3/20/2014. State Highway Aid / ABC s of Liquid Fuels. Goal of this session. What are Liquid Fuels Funds?

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1 State Highway Aid / ABC s of Liquid Fuels What You Need to Know About the Liquid Fuels Tax Fund Goal of this session Provide an overview of Liquid Fuels (LF), including allocation methodology and allowable expenditures, Provide an overview of the support structure that is available to assist municipalities with their LF, Review Top Audit Findings from prior calendar year and how to avoid them, Provide a list of resources to assist municipalities in dealing with the LF fund rules and regulations, To reiterate our open offer for assistance at any time, to any municipality, for any reason related to Liquid Fuels funds. What are Liquