount which covers the actual project costs. The amount of the underrun will reduce the Town Bridge Receivable and increase the allotment accounts. (Example C)

Recognize the underrun






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PROJECT UNDERRUNS ORIGINAL ESTIMATE WITH AN OVERPAYMENT This means that State Aid has encumbered too much and has also advanced too much cash to the county. As a result, the county owes State Aid a refund; however, State Aid usually does not request the money back. Usually the State records the overpayment and applies it against the next construction project that is submitted for State Aid Funding. The county should post the overpayment amount to a liability account (Due to State Aid – Overpayments) until notified of its application to another project. (Example D)

The allotment balance must be increased by both the overpayment amount and the original encumbered amount.




Credit Account: (liability) Due to State Aid - Town Bridge Overpayments

Reduce the Receivable and increase the Town Bridge Allotment for the original encumbered amount

Accounting Entry: For Amount Of Town Bridge Encumbered



If the County elects to return the overpayment

Accounting Entry: For Amount Of Town Bridge Overpayment Returned

Debit Account: (asset) Due to State Aid - Town Bridge Overpayments


FINAL PAYMENT TO CONTRACTOR When the project is FINALIZED, the county will pay the retainage to the contractor and authorize the Certificate of Final Acceptance.

Recognize final disbursement to the contractor.





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48

EXAMPLES

Example A


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Example B


50

Example C


51

Example D


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SPECIAL TOWN BRIDGE ALLOTMENT

NARRATIVE Periodically, the county may exceed their Town Bridge Allotment, if this occurs the county may receive a Special Town Bridge Allotment. This additional allocation may not be required to be paid back to the State.

ACCOUNTS NEEDED (const expense) Special Town Bridge Expenses (there may be numerous of these) (revenue) Special Town Bridge - Revenue (asset) Cash (asset) Special Town Bridge - Receivable (asset) Special Town Bridge - Allotment (liability) Contracts Payable (liability) Special Town Bridge - Unearned Revenue

SEQUENCE OF EVENTS

NOTIFICATION OF SPECIAL TOWN BRIDGE ALLOCATION


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RECOGNIZE SPECIAL TOWN BRIDGE ALLOCATION Recognize the amount from the “Notification of Change to State Aid Town Bridge Allocation”. This notification is based on the engineer’s estimate and not the awarded bid. Changes to the Special Town Bridge Account may be viewed on the SAAS Status report:

Select State Aid County and Municipality Reports/SAAS Status, enter the county to view, review the Special Town Bridge Allocation changes by clicking on the Allocation Amount.

Accounting Entry: Special Town Bridge - Allocation

Debit Account: (asset) Special Town Bridge - Allotment

Credit Account: (liability) Special Town Bridge - Unearned Revenue

SPECIAL CONSIDERATIONS In the case of Special Town Bridge overpayment, the county will be billed by the state for the excess funds, an overpayment account is recommended to keep track of these excess funds. (Example D)

PROJECT IS AWARDED The allotment is reduced throughout the year as construction contracts are let and sent in for Special Town Bridge Funding approval. Go to State Aid Finance – SAAS Reports:

Select State Aid County and Municipality Reports/SAAS Payment Document - Construction to view the payment information on the project. The appropriate entries need to be made to recognize the receivable from Special Town Bridge as well as the reduction to the Special Town Bridge Allotment. Only the Special Town Bridge Obligation amount should be used for the following entry.

Accounting Entry: For Amount Of Special Town Bridge Obligation Only

Debit Account: (asset) Special Town Bridge - Receivable

Credit Account: (liability) Special Town Bridge - Allotment

95% PAYMENT IS RECEIVED FOR THE PROJECT After the State Aid Partial Payment Request has been approved, the county will receive the actual payment for the project. State Aid advances 95% of the total Special Town Bridge Obligation; the remaining 5% is encumbered. In addition, if requested, Engineering, Force Account and/or Right of Way will be received. Requests for actual Engineering costs are submitted along with the State Aid Final Payment Request.

Recognize the receipt of the Special Town Bridge Payment

Accounting Entry: For The 95% Of Special Town Bridge Obligation Only


Credit Account: (liability) Special Town Bridge - Receivable


http://dotapp7.dot.state.mn.us/saasreports/logon.aspx


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Recognize the receipt of Engineering, Force Account and/or Right of Way

Accounting Entry: For The Amount Of Engineering, Force Account, And/Or Right Of Way If Any


Credit Account: (asset) Special Town Bridge - Allotment

Recognize revenue for Engineering, Force Account and/or Right of Way

Accounting Entry: For The Amount Of The Engineering, Force Account, And/Or Right Of Way If Any

Debit Account: (asset) Special Town Bridge - Unearned Revenue

Credit Account: (liability) Special Town Bridge - Revenue

WORK BEGINS ON THE PROJECT Sometime after State Aid approval, work begins on the contract. County inspectors verify that the work is indeed done according to specifications, and a partial payment is paid to the contractor.


Minus: Any retainage ($ withheld as an insurance factor)

Equals: Cash paid to contractor ($ amount of actual disbursement)

As work is certified on contract


Debit Account: (const expense) Special Town Bridge - Expenses


Recognize Revenue earned, allotment which can now be considered Current Year Earned Revenue

Accounting Entry: For The Amount Of Work Certified Only

Debit Account: (liability) Special Town Bridge - Unearned Revenue

Credit Account: (revenue) Special Town Bridge - Revenue

Recognize disbursement to contractor





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PROJECT IS FINALIZED Numerous partial payments may be made to the Contractor following the same sequence as in the step above. When the contract is completed and a State Aid Final Payment Request is submitted, the State will issue a final payment. Go to State Aid Finance – SAAS Reports.

Select State Aid County and Municipality Reports/SAAS Payment Document – Construction to view the payment information on the project. This document outlines the total project cost and shows an increase or decrease to the Special Town Bridge Allotment Account.

Four different situations can occur:

• Project is completed exactly as estimated • Project overruns original estimate • Project underruns original estimate without an overpayment • Project underruns original estimate with an overpayment

PROJECT IS COMPLETED EXACTLY AS ESTIMATED The State will send the original encumbered amount to the county which has already been booked as a Special Town Bridge Receivable. (Example A)

Accounting Entry: For Amount Of Special Town Bridge Receipt


Credit Account: (asset) Special Town Bridge - Receivable

PROJECT OVERRUNS ORIGINAL ESTIMATE The State will send the original encumbered amount to the county as well as additional Special Town Bridge Allotment monies that are due and available in the allotment. The SAAS Payment Document – Construction report will outline the total project costs and should be reviewed, so that any costs which were not previously recorded against the allotment are recorded at this time. (Example B)

Recognize the overrun


Debit Account: (asset) Special Town Bridge - Receivable


Recognize the receipt of the State Aid Obligation






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PROJECT UNDERRUNS ORIGINAL ESTIMATE WITHOUT AN OVERPAYMENT This means that State Aid has encumbered too much and will only reimburse the portion of the encumbered amount which covers the actual project costs. The Final Payment Notice will outline the total project costs. Remember that the amount of the underrun will reduce the State Aid Receivable and increase the allotment accounts. (Example C)




Recognize the receipt of the State Aid Obligation




PROJECT UNDERRUNS ORIGINAL ESTIMATE WITH AN OVERPAYMENT This means that State Aid has encumbered too much and has also advanced too much cash to the county. As a result, the county owes State Aid a refund; however, State Aid will send a bill for the excess funds paid to the county. (Example D)

The allotment balance must be increased by both the overpayment amount and the original encumbered amount.



Credit Account: (asset) Due to State Aid Special Town Bridge - Overpayments

Reduce the receivable and increase the allotment for the original encumbered amount

Accounting Entry: For Amount Of Stata Aid Encumbered



If another active project needs to be finalized at the same time and the payment due is equal to or greater than this project overpayment, the overpayment may be applied to the second project. Check the SAAS Payment Document – Construction report to verify the transactions posted to each project. The allotment balance will be decreased by the underrun project.

Recognize the Overpayment


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Accounting Entry: For Amount Of Special Town Bridge Receipt



Reduce the receivable and increase the Special Town Bridge Allotment of the Original encumbered Amount

Accounting Entry: For Amount Of Special Town Bridge Allotment



REDUCTION OF SPECIAL BRIDGE ALLOTMENT When the project is FINALIZED, the state will reduce the Special Town Bridge Allotment for the finalized project if the allotted amount was greater than the finalized amount of the project. Changes to the Special Town Bridge Account may be viewed on the SAAS Status Report.

Select State Aid County and Municipality Reports/SAAS Status, enter the county to view, review the Special Town Bridge Allocation changes by clicking on the Allocation Amount.

Accounting Entry: For Amount Of Special Town Bridge Allotment Reduction

Debit Account: (liability) Special Town Bridge - Deferred Revenue


FINAL PAYMENT TO CONTRACTOR When the project is FINALIZED, the county will pay the retainage to the contractor and authorize the Certificate of Final Acceptance.

Recognize final disbursement to the contractor






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EXAMPLES

Example A


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Example B


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Example C


61

Example D

Chapter 5 – Special Construction Accounts

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CHAPTER 5 SPECIAL CONSTRUCTION ACCOUNTS

STATE TRANSPORTATION BONDS (BRIDGE, LRIP, & DISASTER)

NARRATIVE The State of Minnesota operates on a two-year budget cycle called a biennium, and although there are laws passed and financial changes in the second year, they are less certain. The state legislature typically passes a bonding bill the first year of the biennium, (even number years). This would include bridge and local road improvement bonds. Disaster bonds are generally passed as needed and triggered by a substantial disaster.

State Aid uses input from the counties to document the “need” for a bonding bill. In the case of bridge bonds this is done through county resolution. Annually each county should pass a “Bridge Priority Resolution” providing a list of all their deficient bridges and a rough estimate of the cost to repair or replace them. This resolution is submitted to State Aid and the bridges are added to the statewide master bridge spreadsheet. This spreadsheet serves as documentation for the bonding need. Once a bonding bill is passed, the counties apply for the funding project by project.

In the case of disaster bonds, local agency estimates are paramount in initiating a bill. If a disaster occurs that impacts the county’s roads and bridges, the District State Aid Engineer (DSAE) should be notified immediately. Preliminary estimates need to be compiled and provided to the DSAE as well as a request for financial assistance. The request is not a formal document but a letter from the County Engineer or County Board to document the request. A request for assistance will not ensure a bond issue, but if the possibility is eminent, having this information in hand helps State Aid for Local Transportation (SALT) to proceed.

Bond funds are limited in supply so counties must submit approved plans to SALT for consideration. Bond funds are rarely the sole source of funding and the county is required to have the balance of the project funding in place prior to a bond award. Projects that are listed in the Statewide Transportation Improvement Plan (STIP) are given priority so federal funding is not lost.

Once approved for bond funds the county will receive a “Funding Letter” for SALT. This letter provides the estimated bond grant award, the bond agreement number, and the bond account number. This letter should be kept in the project file for reference later. At this time the bond funds are also allocated to the project in the State Aid Accounting System (SAAS).

ACCOUNTS NEEDED (const expense) State Bond Construction Expenses (there may be numerous of these) (revenue) State Bond – Revenue (asset) Cash (asset) State Bond - Receivable (liability) Contracts Payable


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SEQUENCE OF EVENTS

PROJECT IS AWARDED Once the project is awarded the abstract is submitted to SALT with the bond eligible items identified. When the encumbrance letter is returned to the county, the bond agreement and board resolution can be executed. Following the instructions on the SALT website: http://www.dot.state.mn.us/stateaid/programs.html

Complete three original agreement documents, insert the board resolution, and submit all to SALT.

The initial State Aid Payment Request (SAPR) is submitted to State Aid indicating all funding sources for the project. If there is Regular State Aid funding on the project, entries for the receivable can be made.

Bond funds are not paid out until work has been certified, so no entries will be made, or payments received as a result of the SAPR if the project is funded entirely by bonds. However, if the county chooses to track the bond grant as an asset, an entry can be made at this time to record the bond grant. These entries will be covered after this section as “OPTIONAL ENTRY METHOD”. The county can determine the method to be used.

WORK BEGINS ON THE PROJECT Work progresses and bond eligible items are certified. Payments are made to the contractor less retained funds in the same manner as a regular construction project. The following entries will need to be made to recognize the construction expense, contract payable, and the disbursement to the contractor. (Example A).

Recognize expense for work certified and record payable

Accounting Entry: Recognize Expense For Work Certified And Record Payable

Debit Account: (const expense) State Bond Expense


Record disbursement to contractor

Accounting Entry: Record Disbursement To Contractor



PARTIAL REIMBURSEMENT IS REQUESTED Once the county has incurred and paid certified work, reimbursement can be requested using a SAPR and revenue can be recognized. (Example A)

Accounting Entry: Recognize State Bond Revenue For Work Certified

Debit Account: (asset) State Bond - Receivable

Credit Account: (revenue) State Bond – Revenue

http://www.dot.state.mn.us/stateaid/programs.html


64

Recognize the Receipt

Accounting Entry: Record Receipt Of State Bond Funds


Credit Account: (asset) State Bond – Receivable

NOTE: According to Minn. Stat. §15.72 the public contracting agency may retain up to 5% from any progress payment. If the contract is 100% bond funded, State Aid will release actual bond funds paid, up to 100% of the bond. Typically, the county withholds 5% retainage until final. If that is the case, State Aid would not pay the last 5% until the final payment is made to the contractor. If a portion of the retainage is released before the project is final, a request for this payment may be made. Revenue for these funds would be booked at the time it becomes certain and determinable when work is certified.

CAUTION: State bond revenue can only be recognized up to the grant amount. In cases where the bond eligible items over run the grant amount, they become county expense and no revenue can be recognized. In special cases it may be possible to request and receive additional grant funds, and then revenue could be increased.

PROJECT IS FINALIZED Numerous partial payments may be made to the contractor and SAPRs completed following the same process as in the steps above. The final SAPR must indicate that the project is final and request any remaining unpaid bond funds equal to the value of eligible work certified or the bond grant whichever is less. Upon final three main situations can occur relating to the bond funds. These are:

• Project is completed exactly as estimated • Project overruns the original estimate • Project underruns the original estimate

PROJECT IS COMPLETED EXACTLY AS ESTIMATED

The remaining unpaid bond funds are released to the county upon the receipt of the executed SAPR. (Example A)



Credit Account: (asset) State Bond - Receivable

PROJECT OVERRUNS ORIGINAL ESTIMATE

The remaining bond funds up to the original grant amount are released to the county upon the receipt of the executed SAPR. The county is responsible to absorb the amount of the bond eligible costs over the bond grant. The State will not reimburse the county for overruns out of the State Bond Account, unless the county specifically applies for and is granted additional State Bond funds. These expenditures will be recognized as county expense at the time they are incurred. (Example B)


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Recognize expense greater than bond grant

Accounting Entry: Recognize Expense Greater Than Bond Grant

Debit Account: (expense) Construction Expense


Record receipt of state bond funds




PROJECT UNDERRUNS ORIGINAL ESTIMATE

The remaining bond funds (up to an amount equal to the value of eligible work certified) are released to the county upon the receipt of the executed SAPR; if no further bond eligible costs remain, any retained funds will be released to the county. (Example C)




NOTE: As soon as it becomes evident that all a bond grant will not be spent, State Aid should be notified so those funds can be allocated to another project. This will not reduce the original bond eligibility should the costs increase later.

NOTE: In cases when an adjustment to bond eligible contract expenditures is made after the county has received payment, the county may be required to repay those funds.

FINAL PAYMENT TO CONTRACTOR When the project is finalized and all the required documentation is received from the contractor, the county will release the retained funds to the contractor. (Example C)





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EXAMPLES

Example A


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Example B


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Example C


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STATE TRANSPORTATION BONDS (OPTIONAL ENTRY METHOD)

NARRATIVE When a State Bond Grant has been awarded, the county has the option to set up a State Bond Grant and State Bond Unearned Revenue Accounts. These accounts are not required but are useful to track the balance of the Bond Grant. The State Auditor’s office may recommend these accounts be adjusted to zero at year end and re-established in the new year.

ACCOUNTS NEEDED (const expense) State Bond Construction Expenses (there may be numerous of these) (revenue) State Bond - Revenue (asset) Cash (asset) State Bond - Receivable (asset) State Bond - Grant (liability) Contracts Payable (liability) State Bond - Unearned Revenue

SEQUENCE OF EVENTS

PROJECT IS AWARDED Once the project is awarded the abstract is submitted to SALT with the bond eligible items identified. When the encumbrance letter is returned to the county the bond agreement and board resolution can be executed. Following the instructions on the SALT website complete three original agreement documents, inserting the board resolution and submit them to SALT.

The initial State Aid Payment Request (SAPR) is submitted to State Aid indicating all funding sources for the project. If there is regular State Aid funding on the project entries for the receivable can be made.

If the county chooses to track the bond grant as an asset the following entries will be made. (Example A)

Accounting Entry: Record Bond Grant Amount

Debit Account: (asset) Bond Grant

Credit Account: (liability) Bond Grant - Unearned Revenue

WORK BEGINS ON THE PROJECT Work progresses and bond eligible items are certified. Payments are made to the contractor less retained funds in the same manner as a regular construction project. The following entries will need to be made to recognize the construction expense, contract payable, and the disbursement to the contractor. (Example A)


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Recognize expense for work certified and record payable

Accounting Entry: Recognize Expense For Work Certified And Record Payable

Debit Account: (expense) State Bond Expense


Recognize disbursement to contractor




PARTIAL REIMBURSEMENT IS REQUESTED Once the county has incurred and paid certified work reimbursement can be requested using a SAPR and revenue recognized. (Example A)

Record state bond receivable for work certified

Accounting Entry: Record State Bond Receivable For Work Certified

Debit Account: (expense) State Bond - Receivable

Credit Account: (asset) State Bond - Grant

Recognize state bond revenue for work certified

Accounting Entry: Recognize State Bond Revenue For Work Certified

Debit Account: (liability) State Bond - Unearned Revenue

Credit Account: (revenue) State Bond – Revenue


Accounting Entry: Record Receipt Of State Bond Funds (95% Of Work Certified)



NOTE: According to Minn. Stat. §15.72 the public contracting agency may retain up to 5% from any progress payment. If the contract is 100% bond funded, State Aid will release actual bond funds paid, up to 100% of the bond. Typically, the county withholds 5% retainage until final. If that is the case State Aid would not pay the last 5% until the final payment is made to the contractor. If a portion of the retainage is released before the project is final, a request for this payment may be made. Revenue for these funds would be booked at the time it becomes certain and determinable when work is certified.


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CAUTION: State bond revenue can only be recognized up to the grant amount. In cases where the bond eligible items overrun the grant amount, they become county expense and no revenue can be recognized. In special cases it may be possible to request and receive additional grant funds, and then revenue could be increased.

Once the county has incurred and paid an expense, the county can recognize revenue and request partial payments for Bridge or Special State Bonding Funds. (Example A)

PROJECT IS FINALIZED Numerous partial payments may be made to the contractor and SAPRs completed following the same process as in the steps above. The final SAPR must indicate that the project is final and request any remaining unpaid bond funds equal to the value of eligible work certified or the bond grant whichever is less. Upon final three main situations can occur relating to the bond funds. These are:

• Project is completed exactly as estimated • Project overruns the original estimate • Project underruns the original estimate

PROJECT IS COMPLETED EXACTLY AS ESTIMATED The remaining unpaid bond funds are released to the county upon the receipt of the executed SAPR. (Example A)




PROJECT OVERRUNS ORIGINAL ESTIMATE The remaining bond funds up to original grant amount are released to the county upon the receipt of the executed SAPR. The county is responsible to absorb the amount of the bond eligible costs over the bond grant. The State will not reimburse the county for overruns out of the State Bond Account, unless the county specifically applies for and is granted additional State Bond funds. These expenditures will be recognized as county expense at the time they are incurred. (Example B)

Recognize additional state bond revenue up to work certified

Accounting Entry: Recognize Additional State Bond Revenue Up To Work Certified


Credit Account: (revenue) State Bond - Revenue

Recognize expense greater than bond grant


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Accounting Entry: Recognize Expense Greater Than Bond Grant







PROJECT UNDERRUNS ORIGINAL ESTIMATE The remaining bond funds up to an amount equal to the value of eligible work certified are released to the county upon the receipt of the executed SAPR, if no further bond eligible costs remain any retained funds will be released to the county. (Example C)

Record underrun

Accounting Entry: Record Underrun


Credit Account: (asset) State Bond Grant





NOTE: As soon as it becomes evident that all a bond grant will not be spent State Aid should be notified so those funds can be allocated to another project. This will not reduce the original bond eligibility should the costs increase later.

NOTE: In cases when an adjustment to bond eligible contract expenditures is made after the county receives payment, the county may be required to repay those funds.






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EXAMPLES

Example A


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Example B


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Example C


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STATE PARK CONSTRUCTION ACCOUNT

NARRATIVE A portion of the Highway User Tax Distribution (HUTD) is set aside to fund public accesses to outdoor recreation areas within a county. These projects must be applied for and final projects are determined through the Department of Natural Resources.

When a project is let a State Aid Payment Request can be submitted for 95% of the state park eligible work. The remaining 5% is encumbered and will be paid when the project is complete, and all costs are verified. Upon final any unspent funds will need to be returned to State Aid. Since this is a special allocation and not an annual allocation this cannot be applied to another project and you will be billed for this overpayment. Any unspent funds that remain encumbered will be released back to the State Park Fund.

ACCOUNTS NEEDED (const expenses) State Park Construction Expenses (there may be numerous of these) (revenue) State Park - Revenue (asset) Cash (asset) State Park - Receivable (liability) Contracts Payable (liability) State Park - Unearned Revenue

SEQUENCE OF EVENTS

PROJECT IS AWARDED Once a State Park project is approved an encumbrance will be set up for the estimated project cost. After the project is let the county can set up State Park Construction Receivable and State Park Unearned Revenue Accounts. (Example A)

Accounting Entry: Record State Park Receivable For Awarded Contract Amount

Debit Account: (asset) State Park - Receivable

Credit Account: (liability) State Park - Unearned Revenue

95% PAYMENT IS RECEIVED FOR THE PROJECT After the initial SAPR has been approved you will receive the requested percentage payment, up to 95% for the project. State Aid advances 95% of the total State Park Construction Obligation and the remaining 5% remains encumbered. (Example A)

To keep contract costs clear it is a good idea to make two entries if you are being paid for engineering, force account work and/or Right of Way (ROW).


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Record receipt of state park contract funds

Accounting Entry: Record Receipt Of State Park Contract Funds


Credit Account: (asset) State Park - Receivable

Record receipt of state park engineering, force account and/or ROW funds

Accounting Entry: Record Receipt Of State Park Engineering, Force Account And/or ROW Funds


Credit Account: (revenue) State Park Construction - Revenue

WORK BEGINS ON THE PROJECT Work progresses and bond eligible items are certified. Payments are made to the contractor less retained funds in the same manner as a regular construction project. The following entries will need to be made to recognize the construction expense, earned State Park revenue, and the disbursement to the contractor. (Example A)

Recognize expense for work certified

Accounting Entry: Recognize Expense For Work Certified

Debit Account: (expense) State Park Construction Expense


Recognize state park revenue for work certified

Accounting Entry: Recognize State Park Revenue For Work Certified

Debit Account: (liability) State Park - Unearned Revenue

Credit Account: (revenue) State Park Construction - Revenue

Record contractor disbursement

Accounting Entry: Record Contractor Disbursement

Debit Account: (liability) Contract Payable


PROJECT IS FINALIZED Numerous partial payments may be made to the contractor and SAPRs completed following the same process as in the steps above. The final SAPR must indicate that the project is final and request any remaining unpaid State Park funds equal to the value of eligible work certified or the State Park allocation whichever is less. Upon final four main situations can occur relating to the State Park funds. These are:

• Project is completed exactly as estimated


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• Project overruns original estimate • Project Underruns original estimate without an overpayment • Project Underruns original estimate with an overpayment

PROJECT IS COMPLETED EXACTLY AS ESTIMATED The remaining unpaid State Park funds are released to the county upon the receipt of the executed SAPR. (Example A)

Accounting Entry: Record Receipt Of State Park Funds



PROJECT OVERRUNS ORIGINAL ESTIMATE The remaining State Park funds up to original encumbrance amount are released to the county upon the receipt of the executed SAPR. If additional funds are requested and granted it is possible that the county will receive additional State Park funds, if not the overage will be paid from local funds. (Example B)

Recognize state park work certified over original allocation

Accounting Entry: Recognize State Park Work Certified Over Original Allocation

Debit Account: (liability) State Park - Receivable

Credit Account: (revenue) State Park - Revenue

Recognize expense greater than state park allocation

Accounting Entry: Recognize Expense Greater Than State Park Allocation



Record receipt of state park contract funds

Accounting Entry: Record Receipt Of State Park Contract Funds



Record receipt of state park engineering, force account and/or ROW funds

Accounting Entry: Record Receipt Of State Park Engineering, Force Account And/Or Row Funds


Credit Account: (asset) State Park - Revenue


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PROJECT UNDERRUNS ORIGINAL ESTIMATE WITHOUT AN OVERPAYMENT The remaining State Park funds up to an amount equal to the value of eligible work certified are released to the county upon the receipt of the executed SAPR, if no further State Park eligible costs remain any retained funds will be released to the county. (Example C)

Record Underrun




Record receipt of state park funds

Accounting Entry: Record Receipt Of State Park Funds



PROJECT UNDERRUNS ORIGINAL ESTIMATE WITH AN OVERPAYMENT Upon the receipt of the executed SAPR, no further State Park eligible costs remain, and the final State Park eligible costs are less than the amount already paid to the county. These funds will have to be repaid to the State Park fund. (Example D)

Record Underrun




Record repayment of State Park funds

Accounting Entry: Record Repayment Of State Park Funds

Debit Account: (asset) State Park - Receivable


Note: The State Park fund overpayments must be repaid by the county. They are not left as outstanding overpayments and applied to future projects like regular allotment overpayments.



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EXAMPLES

Example A


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Example B


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Example C


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Example D


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COUNTY DISASTER ACCOUNT

NARRATIVE The practice of allocating funds from the State Aid Disaster account rather than issuing them to the county was changed in 2013. Encumbering the funds allows for better tracking of the fund usage and repayment of unused funds.

The historic method (prior to 2013) did not track individual projects that may have been set up under the master project because of widespread damage. Counties must maintain a detailed spreadsheet tracking the actual costs and the actual receipts of the disaster projects and include this accounting with the final request for each project to the DSAE.

A portion of the Highway User Tax Distribution (HUTD) is set aside to assist counties in the event of a disaster. Do not confuse this as the state portion of FEMA reimbursement. A disaster is any event that causes damage greater in value than 10% of the county’s last construction allotment. After the disaster occurs the county must contact the DSAE and request a disaster assessment. A disaster team is formed based on the State Aid Rules, assesses the damage, and provides the estimate to State Aid for Local Transportation (SALT). An encumbrance is created in the County State Aid Disaster Account for the 100% of the estimated amount under the master project number that is provided by the county.

If the damage is isolated and only a single project number is needed the funds will be paid on the master project number. If the damage is more wide-spread and more project numbers are needed funds will be released from the master project and encumbered under the other project numbers, up to the initial damage estimate.

When a project is let a State Aid Payment Request can be submitted for 95% of the disaster eligible work. The remaining 5% is encumbered and will be paid when the project is complete, and all costs are verified. Upon final any unspent funds will need to be returned to State Aid, it will not be considered an overpayment and applied to the next project, since this is not an annual allotment. Any unspent funds that remain encumbered will be released back to the County Disaster Fund.

ACCOUNTS NEEDED (const expense) Disaster Construction Expenses (there may be numerous of these) (revenue) Disaster - Revenue (asset) Cash (asset) Disaster - Receivable (liability) Contracts Payable (liability) Disaster Construction - Unearned Revenue


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SEQUENCE OF EVENTS

DISASTER COMMITTEE ESTIMATE APPROVED Upon the approval of the Disaster Committee’s estimate that amount will be allocated to the county under the master project number provided by the county. Once the amount registers on the county’s status report the money is available to be used.

PROJECT IS AWARDED Once a project has been awarded utilizing the disaster funds a receivable can be recognized.

Accounting Entry: Record Disaster Receivable For Awarded Contract

Debit Account: (asset) Disaster Construction - Receivable

Credit Account: (liability) Disaster Construction - Unearned Revenue

95% PAYMENT IS RECEIVED FOR THE PROJECT After the initial SAPR has been approved, the requested percentage payment is received, up to 95% for the project. State Aid advances 95% of the total Disaster Construction Obligation and the remaining 5% remains encumbered.

To keep contract costs clear it is recommended to make separate entries for engineering, force account work and/or Right of Way (ROW).

Record receipt of disaster contract funds

Accounting Entry: Record Receipt Of Disaster Contract Funds


Credit Account: (asset) Disaster Construction - Receivable

Record receipt of disaster engineering, force account and/or ROW funds

Accounting Entry: Record Receipt Of Disaster Engineering, Force Account And/Or ROW Funds


Credit Account: (revenue) Disaster Construction - Revenue

WORK BEGINS ON THE PROJECT Work progresses and Disaster eligible items are certified. Payments are made to the contractor less retained funds in the same manner as a regular construction project. The following entries will need to be made to recognize the construction expense, earned Disaster revenue, and the disbursement to the contractor.



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Debit Account: (expense) Disaster Construction Expense


Recognize disaster revenue for work certified

Accounting Entry: Recognize Disaster Revenue For Work Certified

Debit Account: (liability) Disaster Construction - Unearned Revenue


Record contract disbursement




PROJECT IS FINALIZED Numerous partial payments may be made to the contractor and SAPRs completed following the same process as in the steps above. The final SAPR must indicate that the project is final and request any remaining unpaid Disaster funds equal to the value of eligible work certified or the Disaster allocation whichever is less. Upon final four main situations can occur relating to the State Park funds. These are:

• Project is completed exactly as estimated • Project overruns original estimate • Project Underruns original estimate without an overpayment • Project Underruns original estimate with an overpayment

PROJECT IS COMPLETED EXACTLY AS ESTIMATED The remaining unpaid Disaster funds are released upon the receipt of the executed SAPR.

Accounting Entry: Record Receipt Of Disaster Funds



PROJECT OVERRUNS ORIGINAL ESTIMATE The remaining Disaster funds, up to the original encumbrance amount, are released upon the receipt of the executed SAPR. If additional funds are requested and granted, additional Disaster Funds will be received; if not, the overage will be paid from local funds.

Recognize disaster work certified over original allocation


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Accounting Entry: Recognize Disaster Work Certified Over Original Allocation

Debit Account: (liability) Disaster Construction - Receivable


Recognize expense greater than disaster allocation

Accounting Entry: Recognize Expense Greater Than Disaster Allocation



Record receipt of Disaster Contract funds

Accounting Entry: Record Receipt Of Disaster Contract Funds



Record receipt of disaster engineering, force account and/or ROW funds

Accounting Entry: Record Receipt Of Disaster Engineering, Force Account And/Or ROW Funds


Credit Account: (asset) Disaster Construction - Revenue

PROJECT UNDERRUNS ORIGINAL ESTIMATE WITHOUT AN OVERPAYMENT The remaining Disaster Funds, up to an amount equal to the value of eligible work certified, are released upon the receipt of the executed SAPR; if no further Disaster eligible costs remain, any retained funds will also be released.

Record underrun




Record receipt of disaster funds

Accounting Entry: Record Receipt Of Disaster Funds




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PROJECT UNDERRUNS ORIGINAL ESTIMATE WITH AN OVERPAYMENT Upon the receipt of the executed SAPR, no further Disaster eligible costs remain, and the final Disaster eligible costs are less than the amount already paid. These funds will have to be repaid to the Disaster Fund.

Record underrun




Record repayment of disaster funds

Accounting Entry: Record Repayment Of Disaster Funds

Debit Account: (asset) Disaster Construction - Receivable


Note: The Disaster fund overpayments must be repaid. They are not left as outstanding over payments and applied to future projects like regular allotment overpayments.

FINAL PAYMENT TO CONTRACTOR When the project is finalized and all the required documentation is received from the contractor, the county will release the retained funds to the contractor.

Accounting Entry: Record Disbursement to Contractor



HISTORIC DISASTER PROJECTS PRIOR TO 2013 The practice of allocating funds from the State Aid Disaster account rather than issuing them to the county was changed in 2013. Encumbering the funds allows for better tracking of the fund usage and repayment of unused funds.

The historic method (prior to 2013) did not track individual projects that may have been set up under the master project because of widespread damage. Counties must maintain a detailed spreadsheet tracking the actual costs and the actual receipts of the disaster projects and include this accounting with the final request for each project to the DSAE.

If a county has an open Disaster project that received 100% of the funds up front there are some things to be aware of. Prior to the project getting final approval a complete accounting of actual costs and all funding received must be submitted to the DSAE. If Disaster funds were received and not spent, or projects received FEMA or Federal ER funding those funds must be repaid to the Disaster account.


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DISASTER COMMITTEE ESTIMATE APPROVED Historically when the Disaster Committee’s estimate was approved funds were sent to the county. An entry to record the receipt of cash and the corresponding liability should be recorded.

Accounting Entry: Record Receipt of Disaster Funds


Credit Account: (liability) Disaster Funds - Due to State Aid

WORK BEGINS ON THE PROJECT As projects are completed and the funds are expensed on eligible costs the revenue should be recognized, the liability reduced, and the contractor paid.

Record Disaster work certified

Accounting Entry: Record Disaster Work Certified



Recognize Disaster revenue

Accounting Entry: Recognize Disaster Revenue

Debit Account: (liability) Disaster Funds Due to State Aid

Credit Account: (liability) Disaster Construction - Revenue

Record disbursement to contractor




PROJECT IS FINALIZED Upon completion of all disaster related work, the remaining Disaster funds must be returned to the State Aid Disaster fund. The full accounting of the work along with the repayment is submitted to State Aid

Accounting Entry: Record Final Reimbursement to State Aid Disaster

Debit Account: (liability) Disaster Funds - Due to State Aid



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STATE AID PAYMENT REQUEST (SAPR) When moving the costs from the master project to the individual projects you will need to send in a separate pay request for each. Make sure you include all the funding sources on the project that the funds are being moved to. In the illustration below there would be no payment made.

TURNBACK CONSTRUCTION ACCOUNT

NARRATIVE A portion of the Highway User Tax Distribution (HUTD) is set aside to fund the transfer of roads that have been determined to be on the wrong system. Either through realignment of a trunk highway or through changes in traffic patterns the road may need to move from the Trunk Highway System to the County State Aid System. These projects must be applied for and final projects are determined by SALT based on funds available and project impact.

Turnback projects can be funded with either a Payment in Lieu or the usual encumbrance method. The method to be used is determined by the negotiations and is stated in the Turnback Agreement. The Encumbrance Method will be discussed first, followed by the Payment in Lieu Method.


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When a project is let a State Aid Payment Request can be submitted for 95% of the turnback eligible work. The remaining 5% is encumbered and will be paid when the project is complete, and all costs are verified. Upon final any unspent funds will need to be returned to State Aid, it will not be considered an overpayment and applied to the next project, since this is not an annual allotment. Any unspent funds that remain encumbered will be released back to the Turnback Fund.

ACCOUNTS NEEDED (const expense) Turnback Construction Expenses (there may be numerous of these) (revenue) Turnback – Revenue (asset) Cash (asset) Turnback - Receivable (liability) Contracts Payable (liability) Turnback - Unearned Revenue

SEQUENCE OF EVENTS

PROJECT IS AWARDED Once a Turnback project is approved an encumbrance will be set up for the estimated project cost. After the project is let the county can set up Turnback Construction Receivable and Turnback Unearned Revenue Accounts.

Accounting Entry: Record Turnback Receivable

Debit Account: (asset) Turnback Construction - Receivable

Credit Account: (liability) Turnback Construction - Unearned Revenue

95% PAYMENT IS RECEIVED FOR THE PROJECT After the initial SAPR has been approved you will receive the requested percentage payment, up to 95% for the project. State Aid advances 95% of the total Turnback Construction Obligation and the remaining 5% remains encumbered.

To keep contract costs clear it is a good idea to make two entries if you are being paid for Project Development, Construction Engineering, Utility Relocation and/or Right of Way.

Record receipt of Turnback Contract funds

Accounting Entry: Record Receipt Of Turnback Contract Funds


Credit Account: (asset) Turnback Construction - Receivable

Record receipt of turnback engineering, force account and/or ROW funds


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Accounting Entry: Record Receipt Of Turnback Engineering, Force Account And/Or ROW Funds


Credit Account: (revenue) Turnback Construction - Revenue

WORK BEGINS ON THE PROJECT Work progresses and Turnback eligible items are certified. Payments are made to the contractor less retained funds in the same manner as a regular construction project. The following entries will need to be made to recognize the construction expense, earned Turnback revenue, and the disbursement to the contractor.



Debit Account: (expense) Turnback Construction Expense


Recognize turnback revenue for work certified

Accounting Entry: Recognize Turnback Revenue For Work Certified

Debit Account: (liability) Turnback Construction - Unearned Revenue






PROJECT IS FINALIZED Numerous partial payments may be made to the contractor and SAPRs completed following the same process as in the steps above. The final SAPR must indicate that the project is final and request any remaining unpaid Turnback funds equal to the value of eligible work certified or the Turnback allocation whichever is less. Upon final four main situations can occur relating to the State Park funds. These are:

• Project is completed exactly as estimated • Project overruns original estimate • Project Underruns original estimate without an overpayment • Project Underruns original estimate with an overpayment

PROJECT IS COMPLETED EXACTLY AS ESTIMATED The remaining unpaid Turnback funds are released to the county upon the receipt of the executed SAPR.


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Accounting Entry: Record Receipt Of Turnback Funds



PROJECT OVERRUNS ORIGINAL ESTIMATE The remaining Turnback funds up to original encumbrance amount are released to the county upon the receipt of the executed SAPR. If additional funds are requested and granted it is the county will receive additional Turnback funds, if not the overage will be paid from local funds.

Recognize Turnback work certified over original allocation

Accounting Entry: Recognize Turnback Work Certified Over Original Allocation

Debit Account: (liability) Turnback Construction - Receivable


Recognize expense greater than Turnback allocation

Accounting Entry: Recognize Expense Greater Than Turnback Allocation



Record receipt of Turnback Contract funds

Accounting Entry: Record Receipt Of Turnback Contract Funds



Record receipt of turnback engineering, force account and/or ROW funds

Accounting Entry: Record Receipt Of Turnback Engineering, Force Account And/Or ROW Funds


Credit Account: (asset) Turnback Construction - Revenue

PROJECT UNDERRUNS ORIGINAL ESTIMATE WITHOUT AN OVERPAYMENT The remaining Turnback funds up to an amount equal to the value of eligible work certified are released to the county upon the receipt of the executed SAPR, if no further Turnback eligible costs remain any retained funds will be released to the county.

Record underrun


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Record receipt of Turnback funds




PROJECT UNDERRUNS ORIGINAL ESTIMATE WITH AN OVERPAYMENT Upon the receipt of the executed SAPR, no further Turnback to the county. These funds will have to be repaid to the Turnback fund.

Record underrun




Record repayment of Turnback funds

Accounting Entry: Record Repayment Of Turnback Funds

Debit Account: (asset) Turnback Construction - Receivable


Note: The Turnback fund overpayments must be repaid by the county. They are not left as outstanding overpayments and applied to future projects like regular allotment overpayments.

FINAL PAYMENT TO CONTRACTOR When the project is finalized and all the required documentation is received from the contractor, the county will release the retained funds to the contractor.




TURNBACK – LUMP SUM METHOD (PAYMENT IN LIEU) A lump sum Turnback occurs when the state agrees to either transfer funds from the Turnback account into the county’s construction account or make a payment from the Turnback account for an agreed upon amount of the


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value of work needed to bring the road to acceptable standards. The amount is established, an agreement is executed, and a transfer or payment is made. The amount is final and is not a reimbursement for actual costs. If the work done later overruns this amount, the local agency must fund the additional costs. There are different reasons that the Lump Sum Method is used, generally though, the state wants to turnback the road and the county is not ready to or able to do the work. In these cases, an agreement is executed determining the value of any work needed to get the road up to standards for the county and it is understood that the work will be completed by the county in the future. The road is transferred to the jurisdiction of the county and is added to the appropriate system.

The State Aid Rules (8820.230 Subp. 6a) refer to the Payment in Lieu practice. The intent is that the amount determined through negotiations in the Turnback Agreement will be transferred into the receiving county’s (regular or municipal) construction allotment account based on the road system the turnback is added to. It is possible for the local agency to negotiate a direct payment of the turnback funds, but this is not the standard practice. To allow for possible inflation of costs, the rule states that the payment should reflect the “net value of eligible turnback costs for a project to be constructed within 20 years of the release date.” This is not stating the project is to be constructed within the next 20 years.

TURNBACK ALLOCATION – TRANSFER After the agreement is executed and the funds are transferred, the county will see an increase in the construction allotment balance. An entry must be made to record the change. The funds are then requested and spent on projects just like any other State Aid construction project and no more turnback entries will be needed. State Aid encourages the use of this method.

Accounting Entry: Record Construction Allotment Increase

Debit Account: (asset) Regular or Municipal Construction - Allotment

Credit Account: (liability) Regular or Municipal Construction - Unearned Revenue

TURNBACK CASH PAYMENT In some cases, the Payment in Lieu is paid directly to the county as a cash disbursement. These funds are still considered State Aid funds and must be spent for the specific purpose of the law for “constructing, reconstructing, and improving State Aid highways”. In these cases, it is good practice to isolate the funds and keep a record of the expenditures. Once the funds are received an entry must be made to record the receipt of cash. It is recommended that each lump sum turnback be tracked separately.



Credit Account: (liability) Turnback Construction - Unearned Revenue


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SEQUENCE OF EVENTS

WORK BEGINS ON THE PROJECT The county already has the funds, so a receivable is not required. As work progresses on eligible projects and becomes certified, entries are made to decrease the liability, record the revenue earned, and record contractor payments.

Recognize Turnback revenue

Accounting Entry: Recognize Turnback Revenue







PROJECT IS FINALIZED The lump sum turnback payment received by the county was a defined amount. Funds are expensed on eligible projects until they are depleted.

Chapter 6- Federal, Delegated & Traditional Contract Process

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CHAPTER 6 FEDERAL AID DELEGATED AND TRADITIONAL CONTRACT

PROCESS

NARRATIVE Federal Aid Construction projects are projects that are funded in part with federal funds. The matching funds can be from many sources including State Aid Regular or Municipal funds, State Transportation Bond for Locals Funds (which includes Bridge Bonding, LRIP, and Disaster Bonds), County local funds, or those of townships, cities or private enterprises within the county who are participating in the funding of the project.

The two types of Federal Aid construction projects are Delegated Contract Process (County let projects) and Traditional Contracts (MnDOT let projects).

An important difference between the Delegated Contract Process and Traditional Contracts is the way the funds are handled.

DELEGATED CONTRACT PROCESS (COUNTY ADMINISTERS CONTRACT) The county lets the project, makes payments to the contractor, and collects the necessary funds. The county must submit a DCP payment request to MnDOT for the Federal Funds after contract payments are made.

Contact your DSAE to determine if they want to be copied on partial payments. When a county submits a DCP final payment to MnDOT, the DSAE must be copied. Federal Funds are on a reimbursement basis only; they cannot be advanced at the beginning of the project. State Aid Funds can be advanced to the county at the beginning of the project like non-federal projects. The county pays any local share (county, township, individuals, etc.) as the contract payments are made.

Since the accounts used and the entries to record transactions are different for the two processes, the following pages are broken into 2 sections; DELEGATED CONTRACT PROCESS (County let projects) and TRADITIONAL PROJECTS (MnDOT let projects). In both cases the state will encumber 5% of the total State Aid share. This amount is removed from the Counties available State Aid balance. With TRADITIONAL PROJECTS (MnDOT let projects) the 5% is held in an account identified as Anticipated Federal Transfers. This account is like the Receivable Account used for County let projects. However, since the county does not receive the funds it is not a receivable. Like the Receivable Account, the Anticipated Federal Transfers Account is set up to record the encumbered portion of the State Aid funds until the project is final.

The DCP Payment Request Guide may be found on the State Aid Finance website, along with the DCP Checklist and the DCP Final Payment sample packet.


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TRADITIONAL PROJECTS (MNDOT ADMINISTERS CONTRACT) MnDOT, as an agent for the county, administers the contract for the county. MnDOT lets the project, makes the payments to the contractor, and collects Federal, State Aid or local reimbursement. Federal Funds are collected and deposited into the Federal County Road & Bridge Account with MnDOT. The matching State Funds ARE NOT disbursed to the county. State Aid Finance transfers the funds directly into the Agency Account from the county’s appropriate State Aid Account. A copy of the TRANSFER NOTICE can be found on State Aid Finance’s website in the SAAS Reports – State Aid County and Municipality Reports – SAAS Payment Document – Construction. Enter the SP # and click View Report to make the appropriate entries to your records. Local funds (county, township, individuals, etc.) are billed to the county up front before the project can be awarded.

DELEGATED CONTRACT PROCESS (COUNTY ADMINISTERS CONTRACT) Using the Delegated Contract Process, the County lets the project, makes payments to the contractor, and collects the necessary funds.

Federal and State Transportation Bond for Locals Funds are paid on a reimbursement basis only; they cannot be advanced at the beginning of the project. State Aid funds can be advanced to the County at the beginning of the project like non-federal projects. The county pays any local share (county, township, individuals, etc.) as the contract payments are made.

The county may submit a DCP payment request for the Federal and State Transportation Bond for Locals Funds once the Expenses have been incurred provided they have an approved payment process assuring the contractor is paid promptly upon receiving reimbursement of the Federal share.

SHARED FEDERAL REVENUE When more than one local government has a project as part of a DCP it is the administering government that recognizes all federal revenue from the DCP. The administering government does not capitalize the projects for the other governments. All participating entities will capitalize their portion of the project if it is required; this would be a capital contribution to those that are not administering the project.

State Aid and local funds that are forwarded to the administering government from the other participating governments are to be recognized as reimbursements (revenues). These revenues are not required to be netted to expenditure accounts.

ADVANCE OF STATE AID FUNDS FOR FEDERAL PROJECTS If the county has funds available in their State Aid Construction Accounts, they may use these funds in lieu of Federal funds on a DCP. The State Aid payments are recognized in the following examples:


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For State Aid Construction funds that are received in lieu of federal funds:

Record receipt of State Aid

Accounting Entry: For Amount Of Payment


Credit Account: (liability) Due to State Aid Federal Funds

Recognize revenue


Debit Account: (liability) State Aid - Unearned Revenue (Regular or Municipal Construction)

Credit Account: (asset) State Aid - Allotment (Regular or Municipal Construction)

If Federal funds become available, SAF will transfer the amount of the Federal reimbursement back to the county’s State Aid construction account and the following entries will be required. This transfer may occur within the same year or in future years.

For transfer of Federal funds to State Aid construction account to reimburse State Aid funds and recognize federal revenue.

Record transfer of Federal Funds to reimburse State Aid funds

Accounting Entry: For Amount Of Federal Transfer Notice

Debit Account: (liability) Due to State Aid Federal Funds

Credit Account: (revenue) Federal Construction - Revenue

Recognize federal revenue


Debit Account: (asset) State Aid - Allotment (Regular or Municipal Construction)

Credit Account: (liability) State Aid - Unearned Revenue (Regular or Municipal Construction)

If the county does not have funds available in their State Aid Construction Account, they may advance State Aid funds. The entries for recognizing State Aid revenues for Federal funds would be the same as those discussed above. The discussion below describes the entries required to recognize the State Aid Advance of funds.

ADVANCE RESOLUTION If the county needs to borrow State Aid Funds in excess of their account balance it is mandatory for the county board to pass a resolution. A copy of the resolution must be sent to the SAF. The County Engineer will be notified upon receipt of the resolution.


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A resolution is not required when using State Aid funds in lieu of federal funds if there are sufficient funds available in the State Aid Account.

STATE AID FUNDING ON DELEGATED CONTRACT PROCESS

ACCOUNTS NEEDED (const expense) Regular Construction Expenses (const expense) Municipal Construction Expenses (const expense) Federal Construction Expenses (const expense) State Bond Construction Expenses (revenue) Regular Construction - Revenue (revenue) Municipal Construction - Revenue (revenue) Federal Construction - Revenue (revenue) State Bond Construction - Revenue (asset) Cash (asset) Regular Construction - Receivable (asset) Municipal Construction - Receivable (asset) Federal Construction - Receivable (asset) State Bond - Receivable (asset) Regular Construction - Allotment (asset) Municipal Construction - Allotment (liability) Contracts Payable (liability) Regular Construction - Unearned Revenue (liability) Municipal Construction - Unearned Revenue (liability) Due to State Aid - Overpayments

SEQUENCE OF EVENTS

PROJECT IS APPROVED State Aid Allotments are reduced throughout the year as construction contracts are let and sent in for State Aid funding approval. At the time State Aid funding is approved by the State Aid office you will need to recognize the State Aid Receivable. (Example A)

For State Aid Regular and/or Municipal Construction Obligation

Accounting Entry: For Amount of State Aid Obligation Only

Debit Account: (asset) State Aid - Receivable (Regular or Municipal Construction)



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ADVANCE PAYMENT FOR STATE AID FUNDS RECEIVED FOR THE PROJECT After the State Aid Funding has been approved, you will receive the actual payment for the project. The State advances 95% of the total State Aid Construction Obligation. The remaining 5% is encumbered and will be paid to you when the project is complete, and all costs are verified. (Example A)

Accounting Entry: Recognize The Receipt Of The State Aid Payment


Credit Account: (asset) State Aid - Receivable (Regular or Municipal Construction)

PROJECT DEVELOPMENT, RIGHT OF WAY REIMBURSEMENT, ETC. The process for reimbursement of Project Development, Right of Way, etc. is the same whether a project is a Traditional or Delegated Project. Refer to page 62 of this chapter for details.

WORK BEGINS ON THE PROJECT After State Aid approval, work begins on the contract. Your county inspectors verify that the work is done according to specifications, and a partial payment is paid to the contractor. The amount of Work Certified (total actual work performed) MINUS retainage (funds withheld from contractor) EQUALS cash paid to the Contractor (actual disbursement).

The following entries will need to be made to recognize the Construction Expense, the earned State Aid, Federal and/or State Bond Revenue, and the Disbursement to the Contractor. (Example A)

RECOGNIZE THE CONSTRUCTION EXPENSE

Accounting Entry: As Work Is Certified On Contract

Debit Account: (const expense) Construction Expenses (Regular, Municipal, Federal, State Bond, & Local)


RECOGNIZE REVENUE EARNED For the State Aid Allotment that can now be considered Current Year’s Earned Revenue

Accounting Entry: Recognize State Aid Revenue (Amount Of Work Certified)

Debit Account: (liability) State Aid - Unearned Revenue (Reg or Municipal Construction)

Credit Account: (revenue) State Aid Construction - Revenue (Regular or Municipal Construction)

For the Federal Funds as reported on DCP Payment Request


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Accounting Entry: Recognize Federal And/Or State Bond Revenue

Debit Account: (asset) Federal Receivable


AND -

Debit Account: (asset) State Bond Receivable

Credit Account: (revenue) State Bond Construction - Revenue

Recognize the disbursement to the contractor




REIMBURSEMENT OF FEDERAL AND STATE BOND FUNDS Once Expenses have been incurred and paid, the County can submit invoices to MNDOT TO OBTAIN REIMBURSEMENT FOR THE Federal and/or State Bond portion of the project. The DCP payment request can be found at the State Aid Finance website, by selecting SAAS Reports. After logging in, select Delegated Contract Process (DCP) Payment Request. The instructions for making a DCP Payment Request can be found at DCP Process. The following entries need to be made. (Example A)

Accounting Entry: Recognize Receipt Of Federal And/Or State Transportation Bond For Locals Funds


Credit Account: (asset) Federal Receivable

AND -



FINAL PAYMENT TO CONTRACTOR When the project is final, the county will pay the retainage to the contractor. (Example A)

Accounting Entry: Recognize Payment To Contractor




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PROJECT IS FINALIZED Numerous partial payments may be made to the contractor following the same sequence as in the steps described above. When the contract is completed a Report of Final Estimate must be submitted to the State for final approval of the State Aid funds. Once approved, you will either receive an EFT (if there is an amount due) or a State Aid Overpayment will be processed which will be applied to your next State Aid Project. A DCP Final Payment Request will also need to be submitted to the state for any final Federal and/or State Bond funds that are due.

Four different situations can occur when the project is Final. They are described below:

• Project is completed exactly as estimated • Project Overruns Original Estimate • Project underruns original estimate without an Overpayment • Project underruns original estimate with an Overpayment

PROJECT IS COMPLETED EXACTLY AS ESTIMATED You will also need to submit a DCP Final Payment Request to the State for any additional Federal and /or State

Bond funds that are due, copying the DSAE. This must be submitted even if there are no additional funds due to you. When the cash is received you will need to record the cash receipt. (Example A)

Recognize invoice

Accounting Entry: Recognize Invoice For Federal And/Or State Bond Funds

Debit Account: (asset) Federal - Receivable


AND -

Debit Account: (asset) State Bond - Receivable

Credit Account: (revenue) State Bond Construction - Revenue

Recognize receipt

Accounting Entry: Recognize Receipt Of Federal And/Or State Bond Funds


Credit Account: (asset) Federal - Receivable

AND -




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The State will send the original encumbered amount to the county which has already been recorded as a State Aid Receivable. (Example A)

Accounting Entry: Recognize Receipt Of Encumbered Amount



PROJECT OVERRUNS ORIGINAL ESTIMATE The State will send the original encumbered amount to the County as well as any additional State Aid Allotment Funds that are due and available in the allotment. The Final Notice will inform you of the total final project costs. Remember costs that were not previously recorded against your allotment must be recorded at this time. (Example B)

Reduce the State Aid allotment account to recognize the amount of the State Aid overrun

Accounting Entry: Reduce The State Aid Allotment Account To Recognize The Amount Of The State Aid Overrun.

Debit Account: (asset) State Aid - Receivable (Regular or Municipal Construction)


Recognize remaining State Aid construction revenue, total revenue will equal State Aid obligation for the project

Accounting Entry: Recognize Remaining State Aid Construction Revenue, Total Revenue Will Equal State Aid Obligation For The Project


Credit Account: (revenue) State Aid - Revenue (Regular or Municipal Construction)

Payment for State Aid obligation

Accounting Entry: Payment For State Aid Obligation



Under normal circumstances the Federal and/or State Bond entries are not affected by overruns since funds are requested on a reimbursable basis. You will also need to submit a DCP Final Payment Request to the State for any additional Federal and/or State Bond Funds that are due. This must be submitted even if there are no additional funds due to you. The entries would be identical to those described in (Example A).


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PROJECT UNDERRUNS ORIGINAL ESTIMATE WITHOUT AN OVERPAYMENT This means that the State has encumbered too much and will only reimburse the portion of the encumbered amount that covers the total actual project amount. The Final Notice will inform you of the final project costs. Remember that the amount over-estimated which previously reduced your allotment must be restored to your allotment. (Example C)




Recognize receipt




Under normal circumstances the Federal and/or State Bond entries are not affected by overruns since funds are requested on a reimbursable basis. You will also need to submit a final invoice (Form DCP 14) to the State for any additional Federal and/or State Bond Funds that are due. The entries would be identical to those described in Example A.

PROJECT UNDERRUNS ORIGINAL ESTIMATE WITH AN OVERPAYMENT This means that the State has encumbered too much and advanced too much cash to the county. As a result, the county owes the State a refund. The State usually does not request this money back. It is usually recorded as an overpayment and applied against the next construction project you submit for State Aid funding.

This money should be posted to a Liability Account (Due to State Aid - Overpayments) until you are notified of its use on another project. (Example D)





Reduce the receivable and increase the allotment for the original encumbered amount

Accounting Entry: For Amount Of State Aid Encumbered




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Under normal circumstances the Federal and/or State Bond entries are not affected by an underrun since funds are requested on a reimbursable basis. A DCP Final Payment Request needs to be submitted to the State for the final contract costs. In the case an overpayment has occurred for Federal and/or State Bond Funds an invoice will be received by the local agency for the overpayment amount.

Recognize the Federal and/or State Bond overpayment.

Accounting Entry: Recognize Payment To State For Amount Of Federal Overpayment

Debit Account: (revenue) Federal Construction - Revenue


Recognize payment to state for amount of state bond overpayment

Accounting Entry: Recognize Payment To State For Amount Of State Bond Overpayment

Debit Account: (revenue) State Bond - Revenue



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EXAMPLES

Example A


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EXAMPLE B


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Example C


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TRADITIONAL PROJECTS (MNDOT ADMINISTERS CONTRACT)

ACCOUNTS NEEDED (const expense) Regular Construction Expenses (there may be numerous of these) (const expense) Municipal Construction Expenses (there may be numerous of these) (const expense) Federal Construction Expenses (there may be numerous of these) (const expense) State Transportation Bond Construction Exps (there may be numerous of these) (revenue) Regular Construction - Revenue (revenue) Municipal Construction - Revenue (revenue) Federal Construction - Revenue (revenue) State Transportation Bond - Revenue (asset) Regular Construction - Anticipated Federal Transfers (asset) Municipal Construction - Anticipated Federal Transfers (asset) Regular Construction - Anticipated Expense (asset) Municipal Construction - Anticipated Expense (asset) Prepaid Federal Construction Expense (asset) Cash (asset) Regular Construction - Allotment (asset) Municipal Construction - Allotment (liability) Regular Construction - Unearned Revenue (liability) Municipal Construction - Unearned Revenue

SEQUENCE OF EVENTS

LOCAL OBLIGATION If the project is funded in part with local funds, the county will be required to submit 100% of the local contribution to MnDOT before the project can be awarded. The following entry would be used to record this transaction. (Example A)

Accounting Entry: Recognize Prepaid Federal Construction Expense

Debit Account: (asset) Prepaid Federal Construction Expense


STATE AID TRANSFER NOTICE When a Federal Aid construction project is let and a portion of the funding is from State Aid funds, the county will receive a PARTIAL STATE AID TRANSFER NOTICE when the funds have been transferred from their account. Under the current procedures, these dollars now represent Grant Revenue and Construction Expenses. The accounting entries associated with the initial Partial State Aid Transfer Notice are below.


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NOTE: This example has both State Aid and State Transportation Bond for Locals Funds on the project. Unlike the State Aid Funds, State Transportation Bond for Locals Funds CAN NOT be transferred until actual expenditures have been incurred and paid. For this reason, partial transfers may be processed periodically or not until the end of the project. (Example A)

To reduce the State Aid allotment by the State Aid obligation

Accounting Entry: Reduce The State Aid Allotment By The State Aid Obligation

Debit Account: (asset) Anticipated State Aid Transfers (Regular or Municipal Construction)


State Aid obligation to federal project

Accounting Entry: 95% Of State Aid Obligation To Federal Project

Debit Account: (asset) Anticipated State Aid Construction - Expense

Credit Account: (asset) Anticipated State Aid Transfers (Regular or Municipal Construction)

PROJECT DEVELOPMENT, RIGHT OF WAY REIMBURSEMENT, ETC. The process to receive reimbursement for Project Development, Right of Way, Utility Relocation, etc. is different if part of the costs is funded with Federal Funds or if no Federal Funds are involved (strictly State Aid Funds).

If Federal Funds are involved, an agreement must be written, and the funds must be approved with the Federal Highway Administration. The matching funds are generally local or Fund 29, but it is possible to have State Aid. Invoices are submitted to MnDOT for reimbursement once costs have been incurred and paid by the county. The county absorbs the local funds as the costs are incurred.

If Federal Funds are not involved, the process is easier. The county submits the request for reimbursement on the Report of State Aid Contract.

The entries below reflect the different types of entries required for the different types of requests.

COSTS WITH FEDERAL AID FUNDS When the county submits an invoice to MnDOT, the county records a receivable and the revenue earned for the amount of the invoice. The cash receipt is recorded when the county receives the money. (Example A)

Record Receivable for invoice amount from Bond Grant

Accounting Entry: State Transportation Bond Grant (If Any)

Debit Account: (asset) State Transportation Bond Grant - Receivable

Credit Account: (revenue) State Transportation Bond Construction - Revenue


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Record Receivable for invoice amount for Federal Funds

Accounting Entry: Federal Funds

Debit Account: (asset) Federal - Receivable


Record Receipt of Grant

Accounting Entry: For Amount Of State Transportation Bond Grant (if any)


Credit Account: (asset) State Transportation Bond Grant - Receivable

Record Receipt of Federal Funds

Accounting Entry: For Amount Of Federal Funds


Credit Account: (asset) Federal - Receivable

COSTS WITHOUT FEDERAL AID FUNDS (STATE AID FUND) Recognize receipt of Project Development, Construction Engineering, Utility Relocation and/or Right of Way.

Accounting Entry: For Amount Of Receipt



Recognize Revenue (for the amount of State Aid Receipt)




YEAR-END ADJUSTMENTS Run the “FCRB Ledger by Card Summary” from SAAS Reports for all your SP projects to view the deposits, federal reimbursements, and contract and engineering payments. Also run the “FCRB Payment Summary” report.

The Total row represents project payments that have been processed on behalf of the county. According to CAFR, COFARS and the MN State Auditor, the current year funds must be declared as revenue and Expenses for each type of funding for the project. (You must deduct any revenues and Expenses declared in prior years from the totals in this section.)


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The following entries should be made for EACH FCRB PROJECT SUMMARY. (Example A)

Recognize Federal expense and revenue

Accounting Entry: Recognize Federal Construction Expense And Revenue (Deduct Prior Years Expenses And Revenues)

Debit Account: (const expense) Federal Construction - Expense


Recognize Bond expense and revenue

Accounting Entry: Recognize State Transportation For Locals Bond Construction Expense And Revenue (Deduct Prior Years Expenses And Revenues).

Debit Account: (const expense) State Transportation Bond Construction - Expense


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Accounting Entry: Recognize State Transportation For Locals Bond Construction Expense And Revenue (Deduct Prior Years Expenses And Revenues).

Credit Account: (revenue) State Transportation Bond Construction - Revenue

Recognize State Aid Expense and revenue

Accounting Entry: Recognize State Aid Construction Expense And Revenue (Deduct Prior Years Expenses And Revenues)

Debit Account: (const expense) State Aid Construction - Expense (Regular or Municipal Construction)

Credit Account: (asset) Anticipated Expense (Regular or Municipal Construction)

AND -



NOTE: The Anticipated Expense accounts may carry a credit balance if construction Expenses exceed the original 95% transfer. This will be corrected by future transfers on the project.

Accounting Entry: Recognize Local Construction Expense (Deduct Prior Years Expenses)

Debit Account: (const expense) Federal Construction - Expense

Credit Account: (asset) Prepaid Federal Construction – Expense

PROJECT IS FINAL Unless more State Aid funds are transferred for the federal project (in which case the entries would be identical to those described in State Aid Transfer Notice). The county will generally not receive any notices from State Aid until the project is final. Once the project has been final by MnDOT, the county will receive a Final State Aid Transfer Notice. This notice indicates the final amount of State Aid Funds transferred for the federal project.

The situations that could occur at this point are:

• Project is completed exactly as estimated • Project is completed with an Overrun • Project is completed with an Underrun where the initial State Aid transfer is LESS THAN final contract

amount Project is completed with an Underrun where the initial State Aid transfer is MORE THAN final contract amount

PROJECT IS COMPLETED EXACTLY AS ESTIMATED Recognize remaining State Aid Construction expense


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Accounting Entry: Recognize Remaining State Aid Construction Expense



Recognize remaining State Aid Revenue

Accounting Entry: Recognize Remaining State Aid Revenue



Recognize final transfer of State Aid Funds

Accounting Entry: Recognize Final Transfer Of State Aid Funds

Debit Account: (asset) Anticipated Expense (Regular or Municipal Construction)


NOTE: Previous entries have recognized State Aid Construction Expenses, the Anticipated Expense account will have a credit balance since Expenses will exceed the original 95% transfer. The final transfer will net the balance of the Anticipated Expense and Anticipated State Aid Transfer accounts to zero.

PROJECT OVERRUNS ORIGINAL ESTIMATE Reduce the State Aid Allotment (for the amount of the State Aid OVERRUN - the difference between the transfer and the encumbered amount).

Accounting Entry: Reduce The State Aid Allotment (For The Amount Of The State Aid OVERRUN - The Difference Between The Transfer And The Encumbered Amount).

Debit Account: (asset) Anticipated Federal Transfers (Regular or Municipal Construction)


Recognize remaining Construction Expense

Accounting Entry: Recognize Remaining Construction Expense



Recognize remaining Revenue

Accounting Entry: Recognize Remaining Revenue




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Recognize final transfer of State Aid funds

Accounting Entry: Recognize final transfer of State Aid Funds



NOTE: Previous entries have recognized State Aid Construction Expenses. The Anticipated Expense account will have a credit balance since Expenses will exceed the original 95% transfer. The final transfer will net the balance of the Anticipated Expense and Anticipated State Aid Transfer accounts to zero.

UNDERRUN – INITIAL TRANSFER LESS THAN FINAL CONTRACT AMOUNT Increase the State Aid Allotment

Accounting Entry: Increase The State Aid Allotment (For The Amount Of The State Aid UNDERRUN - The Difference Between The Transfer And The Encumbered Amount).



Recognize remaining expense




Recognize remaining revenue




Recognize final transfer

Accounting Entry: Recognize Final Transfer Of State Aid Funds



NOTE: Previous entries have recognized State Aid Construction Expenses. The Anticipated Expense account will have a credit balance since Expenses will exceed the original 95% transfer. The final transfer will net the balance of the Anticipated Expense and Anticipated State Aid Transfer accounts to zero.


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Accounting Entry: Recognize Refund Of Remaining Local Funds (If Any)


Credit Account: (asset) Prepaid Federal Construction Expense

UNDERRUN – INITIAL TRANSFER MORE THAN FINAL CONTRACT AMOUNT Increase the State Aid Allotment

Accounting Entry: Increase The State Aid Allotment (For The Amount Of The State Aid UNDERRUN - The Difference Between The Transfer And The Encumbered Amount).



Recognize remaining expense




Recognize remaining revenue




Recognize the difference

Accounting Entry: Recognize The Difference Between Actual Expenses And The Initial Transfer Amount, Decrease The Anticipated Expense Account

Debit Account: (asset) Anticipated State Aid Transfers (Regular or Municipal Construction)


NOTE: The difference between the actual Expenses and the initial transfer amount will net the balance of the Anticipated Expense and Anticipated State Aid Transfer accounts to zero.

Accounting Entry: Recognize Refund Of Remaining Local Funds (If Any)


Credit Account: (asset) Prepaid Federal Construction Expense


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EXAMPLES

Example A


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Example B


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Example C


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Example D

Chapter 7 – Local Agency Bonds & Local Transportation Revolving Loan Fund

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CHAPTER 7 LOCAL AGENCY BONDS AND LOCAL TRANSPORTATION

REVOLVING LOAN FUND

LOCAL AGENCY BONDS

NARRATIVE Periodically, due to a cash flow need, the county may sell debt (bonds) with the assistance of financial advisers to finance one or more projects. The State of Minnesota is not a party to any bond issue made by a local government agency, but the annual State Aid Allotments can sometimes be used for repayment of the debt.

It is important to understand that there are accounting guidelines to be followed to accurately record the bond proceeds, bond expenditures, and any revenue that may be earned from interest. There are tax implications to be tracked, public reporting that may be requested showing bond uses, and of course the need for the Highway Department to accurately record the value added to their road system. Each county will have their own unique set of procedures. Prior to bond issue it is important that each department understand its responsibility in the process to avoid duplication as well as omission of important steps.

This chapter will address two types of bonds often used by counties. The difference between the two is the pledge for the source of repayment. Determining the type of bond to be issued looks at the use of the funds and the sources available for repayment. In both cases, once the county determines that it will issue bonds a financial advisor is contacted, and the bond issue process begins following similar steps up through the point of sale.

General Obligation (G.O.) Bonds are backed by a pledge of the full faith and credit of the county and thus, generally repaid with property tax levies. These bonds can be used for very broad purposes depending on the county’s financial plan and structure. Accounting for G.O. bonds will be an internal function and no reporting or compliance will be required by State Aid. They are included here as a part of the Highway Department’s possible accounting entries throughout the bond’s life.

Local Agency Bonds (L.A.) are Revenue Bonds for which the county has pledged repayment with the county’s available annual construction and maintenance allotments. These bonds must be used for the purposes stated in MN Statute 162.181; “establishing, locating, relocating, constructing, reconstructing and improving county State Aid highways and constructing buildings and other facilities for maintaining county State Aid highways.” This statute, along with MN State Aid Rule 8820.1500 Subp. 11, also establish a limit on the bond principal amount that can be considered for issue. State Aid requires a repayment schedule of principal and interest be provided within 30 days of the bond issue. This schedule is used to verify and set aside annual payments that will be released to the county for their repayment of the bond principal and interest. Sometimes to secure a lower interest rate, a County will issue G.O. Revenue Bonds, which pledge the allotments for the repayment of the bonds but includes a secondary pledge of the county’s taxing authority.


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ACCOUNTS NEEDED (expense) Bond Interest (expense) Bond Issuance Costs (expense) Bond Principal Retirement (revenue) Appropriate Construction - Revenue (revenue) Appropriate Maintenance - Revenue (revenue) Investment Interest - Revenue (asset) Cash (asset) Appropriate Construction - Allotment (asset) Appropriate Maintenance - Allotment (asset) Invested Bond Funds (unearned inflow) Appropriate Construction - Unearned Revenue (unearned inflow) Appropriate Maintenance - Unearned Revenue (equity) Assigned Fund Balance (equity) Restricted for Construction (equity) Restricted for Debt Service (other) Other Financing Uses -Transfers Out (other) Other Financing Sources - Transfers In (other) Other Financing Sources - Bonds Issued (other) Other Financing Uses - Discount On Bonds Issued (other) Other financing Sources - Premium On Bonds Issued

SEQUENCE OF EVENTS Entries are the same for both general obligation and local agency bonds from the bond issue through the bond expenditure. The differences lie in the annual bond repayment accounting. Entries here are provided for the Highway Department Accounts only and are provided as guidance; actual account titles will vary.

BOND ISSUE If the bond funds are receipted in the Auditor’s office for the bond issuance, no entries are made at the Highway Department at this time.

When bonds are sold and the cash is received by the Highway Department it is considered an “Other Financing Source”, not operating revenue. The bond issuance costs may or may not be a part of the Highway Department entry. If the funds are transferred from another fund, the expense may have been recorded there and should not be duplicated.

Accounting Entry: Record The Issue Of Bonds And The Related Issue Costs

Debit Account: (asset) Cash (expense) Bond Issue Costs

Credit Account: (non-operating) Other Financing Sources - Bonds Issued


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Bonds issued in a favorable market can create a “premium” meaning they sold for more than the face value of the bonds, providing additional funds for the county. If the market is unfavorable the bond may sell at a discount, or for less than the face value of the issue. In both cases this would be recorded with an additional line to the journal entry above for “Other Financing Sources – Bonds Issued” as a credit for a premium issue or a debit in the case of a discounted issue. It is required to break this amount out in the accounting record for tracking.

The funds received from a bond issue are often recorded into a Construction Account within the Highway Fund that tracks revenues and expenditures impacting the bond proceeds used for construction. If the Highway Department receipted the face value of the bond funds (above) this entry would be made to establish a Construction Account.

Accounting Entry: Record The Issue Of Bonds And The Related Issue Costs

Debit Account: (equity) Assigned Fund Balance

Credit Account: (equity) Restricted for Construction

INVESTED FUNDS If invested funds that are not recorded by the Highway Department no entries would be made.

It is not uncommon for bond funds to be invested immediately to earn interest revenue until they are expensed. In the case of general obligation bonds all revenue earned is generally returned to the Debt Service Fund to be used for future payments. This is not the case for local agency bonds if their future payments are satisfactorily secured by the annual allotments.

Record the investment of bond proceeds

Accounting Entry: Record The Investment Of Bond Proceeds

Debit Account: (asset) Invested Bond Funds


When investments earn interest income that is booked in the Highway Department’s Debt Service Fund/Accounts.

Record the investment revenue

Accounting Entry: Record The Investment Revenue


Credit Account: (revenue) Investment Interest Revenue

Transfer interest income to the Debt Service fund

Accounting Entry: Transfer Interest Income To The Debt Service Fund

Debit Account: (Non-Operating) Other Financing Uses –Transfers


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Accounting Entry: Transfer Interest Income To The Debt Service Fund

Credit Account: (equity) Restricted - Debt Service Fund

CONTRACT PAYMENTS ARE PROCESSED The Highway Department processes all the normal entries for contract expenditures through the project. (See Chapters 3 and 4).

When the bond funds are held in a fund at the Auditor’s office, it is likely that a request to transfer funds will need to be made to reimburse the funds that the Highway Department has paid out to the contractor or has certified.

Accounting Entry: Recognize Funds Transferred Into The Highway Department To Cover Construction Expenditures


Credit Account: (Non-Operating) Other Financing Sources - Transfers In

When the bond funds are held in the Highway Department, no additional entries are required.

ANNUAL PRINCIPAL AND INTEREST PAYMENTS

GENERAL OBLIGATION BONDS (G.O.) During the year, funds from a predetermined repayment source will be deposited into the Debt Service Fund in anticipation of the payment of principal and interest due that year. There are numerous revenue sources and variations on where and when they are recorded.

If the Debt Service Fund is recorded in the Auditor’s office, the Highway Department will not make any entries for the accrual of revenue throughout the year or the annual payment of interest or principal on the bond. These accounts will be tracked in another fund.

If revenues are collected in another fund and transferred to a Debt Service Fund in the Highway Department, it is likely that a request to transfer funds will need to be made to initiate the transfer.

Accounting Entry: Recognize Funds Transferred Into The Highway Department To Cover The Annual Principal And Interest


Credit Account: (Non-Operating) Other Financing Sources - Transfers In

When the Debt Service Fund is recorded in the Highway Department, the current portion of the bond principal and interest will need to be paid to the bond company.

Record payment of the current portion of bond principal


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Accounting Entry: Record Payment Of The Current Portion Of Bond Principal

Debit Account: (expense) Bond Principal Retirement


Record payment of the current portion of bond interest

Accounting Entry: Record Payment Of The Current Portion Of Bond Interest

Debit Account: (expense) Bond Interest


LOCAL AGENCY BONDS (L.A.) In compliance with Minnesota Statute 162.181, the county can use its appropriate annual construction allotment to make bond principal payments and its appropriate annual maintenance allotment to make the bond interest payments. At year end the amount paid for interest will be separated from maintenance expenditures on the Annual Summary of Highway Maintenance Expenditures.

ALLOTMENT SET ASIDE The amount of principal and interest due annually are set aside by State Aid Finance each January when the new allotments are issued. Any advance of construction funds from the previous year is repaid first. From the remaining balance, if there is any, the bond principal due in the current year (March – next February) is “set aside” from the available allotment balance and held until it is needed. If there are insufficient funds to make the bond principal payment, funds will not be automatically advanced from the future year’s allotment. If an advance is needed, an Advance Resolution must be submitted. The interest payments cannot be advanced so they will be paid short if there are insufficient funds in the maintenance allotment.

The county should book the bond set aside when it occurs in January so that it will balance monthly to the allotment accounts.

Record the reduction of the construction allotment for the bond principal due in the current year

Accounting Entry: Record The Reduction Of The Construction Allotment For The Bond Principal Due In The Current Year

Debit Account: (unearned inflow) Appropriate Construction - Unearned Revenue

Credit Account: (asset) Appropriate Construction Allotment

Record the reduction of the construction allotment for the bond interest due in the current year

Accounting Entry: Record The Reduction Of The Construction Allotment For The Bond Interest Due In The Current Year

Debit Account: (unearned inflow) Appropriate Maintenance - Unearned Revenue

Credit Account: (asset) Appropriate Maintenance - Allotment


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STATE AID RELEASES BOND PRINCIPAL AND INTEREST State Aid Finance will hold the set aside bond funds until the county submits the Affidavit to Request Bond Payment. Once that form is received the payment is released to the county. The Affidavit must be submitted about 30 days prior to each payment release, generally twice a year per bond.

In many counties the payments from State Aid are receipted at the Auditor’s office and deposited into the Highway Fund. If the Auditor will be issuing the bond payments, the funds can be deposited directly into the fund the payments will be made from, avoiding the need for an additional transfer. The Highway Department would then recognize the appropriate revenue, but the interest expense and the Debt Service Fund would be recorded in the other fund.

Record revenue earned for bond principal payment

Accounting Entry: Record Revenue Earned For Bond Principal Payment

Debit Account: (non-operating) Other Financing Uses - Transfers

Credit Account: (revenue) Appropriate Construction - Revenue

Record revenue earned for bond principal interest

Accounting Entry: Record Revenue Earned For Bond Principal Interest

Debit Account: (non-operating) Other Financing Uses - Transfers

Credit Account: (revenue) Appropriate Maintenance - Revenue

If the Highway Department is recording the Debt Service activity and will be issuing the bond payments, the revenue, debt service and interest expense entries will be made on the Highway Department books.

Record cash received and corresponding revenue for the bond principal

Accounting Entry: Record Cash Received And Corresponding Revenue For The Bond Principal



Record cash received and corresponding revenue for the bond interest

Accounting Entry: Record Cash Received And Corresponding Revenue For The Bond Interest



COUNTY MAKES BOND PRINCIPAL AND INTEREST PAYMENT

Accounting Entry: Record The Payment Of The Bond Principal And Interest To The Bonding Company

Debit Account: (expense) Bond Principal


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Accounting Entry: Record The Payment Of The Bond Principal And Interest To The Bonding Company

(expense) Bond Interest


APPLYING BOND FUNDS In the State Aid Accounting System (SAAS) there are two balances tracked for a single bond principal. The first is the “Outstanding Bond Principal” that will be reduced annually with the bond principal payments and reflects the remaining debt to be paid by the county. The second is the “Unapplied Bond Principal” that is reduced when the county submits a State Aid Payment Request and states that bond funds have been applied to eligible project costs.

State Aid must ensure that the funds paid annually for bond principal and interest from State Aid Allotments are being spent for the legal purposes defined in MN statute 162.181. In the SAAS Reports Menu, there is a report listing the projects and amounts that the county has paid using bond funds rather than State Aid Funds. If a county has more than one unapplied bond, funds are applied to the oldest bond first.

The bond is not considered completely satisfied until both the “Outstanding Bond Principal” and the “Unapplied Bond Principal” reach zero.

REFUNDING BONDS During the life of a bond the county may “refund” or refinance the bond for a better interest rate or to restructure debt. In this process, the unpaid bond principal is in essence “paid in full” with the issue of the new bond.

This is not done without a fee, and the bond issue fee is often added to the existing bond principal. If the bond issue fees will be paid from State Aid Allotments, the county must be aware that there is additional principal to be “Applied”.

State Aid considers a bond refund to be the same as a new bond issue and requires the same information to be submitted

YEAR END REPORTING On the Annual Summary of Maintenance Costs for the county, bond interest should be reported separately in such a way that it is not added into the calculation for the county's average cost per mile figure for road maintenance. The inclusion of these figures would inflate the county’s average maintenance costs per mile.

TRANSPORTATION REVOLVING LOAN FUND


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NARRATIVE The Transportation Revolving Loan Fund (TRLF) is authorized in MN Statute 161.04 and was created to finance one or more construction projects in advance of when the county’s funds would have allowed them to do so. TRLF loans follow all the general rules of bonds as discussed in the previous section. These loans are not sold publicly as a bond issue is, and the debt accrues as the funding is spent so annual payments may vary. The loan funds are generally kept in the Highway Department fund because they are disbursed out quickly. Additional governing over the TRLF is provided in Minnesota Rule 8820.1500 Subp. 11a.

The principal and interest on the TRLF loans are generally recouped annually from the county’s State Aid Allotments, the same as local agency bonds, according to a payment schedule.

ACCOUNTS NEEDED (expense) Loan Interest (expense) Loan Principal (revenue) Appropriate Construction - Revenue (revenue) Appropriate Maintenance - Revenue (asset) Cash (asset) Appropriate Construction - Allotment (asset) Appropriate Maintenance - Allotment (unearned inflow) Appropriate Construction – Unearned Revenue (unearned inflow) Appropriate Maintenance – Unearned Revenue (equity) Assigned Fund Balance (equity) Restricted For Construction (other) Other Financing Uses - Transfers Out (other) Other Financing Sources - Transfers In (other) Other Financing Sources - Loans Issued

SEQUENCE OF EVENTS The sequence of events below describes the procedures to record the payback of a TRLF loan.

TRLF LOAN PROCEEDS ARE RECEIVED TRLF loan proceeds are distributed to the county as funds are requested through the program.

Record for amount of TRLF loan proceeds

Accounting Entry: Record For Amount Of TRLF Loan Proceeds


Credit Account: (non-operating) Other Financing Sources - Transfers In

AND -


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Accounting Entry: Record For Amount Of TRLF Loan Proceeds

Debit Account: (equity) Assigned Fund Balance

Credit Account: (equity) Restricted for Construction

If the loan funds are invested and interest is earned, entries like the bond investment entries would be made.

The Highway Department processes all normal entries for contract expenditures through the project. (See Chapter 3 and Chapter 4)

STATE AID FUNDS RECEIVED The allotment is not automatically reduced in January as it is for bond payments, so the payment entry will be made when the funds are paid out to the county (about a month prior to the loan due date). The principal and interest amounts received should match the amortization schedule provided by the Public Facilities Authority (PFA).

Generally, a payment schedule is established and provided to the county by the PFA. This schedule may change since the amount borrowed may increase. It is important to verify that the PFA furnished an updated schedule to State Aid Finance each time a distribution of loan funds has occurred.

Record the reduction of the construction allotment for the loan principal

Accounting Entry: Record The Reduction Of The Construction Allotment For The Loan Principal

Debit Account: (liability) Appropriate Construction - Unearned Revenue

Credit Account: (asset) Appropriate Construction - Allotment

Record the reduction of the construction allotment for the loan interest

Accounting Entry: Record The Reduction Of The Construction Allotment For The Loan Interest

Debit Account: (liability) Appropriate Maintenance - Unearned Revenue

Credit Account: (asset) Appropriate Maintenance - Allotment

Record cash received from the appropriate construction allotment for current loan principal payment due

Accounting Entry: Record Cash Received From The Appropriate Construction Allotment For Current Loan Principal Payment Due



Record cash received from the appropriate maintenance

Accounting Entry: Record Cash Received From The Appropriate Maintenance Allotment For Current Loan Interest Payment Due



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Accounting Entry: Record Cash Received From The Appropriate Maintenance Allotment For Current Loan Interest Payment Due


LOAN PAYMENT MADE Record the annual payment made to the PFA for loan principal

Accounting Entry: Record The Annual Payment Made To The PFA For Loan Principal

Debit Account: (expense) Loan Principal Retired


Record the annual payment made to the PFA for loan interest

Accounting Entry: Record The Annual Payment Made To The PFA For Loan Interest

Debit Account: (expense) Loan Interest


Chapter 8 – Advanced Encumbrance

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CHAPTER 8 ADVANCED ENCUMBRANCE

STATE AID ADVANCE

NARRATIVE Periodically, the county may exceed their State Aid Allotments, if this occurs the county may get a State Aid Advance for the funding source that is short of funds. The County Board must pass a resolution and it must be on file with State Aid before any advance may occur. Advances on the next year’s allotment cannot be recognized as revenue, revenues must be reduced on projects that have incurred an advance.

ACCOUNTS NEEDED (const expense) Regular Construction (there may be numerous of these) (const expense) Municipal Construction (there may be numerous of these) (const expense) Town Bridge (there may be numerous of these) (revenue) Regular Construction - Revenue (revenue) Municipal Construction - Revenue (revenue) Town Bridge - Revenue (asset) Cash (asset) Regular Construction - Receivable (asset) Municipal Construction - Receivable (asset) Town Bridge - Receivable (asset) Regular Construction - Allotment (asset) Municipal Construction - Allotment (asset) Town Bridge - Allotment (asset) Regular Construction – Advance Payable (asset) Municipal Construction – Advance Payable (asset) Town Bridge – Advance Payable (liability) Regular Construction - Unearned Revenue (liability) Municipal Construction - Unearned Revenue (liability) Town Bridge – Unearned Revenue

SEQUENCE OF EVENTS

RESOLUTION ON FILE It is mandatory for the county board to pass a resolution to advance funds. A copy of the resolution must be sent to the State Aid Finance office. The County Engineer will be notified upon receipt of the resolution. Resolution to Advance Funds

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PROJECT IS APPROVED Your allotments are reduced throughout the year as construction contracts are let and payment requests are sent in for State Aid Funding Approval. When State Aid approves the funding, the State Aid Receivable will need to be recognized. (Example A)

Accounting Entry: For Amount Of State Aid Construction Obligation Only



NOTE: The allotment will have a credit balance when the amount requested on a project exceeds the remaining balance of the allotment.

FUNDS ARE ADVANCED The amount requested exceeds the amount of the remaining allotment and an advance occurs. The amount of the advance will appear on the Project Payment Notice (Project Payment Notice Example.)

95% PAYMENT IS RECEIVED FOR THE PROJECT After the State Aid Partial Payment Request has been approved you will receive the actual payment for the project. 95% of the total State Aid Construction Obligation is disbursed. The remaining 5% is NOT encumbered; State Aid does not advance funds for the encumbrance amount. (Example A)

Accounting Entry: For 95% Of State Aid Obligation Only



NOTE: The “Encumbrance Balance” on the Status Report will not include any projects that have been paid to the county with a State Aid Advance. The State Aid Receivable on your system will differ by the amount of the projects that have not been encumbered. The “Balance Available” on the Status Report must have the projects that have not been encumbered deducted to reconcile to the State Aid Allotment on the county costing system.

WORK BEGINS ON THE PROJECT Your county inspectors verify that the work is indeed done according to specifications and a partial payment is paid to the contractor. There are two things to be aware of:

Amount of Work Certified ($ amount of work performed)

Minus: Any retainage ($ withheld as an insurance factor)

Equals: Cash paid to Contractor ($ amount of actual disbursement)

The following entries will need to be made to recognize the construction expense, the earned State Aid revenue and the disbursement to the contractor. (Example A)


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NOTE: Excess revenues from State Aid Advances will be backed out at year end.

Recognize the construction expense

Accounting Entry: Recognize Expenses As Work Is Certified On Contract.



Recognize earned revenue








PROJECT IS FINALIZED Numerous partial payments may be made to the contractor following the same sequence as in the process above. When the contract is completed, and final notification is sent into the State, the State will process the Final State Aid Payment Notice. In this example the project is completed for the contract bid.

Recognize the construction expense

Accounting Entry: Recognize Expenses As Work Is Certified On Contract



Recognize earned revenue for the current year

Accounting Entry: Recognize Revenue For Amount Of Work Certified








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FUNDS ARE TRANSFERRED FROM MAINTENANCE Advances may be reduced by transfers from Regular and Municipal Maintenance when final maintenance is posted to the SAAS System. The maintenance final from the county is received and a transfer occurs for the remaining maintenance balance. (Example A)

Accounting Entry: For Amount Of Maintenance Transfer


Credit Account: (liability) State Aid - Unearned Revenue

FUNDS ARE ADVANCED FOR FINAL PAYMENT The final payment to the county exceeds the allotment and a State Aid Advance occurs. The amount of the advance will appear on the Project Payment Notice. Example Final Payment Notice

FINAL PAYMENT IS RECEIVED The final payment is received by the county. (Example A)

Accounting Entry: For Remaining 5%



ANOTHER PROJECT IS FINAL WITH AN OVERRUN Recognize the construction expense

Accounting Entry: Recognize Expenses As Work Is Certified On Contract



Recognize earned revenue for the current year

Accounting Entry: Recognize Revenue For Amount Of Work Certified







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Recognize the final State Aid payment request

Accounting Entry: For Amount Of Final State Aid Payment Request



YEAR-END REVENUE REDUCTION FOR STATE AID ADVANCES The State Aid Advances that have occurred for the year must be recognized at year end.

The “Available Balance” from the State Aid Accounting System “Status Report” as of 12/31/XX is the net amount of all State Aid Advances that have occurred for that funding type. Example A

Accounting Entry: Recognize State Aid Advance

Debit Account: (asset) State Aid Advance

Credit Account: (liability) State Aid Advance Payable

The current year revenues must be reduced by the amount of the Unearned Revenue Balance. Example A

Accounting Entry: Reduce Revenues For The Amount Of The State Aid Advances

Debit Account: (revenues) State Aid Construction - Revenue

Credit Account: (liability) State Aid - Unearned Revenue

BEGIN NEW YEAR – ALLOTMENT AND REVERSING ENTRIES The new year allotment is received; entries are made to the appropriate allotment and unearned revenue accounts. (Example A)

Accounting Entry: New Year Allotments

Debit Account: (asset) State Aid - Allotments

Credit Account: (liability) State Aid - Unearned Revenues

Reverse total of State Aid Advances. (Example A)


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Accounting Entry: Reverse Prior Year State Aid Advances

Debit Account: (liability) State Aid Advance Payable

Credit Account: (asset) State Aid Advance

Recognize remaining earned revenue, the amount of the previous year STATE AID Advance. (Example A)

Accounting Entry: Revenue Not Recognized In Previous Year Due To State Aid Advance.




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EXAMPLES

Example A


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Example B


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Example C

Chapter 9 – Reconciling State Aid Accounts

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CHAPTER 9 RECONCILING STATE AID ACCOUNTS

RECONCILING ACCOUNTS TO STATE AID STATUS REPORTS

NARRATIVE The State Aid Status Report is available on the Web at the SAAS Reports Website.

Select Status Report from the menu presented on this screen.

This report details the status of the State Aid Accounts. It is suggested that the county books are reconciled to this report monthly.

The State Aid Accounts included in the State Aid Status Report are:

Acct # Description

70 CSAH Regular Construction

71 CSAH Municipal Construction

72 County Turnback

73 State Park Construction

75 Special Town Bridge

76 Town Bridge

77 Town Road

80 CSAH Regular Maintenance

81 CSAH Municipal Maintenance

89 County Disaster

Multiple State Transportation Bonds for Locals (Bridge, LRIP and Disaster)

(State Aid Status Report Sample)

The following pages discuss the items on the report and offer some guidelines to reconciling accounts with this report. If the proper accounting procedures are being followed (as detailed in the previous sections of this manual), the State Aid Accounts from your accounting system should reconcile directly to the figures on this report.

The best way to track down a discrepancy is to walk through the State Aid Payment/Transfer documents for the current year and post the entries on paper (using T-Accounts). Follow the rules and procedures as outlined in the previous sections of this manual for the various situations. Start by posting the beginning balances as of the beginning of the year (or from the last time the accounts were balanced to the State Aid Report) onto T-Accounts, for all the possible affected accounts. Then, as each payment/transfer document is gone through,

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make all entries to the appropriate T-Accounts on the projects which had activity since the accounts were last balanced with State Aid.

Balance to the State Aid Status Report in this manual fashion, first. Then, trace the entries that were made to your accounting system, until the ones are found that don't agree with the T-Account entries which were made manually.

If the discrepancy cannot be found in this manner, call the MnDOT State Aid Finance office.

CSAH REGULAR CONSTRUCTION • Disbursements should always equal the cash received and transfers processed during the year as

reported on the State Aid Payment Documents. • Encumbrances represent funds the State has not yet released to the county for outstanding projects. An

itemized listing may be obtained when the Status Report is reviewed online. The amount here should be equal to the balances in the Regular Construction - Receivable Account (asset). Advances are not encumbered on the State Report, the balance of the receivable will be greater by those amounts not encumbered.

• Balance Available represents funds available in the Allotment Account but not yet requested or processed. The amount here should be equal to the balance in the Regular Construction - Allotment (asset) Account. If the county is advancing funds from a future year, the Balance Available will not include encumbrance for those advanced projects, the balance of the Allotment Account will be further negative by those amounts that have not been encumbered.

CSAH MUNICIPAL CONSTRUCTION • Follow the same guidelines as for CSAH Regular Construction.

COUNTY TURNBACK • Disbursements should always equal the cash received during the year as reported on the State Aid

Payment Documents • Encumbrances represent funds the state has not yet released to the country for outstanding projects.

An itemized listing may be obtained when the Status Report is reviewed online. The amount here should be equal to the balance in the County Turnback – Receivable Account (asset). This is the only account that is reconciled to the State Report.

STATE PARK CONSTRUCTION • Disbursements should always equal the cash received during the year as reported on the State Aid

Payment Documents. • Encumbrances represent funds the State has not yet released to the county for outstanding projects. An

itemized listing may be obtained when the Status Report is reviewed online. The amount here should be equal to the balances in the State Park - Receivable Account (asset). This is the only account that is reconciled to the State Report.

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SPECIAL TOWN BRIDGE • Follow the same guidelines as for CSAH Regular Construction.

TOWN BRIDGE • Follow the same guidelines as for CSAH Regular Construction.

TOWN ROAD • This should be zero because it is paid out.

CSAH REGULAR MAINTENANCE • If there is any unused Maintenance Allotment from the previous year, it is transferred to the Regular

Construction Account. • Disbursements should always equal the cash received this year as reported on the State Aid Payment

Documents. • Unexpensed Balance and Balance Available are equal. The amounts shown here should equal the

balance in the Regular Maintenance Allotment (asset) Account, provided the Annual Summary of Highway Information, for the previous years, has been processed by State Aid Finance. If the Annual Summary of Highway Information has not been processed, the Beginning Balance must be deducted from the Balance Available.

• Encumbrances are always zero. • Balance available before July is usually 50% of the current year's allotment and 10% or $0.00 after July,

depending on the state payment plan (50%, 40% and 10% or 50%/50%). • If the county has a Local Agency Bond, the payments are calculated after reducing the allotment by the

bond interest paid that year.

CSAH MUNICIPAL MAINTENANCE • If there is any unused Maintenance Allotment from the previous year, it is transferred to the Municipal

Construction Account. • Disbursements should always be equal to the cash received during the year as reported on the State Aid

Payment sheets. • Unexpensed Balance and Balance available are equal. The amount shown here should equal the balance

in the Municipal Maintenance Allotment (asset) Account, provided the Annual Summary of Highway Information, for the previous years, has been processed by State Aid Finance. If the Annual Summary of Highway Information has not been processed, the Beginning Balance must be deducted from the Balance Available.

• Encumbrances are always zero. • Balance available will be a percentage of the current year's allotment, each county may request a

different percentage of Municipal Maintenance to have paid them during the year.


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COUNTY DISASTER • Disbursements should always be equal to the cash received during the year as reported on the State Aid

Payment sheets. • Encumbrances represent funds the State has not yet released to the county for outstanding projects. An

itemized listing may be obtained when the Status Report is reviewed online. The amount here should be equal to the balances in the County Disaster - Receivable Account (asset). This is the only account that is reconciled to the State Report.

RECONCILING THE UNEARNED REVENUE ACCOUNTS

NARRATIVE The county will be able to reconcile its Unearned Revenue Accounts to the Allocation Amount (Regular and Municipal Maintenance) or the Balance Available (Regular, Municipal and Town Bridge) on the State Aid Status Report. The following Explanations should hold true for the Unearned Revenue Accounts if the correct Grant Accounting entries have been made throughout the year. Review the following to proof the Unearned Revenue Account Balances at year end.

REGULAR MAINTENANCE Prior to completing the year-end sequence, making the necessary adjustments to recognize the amount of Regular Maintenance expenditures, and closing the year, the Regular Maintenance Unearned Revenue Account balance should be the same figure as the Regular Maintenance Allocation amount on the Status Report.

NOTE: However, this figure will not be the same figure in the Regular Maintenance Allotment Account at this time since this account is reduced by State Aid Payments during the year.

MUNICIPAL MAINTENANCE Prior to completing the year-end sequence, making the necessary adjustments to recognize the amount of Municipal Maintenance expenditures, and closing the year, the Municipal Maintenance Unearned Revenue Account balance should be the same figure as the Municipal Maintenance Allocation amount on the Status Report.

NOTE: However, this figure will not be the same figure in the Municipal Maintenance Allotment Account at this time since this account is reduced by State Aid Payments during the year.

REGULAR, MUNICIPAL, SPECIAL TOWN BRIDGE AND TOWN BRIDGE Both State Aid Construction Unearned Revenue Account balances should NEVER BE LESS THAN their corresponding Allotment Account balances UNLESS a project has overrun by a large amount and the overrun hasn't been released. Most often however, the Unearned Revenue Account balance WILL BE GREATER THAN the Allotment Account balance.


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The Unearned Revenue Account balance (either Regular, Municipal or Town Bridge) can be calculated via the following formula:

Calculation: Unearned Revenue Account Balance

ADD: Current Allotment Account Balance (after reconciliation with State Aid)

PLUS: Total Uncompleted Work on State Aid Projects (All years and State Aid Obligation ONLY)

MINUS: Any State Aid Project Overruns that have NOT been requested

EQUAL: Balance in State Aid Unearned Revenue

NOTE: Unearned Revenue Accounts are normally Credit Balance Accounts.


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STATE AID STATUS REPORT (NEW EXAMPLE)


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Chapter 10 – Unallocated Cost Distribution

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CHAPTER 10 UNALLOCATED COST DISTRIBUTION

NARRATIVE Costs that cannot be directly related to a specific road, construction/engineering project, or unit of equipment are considered unallocated costs. Every effort should be made to charge costs directly to the appropriate cost area before using the unallocated accounts.

Unallocated costs are divided between two categories – highway related, and non-highway related. The highway related unallocated costs are divided into categories for administration, maintenance, construction/engineering, and equipment.

All engineering and administrative personnel time should be supported by timesheets to justify highway and non-highway related costs.

ADMINISTRATIVE COSTS Administrative costs are Expenses which are not directly attributable to a specific operation. These costs include Expenses which benefit all roads currently and in the future. Any unapplied administrative costs will be included with the maintenance reporting by road system as unallocated. Examples of administrative costs are:

• Administrative Salaries1 • Engineering Computer Prog/Serv Contract • Fringe Benefits2 • Minor office Furniture/Equipment • Office Supplies and Expenses • Offsetting Fringe Benefits – applied to direct labor2 • Railroad Inspection • Road Studies • Training and Education • Travel and Lodging • Utilities

1 A portion of the Engineer's salary may be moved to the construction area based on a fair estimate of the Engineer's time. You should have documentation on file as to how you determined this estimate.

2 Fringe Benefits should have an offsetting account to record the credit for fringe benefits applied to direct labor. This offsetting credit is based on the fringe benefit rate calculation schedule included in this section.


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FRINGE BENEFIT RATE CALCULATION The following steps should be followed to determine the fringe benefit rate calculation. Refer to the example below.

Isolate and identify all benefits for full time employees that are part of the County’s employment package. Do not include any items that are not payroll related.

Identify the total labor dollars worked for full time employees. Exclude any wages for temporary or part-time employees that do not receive the County’s normal benefit package.

Calculate the fringe benefit rate by dividing the fringe benefits by the total labor dollars for full time employees. Apply this rate factor to all direct labor dollars costed for the County Highway operations with an offsetting credit to the fringe application account in the Unallocated Administrative area.

EXAMPLE 20XX Fringe Benefits

20XX Fringe Benefits Dollar Amount

Disability Insurance 4,819.54

Health Benefits 40,285.42

Group Life Benefits 1,390.41

Accidental Death 0.00

P.E.R.A. 45,858.26

Social Security 46,101.84

Unemployment Tax 4,685.60

Workers Compensation Taxes 24,007.14

Liability Insurance 98.00

Salary adjustments, premium time, shift differential 41,583.76

Leave time – vacation, sick, jury, and military 59,678.55

Total Fringe Benefit Costs $268,508.52

Total Labor Dollars $815,284.31


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Labor dollars should exclude temporary or part-time employees that do not receive a benefit package. In addition, labor dollars should not include vacation, sick leave, military leave, and jury duty that are included within fringe benefits.

𝐹𝐹𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝐵𝐵𝑟𝑟𝑟𝑟𝑟𝑟𝐵𝐵𝑟𝑟𝐵𝐵 𝑅𝑅𝑅𝑅𝐵𝐵𝑟𝑟 = $268,508.52$815,284.31

= 0.3294

Education and training costs related to the county engineering staff are not allowed to be prorated to construction projects or individual roads. These costs should be included in the administrative unallocated dollar amount on the maintenance report by road system.

CONSTRUCTION COSTS Unallocated construction costs are Expenses relating to construction operations that cannot be identified to a particular construction project. The costs in these accounts should be prorated to engineering based on total costs of the projects at year-end. If the County chooses, they may seek reimbursement of these engineering costs using their State Aid allocation.

Examples of unallocated construction costs include:

• Alignment Surveys • Cross Section Stockpiles • Drafting Supplies • Engineering Expense • Engineering Field Work • Field Engineering Supplies • General Permits • Road Studies • Wetlands Bank/Mitigation

Education and training costs related to the county engineering staff are not allowed to be prorated to construction projects or individual roads. These costs should be included in the administrative unallocated dollar amount on the maintenance report by road system.

MAINTENANCE COSTS Unallocated maintenance costs are maintenance Expenses that are difficult to associate with a particular road. All efforts should be made to charge to the individual roads before using unallocated maintenance accounts. Maintenance costing accounts are listed in Chapter 14.

After costs have been accumulated in each unallocated account, they may be spread to the individual roads in the appropriate maintenance account. Unallocated maintenance costs may be distributed to the roads based on total mileage, system mileage, surface mileage, labor, or number of intersections, curves, and hills. The formula used to distribute unallocated costs will be determined by the type of unallocated cost.


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Examples of unallocated maintenance costs include:

• Annual Bridge Inspections & Report • Bridge Inspections - Not related to a project • Building Barricades • Gravel (stockpiled, crushing, prospecting) • Maintenance Supplies for specific maintenance accounts (brooms for minor surface maintenance

sweeping) • Salt and Sand, materials and mixing costs • Sign Materials • Straightening Signposts • Traffic Studies/Counts • Weight Restrictions • Weight Scale Calibration

Most unallocated costs will be distributed by mileage, there are some costs that will be distributed based on special distribution formulas.

Each county should develop a method of allocating materials they choose to spread that works best for them. Salt and sand are a good example of a special distribution formula. It is usually applied to bituminous or concrete surfaces only at intersections, curves, and hills. A survey of all road systems should be done to determine the number of intersections, curves, and hills on bituminous or concrete roads.

Example:

CSAH Regular: 120 intersections, 55 curves, 30 hills = 205 CSAH Municipal: 110 intersections, 20 curves, 3 hills = 133 County Roads: 30 intersections, 5 curves, 10 hills = 45

Based on this example, the percentage of salt and sand distributed to CSAH Regular would be 54%, CSAH Municipal would be 35% and county roads would be 11%.

The salt and sand would be distributed to each road program based on the calculated percentages to bituminous or concrete surfaces only. Using this formula will place more costs on the CSAH Municipal roads since the number of CSAH Municipal miles are usually the least of the county’s road systems.

Education and training costs related to the county engineering staff are not allowed to be prorated to construction projects or individual roads. These costs should be included in the Administrative Unallocated dollar amount on the maintenance report by road system.

SHOP AND EQUIPMENT COSTS Unallocated shop and equipment costs are Expenses relating to shop and equipment operations that cannot be identified to a particular unit.


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Examples of unallocated equipment costs include:

• Shop Overhead (Utilities) • Shop Supplies and Small Tools • Miscellaneous Repair Parts • Building and Grounds Maintenance • Inventory Adjustments for Fuel • Inventory Adjustments for Parts and Replacements

Inventory adjustment should be held to a minimum using good inventory control and management. Inventory adjustments should become part of cost added to equipment and prorated back to the units in developing a rate or ultimately become an entry into adjustment to equalize depreciation.

NON-HIGHWAY RELATED COSTS Non-highway costs should be accumulated in the area for county dollars or authorized work for others. Non-highway related activities must not be included in the unallocated costs which are distributed to the road system.

Non-highway costs may include costs associated with:

• Capital Outlay • Ditch Fund for Flood Control • Agricultural Inspection • Work for Others • Other Non-Highway Related Costs • 911 Signing

Chapter 11 – Fixed Assets

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CHAPTER 11 FIXED ASSETS

NARRATIVE The Governmental Modified Accrual Basis of Accounting (explained in the GAAFR and COFARS manuals) requires the removal of Fixed Assets from the Balance Sheet of General and Special Revenue Fund Types. The County Highway Department Fund is classified as a Special Revenue Fund under COFARS, and thus should not contain Fixed Assets on its Balance Sheet for year-end financial reporting.

This is due to the nature of fixed assets, which represent Long-Term holdings or assets of the governmental unit. Since it is the purpose of General and Special Revenue Fund Types, to track simply Current Operating Revenues and Expenditures, and to report on Available Spendable Resources which can be used to finance operations of the fund in the current operating period, long-term assets and liabilities are not to be reported on financial reports of these funds. A more thorough Explanation of this concept can be obtained by reviewing the COFARS and GAAFR manuals.

The following points summarize the approach this write-up will follow, regarding the accounting for fixed assets within the MN Highway Department Fund.

1. Fixed Assets will not be carried as an asset on the Balance Sheet of the Highway Department Fund. Thus, we will not have an asset account set up.

2. Fixed Assets will be carried as Master File items on the costing system, however. That is, they will be input in the Equipment Units Master File and will still generate the Fixed Asset Listing and Year-End Report for the Highway Departments Annual Report.

3. The purchase of a Fixed Asset will be shown in the highway department books (input to costing system) as an Expenditure. It will be treated as a Capital Expenditure and will be charged to a County Expenditure Account.

4. The amount of the expenditure entry will be for the amount of the actual cash laid out for the unit (list price minus any reduction or trade in value). It will not be for the list, retail, or book value of the unit.

5. Depreciation is calculated on the purchase price and is made as a memo entry only.

ACCOUNTS NEEDED (unallocated expense) EOY - Adjust to Equal Cost vs Rental (expense) Capital Outlay - Equipment Purchases (expense) Capital Outlay - Land Purchases (expense) Capital Outlay - Building Purchases (expense) Capital Outlay - Other Fixed Asset Purchases (expense) Capital Improvements - Equipment (expense) Capital Improvements - Land (expense) Capital Improvements - Buildings (expense) Capital Improvements - Other Fixed Assets


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(revenue) Revenue from Sale of Equipment (revenue) Revenue from Sale of Land (revenue) Revenue from Sale of Buildings (revenue) Revenue from Sale of Other Fixed Assets (asset) Cash (asset) Accounts Receivable (liability) Accounts Payable

NOTE: The following discussion concerning how to account for fixed assets in the county highway department will deal solely with equipment. However, the accounting entries would be quite the same for other types of fixed assets (land, building, etc.).

RENTAL RATES VERSUS ACTUAL UNIT EXPENSES In Minnesota County Highway Departments, fixed assets (namely equipment units) are used to maintain (or construct) the various roads within the county. To keep accumulated cost information on these roads, the time (or mileage) a unit spends on a road is charged to the road via a Rental Rate for the unit. These Rental Rates are assigned to each unit (generally by the Highway Engineer) once a year and are used as the unit's cost basis throughout the year.

The Rental Rate, however, is indeed a best guess rate as to how much the unit is costing to operate during the year. Therefore, at year-end, the engineer will generally review the total Rental Rate dollars charged out by each unit, with each units Actual Costs for the same period. The actual costs are all items directly charged to the unit, which keep it operable during the year. These items are things like Fuel, Grease, Parts, Routine in-house Repairs, Outside Repair Services, Major Overhauls, etc.

The difference between the Total Rental Rate Charges and the Total Actual Equipment Costs, is then used to adjust the Rental Charges (charge throughout the year to the roads, etc.), down or up, so that these charges reflect the Actual Equipment Cost and NOT the Arbitrary Rental Rate. In Minnesota, this adjustment has been made annually and has come to be known as the Adjustment to Equalize Depreciation.

MODIFYING RENTAL RATES TO REFLECT ACTUAL UNIT EXPENSES MORE CLOSELY If the County Engineer chooses to compare the Rental Rates with the Actual Unit Expenses, and then modify Rental Rates more often than only at year-end, the following formula is a quick method for calculating the new or corrected rental rate.

A. Rental Rates may be adjusted monthly, quarterly, mid-year or yearly. The quarterly or mid-year approach is most recommended.

B. Using the figures found on the Fixed Asset report, perform the following calculations for each unit.


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* Add Depreciation Expense if it is present. Usually it is only present at year end; however, some clients are charging depreciation expense monthly to be more current. This is solely up to the discretion of the user.

PURCHASES In 1988, the State Aid Task Force finalized the accounting requirements for equipment costing, depreciation, and useful life.

The significant changes that occurred because of this were:

• The depreciation method is straight line. • Equipment life is defined for each unit. • Zero salvage value is implemented. • Equipment depreciation value is established. • Treatment of leases and buy backs is clarified. • Minor equipment is reclassified by new categories which may be treated differently. • The account presentation will include a summary of the current year's activity.

The goal of the task force is equitable rates for like pieces of equipment based on actual costs including depreciation. This means that you may have to do some analysis and establish new equipment rates. The adjustment to equalize account should be as close to zero as possible.

The equipment list in this section is taken from the Manual of Uniform Highway Accounting and Financial Management Procedures, (AASHTO 1970 edition) with some changes to the life/years based on task force members' experience and current equipment operations. The straight-line method using the depreciation period shown in the equipment list with zero salvage value will be used to provide consistency in equipment costing on a statewide basis.

According to GAAP, equipment acquisition costs for accounting purposes include the full cost required to put the asset into service. Thus, cash or trade discounts as well as any interest costs are deducted from the booked value of equipment. Simply stated, the formula for calculating equipment value for depreciation purposes is:

Description Gross Invoice Price

PLUS: Remaining Book Value of Unit Traded

MINUS: Discounts, Interest and Trade in Value

EQUALS: Equipment Value

Specific examples presented incorporate portions of this formula.


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Example 1

Description New Unit Purchased With A Discount Years Of Life: 10

Amount In $

LESS: Gross Invoice Amount $140,000

Government Discount $20,000

EQUALS: Net Cost of Equipment $120,000

The amount for depreciation purposes would be $120,000 because the net cash outlay is $120,000. When calculating depreciation for this unit using the straight-line method, the net cost of $120,000 will be recovered at the rate of $12,000 per year. Salvage value will be zero for accounting ease and consistency.

Accounting Entry: Description Amount in $

Date: MM/DD/YYYY -

Debit Account: Fixed Assets $120,000

Credit Account: Accounts Payable/Cash $120,000

Example 2

Description New Unit Purchased With Trade-In Gain Years Of Life: 10

Amount In $


In unit (XXX) $50,000

EQUALS: Net Cost of Equipment $90,000

Remaining Book Value (Unit XXX) $20,000

The value of the new asset for depreciation purposes is $110,000 because the cash outlay plus the traded unit's value is equal to $110,000 (or in reverse, the new asset less the unrecognized gain). This same piece of equipment would be depreciated at a rate of $11,000 per year for 10 years with zero salvage value after 10 years.

Accounting Entry: Description Amount In $

Date: MM/DD/YYYY -



Credit Amount: Fixed Assets (Unit XXXX) $20,000


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Example 3

Description New Unit Purchased With Trade-In Loss Years Of Life: 10

Amount In $


Trade- In unit (XXX) $50,000

EQUALS: Net cost of Equipment $90,000

Remaining Book Value (Unit XXX) $60,000

In example 3, the value of the new asset for depreciation purposes is $150,000 because the cash outlay ($90,000) plus the traded unit's value ($60,000) is equal to $150,000 (or in reverse, the new asset $140,000 plus the unrecognized trade-in loss of $10,000). This piece of equipment would be depreciated at a rate of $15,000 per year for 10 years with zero salvage value.

Accounting Entry: Description Amount

Date: MM/DD/YYYY -



Credit Account: Fixed Assets (Unit XXX) $60,000

EQUIPMENT PURCHASES OVER MULTIPLE YEARS Equipment depreciation begins when the equipment unit is complete and ready for service, which means that the purchase of a unit may cross over multiples years. The expenseense cost will be posted to the appropriate year in which it occurs; use the Fixed Asset Maintenance Worksheet to track these accumulated costs.

BUY BACKS In a buy back situation, an option is available for the purchaser to sell the equipment back to the vendor at the end of a certain period for a specified sum.

Example 1

Buy Back With Trade In Gain Years Of Life: 10

Amount In $

Gross Invoice Amount $140,000

Trade in Amount $50,000

Buy Back Amount at End of 5 Years (Unit XXX) $80,000


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Buy Back With Trade In Gain Years Of Life: 10

Amount In $

Remaining Book Value *Unit XXX $20,000

The value of the new asset for depreciation purposes is $110,000 with the same accounting entries as Example 2 because the cash outlay plus the traded unit's value is equal to $110,000. This piece of equipment would be depreciated at the rate of $6,000 per year for the first five years ($110,000 - $80,000 = $30,000) with a book value of $80,000 at the end of the fifth year. If the county elects not to sell the machine at the end of the buyback period, the remaining $80,000 value would be depreciated over the subsequent five-year period.

In all the above examples, the original cost of the piece of equipment would be $140,000. This amount would be noted in the records for informational purposes only and would never be used for depreciation calculations.

LEASES In a leasing situation, there are three methods of accounting to consider. In the first situation, where the acquisition of the asset at the end of the lease is not known and/or not anticipated, each year's lease cost may be expensed in the year of occurrence and cost to the road systems. The depreciable value of the equipment unit would be $0.00.

Accounting Entry: Description

Date: MM/DD/YYYY

Debit Account: Expenditures (years 1-5 = lease term)

Credit Account: Cash

In the second situation, where the lease is greater than 12 months in length, the asset should be set up as usual at the equipment's current value and depreciated over the recommended life of the equipment. The lease payments would be made with county dollars as though it was a financing situation and the rate costed to the road systems would distribute the costs.


Date: MM/DD/YYYY

Debit Account: Fixed Assets (the equipment's actual current value)

Credit Account: Long Term Leases Payable

In the third situation, where the county exercises a buy-out option during the term of the lease agreement, the annual lease payments would be expensed in the year of occurrence. When the equipment is purchased at the buy-out point, the asset would be set up on the records at the buy-out amount and depreciated over the remaining useful life.


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Date: MM/DD/YYYY

Debit Account: Expenditures (years 1-5 = lease term)

Credit Account: Cash

Debit Account: Fixed Assets (year 6 = acquisition)

Credit Account: Accounts Payable/Cash

Any units sold outright will require the following accounting entries and actions:

Accounting Entry: Sale Of Equipment

Date: MM/DD/YYYY

Debit Account: Cash

Credit Account: Revenue - Sale of Equipment

• Any units scrapped or disposed of require no Accounting Entry. • Actions for sold, scrapped, or disposed equipment units. • The equipment unit must be flagged as sold, scrapped, or disposed per that procedures of your cost

accounting system.

RENTAL RATES Equipment rates for costing purposes shall be as close to actual costs as possible for road system reporting purposes and State Aid maintenance reimbursement. The goal is to reduce the adjustment to equalize at year end as much as possible.

This does not prevent the county from charging a different rate competitive with private enterprise for outside billing purposes. The outside billing rate should be documented and can include the operator's wages and fringes, equipment cost rate and appropriate county overhead.

The amount billed to a customer for equipment usage is posted to a revenue account usually “Fees for Services”. The amount billed to a customer does not affect any cost added or rental earned on any equipment unit.

The rental rate for an equipment unit may be $100.00 per hour but may be charged to a customer with a 20% mark up or $120.00. The revenue for 1 hour of equipment usage would be $120.00, the cost charged for work done for the customer would be $100.00.

A customer cost report would show what it costs the highway department to maintain the customer, a customer revenue report would show what the highway department billed the customer.


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BETTERMENTS Equipment betterments are defined as any modification which changes or alters a unit's original function/design and major repairs which extend the life of the unit. In both situations, the costs should be capitalized and depreciated over the unit's extended life or function. These costs should be identified as county expense and should not be included in the costs added for the current year. (Once again, the goal is to distribute costs equitably overall years affected).

Major repairs which occur early in the unit's life and do not extend the unit's life shall become part of cost added and shall be expensed in the year of occurrence.

Minor equipment is defined as any equipment with a short life span, not significant in value, and difficult to cost or distribute equitably. Minor equipment should be separated into categories for: maintenance (i.e. tar pots, chain saws, etc.), construction (i.e. survey, drafting, etc.), equipment (i.e. radios, shop equipment, etc.), and administrative (i.e. desks, computers, copiers, etc.).

The costs for these groups of minor equipment should be distributed to the appropriate area using the unallocated method and procedures.

PRESENTATION IN ANNUAL REPORT The equipment account presentation in the annual report should include a summary of activity or changes in the account value during the year. The summary should identify:

• Beginning balance • Betterments and major repairs • New acquisitions • Sales, trades, etc. • Scrapped • Ending value of capital ASSETS

USEFUL LIFE – RECOMMENDED GUIDELINES SUMMARY This listing, a condensed version of the more specific schedule, reflects a range of estimated life used by several counties for depreciation purposes. It is not intended to be an all-inclusive list of specific equipment. Your county's schedule should reflect not only the purchase price but also consideration of the rental hours and costs added for these types of equipment so that Expenses of such are recouped within the depreciation period. The determination of estimated life is based upon these tables and the County's own experience and professional opinion.


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Equipment Types Estimated Life (Yrs)

Attachments - Mounted and Pulled 5 – 15

ATVs - All Classes 5 – 8

Autos - Vans 5 – 8

* Bituminous Maintenance Equipment 5 – 10

Compressors 7 – 10

* Concrete Maintenance Equipment 5 – 10

Conveyors - Stackers 5 – 10

Forklifts - Skid steers 5 – 10

Generators - Engines 5 – 10

Heavy Equipment (includes specialized equipment for specific road maintenance procedures)

10 – 15

Hoist/Lift - not attached to building or unit 5 – 10

Pickups 5 – 8

Equipment Types Estimated Life (Yrs)

Plant - Crushing, Screening, Washing 12 – 20

Salt Brine Systems 8 – 10

Small Maintenance Tools (Saws, Jack Hammers, etc. often holding a number just to allow cost recovery)

3 – 5

Steamers 5 – 8

Technology (computer servers, plotters, drones, etc.) 3 - 5

Tractors 10 – 15

Trailers, large 8 – 15

Trailers - Pup, Belly Dump, Flatbeds 7 – 12

Trailers, small 5 – 10

Trucks (Tandems and single axle trucks over 1 Ton) 7 – 12

* Turf Establishment & Maintenance Equipment 5 – 10

Water Tanks 6 – 8

Woodchippers 8 – 10

* Includes specialized equipment not large enough to be considered “Heavy Equipment”

Many small equipment items that do not meet the capitalization threshold for a county are listed on the asset list for the purpose of recouping maintenance funds. These items can be expensed in the year purchased.


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Broad categories have been used in the list to allow the list flexibility and longevity. The county can use the categories and life spans that best fit their situation.

COSTRITE PROCEDURES NEW EQUIPMENT 1. Create an equipment unit number, do not provide new equipment purchase costs

2. As purchases are made for the new equipment, the purchase is assigned to a 5XXXX cost account, the equipment number is included in the entry and the New/Capital Improvement field is flag with an “N”. There may be multiple purchases processed for each new piece of equipment provided all transactions are within the same year.

3. When the purchase entries are posted to the system, the original cost is updated on the equipment master record, the 5XXXX cost account is updated with the purchase expense, the Capital Outlay G/L Expense account is updated with the purchase expense. The Fixed Asset G/L account is debited, and Fixed Asset Reserve G/L account is credited with the purchase entries also.

The following illustrates the entries generated by the Costrite system:

New piece of equipment total purchase of $100,000, with or without trade in, trade in has no remaining depreciable value.


Date: MM/DD/YYYY -

Debit Account: Capital Outlay (expense) $100,000

Credit Account: Accounts Payable/Cash (asset) $100,000

Debit Account: Fixed Assets (asset) $100,000

Credit Account: Fixed Asset Reserve (equity) $100,000

If the trade in has a remaining depreciable value additional manual entry are required to account for this:

Disposal of trade in with remaining depreciation of $20,000.


Date: MM/DD/YYYY -

Debit Account: Fixed Asset Reserve (equity) $20,000

Credit Account: Fixed Assets (asset) $20,000

Additional steps are required in the Costrite system to add the remaining depreciation to the new equipment unit.

In Costrite, from the Input Tab select Adjustments.


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On the input screen enter the following:

Adjustment Type 2 – Equip Balance

Tran Date MM/DD/YYYY

Account 5XXXX – Major Equipment Purchases

Amount (2) The amount of the remaining depreciable value of traded unit

Equipment Unit Enter the New Equipment Unit Number

New/Capital Impr “C” for Capital Improvement

Click on the “Submit” button, then click the “Process” button

The Capital Improvement must be depreciated, the following steps accomplish this task:

From the Maintenance Tab select Equipment and then select the new equipment unit number. Click the “Cap Imp” button


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On the screen that follows enter:

Life Expectancy: Years to depreciate

Depreciation Start Date: Date the new unit was acquired and put into service Click the “Submit” button

The Asset Worksheet illustrates the example above:


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Fixed Asset Maintenance

4. The new equipment unit record is updated with the depreciable cost by the user. The estimated life (number of years to depreciate) is update by user. The acquisition date is updated by the date of the first purchase entry posted to the system for the new equipment unit, this field may be modified by the user. The depreciation start date must be entered only if the Depreciation Y/N indicator is flagged with a “Y”. No matter what date of the month is entered, the depreciation will be for the full month.

COSTRITE PROCEDURES – CAPITAL IMPROVEMENTS 1. As purchases are made for an improvement to a fixed asset, the purchase is assigned to a 5XXXX cost

account, the equipment number is included in the entry and the New/Capital Improvement field is flagged with an “I”. If there are multiple purchases made for a Capital Improvement a separate Capital Improvement record will be created for each transaction processed.


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The following illustrates the entries generated by the Costrite system:

Improved equipment total purchase of $55,000.


Date: MM/DD/YYYY -

Debit Account: Capital Outlay (expense) $55,000

Credit Account: Accounts Payable/Cash (asset) $55,000

Debit Account: Fixed Assets (asset) $55,000

Credit Account: Fixed Asset Reserve (equity) $55,000

2. When the purchase entries are posted to the system, the Capital Improvement record for the improved equipment unit is updated, the 5XXXX cost account is updated with the purchase expense, the Capital Outlay G/L Expense account is updated with the purchase expense. The Fixed Asset G/L account is debited, and Fixed Asset Reserve G/L account is credited with the purchase entries also.

3. The Capital Improvement records created by the purchase entries must be modified, the Life Expectancy field (number of years to depreciate), the Depreciation Start Date and the Depreciable Cost is provided by the purchase entry but may be modified by the user. No matter what date of the month is entered, the depreciation will be for the full month.

COSTRITE PROCEDURES – TRADED, SOLD, AND SCRAPPED EQUIPMENT 1. If an equipment unit is Traded, Sold, Auction, Flood or Disposed the user must provide a disposal date and

disposal code.

2. The user will need to make an adjustment to the Fixed Asset and Fixed Asset Reserve accounts for any lost depreciation from any disposed equipment for the year.

NEWROADS PROCEDURES NEW EQUIPMENT 1. Create an equipment unit number, Equipment Status should be “New”, include Original Cost based the

Asset Worksheet shown below.


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2. As purchases are made for the new equipment, the purchase is assigned to a 7X cost account, the equipment number is not included in the entry. There may be multiple purchases processed for each new piece of equipment provided all transactions are within the same year.

The Asset Worksheet illustrates the example above:

Fixed Asset Maintenance


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3. The equipment unit must have a depreciation schedule created. If the depreciation start date is from the 1st to the 15th of the month depreciation will start as of that month, if the depreciation start date is from the 16th to the end of the month depreciation will start as of the following month.


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NEWROADS PROCEDURES – CAPITAL IMPROVEMENTS As purchases are made for an improvement to a fixed asset, the purchase is assigned to a 7X cost account, the equipment number is included in the entry. The amount of the capital improvement will be reflected in the depreciation schedule. The estimated life will be extended due to the capital improvement and the Equipment Unit Master must be changed to reflect the additional estimated life.

NEWROADS PROCEDURES – TRADED, SOLD, AND SCRAPPED EQUIPMENT If an equipment unit is Traded, Sold, or Scrapped the user must change the Equipment Status to reflect how the unit was disposed, a Status Date must also be provided.

Chapter 12 – Infrastructure Capitalization

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CHAPTER 12 INFRASTRUCTURE CAPITALIZATION (GASB 34) The following section includes excerpts from “Governmental Accounting Standards Series”, Publication No. 171-A, Statement No. 34 of the Government Accounting Standards Board (GASB 34).

REPORTING CAPITAL ASSETS Capital assets should be reported at historical cost. The cost of a capital asset should include capitalized charges necessary to place the asset into its intended location and condition for use. Ancillary charges include costs that are directly attributable to asset acquisition – such as freight and transportation charges, site preparation costs, and professional fees. Donated capital assets should be reported at their estimated fair value at the time of acquisition plus ancillary charges, if any.

The term Capital Assets includes land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and all other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period. Infrastructure Assets are long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems. Buildings, except those that are an ancillary part of a network of infrastructure assets, should not be considered infrastructure assets.

Capital assets that are being or have been depreciated should be reported net of accumulated depreciation in the statement of net assets. (Accumulated depreciation may be reported on the face of the statement or disclosed in the notes.) Capital assets that are not being depreciated, such as land or infrastructure assets reported using the modified approach, should be reported separately if the government has a significant amount of these assets. Capital assets also may be reported in greater detail, such as by major class of asset (for example, infrastructure, buildings and improvements, vehicles, machinery, and equipment).

Capital assets should be depreciated over their estimated useful lives unless they are either inexhaustible or are infrastructure assets reported using the modified approach. Inexhaustible capital assets such as land and land improvements should not be depreciated.

Depreciation expense should be measured by allocating the net cost of depreciable assets (historical cost less estimated salvage value) over their estimated useful lives in a systematic and rational manner. It may be calculated for (a) a class of assets, (b) a network of assets, (c) a subsystem of a network, or (d) individual assets. (Composite methods may be used to calculate depreciation expense.)

REPORTING GENERAL INFRASTRUCTURE ASSETS AT TRANSITION Prospective reporting of general infrastructure assets in the statement of net assets is required beginning at the effective date of this Statement (GASB 34). Retroactive reporting of all major general infrastructure assets is encouraged at that date. Phase 1 governments (total annual revenues of $100 million or more) should retroactively report all major general infrastructure assets for the fiscal years beginning after June 15, 2005.


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Phase 2 governments (total annual revenues of $10 million or more but less than $100 million) should retroactively report all major general infrastructure assets for the fiscal years beginning after June 15, 2006. Phase 3 governments (total annual revenues of less than $10 million) are encouraged but are not required to report major general infrastructure assets retroactively.

If determining the actual historical cost of general infrastructure assets is not practical because of inadequate records, governments should report the estimated historical cost for major general infrastructure assets that were acquired or significantly reconstructed, or that received significant improvements, in fiscal years ending after June 30, 1980.

If during the transition period, information is not available for all networks of infrastructure assets, those networks for which information is available may be reported.

INITIAL CAPITALIZATION OF GENERAL INFRASTRUCTURE ASSETS

DETERMINING MAJOR GENERAL INFRASTRUCTURE ASSETS At the applicable general infrastructure transition date, phase 1 and 2 governments are required to capitalize and report general infrastructure assets that were acquired (purchased, constructed, or donated) in fiscal years ending after June 30, 1980, or that received major renovations, restorations, or improvements during that period.

The determination of major general infrastructure assets should be at the network or subsystem level and should be based on these criteria:

• The cost or estimated cost of the subsystem is expected to be at least 5 percent of the total cost of all general capital assets reported in the first fiscal year ending after June 15, 1999, or.

• The cost or estimated cost of the network is expected to be at least 10 percent of the total cost of all general capital assets reported in the first fiscal year ending after June 15, 1999.

Reporting of non-major networks is encouraged but not required.

ESTABLISHING CAPITALIZATION AT TRANSITION The initial capitalization amount should be based on historical cost. If determining historical cost is not practical because of inadequate records, estimated historical cost may be used.

ESTIMATED HISTORICAL COST – CURRENT REPLACEMENT COST A government may estimate the historical cost of general infrastructure assets by calculating the current replacement cost of a similar asset and deflating this cost through the use of price-level indexes to the acquisition year (or estimated acquisition year if the actual year is unknown). There are several price-level indexes that may be used, both private- and public-sector, to remove the effects of price-level changes from current prices. Accumulated depreciation would be calculated based on the deflated amount, except for general infrastructure assets reported according to the modified approach.


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EXAMPLE: ESTIMATED HISTORICAL COST – CURRENT REPLACEMENT COST In 1998, a government has sixty-five lane-miles of roads in a secondary road system, and the current construction cost of similar roads is $1 million per lane-mile. The estimated total current replacement cost of the secondary road subsystem of a highway network; therefore, is $65 million ($1 million * 65). The roads have an estimated weighted-average age of fifteen years; therefore, 1983 is the acquisition year. Based on the U.S. department of Transportation, Federal Highway Administration’s “Price Trend Information for Federal-Aid Highway Construction” (publication number FHWA-IF-99-001) for 1983 and 1998, 1983 construction costs were 69.03% of 1998 costs. The estimated historical cost of the subsystem, therefore, is $44,869,500 ($65 million * 0.6903). In 1998, the government would have reported the subsystem in its financial statements at an estimated historical cost of $44,869,500 less accumulated depreciation for fifteen years based on that deflated amount.

ESTIMATED HISTORICAL COST – EXISTING INFORMATION Other information may provide sufficient support for establishing initial capitalization. This information includes bond documents used to obtain financing for construction or acquisition of infrastructure assets, expenditures reported in capital project funds or capital outlays in governmental funds, and engineering documents.

EXAMPLE: ESTIMATED HISTORICAL COST – EXISTING INFORMATION

METHODS OF CALCULATING DEPRECIATION Governments may use any established depreciation method. Depreciation may be based on the estimated useful life of a class of assets, a network of assets, a subsystem of a network, or individual assets. For estimated useful lives, governments can use (a) general guidelines obtained from professional of industry organizations, (b) information for comparable assets of other governments, or (c) internal information. In determining estimated useful life, a government also should consider an asset’s present condition and how long it is expected to meet service demands.

EXAMPLE: CALCULATING DEPRECIATION Assuming that, in 1998, the road subsystem had a total estimated useful life of twenty-five years from 1983 (with an estimated value of $44,869,500) and therefore has an estimated remaining useful life of ten years. Assuming no residual value at the end of that time, straight-line depreciation expense would be $1,794,780 per year ($44,869,500/25), and accumulated depreciation in 1998 would be $26,921,700 ($1,794,780*15).

COMPOSITE METHODS Governments may also use composite methods to calculate depreciation expense. Composite methods refer to depreciating a grouping of similar assets (for example, interstate highways in a state) or dissimilar assets of the same class (for example, all the roads and bridges of a state) using the same depreciation rate. Initially, a depreciation rate for the composite is determined. Annually, the determined rate is multiplied by the cost of the grouping of assets to calculate depreciation expense.


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A composite depreciation rate can be calculated in different ways. The rate could be calculated based on a weighted average or on an unweighted average estimate of useful lives of assets in the composite. For example, the composite depreciation rate of three interstate highways with estimated remaining useful lives of 16, 20, and 24 years could be calculated using an unweighted average estimate as follows:

1(16 + 20 + 24) 3⁄

= 5% annual depreciation rate

A composite depreciation rate may also be calculated based on an assessment of the useful lives of the grouping of assets. This assessment could be based on condition of assessments or experience with the useful lives of the grouping of assets. For example, based on experience, engineers may determine that interstate highways generally have estimated remaining lives of approximately 20 years. In this case, the annual depreciation rate would be 5%.

The composite depreciation rate is generally used throughout the life of the grouping of assets. However, it should be recalculated if the composition of the assets or the estimate of average useful lives changes significantly. The average useful lives of assets may change as assets are capitalized or taken out of service.

The annual depreciation expense is calculated by multiplying the annual depreciation rate by the cost of the assets. For example, if the interstate highway subsystem cost $100 million and the annual depreciation rate was 10%, then the annual depreciation would be $10 million. Accumulated depreciation should not exceed the reported cost of the assets.

MODIFIED APPROACH FOR REPORTING INFRASTRUCTURE Infrastructure assets that are part of a network or subsystem of a network (hereafter, eligible infrastructure assets) are not required to be depreciated if two requirements are met. First, the government manages the eligible infrastructure assets using an asset management system that has the characteristics set forth below; second, the government documents that the eligible infrastructure assets are being preserved approximately at (or above) a condition level established and disclosed by the government. To meet the first requirement, the asset management system should:

A) Have an up-to-date inventory of eligible infrastructure assets. B) Perform condition assessments of the eligible infrastructure assets and summarize the results using a

measurement scale. C) Estimate each year the annual amount to maintain and preserve the eligible infrastructure assets at the

condition level established and disclosed by the government.

Determining what constitutes adequate documentary evidence to meet the second requirement for using the modified approach requires professional judgment because of variations among governments’ asset management systems and condition assessment methods. These factors also may vary within governments for different eligible infrastructure assets. However, governments should document that:

• Complete condition assessments of eligible infrastructure assets are performed in a consistent manner at least every three years.


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• The results of the three most recent complete condition assessments provide reasonable assurance that the eligible infrastructure assets are being preserved approximately at (or above) the condition level established and disclosed by the government.

Governments may begin to use the modified approach for reporting eligible infrastructure assets as long as at least one complete condition assessment is available and the government documents that the eligible infrastructure assets are being preserved approximately at (or above) the condition level the government has established and disclosed.

If eligible infrastructure assets meet the requirements as stated above and are not depreciated, all expenditures made for those assets (except for additions and improvements) should be expensed in the period incurred. Additions and improvements to eligible infrastructure assets should be capitalized. Additions or improvements increase the capacity or efficiency of infrastructure assets rather than preserve the useful life of the assets.

If the above requirements are no longer met, the depreciation requirements should be applied for subsequent reporting periods.

Governments should present the following schedules, derived from asset management systems, as RSI (Required Supplementary Information) for all eligible infrastructure assets that are reported using the modified approach:

• The assessed condition performed at least every three years, for at least the three most recent complete condition assessments, indicating the dates of the assessments.

• The estimated annual amount calculated at the beginning of the fiscal year to maintain and preserve at (or above) the condition level established and disclosed by the government compared with the amounts actually expensed for each of the past five reporting periods.

The three most recent complete condition assessments and the estimated and actual amounts to maintain and preserve the infrastructure assets for the previous five reporting periods may not be available initially. In these cases, the information required should be presented for as many complete condition assessments and years of estimated and actual Expenses are available.

The following disclosures should accompany the schedules required by the statement above:

• The basis for the condition measurement and the measurement scale used to assess and report condition. For example, a basis for condition measurement could be distresses found in pavement surfaces. A scale used to assess, and report condition could range from zero for a failed pavement to 100 for a pavement in perfect condition.

• The condition level at which the government intends to preserve it eligible infrastructure assets reported using the modified approach.

• Factors that significantly affect trends in the information reported in the required schedules, including any changes in the measurement scale, the basis for the condition measurement, or the condition assessment methods used during the periods covered by the schedules. If there is a change in the condition level at which the government intends to preserve eligible infrastructure assets, an estimate of the effect on the change on the estimated annual amount to maintain and preserve those assets for the current period also should be disclosed.


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ANNUAL INFRASTRUCTURE REPORTING Each year the county must recognize changes to the county infrastructure. The most common source of this information comes from the Statement of Construction Costs which is a part of the County Highway Annual Report. The county may elect to add road segments to infrastructure as work progresses or when all construction is complete, and the segment is placed into service.

Costs that must be added to infrastructure:

RIGHT OF WAY: This would include permanent easements and deeded property acquired for highway purposes. Right of Way costs generally include the purchase price from the landowner, attorney fees in court cases, relocation fees, deed tax and reimbursement of pre-paid real estate taxes to the former landowner. Appraisal fees and title opinions are not considered Right of Way costs and should be expensed. Right of Way is not to be depreciated.

ROADS: This would include construction labor, construction equipment time, materials, signs, lighting, sewers, landscaping, bike paths overhead, etc. This would include certified costs of major construction projects, and overlays that increase the efficiency or extend the useful life of the road segment. A maintenance overlay which gets the road segment to the end of its useful life will not be considered an infrastructure addition and will be expensed in the year it occurred. If a road segment is resurfaced or reconstructed before it is fully depreciated, the remaining value is written off in the year the new construction is finalized.

BRIDGES: This would include all bridges on county roads as defined by the Minnesota Department of Transportation. Bridge costs include construction contracts for bridge work, approach work, guardrails, sidewalks, signage, and lighting. Bridge culverts will capitalize labor, equipment, materials, and overhead costs related to the installation of the bridge or culvert. Deck overlay and deck rehabilitation that represent a major increase in efficiency or extend the useful life of the bridge will be capitalized, if not these costs will be expensed in the year they occurred.

Chapter 13 – Inventory Management

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CHAPTER 13 INVENTORY MANAGEMENT

NARRATIVE The average Highway Department spends several thousand dollars a year on inventory items. These purchases are often made in varying amounts through the year so the overall value may not appear as evident as the construction project costing thousands of dollars in a single payment. In any case, safeguarding this asset, which may be spread across the county, is a very important aspect of financial control. Much of the ordering, handling, and storing of the inventory items are beyond the scope of the average highway accounting position. However, verification of delivery, vendor charges, inventory system records and the annual reconciliation of physical to inventory system counts are very much a part of it.

Each county has a different method of tracking inventory, setting up the inventory in its system, deciding what to keep on hand and what to buy as needed. It is not the function of an accounting manual to weigh in on these items. This chapter will provide a few points of consideration for your system and possible financial implications for your department, outline the accepted valuation methods as well as the typical methods of expenseensing your inventory items, and finally discussion on the annual physical to calculated inventory adjustments.

ACCOUNTS NEEDED (expense) Expense Accounts (Road, Project, Shop, Equipment) (asset) Cash (asset) Inventory Item Account (liability) Accounts Payable (equity) Fund Balance - Non-Spendable for Inventory (equity) Fund Balance - Assigned

INVENTORY STRUCTURE Keeping in mind that everything has a cost in either time, money or both, and that information is only as valuable as it is accurate, the detail of your inventory should be assessed. Consider the bin of screws in the shop. Is the value of knowing how many screws there are on hand at year end greater than the cost of a mechanic standing for 2 days counting each one? The point here is that although there is a substantial cost that goes into replenishing screws each year, it is a “consumable” you will not charge to a unit as a repair part. Or at least it would not be a suggested practice. The cost of inventorying these types of items would cost more than the benefit.

Time spent tracking inventory items that add cost to road system or to the operation of equipment has a true financial value. Materials placed on State Aid roads become part of the annual maintenance expense and are reimbursed through a maintenance allotment. Repair parts and fuels add to the calculation of equipment rates which also become a part of the reimbursable costs submitted for maintenance and sometimes construction.

Also remember that grouping together “like” items is acceptable, but if the unit prices vary, this may create more work than anticipated.


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It is a good idea to meet with the people who handle the inventory items and discuss the practicality of including items as inventory or if some are better expensed as purchased. Discussion about how to best track the use of items is also worthy. These are the people who are keeping record, if the process is too cumbersome, it may be easier to skip it, or do it later when there is more time. You can see how this could easily make or offset the annual reconciliation.

Simply consider the cost to track and the value of the information to organize in determining the level of detail which will most efficiently and effectively allow the county to manage inventory. Changes made to an existing system are best done when starting a new year for consistency and to document what is done to explain any large changes in the value from one year to another.

INVENTORY CONTAINMENT Storage of inventory items is an important consideration. The storage space should be secure from the public or those not having access to county property. This reduces loss due to theft and the possibility of lawsuit due to injury. Insurance value should be considered as well.

Although it is evident that inventory should be secured and kept safe from damage, it is not always fool proof. Ensure that the county highway has insurance to cover items and in the event of a loss that the insured value would cover the average inventory value on hand. If the insurance coverage is not monitored by the accounting position, it may be a good idea to meet with the person who is responsible confirm values are up to date and all items or storage areas are correct.

INVENTORY CONTROL This generally addresses the way inventory is withdrawn. Every county has a variation of how this is done, and these vary widely in complexity and degree of control. A large county may have an employee who controls inventory withdrawals and does the ordering, etc. Other smaller counties may have a simple handwritten sign-up sheet. If the physical count is close to the system count each year, you are probably doing a good job of control and the system is working for you.

The main idea is that the county needs to establish controls that will assure, with a reasonable amount of accuracy, that there is accurate feedback concerning the movement of inventory.

Keep in mind that there will always be inventory adjustments when a physical count is taken. There are too many variables and human error is always present.

INVENTORY VALUATION METHODS Since many inventory items can change their values rapidly, there are various methods for assigning the values to inventory items when they are costed out in a cost accounting system. The three most common methods of valuing inventory items for costing purposes are FIFO, LIFO, and Averaging. The Highway Department can use any of these accepted methods, but once a method is adopted it should be used consistently.


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FIFO This simply stands for First In – First Out and means that the first item purchased (oldest on the shelf) will be the first item used and will be cost at the rate at which it was purchased. Thus, it is crucial under this system that an item by item history log is kept, showing exactly when items were purchased and what their values are. Each item could be on file with a completely different rate and must be cost at the appropriate rate whenever it is used.

LIFO This simply stands for Last In – First Out and means that the last item purchased (newest on the shelf) will be the first item used and will be cost at the rate at which it was purchased. Thus, like the FIFO method, it is crucial under this system that an item by item history log is kept, showing exactly when items were purchased and what their values are. Each item could be on file with a completely different rate and must be cost at the appropriate rate whenever it is used.

AVERAGING This is a simpler form of costing inventory, which simply costs all items out according to the current average value of all inventory items (of that type) on-hand at the current time (or over a designated period). The calculation, for average unit values, is as follows:

Value of All Items on Hand

(Adding all purchase prices together to come up with a lump sum value)

EQUALS: Average Unit Rate of All ItemsOn Hand at the Current Time

Although the Averaging method may not provide the exact unit price, the method is easier to use over time and may end up being more accurate than either FIFO or LIFO.

INVENTORY EXPENSES VERSUS EXPENDITURES The terms expenditure and expense carry different meanings in highway costing systems.

Accepted practice is that expenditures occur when the inventory is purchased, but the actual expense occurs when the inventory item is used or charged out. Essentially, the expenditure increases the inventory asset value and is not reflected in the operating costs. The expense reflects operating costs in the period. The inventory method that applies to this activity is referred to as the “Consumption Method”.

SEQUENCE OF EVENTS During the year inventory items are purchased to be kept in inventory until needed and expenditures occur. Most accounting systems perform the following entries behind the scenes as purchase orders are entered and paid.


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Record the purchase of inventory

Accounting Entry: Record The Purchase Of Inventory

Debit Account: (asset) Inventory Item Account

Credit Account: (liability) Accounts Payable

Pay the vendor for the purchase

Accounting Entry: Recognize Local Construction Expense (Deduct Prior Years Expenses)

Debit Account: (liability) Accounts Payable


Inventory items are used during the year creating an expense in the accounting records. They are charged out on timesheets and inventory withdrawal reports depending on the county procedure and entered into the accounting system.

Accounting Entry: Record The Use Of Inventory

Debit Account: (expense) Expense Account (Road, Project, Shop, Equipment)

Credit Account: (asset) Inventory Item Account

During the year, usually near year end, a physical count of all items recorded in inventory is done. A physical count is required annually to ensure integrity in inventory controls. If the count is done in the fall, adjustments for purchases and Expenses can be made up to year end, or the count can be made at year end.

The physical count is the actual quantity of inventory you have on hand, regardless of the accounting system information. If large discrepancies occur, it may be good to recount those items to ensure a counting error is not the cause. Determine the correct unit price and adjust the inventory quantity and value in the accounting system to match the physical count. At year end the fund balance will need to be adjusted for the ending inventory value. See Chapter 17 – Year End Adjustments.

Chapter 14 – Maintenance Costing

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CHAPTER 14 MAINTENANCE COSTING

ROUTINE MAINTENANCE

DEFINITION Maintains the status quo even though deteriorated. To keep at original condition or use.

NOTE: All items include labor and material.

Ma 1. Smoothing Surface - Strictly Gravel Roads

• Blading or dragging earth or gravel roads • Scarifying for purpose of mixing gravel with binder and removing washouts on surface

Ma 2. Minor Surface Maintenance - Hard Surface Roads

• Bituminous patching, crack filling • Repairing concrete pavement and crack filling • Patch sealing • Repairing sand pockets • Blading shoulders - no material added • Sweeping or cleaning surfaces

Ma 3. Roadside and Drainage

• Cleaning culverts (thawing culverts) • Minor ditch cleaning, except for brush • Repair to tile lines on Right of Way • Marking ends of culverts • Picking up debris off roadside and roadbed including animal removal • Checking driveway and utility permits • Beaver dam removal • Locating tile lines

Ma 4. Brush and Weed Control

• Mowing of grass and weeds on roadsides and around guard rail, and bridge ends • Spraying of weeds and brush • All clearing and grubbing not in connection with construction work, (Where clearing and grubbing is

done in advance of a grading project, this work should be given a project number and charged to construction)


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Ma 5. Snow and Ice Control

• Erecting, removing, repairing snow fence, including cost of new fence, posts, and tie wires • Snow plowing and winging • Sanding and application of salt and calcium chloride for ice control • Cleaning snow from bridges and around guard rails • Fixing mailboxes

Ma 6. Traffic Services

• Erecting and repairing signs and markers, including cost of signs and posts • Erecting and removing signs for road restrictions • Traffic signals, maintenance, and repair work, (Installation of new traffic signals and railroad grade

crossing signals should be a construction item) • Traffic guidelines, center line striping, retracing not on new construction • Road inspection, looking for washouts, etc. • Road patrol for load restrictions • Putting up barricades

NOTE: Charge any of the following costs to the activity or operation being performed:

Flagmen, Sweeping, Prospecting for gravel, Construction project, Maintenance unallocated

REPAIRS AND REPLACEMENTS

DEFINITION To restore to original condition. To make the surface as it was before, even though material used is better. Original condition or use is the key.

NOTE: All items include labor and materials.

Mb 1. Reshaping

• Cutting shoulders and shoulder slopes, reshaping roadbed, backsloping, where no appreciable amount of material is added to the roadbed, and the ditch bottoms are not changed or deepened appreciably.

Mb 2. Resurfacing

• All re-gravelling of gravel roads, whether spot groveling or a continuous coat. (Gravel for newly graded roads shall be charged to construction; this may be applied in two coats in succeeding years but should be charged to construction.)

• Addition of clay or binder to the surface (This also can be an item under construction.) • Water, rolling, spreading if gravel is stabilized. (This work may be included in some construction

projects.) • Aggregate shouldering


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• Any overlay of less than 1 1/2" in thickness

Mb 3. Culverts, Bridges & Guard Rails

• Replacement of deteriorated or damaged culverts by one of like diameter. (If a culvert is replaced with one of a larger diameter, this should be charged as a betterment under Mc 1.)

• Replacing, lowering, or raising of same size culverts • All bridge repairs and painting • Repair of guard rail • Drainage ditch repair assessments • Storm sewer repair assessments

Mb 4. Washouts = Erosion Damage Storm Related

• All washouts on shoulders, ditches, backslopes and roadbeds. If a culvert is washed out and a new culvert is installed, all labor, materials and backfilling costs shall be included. (Any increased size culvert should be costed to Mc 1.)

Mb 5. Subgrade Repair

• Mud Jacking, frost boils including sub-grade excavation, sand and gravel backfill

BETTERMENTS

DEFINITION Any improvement over original condition or design. The first time something is done to the roadway, it is a betterment.


Mc 1. New Culverts, Guard Rails and New Tiling

• New installations and delivery where not previously in place • Replacement of existing with a larger diameter or longer length • Rip Rap • Erosion control structures • Drainage ditch improvement and storm sewer assessments, including new or expensed sizes • Installation of new approaches and driveways

Mc 2. Cuts and Fills

• Reshaping work where the road grade, backslope and ditch bottoms are changed beyond original design

• Correction of sight distances • Shoulder widening


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Mc 3. Sodding and Seeding

• Tree planting

Mc 4. Bituminous Treatment

• Spot retreatments, complete retreatments, and seal coating not on and approved State Aid construction project

• Railroad crossing replacements

Mc 5. Overlays

• Bituminous or concrete over 1 1/2" thickness that is not an approved State Aid construction project

SPECIAL WORK

DEFINITION Any maintenance work not clearly appropriate for the previous areas.


Md 1. Dust Treatments

• Calcium chloride or other applications to settle dust

*Md 2. N/A

*Md 3. N/A

*Md 4. Construction of Bike Lanes (if not an approved State Aid construction project)

*Md 5. Construction of Turn Lanes (if not an approved State Aid construction project)

*Md 6. Special Agreements

• Agreements with other entities that covers more than one activity

* These items were deliberately left blank to allow for employee reorientation and previous costing to be cleared. In the future, other items may be included here to fill these gaps.

It is acceptable to combine Routine Maintenance with repairs and replacements within the costing system. Betterments must be recorded separate in the costing system because of FHWA requirements on the FHWA Form 536.

Chapter 15 – Construction Costing

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CHAPTER 15 CONSTRUCTION COSTING The Accountant’s Reference Guide provides detailed procedures for the construction process, a link is provided:

http://www.dot.state.mn.us/safinance/resources/accountants-reference-guide.pdf

The Construction Costs are broken down by Road System:

HIGHWAYS Examples:

• Grading and shouldering • Base and surface job • Hard surfacing or resurfacing (including aggregate shouldering) • Aggregate surfacing • Newly graded roads only, may be applied in succeeding years • Any approved construction overlays • Bridges and Culverts • Any project with 50 square feet or more of open waterway • Any span exceeding 10 feet or more • Special Work • May include bituminous salvage, railroad crossings and signals • Right of Way

Includes any cost associated with ROW whether or not it's recoverable. This would include permanent or temporary easements, utility relocation, tree removal, fencing, and appraisal fees, etc.

ENGINEERING (ALL INCLUDING PRELIMINARY AND CONSTRUCTION) Engineering salaries should include the fringe benefit rate. The cutoff between preliminary and construction engineering is defined as the letting date for State Aid purposes even though federal and state cutoff is at the submission of the plans, specifications, and estimate (P.S. & E.) package.

The cutoff point for construction engineering (CE) versus preliminary engineering (PE) is the bid opening date of the contract. Any further breakdown or reporting will be at the county's option. State Aid reimbursement does not require separate reporting of CE and PE Expenses, it is reported as a combined total referred to as Project Development (PD).

These construction project costs are to be reported based on the primary portion of the project. Any projects that cross more than one category with substantial dollars should be split. Right of Way and engineering will always be reported separately.

http://www.dot.state.mn.us/safinance/resources/accountants-reference-guide.pdf

Chapter 15 – Construction Costing

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The construction summary should include all dollars expensed on the three road systems (CSAH-Regular, CSAH-Municipal, and County Roads) separately for the calendar year of the Annual Report. All federal aid and bridge bonding dollars should be identified as separate dollars.

Chapter 16 – Other Accounting Issues

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CHAPTER 16 OTHER ACCOUNTING ISSUES

CONSTRUCTION OF MAINTENANCE FACILITIES Maintenance Facilities are eligible for State Aid funds when approved by the District State Aid Engineer (DSAE) and the State Aid for Local Transportation (SALT) Engineer.

• A county resolution is required. • The preferred method of accounting for the Maintenance Facilities is by setting it up as a construction

project using construction allotment. • Maintenance funds may be used for a small project provided the county does not anticipate using all the

maintenance allotment for road maintenance. • Facilities may be financed with Local Agency Bonds per MN Statute 162.181, Subd. 1. • Annual depreciation for this facility (as with any other facility) should not be charged to the CSAH Regular

system.

APPROVAL PROCESS A request for approval must be sent to the DSAE and include the following:

• Information regarding the use of the facility • Total estimated cost of the facility • Indicate whether the pay requests will be made from a construction account (preferred) or a

maintenance account.

What percent of the cost of the facility is attributable to State Aid? This can be justified by:

• Percent of CSAH Regular mileage to total mileage, or by • Percent of CSAH Regular expenditures to total cost (use total CSAH Regular and Municipal Maintenance

costs and divide it into the total maintenance cost from the Annual Summary of Highway Information report to calculate the percentage.)

Lump sum payment requests may be approved. If a lump sum payment is preferred, it must be equal to or less than the amount approved based on either % method above. Identify payment as a "lump sum" on the request.

DSAE reviews request, makes recommendation for payment and forwards to SALT Engineer for review and final approval.

SALT Engineer notifies county of the approved percent or lump sum and forwards copy of county request and approval letter to State Aid Finance (SAF).


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PARTIAL PAYMENT PROCESS – USING CONSTRUCTION FUNDS (PREFERRED METHOD) County obtains State Aid Project number from SALT.

County submits State Aid Payment Request identifying the costs as Maintenance Facility in the "Other Costs" section of the form, for up to 95% of the approved estimated cost of the facility.

• The amount requested should use the same percentage of total cost or lump sum amount as approved by SALT.

• Follow the State Aid Payment Request process by sending the partial State Aid Payment Request to the DSAE, then the DSAE will send to [email protected]

• If the facility is being funded with Local Agency Bonds, the county must submit a bond repayment schedule to SAF.

• A State Aid Payment Request is required to be applied against the bond.

If the final cost is less than bond principal, the bond principal payments (in the SAAS) will be reduced to reflect the actual facility cost, and the remaining principal is paid from local funds.

FINAL PAYMENT PROCESS Once the facility has been constructed, a final payment request must be submitted to SALT.

• Follow the State Aid Payment Request process by sending the partial State Aid Payment Request to the DSAE, then the DSAE will send to [email protected]

• If total cost exceeds 20% of the original approved amount, SAF will forward to the SALT Engineer for approval.

PAYMENT PROCESS – USING MAINTENANCE FUNDS The final costs of the Maintenance Facility must be added to the Annual Summary of Highway Information as a separate line item for Maintenance Facilities listed between Local Agency Bond Interest and Maintenance Cost. The total of these three will equal the county’s total maintenance cost.

DISASTER ISSUES Refer to the Disaster Guidelines for Highway Accountants document.

This guide is intended to provide an overview of issues the highway accountant may be expensed to or be responsible for when dealing with a disaster event.

FEMA/DISASTER RECEIPTS AFTER MAINTENANCE COSTS HAVE BEEN REPORTED In the event of a disaster, the county should isolate the costs related to the recovery. Recovery costs that are not reimbursed by disaster or FEMA funds may be included in the Annual Highway Information Report.


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If FEMA/Disaster reimbursements are receipted after the maintenance costs have been reported and the reimbursement causes an overpayment of maintenance funds, the amount is most likely insignificant and does not have to be reported.

Accounting Entry: Record Receipt Of FEMA Funds


Credit Account: (revenue) FEMA Revenue

This does not cover State Aid Disaster Funding, refer to “STATE PARK CONSTRUCTION ACCOUNT”.

DISASTER ASSISTANCE CONTINGENCY ACCOUNT The state Disaster Assistance Contingency Account provides the full non-federal share in a major disaster declaration and provides funds for counties not eligible for federal assistance.

Through the Presidential Disaster Declaration, the state must have a least $7.3 million in damage and counties must meet individual county thresholds (county population times $3.50). Through the State Disaster Declaration, the county must incur eligible damages that equal or exceed 50% of countywide per capita impact indicator.

When the Governor declares a state disaster (State Disaster Declaration), the state will assist eligible applicants (counties, cities, and townships) with costs to repair and replace uninsured public infrastructure damaged in the disaster.

DISTRIBUTION: A Disaster Assistance Contingency Account is created in the Special Revenue Fund in the state treasury (Minn, Laws 2014 c 312 art 7 s 4). Money in this account is appropriated to the Commissioner of Public Safety to provide cost-share of federal assistance and state public disaster assistance to eligible applicants. The amount appropriated for cost-share for federal assistance is 100 % of any nonfederal share for state agencies and local governments which may be used to pay all or a portion of the nonfederal share for publicly owned capital improvement projects. The amount appropriated to state public disaster assistance to eligible applicants is the amount required to fully pay all eligible claims. Funds appropriated or transferred to the Disaster Assistance Contingency Account do not lapse but remain in the account until appropriated. Funds appropriated from the Disaster Assistance Contingency Account do not lapse and are available until expensed.

PROCESS: 1. The County Board requests a formal state disaster declaration from the Minnesota Department of Public

Safety Division of Homeland Security and Emergency Management (HSEM).

2. County obtains a preliminary damage assessment. HSEM officials meet with local officials to identify facilities impacted, damage, impacts to the communities and their demographics. Damages must meet the following criteria:

• Damage and costs are the direct result of the disaster;


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• Federal assistance is not available; and • Applicant incurred eligible damages that meet the damage threshold.

3. Applicants apply to HSEM for reimbursement of eligible costs. Eligible costs are the same as under a federal declaration.

• Applicants assume responsibility for 25% of total eligible costs. This can be in-kind match of volunteer hours, donation of equipment, etc.

• Funds became available July 1, 2014. • If the $3 million fund is depleted, applicants must wait until the legislature appropriates additional

funds. • Check HSEM’s website for updates on this funding.

Accounting Entry: Record Receipt Of State Disaster Assistance Contingency Funds


Credit Account: (revenue) State Disaster Assistance Revenue

NON-STATE AID BONDS General Obligation Bonds issued by the county are usually accounted for in the debt service fund. In some instances, the bonds are accounted for in the county highway fund. This section illustrates both instances.

BONDS ACCOUNTED FOR IN DEBT SERVICE FUND Funds from a general obligation bond are transferred to the highway fund:

Accounting Entry: To Post Bond Proceeds

Date: MM/DD/YYYY

Explanation: Proceeds from Debt Service - General Obligation Bonds


Credit Account: (revenue) Proceeds from Sale of Bonds

Amount: Amount of transfer

BONDS ACCOUNTED FOR IN HIGHWAY FUND Funds from the sale of general obligation bonds are receipted to the highway fund, as reported on the bond settlement statement:

Accounting Entry: To Post Sale Of General Obligation Bonds

Date: MM/DD/YYYY

Explanation: Sale of General Obligation Bonds



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Accounting Entry: To Post Sale Of General Obligation Bonds

Credit Account: (revenue) proceeds from Bonds Issued

Amount: Amount of bond proceeds

Funds from interest earned receipted to the highway fund, as reported on the bond settlement statement:

Accounting Entry: To Post Interest Earned On Bond Funds

Date: MM/DD/YYYY

Explanation: Interest earned on general obligation bonds


Credit Account: (revenue) Interest earned

Amount: Amount of bond interest

Funds for premium on general obligation bond receipted to the highway fund, as reported on the bond settlement statement:

Accounting Entry: To Post Premium On General Obligation Bonds

Date: MM/DD/YYYY

Explanation: Premium on general obligation bonds


Credit Account: (revenue) Premium on General Obligation Bonds

Amount: Amount of bond premium

Funds for discounts or issuance costs deducted from general obligation bonds, as reported on the bond settlement statement:

Accounting Entry: To Post Discounts On General Obligation Bonds

Date: MM/DD/YYYY

Explanation: Discounts/charges to general obligation bonds

Debit Account: (county expense) Disc/charges to general obligation bonds


Amount: Amount of discount or issuance charges

If bond covenants restrict levy used to pay back bonds, a reserve for debt service must be setup.

Accounting Entry: Reserve For Debt Service

Date: MM/DD/YYYY

Explanation: Reserve for debt service

Debit Account: (fund bal) Unreserved/Undesignated Fund Balance


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Accounting Entry: Reserve For Debt Service

Credit Account: (fund bal) Reserve for debt service

Amount: Amount of (bond principal + interest + charges)

The County Highway Accountant should recognize (assuming an accrual basis of accounting) the liability due the bonding company.

Book bond principal liability to bonding company

Accounting Entry: For Amount of Bond Principal Due, Recognize Local Construction Expense (Deduct Prior Years Expenses)

Debit Account: (county expense) Bond Principal


Book bond interest expense and liability to bonding company

Accounting Entry: For Amount Of Bond Interest Due

Debit Account: (county expense) Bond Interest Expense


Book bond company service charge

Accounting Entry: For Amount of Bond Company Service Charge

Debit Account: (county expense) Bond Service Charge


County pays the bonding company the amounts due for bond principal, interest, and service charge

Accounting Entry: For Amount Of Disbursement To The Bond Company

Debit Account: (liability) Accounts Payable


Relieve the Reserve for Debt Service:

Accounting Entry: Relieve Reserve For Debt Service

Date: MM/DD/YYYY

Explanation: Relieve reserve for debt service

Debit Account: (fund bal) Reserve for Debt Service

Credit Account: (fund bal) Unreserved/Undesignated Fund Balance

Amount: Amount of (bond principal + interest + charges)


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SHARED FEDERAL REVENUE When more than one local government has a project as part of a DCP it is the administering government that recognizes all federal revenue from the DCP. The administering government does not capitalize the projects from the other governments.

State Aid funds that are forwarded to the administering government from the other participating governments are to be recognized as reimbursements, these funds may be posted to revenues; they are not required to be netted to expenditure accounts.

ADVANCE OF STATE AID FUNDS FOR FEDERAL PROJECTS If the county has funds available in their State Aid Construction Accounts, they may use these funds in lieu of Federal funds on a DCP. The State Aid payments are recognized in the following examples:

For State Aid Construction funds that are received in lieu of federal funds:



Credit Account: (liability) Due to State Aid Federal Funds



If Federal funds become available, SAF will transfer the amount of the Federal reimbursement back to the county’s State Aid construction account and the following entries will be required. This transfer may occur within the same year or in future years.

For transfer of Federal funds to State Aid construction account to reimburse State Aid funds and recognize federal revenue.


Debit Account: (liability) Due to State Aid Federal Funds



Credit Account: (liability) State Aid - Unearned Revenue (Regular or Municipal Construction)

If the county does not have funds available in their State Aid Construction Account, they may advance State Aid funds. The entries for recognizing State Aid revenues for Federal funds would be the same as those discussed above. The discussion below describes the entries required to recognize the State Aid Advance of funds.


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ADVANCE RESOLUTION If the county needs to borrow State Aid Funds in excess of their account balance it is mandatory for the county board to pass a resolution. A copy of the resolution must be sent to the SAF. The County Engineer will be notified upon receipt of the resolution.

A resolution is not required when using State Aid funds in lieu of federal funds if there are sufficient funds available in the State Aid Account.

TRANSFER FOR HARDSHIP CONDITION OR OTHER LOCAL USE

HARDSHIP When the county board desires to use a part of its State Aid allocation off an approved State Aid system, it shall certify by resolution that it is experiencing a hardship condition in regard to financing its local roads while holding its current road and bridge levy or budget equal to or greater than the levy or budget for previous years. Approval may be granted only if the county board demonstrates that the request is made for good cause (flooding, disaster, etc.). If the hardship condition is approved, without requiring progress reports and within 30 days, an immediate payment of at least 50 percent of the total amount authorized will be made, with the balance to be paid within 90 days, or an immediate payment of the entire amount authorized will be made upon determining that sufficient funds are available.

State Aid funds received for hardship condition:

Record State Aid receipt




Recognize revenue for amount of State Aid payment

Accounting Entry: Recognize Revenue For Amount State Aid Payment



(Click for increasing or decreasing maintenance allotments)

OTHER LOCAL USE When the county board desires to use a part of its State Aid allocation on local roads not on an approved State Aid system, it shall certify by resolution that its State Aid routes are improved to State Aid standards or are in adequate condition that does not have needs other than additional surfacing or shouldering needs identified in its State Aid Needs report. The portion of the county apportionment attributable to needs may not be used on the local system.


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A construction project for a local road not on an approved State Aid system and not designed to State Aid standards will not be given approval by the State Aid for Local Transportation Division unless the plan is accompanied by a resolution from the respective county board that indemnifies, saves, and holds harmless the State of Minnesota and its agents and employees from claims, demands, actions, or causes of actions arising out of or by reason of a matter related to constructing the local road and agree to defend at the sole cost of the county any claim arising as a result of constructing the local road.

Payments for Other Local Use must be requested on the State Aid Payment Request Form, the accounting entries are the same as those made for Regular and Municipal State Aid Construction. See REGULAR AND MUNICIPAL CONSTRUCTION ACCOUNTS for further discussion.

REVISION OF COUNTY MAINTENANCE APPORTIONMENTS The commissioner may, upon recommendation of the screening board or upon receipt of a resolution from a county board and for good cause shown, increase or decrease the proportion to be used for maintenance for a requested year.

Maintenance proportion is increased:

Recognize increase to maintenance

Accounting Entry: Recognize Increase To Maintenance

Debit Account: (asset) Maintenance - Allotment

Credit Account: (liability) Maintenance - Unearned Revenue

Recognize reduction to construction

Accounting Entry: Recognize Reduction To Construction

Debit Account: (liability) Construction - Unearned Revenue

Credit Account: (asset) Construction - Allotment

Maintenance proportion is decreased:

Recognize decrease to maintenance

Accounting Entry: Recognize Decrease To Maintenance

Debit Account: (liability) Maintenance - Unearned Revenue

Credit Account: (asset) Maintenance - Allotment

Recognize increase to construction

Accounting Entry: Recognize Increase To Construction


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Debit Account: (asset) Construction - Allotment

Credit Account: (liability) Construction - Unearned Revenue

FEDERAL FUND EXCHANGE PROGRAM (FUND SWAPS) The Federal Fund Exchange Program is a voluntary program which allows counties who have been selected to receive federal funds to trade them with other counties for State Aid funds. This process de-federalizes the project donating the federal funds and brings the other project (the recipient) up closer to allowable federal participation levels. The result is not only a decrease in the total number of federal projects that need to be processed each year but also a decrease in review queues for the remaining federal project. The fund swap program is not intended to circumvent the Area Transportation Partnership (ATP) process but simply to consolidate federal funds and streamline plan processing for all projects.

Eligible Participants

Any county that has been selected to receive federal funds for a project eligible for State Aid funding may opt to exchange the federal funds from one or more county’s State Aid construction funds; exchanges may occur over multiple years as well.

Eligible Funds

Federal Funds eligible to be donated are Surface Transportation Program (STP) and Highway Bridge Program (BR). Enhancement funds (TE) may be swapped if the donor’s project is eligible for State Aid funds.

Exchange Rate

The exchange rate for the program is currently 1:1. The fund exchange must occur between like funding accounts (regular construction to regular construction or county municipal construction to county municipal construction).

Exchange Approval Process

• Counties who wish to be considered for a fund exchange need to fill out a fund exchange application. • DSAE and SALT review and approve fund exchange. • DSAE prepares STIP modification. • STIP modification is approved. • Agreement is prepared by SALT to designate fund exchange amounts and timing. Download the

Federal Fund Exchange Application from the State Aid Finance Website: Forms and Resolutions Agreement is executed by local agencies and SALT.

• State Aid Finance transfers State Aid funds from Recipient County to the Donor County’s State Aid Account.

• Recipient County completes federal process to receive funds for the project (plan approval, permits etc.).

Recipient County receives federal funds when the project is authorized, and payment requests are submitted.


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Rules

• Both projects must be eligible for State Aid funds. • Both projects must be in STIP but do not need to be in the same fiscal year. • Projects involved in the swap should be constructed in the year they were programmed in the STIP.

Federal funds donated cannot exceed federal participation rules for the project.

Cautions

• Projects constructed with state funds may still be federalized if an Army Corps of Engineers (COE) permit is required.

• Accurate cost estimates are extremely important. Once an agreement is executed and funds are transferred, there will be no further adjustments.

• CSAH Regular funds cannot be spent on MSAS or TH routes.

If the county is the Recipient (receives the federal funds):

Post the entry to transfer the State Aid funds to the Donor County (donates the federal funds):

Accounting Entry: Transfer Of State Aid Funds To “Donor County”

Debit Account: (liability) SA Regular Construction - Unearned Revenue

Credit Account: (asset) SA Regular Construction - Allotment

If the county is the Donor (donates the federal funds):

Post the entry to transfer the State Aid funds from the Recipient County (receives the federal funds):

Accounting Entry: Transfer Of State Aid Funds From “Recipient County”

Debit Account: (asset) SA Regular Construction - Allotment

Credit Account: (liability) SA Regular Construction - Unearned Revenue

No other special entries are required, the standard construction entries apply as defined in previous chapters.

FLEXIBLE HIGHWAY ACCOUNT (FLEX) EXCESS SUM FUNDS ACCOUNTS Flexible Highway Account (Flex) is created in the state treasury and derives funds from the 5% of Highway User Tax Distribution Fund (HUTDF). Flex account funds are divided equally, to the extent feasible, between the seven Metropolitan Area Counties (Metro) and the Greater Minnesota Counties (GM). Funds in the flex account are defined in two parts. Base funds are those derived from the pre-2008 HUTDF revenue formula. Excess sum funds are those derived from the difference of base and total revenue, the delta of old formula and current formula.

For budgeting and appropriation purposes, GM excess sum funds are added to its 50% of the Flex Account base. Metro’s excess sum is divided among the seven metropolitan counties by population excluding cities of the first class in the calculation and deposited in separate accounts for each county. The remainder of flex account funds, GM base plus excess, Metro base, are appropriated by the state legislature biennially. County Turnback Account (72GM, 72DM), Municipal Turnback Account (91GM, 91DM), and Trunk Highway Fund are the three eligible


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recipients of Flex funds. Appropriations are to the three recipients in whole, distribution to sub accounts is accomplished by the annual commissioner’s order.

Priority use of these funds is for turnbacks per §MS 161.081. For Metro counties without County Turnback Account (CTB) project obligations, excess sum funds may be used for safety improvements to local roads or routes of regional significance.

The procedure for metro county flex-excess sum projects for turnback, safety improvement and routes of regional significance projects is as follows:

1. County requests use of funds by letter to District State Aid Engineer (DSAE) including category, estimated amount and schedule.

2. DSAE responds affirming eligible use and availability of funds, with copy to State Aid Finance. 3. Follow standard State Aid project approval procedures.

District SA office issues project approval letter including payment request instructions (SEE 5).

1. County submits a “State Aid Pay Request” indicating the amount and the category type on the Turnback/Flex line of the request form; 95% may be advanced with 5% retained until receipt of the final project acceptance and final cost determination by the county or city engineer, and upon concurrence of project acceptance by the DSAE. On the specify line enter your FLEX-EXCESS SUM Account Number and indicate whether it is for Turnback, Safety Improvement, or Routes of Regional Significance.

2. A copy of the DSAE approval letter must accompany the State Aid Pay Request. (See No. 2 above) 3. SA Finance will process the payments using the specified category type. Payments cannot be processed

without this information.

Refer to the "Regular and Municipal Construction" entries in chapter 3.

ACCOUNTS NEEDED (expense) Construction Expenses (there may be numerous of these) (revenue) Flex - Excess Sum Construction - Revenue (asset) Cash (asset) Flex - Excess Sum Construction - Receivable (asset) Flex - Excess Sum Construction - Allotment (liability) Contracts Payable (liability) Due to State Aid Flex - Excess Sum - Overpayment (liability) Flex - Excess Sum Construction - Unearned Revenue

LOCAL OPTION SALES TAX (LOST) AND WHEELAGE TAX These local taxes are collected by the MN Department of Revenue and are disbursed to the county. These funds may be deposited directly to the County Highway Fund or another designated fund within the county.

If the funds are deposited to the highway department:


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Credit Account: (revenue) LOST or Wheelage Tax Revenue

An entry is required to recognize any unused funds from these tax sources at year end:

Accounting Entry: Restrict Unused Funds

Debit Account: (fund equity) Undesignated Fund Balance

Credit Account: (fund equity) Restricted LOST or Wheelage Tax

If the funds are deposited to another designated fund:

Needed funds are requested by the Highway Fund and are transferred from the Designated Fund.

Accounting Entry: For Amount Requested And Transferred


Credit Account: (revenue) Transfer from Designated Fund

Chapter 17 – Year End Adjustments

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CHAPTER 17 YEAR END ADJUSTMENTS

NARRATIVE Adjustment entries may be required at year-end to various balance sheet accounts, these accounts may include:

Inventory (this would also include inventory items) Comp Time Payable Current and Delinquent Taxes Receivable Non-spendable for Inventory Salaries and Wages Payable Restricted Funds for CSAH Contracts Benefits Payable Committed Funds for County Contracts Vacation Payable Assigned Funds Fund Balance Vested Sick Leave Payable Unassigned Fund Balance

SEQUENCE OF EVENTS

INVENTORY ADJUSTMENTS The inventory on your accounting system may differ from the physical inventory taken at year-end. Inventory variance adjustments are required to bring the inventory quantities and dollar values in balance with the physical inventory.

If variances exist, entries to the following unallocated areas will be required:

• End-of-year Inventory Adjustments for Field Supplies • End-of-year Inventory Adjustments for Administrative Supplies • End-of-year Inventory Adjustments for Shop and Equipment Supplies

Take the following steps to determine your inventory variances:

• Take a physical count of all inventory items. • Calculate the dollar value for each item; physical count multiplied by unit price. • Compare the calculated dollar values and quantities to the amounts on the accounting system. • Adjust any items that differ. The offset for these differences will be in the unallocated sections described

above.

NOTE: In the case of specific inventory items such as road sand or salt, the variance for those items should be charged to the respective cost center (snow and ice control).

CURRENT AND DELINQUENT TAXES RECEIVABLE Current and Delinquent Taxes Receivable represent the Highway Department's portion of property taxes owed the county for the current and past years. This balance is calculated by the County Auditor/Treasurers office and needs to be posted to your accounting system. The amount from the prior year may need to be reversed and the current year posted. Any amounts not collected within the first 60 days after the year-end should be unearned.


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Reverse prior year current and delinquent taxes receivable

Accounting Entry: Reverse Prior Year Current And Delinquent Taxes Receivable

Debit Account: (revenue) County Tax - Revenue

Credit Account: (asset) Current Taxes - Receivable

AND -

Debit Account: (liability) Delinquent Tax - Unearned Revenue

Credit Account: (asset) Delinquent Taxes - Receivable

Current year current and delinquent receivable

Accounting Entry: Current Year Current And Delinquent Taxes Receivable

Debit Account: (asset) Current Taxes - Receivable

Credit Account: (revenue) County Tax - Revenue

AND -

Debit Account: (asset) Delinquent Taxes - Receivable

Credit Account: (liability) Delinquent tax - Unearned Revenue

SALARIES AND WAGES PAYABLE Salaries and Wages Payable represent the amount owed to Highway Department employees for work performed in the current year and paid in subsequent years. This liability may need to be adjusted to match the payable amount provided by the County Auditor/Treasurers office at year-end.

Salaries and wages payable is too high

Accounting Entry: Salaries And Wages Payable Is Too High

Debit Account: (liability) Salaries and Wages Payable

Credit Account: (expense) Unallocated (EOY Salaries/Wages Adjustment Account)

Salaries and wages payable is too low

Accounting Entry: Salaries And Wages Payable Is Too Low

Debit Account: (expense) Unallocated (EOY Salaries/Wages Adjustment Account)

Credit Account: (liability) Salaries and Wages Payable

BENEFITS PAYABLE Benefits Payable represent the Highway Department’s portion of the accrued County expense for FICA, Medicare and PERA. These accruals are based on the Salaries and Wages Payable balance. This balance is


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calculated by the County Auditor/Treasurers office and needs to be posted to your accounting system. The amount from the prior year may need to be reversed and the current year posted.

Reverse prior year benefits payable

Accounting Entry: Reverse Prior Year Benefits Payable

Debit Account: (liability) Benefits Payable

Credit Account: (expense) Unallocated (FICA, Medicare, PERA)

Current year benefits payable

Accounting Entry: Current Year Benefits Payable

Debit Account: (expense) Unallocated (FICA, Medicare, PERA)

Credit Account: (liability) Benefits Payable

LONG TERM COMPENSATED ABSENCES PAYABLE Long Term Liabilities (Vacation, Vested Sick Leave, and Comp Time Payables) are not required to be reported at the fund level. They are reported on the county wide financials. It is beneficial to report here since the information is accumulated by each fund for the county wide report.

VACATION PAYABLE Vacation Payable represents the amount owed to Highway Department employees for their vacation hours accrued as of year-end. This balance may be determined by county policy or union contracts and is calculated by the County Highway Department or County Auditor/Treasurers office. The amount from the prior year may need to be reversed and the current year posted.

Reverse prior year vacation payable

Accounting Entry: Reverse Prior Year Vacation Payable

Debit Account: (liability) Vacation Payable

Credit Account: (expense) Unallocated (Vacation Expense)

Current year vacation payable

Accounting Entry: Current Year Vacation Payable

Debit Account: (expense) Unallocated (Vacation Expense)

Credit Account: (liability) Vacation Payable


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VESTED SICK LEAVE PAYABLE Vested Sick Leave Payable represents the amount of sick leave compensation owed to each Highway Department employee if job termination were to occur prior to year-end. This balance may be determined by county policy or union contracts and is calculated by the County Highway Department or County Auditor/Treasurers office. The amount from the prior year may need to be reversed and the current year posted.

Reverse prior year vested sick leave payable

Accounting Entry: Reverse Prior Year Vested Sick Leave Payable

Debit Account: (liability) Vested Sick Leave Payable

Credit Account: (expense) Unallocated (Sick Leave Expense)

Current year vested sick leave payable

Accounting Entry: Current Year Vested Sick Leave Payable

Debit Account: (expense) Unallocated (Sick Leave Expense)

Credit Account: (liability) Vested Sick Leave Payable

COMP TIME PAYABLE Comp Time Payable represents the amount owed to Highway Department employees for their remaining comp time hours accrued as of year-end. This balance may be determined by county policy or union contracts and is calculated by the County Highway Department or County Auditor/Treasurers office. If your accounting system has been posting transactions to this account during the year, one of the following adjustments may be required.

Comp time payable it too high

Accounting Entry: Comp Time Payable Is Too High

Debit Account: (liability) Comp Time Payable

Credit Account: (expense) Unallocated (EOY Comp Time Adjustment Account)

Comp time payable is too low

Accounting Entry: Comp Time Payable Is Too Low

Debit Account: (expense) Unallocated (EOY Comp Time Adjustment Account)

Credit Account: (liability) Comp Time Payable


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FUND BALANCE NON-SPENDABLE FOR INVENTORY The Non-spendable for Inventory is based on the year-end inventory value. Some accounting systems make this entry automatically.

The adjustment to the Non-spendable for Inventory is calculated with the following formula:

Current balance of the Non-spendable for Inventory

MINUS: Current year-end Inventory Value

EQUALS: Adjustment to Non-spendable for Inventory

If the adjustment amount is POSITIVE

Accounting Entry: Adjustment To Non-Spendable For Inventory

Debit Account: (fund equity) Non-spendable for Inventory

Credit Account: (county expense) EOY Adjustment to Non-spendable for Inventory

If the adjustment amount is NEGATIVE

Accounting Entry: Adjustment To Non-Spendable For Inventory

Debit Account: (county expense) EOY Adjustment to Non-spendable for Inventory

Credit Account: (fund equity) Non-spendable for Inventory

The following entries are recommended but not required due to the differences in accounting practices between the highway department and the county wide financial system. Year-end reporting of restricted, committed, assigned, and residual fund balances is required for the county wide financials.

RESTRICTED FUNDS FOR STATE AID PROJECTS Restricted Funds for State Aid Projects (CSAH Regular, CSAH Municipal, and Town Bridge Projects) may be combined as one total or may be reported separately as illustrated below.

FUND BALANCE RESTRICTED FOR CSAH REGULAR PROJECTS The Restricted Funds for CSAH Regular Projects is the remainder of the CSAH Regular funds paid to the county for each CSAH Regular project minus the certified work for the CSAH Regular portion of the project.

Reverse prior year fund balance restricted for CSAH regular projects

Accounting Entry: Reverse Prior Year Fund Balance Restricted For CSAH Regular Projects

Debit Account: (fund equity) Fund Balance Restricted for CSAH Regular Projects

Credit Account: (fund equity) Unassigned (Assigned) Fund Balance


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Current year fund balance restricted for CSAH regular projects

Accounting Entry: Current Year Fund Balance Restricted For CSAH Regular Projects

Debit Account: (fund equity) Unassigned (Assigned) Fund Balance

Credit Account: (fund equity) Fund Balance Restricted for CSAH Regular Projects

FUND BALANCE RESTRICTED FOR CSAH MUNICIPAL PROJECTS The Restricted Funds for CSAH Municipal Projects is the remainder of the CSAH Municipal funds paid to the county for each CSAH Municipal project minus the certified work for the CSAH Municipal portion of the project.

Reverse prior year fund balance restricted for CSAH municipal projects

Accounting Entry: Reverse Prior Year Fund Balance Restricted For CSAH Municipal Projects

Debit Account: (fund equity) Fund Balance Restricted for CSAH Municipal Projects


Current year fund balance restricted for CSAH municipal projects

Accounting Entry: Current Year Fund Balance Restricted For CSAH Municipal Projects


Credit Account: (fund equity) Fund Balance Restricted Funds CSAH Municipal Projects

FUND BALANCE RESTRICTED FUNDS TOWN BRIDGE PROJECTS The Restricted Funds for Town Bridge Projects is the remainder of the Town Bridge funds paid to the county for each Town Bridge project minus the certified work for the Town Bridge portion of the project.

Reverse prior year fund balance restricted for town bridge projects

Accounting Entry: Reverse Prior Year Fund Balance Restricted For Town Bridge Projects

Debit Account: (fund equity) Fund Balance Restricted for Town Bridge Projects


Current year fund balance restricted for town bridge projects

Accounting Entry: Current Year Fund Balance Restricted For Town Bridge Projects


Credit Account: (fund equity) Fund Balance Restricted for Town Bridge Projects


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FUND BALANCE RESTRICTED FUNDS FOR BOND PRINCIPAL AND INTEREST If funds are received from State Aid for principal and interest for a State Aid Bond prior to year-end but are not paid to the bond service company until the new-year the amount should be reported in the Restricted Funds for Bond Principal and Interest.

Reverse prior year fund balance restricted for CSAH regular project year fund balance restricted for bond principal and interest

Accounting Entry: Reverse Prior Year Fund Balance Restricted For CSAH Regular Projects Year Fund Balance Restricted For Bond Principal And Interest

Debit Account: (fund equity) Fund Balance Restricted for Bond Principal and Interest


Current year fund balance restricted for bond principal and interest

Accounting Entry: Current Year Fund Balance Restricted For Bond Principal And Interest


Credit Account: (fund equity) Fund Balance Restricted for Bond Principal and Interest

FUND BALANCE COMMITTED FOR COUNTY PROJECTS/PURPOSES The Fund Balance Committed for County Projects/Purposes is the county portion of projects or other specific purpose that the County Board has identified. Any committed funds must be placed in reserve by the county board by resolution prior to year-end, but the amount may be adjusted after year-end.

Reverse prior year fund balance committed for county projects/purposes

Accounting Entry: Reverse Prior Year Fund Balance Committed For County Projects/Purposes

Debit Account: (fund equity) Fund Balance Committed for County Projects/Purposes


Current year fund balance committed for county projects/purposes

Accounting Entry: Current Year Fund Balance Committed For County Projects/Purposes


Credit Account: (fund equity) Fund Balance Committed for County Projects/Purposes

ASSIGNED FUND BALANCE All resources of the Road and Bridge Fund are considered assigned for road and bridge purposes. For this discussion, this fund balance is labeled unassigned. The County can also assign fund balance for more specific purposes. Assigned Fund Balances are balance accounts that may be assigned at or after year-end. The County


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Board may grant authority to the County Administrator, County Auditor, County Engineer, or Financial officer to assign these balances. Examples of Assigned Fund Balances are:

• Assigned for County Maintenance Projects • Assigned for County Highway Improvements • Assigned for County Roads and Bridges

These Fund Balances are assigned after Non-spendable, Restricted and Committed Funds have been deducted from the Fund Balance. If the remaining Fund Balance is negative after these deductions, no funds may be assigned in these fund balance accounts; they will remain in the residual account called Assigned for Road and Bridge Fund Balance. The Assigned Fund Balance Accounts are transferred back to Unassigned (Assigned) Fund Balance as of the beginning of the new year.

Current year assigned for county highway “example”

Accounting Entry: Current Year Assigned For County Highway “Example”


Credit Account: (fund equity) Assigned for County Highway “Example”

For new year assigned for county highway “example”

Accounting Entry: For New-Year Assigned For County Highway “Example” For The Assigned For County Highway “Example” Balance At Year-End.

Debit Account: (fund equity) Assigned for County Highway “Example”


RESIDUAL FUND BALANCE If the Unassigned (Assigned) Fund Balance is negative after the deductions for Non-spendable, Restricted and Committed Funds, the negative balance will remain in Unassigned Fund Balance and no additional entries are required. Any positive residual balance after deductions for Non-spendable, Restricted, Committed, or other Assigned amounts should be classified Assigned to Roads and Bridges.

Chapter 18 – Annual Report, Sample & Instructions

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CHAPTER 18 ANNUAL REPORT – SAMPLE & INSTRUCTIONS

INSTRUCTIONS The Annual Report is not required to be submitted to State Aid Finance, see Chapter 19 Annual Summary of Highway Information for State Aid Finance reporting requirements.

The Annual Report is used to report county highway activities for the year to other commissions and committees within the county. It may be used as a source of information to the State Auditor’s office in the preparation of the county wide financial report.

COVER PAGE


209


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LETTER OF TRANSMITTAL The letter of transmittal included with the annual report formally presents the report to the board of county commissioners.

The letter of transmittal should meet the following criteria:

• The letter should be typed on letterhead paper. • The letter should be dated as of the date of completion of the report. • The letter should be addressed to the board of county commissioners. • The letter should be signed by the County Engineer. • The body of the letter should be like the sample letter of transmittal. Although the contents of the letter

are left to the discretion of the engineer, it should not include specific information regarding the activities of the county for either the current or upcoming year. Information of this nature should be included in the Brief of Activities, Comments and Recommendations.

s


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SUMMARY OF COUNTY HIGHWAY INFORMATION The Summary of County Highway Information page summarizes the current year's maintenance costs and corresponding mileage amounts, and construction costs by funding sources.

Construction costs include all costs from federal projects (SPs) and non-federal (SAPs) projects, costs should exclude Federal Funds, Bridge Bonding Funds and Special Account Funds (Town Bridge, State Park, Turnback, etc.). Total costs should not be reduced by any reimbursements received from other sources if the reimbursement is for work associated to the CSAH Regular or CSAH Municipal road. If work is associated with other road systems, those costs or reimbursements should not be included at all.

The construction and maintenance costs should match the amounts shown on the Summary of Construction Cost and the Summary of Maintenance Cost pages, respectively.

The mileage amounts should correspond to the mileage amounts in the State Aid Apportionment Data report.


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BRIEF OF ACTIVITIES, COMMENTS AND RECOMMENDATIONS The Brief of Activities, Comments and Recommendations page summarizes the major accomplishments and activities of the highway department during the year. This page may also include recommendations and/or proposals for the upcoming year. The format of the page is left to the discretion of the county; however, the State Aid office prefers that most of the data be summarized quantitatively rather than narratively, as shown in the sample annual report.


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FINANCIAL STATEMENT The Financial Statement summarizes the financial position of the highway department on 12/31/XX by disclosing the assets, liabilities, and fund balance on that date. Some of the asset, liability and fund balance accounts are briefly described below.

ASSETS

CASH AND POOLED INVESTMENTS Cash and Pooled Investments is the amount of cash the highway department has on hand, including pooled investments. This amount should correspond to the ending cash balance shown on the Statement of Revenues and Expenditures.

PETTY CASH AND CHANGE FUNDS A Petty Cash and Change Fund is a small amount of cash the highway department has on hand to pay for such items as office supplies and postage. This amount should always equal the full petty cash amount designated by the county board.

TAXES RECEIVABLE Taxes Receivable is composed of two accounts – Non-apportioned Taxes and Delinquent Taxes.

NON-APPORTIONED TAXES Non-apportioned taxes is the amount of taxes collected at the close of the current year that will not be receipted into the Road and Bridge fund until the upcoming year.

DELINQUENT TAXES Delinquent Taxes is the amount of outstanding delinquent taxes from the current year and the past six years (If the actual amount is not known, it should be estimated). Delinquent taxes that have been outstanding for over six years should be written off the records by debiting Bad Debt Expense and crediting Accounts Receivable.

ACCOUNTS RECEIVABLE Accounts receivable is the amount due from non-governmental entities resulting from various transactions such as the sale of goods and/or services. This account encompasses all receivables not classified within one of the other receivable accounts (e.g., receivables from individuals and businesses).

ACCRUED INTEREST RECEIVABLE Accrued Interest Receivable is the amount of interest that has been earned on investments which has not yet been collected. This amount should match the amount on the Receivables page.


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DUE FROM OTHER FUNDS Due from Other Funds is the total amount due from the county's other funds resulting from various transactions such as the sale of goods and/or services. This amount should match the amount on the Receivables page.

DUE FROM OTHER GOVERNMENTS Due from Other Governments is the total amount due from other governmental entities. The accounts may include Due from Townships, Due from Municipalities, Due from Counties and State Aid Maintenance and Construction Receivables.

DUE FROM TOWNSHIPS/MUNICIPALITIES Due from townships/municipalities is the amount due from townships/municipalities resulting from various transactions such as the sale of goods and/or services.

DUE FROM COUNTIES Due from counties is the amount due from other counties resulting from various transactions such as the sale of goods and/or services.

STATE AID REGULAR AND MUNICIPAL MAINTENANCE RECEIVABLE The State Aid Maintenance Receivable amounts indicate the portion of the maintenance allotment that has been spent, but not yet reimbursed from the State Aid office. Generally, this amount is 10% of the Regular Maintenance Allotment, unless the county has spent less than their allotment, and 100% of the Municipal Maintenance Allotment, unless the county has spent less than their allotment or a portion of their allotment has previously been advanced.

STATE AID REGULAR, MUNICIPAL AND TOWN BRIDGE RECEIVABLES The State Aid Regular, Municipal and Town Bridge Receivable amounts indicate the funds encumbered on open regular, municipal and town bridge construction projects (typically 5% of the estimated costs of the projects). These amounts should match the allotment encumbrances shown on the Status of State Aid Accounts (status report) as of 12/31/XX. If the amounts do not match, you will need to reconcile the differences on the Receivables Addendum page.

BRIDGE BONDING CONSTRUCTION RECEIVABLE The Bridge Bonding Construction Receivable amount indicates the funds encumbered on open bridge bonding construction projects. Typically, 100% of the grant amount is encumbered until the project has been finalized.

STATE AID ALLOTMENTS State Aid Allotments is the total balance available in the State Aid Allotment accounts. The accounts may include Regular Maintenance, Regular Construction, Municipal Maintenance, Municipal Construction, and Town Bridge


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Construction. The amounts for each of the accounts should match the balances available shown on the Status of State Aid Accounts (status report) as of 12/31/XX.

INVENTORIES Inventories is the total value of materials and supplies the highway department has on hand. (For information regarding inventory costing methods, see the Inventory Management section in the State Aid Accounting Manual).

LIABILITIES

ACCOUNTS PAYABLE Accounts payable is the total amount owed to non-governmental entities resulting from various transactions such as the purchase of goods and/or services. This account encompasses all payables not classified within one of the other payable accounts (e.g., payables to vendors, individuals, etc.).

SALARIES PAYABLE Salaries Payable is the amount owed to employees for services rendered.

CONTRACTS PAYABLE Contracts Payable is the amount owed to contractors resulting from various transactions, such as the purchase of goods and/or services.

DUE TO OTHER FUNDS Due to Other Funds is the total amount owed to the county's other funds resulting from various transactions such as the purchase of goods and/or services.

DUE TO OTHER GOVERNMENTS Due to Other Governments is the total amount owed to other governmental entities resulting from various transactions, such as the purchase of goods and/or services. The accounts may include Due to Townships, Due to Municipalities, Due to Counties and Due to State Aid - Overpayments.

DUE TO TOWNSHIPS/MUNICIPALITIES Due to townships/municipalities is the amount due to townships/municipalities resulting from various transactions such as the purchase of goods and/or services.

DUE TO COUNTIES Due to counties is the amount due from other counties resulting from various transactions such as the purchase of goods and/or services.


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DUE TO STATE AID - OVERPAYMENTS Due to State Aid - Overpayments is the amount of State Aid funds that were overpaid to the highway department. This usually occurs if a construction project underran its original estimate, or annual maintenance expenditures were less than the portion of the maintenance allotment advanced for that year.

UNEARNED REVENUE Unearned Revenue represents future income contracted for and/or collected in advance which has not yet been earned. Unearned revenue accounts may include State Aid Allotments, Delinquent Taxes and Prepaid Taxes.

STATE AID ALLOTMENTS State Aid Allotments is the amount of State Aid Allotment funds which have not yet been earned (i.e., the balance available in the account plus the uncertified portions of contracts).

DELINQUENT TAXES Delinquent taxes is the amount of outstanding delinquent taxes from the current year and the past six years that is estimated that will not be collected within the first 60 days of the upcoming year.

PREPAID TAXES Prepaid taxes is the amount of taxes that have been receipted into the Road and Bridge Fund which have not yet been earned.

COMPENSATED ABSENCES Compensated absences is the amount of vested vacation and sick leave that will become payable within 60 days of the close of the year. Compensated absences are only recorded as a liability in cases where it is known that employees who have vested vacation or sick leave will be resigning within the first 60 days of the upcoming year. Vested benefits are benefits earned by employees that are not contingent on remaining in the service of the employer (i.e., the employees will receive benefits based on service to date, even if they terminate employment).

FUND BALANCE

RESERVED Reserved fund balance is the portion of the fund balance that has been earmarked for specific purposes for which the highway department has a legal obligation. A legal obligation occurs when a purchase order has been approved, a contract has been awarded or an expenditure has been approved per board motion.

UNRESERVED None


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DESIGNATED Designated fund balance is the portion of the unreserved fund balance that has been earmarked for specific purposes for which the county has no legal obligation (i.e., the funds are not legally obligated to be used for the proposed purposes).

NOTE: Designated funds are not recognized by the State Auditor's office as reducing the fund balance.

UNDESIGNATED Undesignated fund balance is the portion of the unreserved fund balance that has not been designated for any purpose (i.e. available funds).


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RECEIVABLES The Receivables page summarizes the activity of the receivable accounts for the year. The format of the page typically includes four columns. The first column is the balance at the beginning of the year. The second column adds charges billed during the year. The third column subtracts payments received during the year. The fourth column shows the resulting year-end balance. The final column - the ending balance - is the only column that is required to be shown; however, if this is done, records should be kept verifying these amounts.

The "charges billed" amounts should correspond to the "modified accrual balance" amounts on the Statement of Revenues and Expenditures page. The "payments received" amounts should correspond to the "cash receipts" amount on the Statement of Revenues and Expenditures page. The "ending balance" amounts should match the amounts shown on the Financial Statement.

The receivable accounts are briefly described below. The amounts referred to in the descriptions are the ending balances (balances as of 12/31/XX).

TAXES RECEIVABLE Taxes Receivable is composed of two accounts – non-apportioned Taxes and Delinquent Taxes.

NON-APPORTIONED TAXES Non-apportioned taxes is the amount of taxes collected at the close of the current year that will not be receipted into the Road and Bridge fund until the upcoming year.

DELINQUENT TAXES Delinquent taxes is the amount of outstanding delinquent taxes from the current year and the past six years. Delinquent taxes that have been outstanding for over six years should be written off the records by debiting Bad Debt Expense and crediting Accounts Receivable.

ACCOUNTS RECEIVABLE Accounts receivable is the amount due from non-governmental entities resulting from various transactions such as the sale of goods and/or services. This account encompasses all receivables not classified within one of the other receivable accounts (e.g., receivables from individuals and businesses).

ACCRUED INTEREST RECEIVABLE Accrued Interest Receivable is the amount of interest that has been earned on investments which has not yet been collected.

DUE FROM OTHER FUNDS Due from Other Funds is the total amount due from the county's other funds resulting from various transactions such as the sale of goods and/or services.


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DUE FROM OTHER GOVERNMENTS Due from Other Governments is the total amount due from other governmental units. The accounts may include Due from Townships, Due from Municipalities, Due from Counties and State Aid Maintenance and Construction Receivables.

DUE FROM TOWNSHIPS/MUNICIPALITIES Due from townships/municipalities is the amount due from townships/municipalities resulting from various transactions such as the sale of goods and/or services.

DUE FROM COUNTIES Due from counties is the amount due from other counties resulting from various transactions such as the sale of goods and/or services.

STATE AID REGULAR AND MUNICIPAL MAINTENANCE RECEIVABLES These amounts indicate the portion of the maintenance allotment that has been spent, but not yet reimbursed from the State Aid office. Generally, this amount is 10% of the Regular Maintenance Allotment, unless the county has spent less than their allotment, and 100% of the Municipal Maintenance Allotment, unless the county has spent less than their allotment or a portion of their allotment has previously been advanced.

STATE AID REGULAR, MUNICIPAL AND TOWN BRIDGE RECEIVABLES These amounts indicate the funds encumbered on open construction projects (typically 5% of the estimated costs of the projects). These amounts should match the allotment encumbrances shown on the Status of State Aid Accounts (status report) as of 12/31/XX. If the amounts do not match, you will need to reconcile the differences on the Receivables Addendum page.

BRIDGE BONDING CONSTRUCTION RECEIVABLE The Bridge Bonding Construction Receivable amount indicates the funds encumbered on open construction projects. Typically, 100% of the grant amount is encumbered until the project has been finalized.


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RECEIVABLES ADDENDUM The Receivables Addendum page is only required if the ending balance of a state aid account on the receivables page does not coincide with the allotment encumbrances on the Status of State Aid Accounts (status report) as of 12/31/XX. This usually occurs if State Aid funds were overpaid to the county for some reason (e.g., a project underrun). If this is the case, the differing amounts should be reconciled on this page.

Individual accounts should be reconciled separately. The overpayment(s) should be subtracted from the allotment encumbrances (funds encumbered for open construction projects) to arrive at an adjusted receivable amount. This adjusted amount should then match the amount on the Receivables page.


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TOWN ROAD ALLOTMENT The Town Road Allotment page shows the distribution of the current year's town road allotment. All townships within the county and their respective distribution amounts should be listed.

The total should match the town road allotment shown on the Notice of Annual Apportionment, which is sent out in January.

It should be noted who administered the funds (e.g., Highway Department, Auditor, etc.).


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INVENTORY OF MATERIALS AND SUPPLIES The Inventory of Materials and Supplies page itemizes the values of the materials and supplies on hand as of 12/31/XX. (For information regarding inventory costing methods, see the Inventory Management section in the State Aid Accounting Manual).

The inventory items should be divided into three main categories:

1. Parts and Replacements - This includes such items as batteries, belts, cutting edges, filters, etc.

2. Motor Fuels, Lubricants and Fluids - This includes such items as gasoline, grease, transmission fluid, anti-freeze, etc.

3. Field Materials and Supplies - This includes such items as calcium chloride and salt, crack filler, signs and posts, etc.

The total should correspond to the amount shown on the Financial Statement.

A change in the inventory costing method from the previous year should be footnoted.


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LIABILITIES AND FUND BALANCE RESERVES The Liabilities and Fund Balance Reserves page shows the breakdown of the liability and fund balance reserve accounts. The amounts on the Liabilities and Fund Balance Reserves page should correspond to the amounts shown on the Financial Statement.

The Accounts Payable, Salaries Payable, Due to Other Funds and Due to Other Governments liability accounts are divided into five categories - maintenance, construction, equipment maintenance and shops, administration and other. The breakdown of these accounts is shown on a separate page - the Liabilities and Fund Balance Reserves Addendum page. The totals for each of these accounts should be combined and shown on the Liabilities and Fund Balance Reserves page as Accounts Payable/Other Liabilities.

Some of the liability and fund balance accounts are briefly described below.

LIABILITIES

ACCOUNTS PAYABLE/OTHER LIABILITIES

ACCOUNTS PAYABLE Accounts payable is the amount owed to non-governmental entities resulting from various transactions such as the purchase of goods and/or services. This account encompasses all payables not classified within one of the other payable accounts (e.g., payables to vendors, individuals, etc.).

SALARIES PAYABLE Salaries Payable is the amount owed to employees for services rendered.

DUE TO OTHER FUNDS Due to Other Funds is the total amount owed to the county's other funds resulting from various transactions such as the purchase of goods and/or services.

DUE TO OTHER GOVERNMENTS (GOODS AND SERVICES) Due to Other Governments is the total amount owed to other governmental units resulting from various transactions, such as the purchase of goods and/or services. Other governmental units may include townships, municipalities, and counties.

CONTRACTS PAYABLE Contracts Payable is the amount owed to contractors resulting from various transactions, such as the purchase of goods and/or services. This amount does not include amounts owed to contractors for federal aid projects, since the State Aid Finance office pays them directly.


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DUE TO OTHER GOVERNMENTS – (OTHER)

DUE TO STATE AID - OVERPAYMENTS Due to State Aid - Overpayments is the amount of State Aid funds that were overpaid to the highway department. This usually occurs if a construction project underran its original estimate, or annual maintenance expenditures were less than the portion of the maintenance allotment advanced for that year.

UNEARNED REVENUE Some of the accounts Unearned Revenue may consist of include State Aid Allotments, Delinquent Taxes and Prepaid Taxes.

STATE AID ALLOTMENTS State Aid Allotments is the amount of State Aid Allotment funds which have not yet been earned. (i.e., the balance available in the account plus the uncertified portions of contracts).

DELINQUENT TAXES Delinquent taxes is the amount of outstanding delinquent taxes from the current year and the past six years that is estimated will not be collected within the first 60 days of the upcoming year.

PREPAID TAXES Prepaid taxes is the amount of taxes that have been receipted into the Road and Bridge Fund which have not yet been earned.

COMPENSATED ABSENCES Compensated absences is the amount of vested vacation and sick leave that will become payable within 60 days of the close of the year. Compensated absences are only recorded as a liability in cases where it is known that employees who have vested vacation or sick leave will be resigning within the first 60 days of the upcoming year. Vested benefits are benefits earned by employees that are not contingent on remaining in the service of the employer (i.e., the employees will receive benefits based on service to date, even if they terminate employment).

FUND BALANCE

RESERVED Reserved fund balance is the portion of the fund balance that has been earmarked for specific purposes for which the highway department has a legal obligation. A legal obligation occurs when a purchase order has been approved, a contract has been awarded or an expenditure has been approved per board motion.


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DESIGNATED Designated fund balance is the unreserved portion of the fund balance that has been earmarked for specific purposes for which the county has no legal obligation (i.e., the funds are not legally obligated to be used for the proposed purposes).

NOTE: Designated funds are not recognized by the State Auditor's office as reducing the fund balance.

UNDESIGNATED Undesignated fund balance is the unreserved portion of the fund balance that has not been designated for any purpose (i.e. available funds).


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LIABILITIES AND FUND BALANCE RESERVES ADDENDUM (OPTIONAL PAGE) The Liabilities and Fund Balance Reserves Addendum page shows the detailed breakdown of the Accounts Payable, Salaries Payable, Due to Other Funds and Due to Other Governments liability accounts. The liabilities are divided into five types - maintenance, construction, equipment maintenance and shops, administration and other.

The totals for each of the accounts should be combined and specified as Accounts Payable/Other Liabilities on the Liabilities and Fund Balance Reserves page.


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FIXED ASSETS The Fixed Assets page itemizes the fixed assets as of 12/31/XX. Fixed assets are not reported on the Financial Statement under the governmental modified accrual basis of accounting.

The Fixed Assets page should include twelve columns, as shown in the sample annual report. Fixed assets are divided into two categories - major equipment and minor equipment. Minor equipment is further divided into four subcategories - maintenance, construction, equipment maintenance and shops and administration. (For information regarding the classification of fixed assets as major or minor equipment, see the Fixed Assets section in the State Aid Accounting Manual).

THE TWELVE COLUMN HEADINGS ARE BRIEFLY DESCRIBED BELOW.

EQUIPMENT NUMBER This is the identification number that has been assigned to the piece of equipment by the highway department.

EQUIPMENT DESCRIPTION This is a brief description of the piece of equipment.

DATE ACQUIRED This is the date the piece of equipment was originally purchased (i.e., the date of delivery of the equipment).

ORIGINAL COST This is the cash outlay or its equivalent that is necessary to acquire the piece of equipment and put it in operating condition. The amount is determined when the equipment is originally purchased and remains constant from year to year.

Original cost typically equals:

• Invoice price • Less cash discounts and other discounts available if any • Plus, freight-in • Plus, assembly • Plus, installation charges • Plus, testing costs • Plus, sales and federal excise taxes

However, the interpretation of the meaning of the term "original cost" is left to the discretion of the county; therefore, it should be noted as to what this number represents.


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ESTIMATED LIFE This is a measure of the number of years of service expected from the asset before its disposal. (Refer to the Fixed Assets section in the State Aid Accounting Manual for a listing of the estimated years of life of most types of equipment). The estimated life may increase if a betterment is made to the piece of equipment.

STATUS CODE This indicates any change in condition of the piece of equipment during the year (e.g., new, improved, traded, and scrapped).

BEGINNING NET BOOK VALUE This amount is the equipment's remaining depreciable value at the beginning of the year. For existing equipment, this amount is the same as the previous year's ending net book value. For new equipment, the amount is the same as the original cost.

CURRENT YEAR COSTS This amount includes any costs incurred during the year to maintain the piece of equipment (e.g., routine repairs, major overhauls, gas, oil, etc.). Current year costs do not include betterments made to the unit.

CURRENT YEAR RENTAL EARNED This amount is the current year's rental earned for the piece of equipment. Rental earned is the total amount that was charged to various roads for the use of a specific unit during the year. (For information regarding rental rates, see the Fixed Assets section in the State Aid Accounting Manual).

ADJUSTMENT TO EQUALIZE DEPRECIATION This is the amount needed to adjust the current year's rental earned so that it reflects the actual costs of maintaining the piece of equipment, and not the estimated amount obtained using the equipment's rental rate.

To calculate this amount, first determine the equipment's actual total costs for the year (current year's costs plus depreciation Expenses). Next, subtract the amount of rental earned for the year from the actual total costs for the year. The difference is the adjustment to equalize depreciation. This will be a negative number if the rental earned was greater than the actual costs and a positive number if the rental earned was less than the actual costs. This number should be as close to zero as possible. If it is not, the need to modify the equipment's rental rate should be considered. (For more information regarding the modification of rental rates, see the Fixed Assets section in the State Aid Accounting Manual).

CURRENT YEAR DEPRECIATION This amount is the current year's depreciation expense for the piece of equipment. The annual depreciation expense for the piece of equipment should be determined at the time the equipment is acquired using the straight-line method. Since the straight-line method provides for equal periodic charges to expense over the


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estimated life of the asset, the annual depreciation expense will remain constant, unless a betterment is made to the unit.

ENDING NET BOOK VALUE This amount is the equipment's remaining depreciable value at the end of the year. This amount is calculated by taking the equipment's beginning net book value plus betterments during the year (if any) less the current year's depreciation expense.


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FIXED ASSETS BETTERMENTS The Fixed Asset Betterments page discloses the betterments made to fixed assets during the year. The information required for each betterment includes the equipment number and description of the fixed asset; date, cost, and type of betterment; and the number of years the betterment extended the life of the fixed asset. All betterments should be recorded, regardless of the source of funding.

Betterments are defined as modifications that altar the original function/design which improve the quantity or quality of the unit, or major repairs which extend the life of the unit. (For more information regarding betterments, see the Fixed Assets section in the State Aid Accounting Manual).

LAND AND BUILDINGS The Land and Buildings page itemizes the highway department's land and buildings as of 12/31/XX. Land and buildings, like fixed assets, are not reported on the Financial Statement under the governmental modified accrual basis of accounting.

The Land and Buildings page should include seven columns, as shown in the sample annual report. The column headings are briefly described below.

LAND AND BUILDING DESCRIPTION This is a brief description of the land/building.

DATE ACQUIRED This is the date the land/building was originally purchased (i.e., the date the transaction was closed).


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ORIGINAL COST This is the cash outlay or its equivalent that is necessary to acquire the land/building and put it in operating condition. The amount is determined when the land/building is originally purchased and remains constant from year to year. If land and a building are acquired for a single lump-sum purchase price, the purchase price should be allocated to the individual assets based on their relative fair market values.

The cost of land generally includes:

• Purchase price • Costs of closing the transaction and obtaining title, including commissions, options, legal fees, title

search, insurance, and past due mortgage payments and taxes.

The cost of a building generally includes:

• Contract price • Costs of excavation for the specific building • Architectural costs and the costs of building permits • Capitalized interest costs in certain instances • Unanticipated costs resulting from the condition of the land (e.g. blasting rock or channeling an

underground stream)

BEGINNING ACCUMULATED VALUE This is the accumulated value of the land/building at the beginning of the year. Accumulated value is the land/building's original cost plus the cost of all betterments made to the property. For existing property, the beginning accumulated value is the same as the previous year's ending accumulated value. For new property, the beginning accumulated value is the same as the original cost.

CURRENT YEAR BETTERMENT This is the cost of a betterment made to the land/building during the year, if any.

The costs of betterments to land generally include:

• The costs of surveys • The costs of preparing the land for its particular use such as clearing, grading, and razing old buildings

(net of any proceeds from salvage) when such improvements have an indefinite life

The costs of betterments to buildings generally include:

• The costs of remodeling and reconditioning • Architect's fees

TYPE OF BETTERMENT This is a brief description of the betterment made to the land/building during the year, if any.


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ENDING ACCUMULATED VALUE This is the accumulated value of the land/building at the end of the year. This amount is calculated by taking the land/building's beginning accumulated value plus betterments during the year (if any).

STATEMENT OF REVENUES AND EXPENDITURES The Statement of Revenues and Expenditures page summarizes the results of the highway department's operations for the year. The format of the page typically includes five columns. The first column lists the Cash Receipts/Disbursements during the year. The second column reverses (subtracts) previous years' receivables/payables that were received/paid in the current year. The third column records (adds) current year receivables/payables that were not received/paid in the current year. The fourth column adds/subtracts any transfers or adjustments that were made in the current year. The fifth column shows the resulting modified accrual balance figures. The final column - the modified accrual balance - is the only column that is required to be shown; however, if this is done, records should be kept verifying these amounts.

The "cash receipts" and "modified accrual balance" amounts should correspond to the "payments received" and "charges billed" amounts, respectively, on the Receivables page, if applicable.

Depreciation expense is not reported on the Statement of Revenues and Expenditures page because depreciation is not an allowable expenditure under the governmental modified accrual basis of accounting.

Following the revenues and expenditures, the beginning and ending year cash and fund balance amounts should be reconciled to verify that the figures on the Statement of Revenues and Expenditures are correct.

The main categories for revenue and expenditures are briefly described below.


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REVENUES

TAXES Current and delinquent taxes may be lumped into one figure on the Statement of Revenues and Expenditures page.

PREVIOUS YEAR ACCRUALS The amount of previous year accruals should include the previous year's non-apportioned taxes (taxes collected at the close of the previous year that were receipted into the Road and Bridge Fund in the current year), and the portion of previous years' delinquent taxes that were collected within the first 60 days of the current year.

CURRENT YEAR ACCRUALS The amount of current year accruals should include the current year's non-apportioned taxes (taxes collected at the close of the current year that will not be receipted into the Road and Bridge Fund until the upcoming year), and the portion of the current year's delinquent taxes that is estimated will be collected within the first 60 days of the upcoming year.

INTERGOVERNMENTAL REVENUE Intergovernmental revenues are revenues from other governments in the form of operating grants, entitlements, shared revenues, or payments in lieu of taxes. This includes the Real Estate HACA (Homestead and Agricultural Credit Aid) Credit, Mobile Home HACA Credit, and Disparity Reduction Aid.

STATE AID REGULAR MAINTENANCE The cash receipts amount for Regular Maintenance should include 90% of the current year's allotment and 10% or less of the previous year's allotment unless the county has a bond. The amount received in the current year from previous years' allotments should be recorded in the second column as a reversal. The receivable amount for the current year should be recorded as an accrual in the third column. The receivable amount should match the amounts shown on the Financial Statement page and the Receivables page.

STATE AID MUNICIPAL MAINTENANCE The cash receipts amount for municipal maintenance generally includes the previous year's municipal maintenance Expenses up to the previous year's allotment amount unless a portion of the allotment was previously advanced.

The previous year accruals generally include the amount received in the current year for previous years' receivables. The current year accruals should include amounts not yet received for current year Expenses, up to the current year's allotment amount.


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STATE AID REGULAR CONSTRUCTION The cash receipts amount includes cash received for regular construction projects, including engineering, ROW, utility costs, and bond principal.

The amount of the current year's revenue earned for regular construction projects is equal to the amount of work certified during the year. Previous year accruals should include amounts received in the current year for work not yet certified or for work certified in previous years. Current year accruals should include amounts not yet received or received in previous years for work certified in the current year.

STATE AID TRANSFERS (STATE AID PORTION OF FUNDING FOR A FEDERAL CONSTRUCTION

PROJECT) The county never receives State Aid funds for federal projects because the State Aid office acts as an agent for the county and disburses the funds directly to the contractor. Therefore, there is never any cash receipts or previous year accruals. The current year's accrual is the amount transferred from the State Aid Account(s) to the Agency Fund. This amount is obtained from the State Transfer Notice sent by the State Aid Finance office shortly after the transfer has been made, and can be verified from copies of the ledger sheets sent by the State Aid Finance office in January of the following year.

STATE AID MUNICIPAL CONSTRUCTION The same guidelines are followed for Municipal Construction as Regular Construction.

TOWN BRIDGE The same guidelines are followed for Town Bridge as Regular Construction.

BRIDGE BONDING CONSTRUCTION The same guidelines are followed for Bridge Bonding Construction as for Regular and Municipal Construction, except that revenue earned cannot exceed the bridge bonding grant amount (i.e. the ending modified accrual balance should be less than or equal to the grant amount).

FEDERAL AID CONSTRUCTION The county never receives Federal Aid funds for federal aid construction projects because the State Aid office disburses the funds directly to the contractor. Therefore, there is never any cash receipts or previous year accruals. The current year's accrual is obtained from copies of the ledger sheets sent by the State Aid Finance office in January of the upcoming year.

TOWN ROAD ALLOTMENT If the highway department administers the town road allotment funds, the cash receipts amount is the same as the town road allotment amount. Since there are no previous year or current year accruals, the cash received is


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also the modified accrual balance amount. If the highway department does not administer the town road allotment funds, the town road allotment is not shown on the Statement of Revenues and Expenditures.

CHARGES FOR MATERIALS AND SERVICES Charges for materials and services is revenue earned from the sale of goods and/or services to other departments, other governmental units, individuals, and businesses.

MISCELLANEOUS REVENUE Miscellaneous Revenues are revenues not classified within one of the other categories. Examples of various accounts which may classify as miscellaneous revenue include interest on investments, sales of supplies and materials and sale of used equipment.

OTHER FINANCING SOURCES Other financing sources include governmental fund general long-term debt proceeds, amounts equal to the present value of minimum lease payments arising from capital leases, proceeds from the sale of general fixed assets and operating transfers in.


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EXPENDITURES Expenditures is divided into four main categories - administration, maintenance, construction and equipment maintenance and shop. Other categories may include material and services for resale, unallocated expenditures, intergovernmental expenditures and debt service and other financing uses. The categories are further divided into three subcategories - personal services, services and supplies and capital outlay. The maintenance category may have an additional subcategory - contracts. The construction category may have two additional subcategories - contracts and federal aid.

UNALLOCATED EXPENDITURES Unallocated Expenditures include all costs that cannot be classified within one of the other categories.

INTERGOVERNMENTAL EXPENDITURES Intergovernmental expenditures are expenditures made by one level or unit of government to another government in support of government activities administered by the recipient unit.

DEBT SERVICE Debt Service includes interest and principal payments on general long-term debt.

OTHER FINANCING USES Other Financing Uses includes governmental fund operating transfers out (e.g. Town Road Allotment) and the amount of refunding bond proceeds deposited with the escrow agent.

PERSONAL SERVICES Personal service expenditures pertain to employee salaries and/or wages and fringe benefits.

SERVICES AND SUPPLIES Services and Supplies expenditures pertain to the purchase of services and supplies.

CAPITAL OUTLAY Counties may classify equipment purchases as capital outlay or services and supplies. This may be dependent on the dollar value of the equipment or if the equipment will be depreciated. Betterments to fixed assets may be considered a capital outlay expense.


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YEAR-END CASH RECONCILIATION The beginning cash balance is the previous year's ending cash balance. The cash receipts amount is the total from the "cash receipts" column under the revenues section. The cash disbursements amount is the total from the "cash disbursements" column under the revenues section. The resulting ending cash balance should equal the cash and pooled investments amount shown on the Financial Statement.

YEAR-END FUND BALANCE RECONCILIATION The beginning fund balance is the previous year's ending fund balance. The revenues amount is the total from the "modified accrual" column under the revenues section. The expenditures amount is the total from the "modified accrual" column under the expenditures section. The resulting ending fund balance should equal the total fund balance amount shown on the Financial Statement.


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SUMMARY OF EXPENDITURES The Summary of Expenditures page summarizes some of the highway department's expenditures for the year. The following types of expenditures should be included in this summary:

SNOW AND ICE CONTROL Snow and ice control include expenditures for snow removal, sanding and salting, and erection and removal of snow fences.

Snow and ice control expenditures should equal the total of the snow and ice control costs for each funding source on the Detailed Maintenance Costs by Funds page.

RIGHT OF WAY Right of Way includes expenditures for land purchases, improvements, easements, and moving and relocating buildings and persons. (Utility relocation is not included).

Right of Way expenditures should equal the total of the Right of Way costs from the Summary of Construction Costs pages.

ENGINEERING Engineering includes expenditures for field engineering, surveys, material testing, borings, preparation of plans and related traffic studies.

Engineering expenditures should equal the total of the engineering costs from the Summary of Construction Costs pages.

CONSTRUCTION Construction includes expenditures for construction, reconstruction, additions, and betterments.

Construction expenditures should equal the total of the construction costs from the Summary of Construction Costs pages.


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BUILDING AND EQUIPMENT (CAPITAL OUTLAY) Building and equipment expenditures should equal the total of the capital outlay costs from the modified accrual balance column on the Statement of Revenues and Expenditures pages.

NOTE: The expenditure amounts include all costs, including federal funds, unallocated Expenses, and equipment rental charges, where applicable.

SUMMARY OF MAINTENANCE COSTS BY FUNDS The Summary of Maintenance Costs by Funds page summarizes the current year's maintenance costs by funding sources. The funding sources include CSAH Regular - Regular, CSAH - Municipal and County Roads. The costs are split into the four primary maintenance types - routine, repairs and replacements, betterments, and special work. (For more information regarding the classification of maintenance costs, see the Maintenance Costing section in the State Aid Accounting Manual). The cost per mile is calculated by dividing the specific maintenance cost by the total number of miles. Unallocated Expenses and adjustments to equalize depreciation are added to the maintenance costs to arrive at a sub-total. Bond Expenses and bond interest Expenses, if any, are then added to the sub-total to obtain a grand total. The total mileage and mileage proration percent are also reported for each funding source.

To calculate the proration percent for each funding source:

First, determine the total mileage for all funding sources by adding the total mileage amounts of the separate funding sources. Next, divide the total mileage of the specific funding source by the total mileage for all funding sources (as calculated above). The result is the proration percent for that specific funding source. The total proration percent for all funding sources should equal 100%.


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The sub-total for all funding sources should correspond to the grand total for CSAH Regular - Regular funds on the Detailed Maintenance Costs by Funds page. The grand total for all funding sources should correspond to the sub-total for CSAH Regular - Regular funds on the Summary of Maintenance Costs by Funds page.

The Regular Maintenance and Municipal Maintenance costs should be identical to the amounts shown on the Annual Maintenance Expenditure Report. (An Annual Maintenance Expenditure Report form is shown in the State Aid Operations Manual).


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DETAILED MAINTENANCE COSTS BY FUNDS The Detailed Maintenance Costs by Fund page details the current year's maintenance costs by funding sources. The funding sources include CSAH - Regular, CSAH - Municipal and County Roads. The costs are split into subdivisions of the four primary maintenance types: routine, repairs and replacements, betterments, and special work. (For more information regarding the classification of maintenance costs, see the Maintenance Costing section in the State Aid Accounting Manual).


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SUMMARY OF MAINTENANCE COSTS BY ROADS - CSAH REGULAR The Summary of Maintenance Costs by Roads page summarizes the current year's regular maintenance costs by roads. The maintenance costs are split into the four primary maintenance types - routine, repairs and replacements, betterments, and special work. The maintenance costs are added together to arrive at a sub-total. The prorated costs are then added to the sub-total to obtain a grand total.

The sub-total for all maintenance types should correspond to the grand total for CSAH - Regular funds on the Detailed Maintenance Costs by Funds page. The grand total for all maintenance types should correspond to the sub-total for CSAH - Regular funds on the Summary of Maintenance Costs by Funds page.


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DETAILED ROUTINE MAINTENANCE COSTS BY ROADS - CSAH REGULAR (OPTIONAL

PAGE) The Detailed Routine Maintenance Costs by Roads page details the current year's routine regular maintenance costs by roads. The costs are divided into the specific types of routine maintenance - smoothing surface, minor surface maintenance, roadside and drainage, brush and weed control, snow and ice control and traffic services.

The total costs for all maintenance types should correspond to the total routine maintenance costs on the Summary of Maintenance Costs by Roads page for CSAH - Regular funds.


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SUMMARY OF MAINTENANCE COSTS BY ROADS - CSAH MUNICIPAL The Summary of Maintenance Costs by Roads page summarizes the current year's municipal maintenance costs by roads. The maintenance costs are split into the four primary maintenance types - routine, repairs and replacements, betterments, and special work. The maintenance costs are added together to arrive at a sub-total. The prorated costs are then added to the sub-total to obtain a grand total.

The sub-total for all maintenance types should correspond to the grand total for CSAH Regular - Municipal funds on the Detailed Maintenance Costs by Funds page. The grand total for all maintenance types should correspond to the sub-total for CSAH Regular - Municipal funds on the Summary of Maintenance Costs by Funds page.


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DETAILED ROUTINE MAINTENANCE COSTS BY ROADS - CSAH MUNICIPAL

(OPTIONAL PAGE) The Detailed Routine Maintenance Costs by Roads page details the current year's routine municipal maintenance costs by roads. The costs are divided into the specific types of routine maintenance - smoothing surface, minor surface maintenance, roadside and drainage, brush and weed control, snow and ice control and traffic services.

The total costs for all maintenance types should correspond to the total routine maintenance costs on the Summary of Maintenance Costs by Roads page for CSAH Regular - Municipal funds.


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SUMMARY OF MAINTENANCE COSTS BY ROADS - COUNTY ROADS The Summary of Maintenance Costs by Roads page summarizes the current year's county road costs by roads. The maintenance costs are split into the four primary maintenance types - routine, repairs and replacements, betterments, and special work. The maintenance costs are added together to arrive at a sub-total. The prorated costs are then added to the sub-total to obtain a grand total.

The sub-total for all maintenance types should correspond to the grand total for County Road funds on the Detailed Maintenance Costs by Funds page. The grand total for all maintenance types should correspond to the sub-total for County Road funds on the Summary of Maintenance Costs by Funds page.


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DETAILED ROUTINE MAINTENANCE COSTS BY ROADS - COUNTY ROADS (OPTIONAL

PAGE) The Detailed Routine Maintenance Costs by Roads page details the current year's routine county maintenance costs by roads. The costs are divided into the specific types of routine maintenance - smoothing surface, minor surface maintenance, roadside and drainage, brush and weed control, snow and ice control and traffic services.

The total costs for all maintenance types should correspond to the total routine maintenance costs on the Summary of Maintenance Costs by Roads page for County Road funds.


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SUMMARY OF CONSTRUCTION COSTS - CSAH REGULAR The Summary of Construction Costs page summarizes the current year's regular construction costs by projects.

The costs are divided into three types - construction, Right of Way, and engineering. (Construction costs may be further split into contract costs and county force costs, if preferred). Each project's costs should match the current year's costs shown on the corresponding Statement of Construction Costs page.

The construction costs include federal funds, bridge bonding funds, and other funding sources (e.g., reimbursements from other governmental agencies, businesses, etc.). Federal and bridge bonding amounts included in a project's costs should be subtracted from the total to arrive at a revised total. This revised total should then match the amount on the Summary of County Highway Information page.

Both federal projects and non-federal projects should be included on this page.


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STATEMENT OF CONSTRUCTION COSTS - CSAH REGULAR The Statement of Construction Costs page summarizes the total costs and projected funding of a regular construction project as of 12/31/XX. A separate page should be included for each project that was open as of 12/31/XX or that was finalized during the year.

A brief description of the project should be specified at the top of the page, including the project number, CSAH Regular number, location, length of construction, type of construction and percentage of completion.

The project's costs are divided into three types of costs - construction, Right of Way, and engineering. (Further breakdown is optional). The costs are also categorized as previous years' costs and current year's costs. All costs are reported, including unallocated Expenses and equipment rental charges, if applicable. The current year's total costs should correspond to the amount shown on the Summary of Construction Costs page.

The project's costs are also divided into the projected funding sources. The costs are again categorized as previous years' costs and current year's costs. All funding sources are reported, including federal funds, bridge bonding funds, and reimbursements from other governmental agencies, businesses, etc.


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SUMMARY OF CONSTRUCTION COSTS - CSAH MUNICIPAL The Summary of Construction Costs page summarizes the current year's municipal construction costs by projects.

The costs are divided into three types - construction, ROW, and engineering. (Construction costs may be further split into contract costs and county force costs, if preferred). Each project's costs should match the current year's costs shown on the corresponding Statement of Construction Costs page.

Construction costs include federal funds, bridge bonding funds, and other funding sources (e.g., reimbursements from other governmental agencies, businesses, etc.). Federal and bridge bonding amounts included in a project's costs should be subtracted from the total to arrive at a revised total. This revised total should then match the amount on the Summary of County Highway Information page.



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STATEMENT OF CONSTRUCTION COSTS - CSAH MUNICIPAL The Statement of Construction Costs page summarizes the total costs of a municipal construction project and projected funding as of 12/31/XX. A separate page should be included for each project that was open as of 12/31/XX or that was finalized during the year.

A brief description of the project should be specified at the top of the page, including project number, CSAH Regular number, location, length of construction, type of construction and percentage of completion.

The project's costs are divided into three types of costs - construction, ROW, and engineering. (Further breakdown is optional). The costs are also categorized as previous years' costs and current year's costs. All costs are reported, including unallocated Expenses and equipment rental charges, if applicable. The current year's total costs should correspond to the amount shown on the Summary of Construction Costs page.



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SUMMARY OF CONSTRUCTION COSTS - COUNTY ROADS The Summary of Construction Costs page summarizes the current year's county roads construction costs by projects.

The costs are divided into three types - construction, ROW, and engineering. (Construction costs may be further split into contract costs and county force costs, if preferred). Each project's costs should match the current year's costs shown on the corresponding Statement of Construction Costs page.

Construction costs include federal funds, bridge bonding funds, and other funding sources (e.g., reimbursements from other governmental agencies, businesses, etc.). Federal and bridge bonding amounts included in a project's costs should be subtracted from the total to arrive at a revised total. This revised total should then match the amount on the Summary of County Highway Information page.



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STATEMENT OF CONSTRUCTION COSTS - COUNTY ROADS The Statement of Construction Costs page summarizes the total costs and projected funding of a county construction project as of 12/31/XX. A separate page should be included for each project that was open as of 12/31/XX or that was finalized during the year.

A brief description of the project should be specified at the top of the page, including project number, CSAH number, location, length of construction, type of construction and percentage of completion.

The project's costs are divided into three types of costs - construction, ROW, and engineering (further breakdown is optional). The costs are also categorized as previous years' costs and current year's costs. All costs are reported, including unallocated Expenses and equipment rental charges, if applicable. The current year's total costs should correspond to the amount shown on the Summary of Construction Costs page.



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STATE AID BONDS The State Aid Bonds page summarizes the status of a State Aid bond as of 12/31/XX by disclosing the projects that have been applied toward the bond as of that date. A separate page should be included for each bond that has a balance greater than zero. If the highway department does not have any bonds, it should be stated as such on the page.

The bond's issue amount and issue date should be specified at the top of the page. Following this, there are typically five columns, which contain project information and a running bond fund balance. The information required for each project includes the project number, whether the project has been finalized, the date the costs were applied toward the bond, and the amount of the costs applied toward the bond.

The information provided on this page should correspond to the bond information in the State Aid System.


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ESTIMATED BUDGET The Estimated Budget page shows the estimated revenues and expenditures passed by the county board for the upcoming year. Although the format of this page is left to the discretion of the county, the format shown in the sample annual report is the one most prevalently used by counties.

Chapter 19 – Annual Summary of Highway Information Sample

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CHAPTER 19 ANNUAL SUMMARY OF HIGHWAY INFORMATION SAMPLE


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INSTRUCTIONS One copy of the Annual Summary of Highway Information is due in the State Aid Finance office by August 1st of the following year, the District State Aid Engineer (DSAE), must approve this form so remember to allow time for processing. When the report is received, State Aid Finance will final the county’s maintenance accounts and distribute remaining funds due (if any) or transfer unused funds to the appropriate construction account.

The Annual Summary of Highway Information includes the construction and maintenance costs incurred during the calendar year for the CSAH Regular, CSAH Municipal and County Highway Systems. The County Engineer and the DSAE must approve this report.

Amounts are totaled and reported by construction, maintenance, unallocated, and adjustment to equalize depreciation.

The Needs Manager will contact the County Engineer if the Signal Optimization applies to your county. The County Engineer and DSAE, both must sign Signal Optimization Certification section.

Enter the total mileage for each road system, CSAH Regular, CSAH Municipal and County.

TOTAL MILEAGE Enter the total mileage for each road system, CSAH Regular, CSAH Municipal, and County.

CONSTRUCTION

ALLOCATION

State Bond Interest Enter The State Allocation For The Reporting Year For CSAH Regular And CSAH Municipal Construction

Enter the amount paid to the county for Bond Interest paid from Regular Maintenance

$

Total Cost $

Enter the total costs for federal (SP) projects, non-federal (SAP) projects and county (CP) projects for each road system. Costs should include construction, engineering, ROW, FA, and other miscellaneous costs associated with each project. Federal Funds, State Bonding Funds and Special Account Funds (Town Bridge, LRIP, State Park, Turnback, Disaster, etc.) should be subtracted from the total cost reported. Total cost should not be reduced by any reimbursements received from other sources.


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MAINTENANCE

Allocation Enter The Total Costs For Federal (SP) Projects, Non-Federal (SAP) Projects And County (CP) Projects For Each Road System

Enter the State Allocation for the reporting year for CSAH Regular and CSAH Municipal Maintenance.

$

Total Cost $

Enter the maintenance costs for CSAH Regular, CSAH Municipal and County Road Systems. These amounts should include all costs, unallocated and adjustment to equalize depreciation.

UNALLOCATED COSTS Costs are distributed to their appropriate cost centers during the year-end process, (see Chapter 10). The remaining Unallocated Costs are distributed to the county road systems by mileage. The amounts spread to the CSAH Regular, CSAH Municipal and County Systems are included in the Annual Summary of Highway Information.

ADJUSTMENT TO EQUALIZE DEPRECIATION This is obtained from the Fixed Asset Report.

Total Rental Earned Description

Minus (Total Equipment Depreciation + Total Equipment Costs)

Equal Adjustment to Equalize Depreciation

A negative amount in the Adjustment to Equalize indicates Total Rental Earned was less than the actual costs for the equipment during the year. Rental rates may need to be increased to better reflect the cost during the year. Maintenance costs will be increased by this amount to equalize the cost for a rate that was too low.

A positive amount in the Adjustment to Equalize indicates the Total Rental Earned was greater than the actual costs for the equipment during the year. Rental rates may need to be decreased to better reflect the cost during the year. Maintenance costs will be decreased by this amount to equalize the cost for a rate that was too high.

The Adjustment to Equalize Depreciation is distributed to the county road systems by mileage. The amount for the CSAH Regular, CSAH Municipal and County Systems are included in the Annual Summary of Highway Information.

Appendix

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APPENDIX

NOTICE OF ANNUAL APPORTIONMENT

Appendix

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AGENCY FUND LEDGER – FEDERAL AID PROJECTS

Appendix

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AGENCY FUND LEDGER

Index

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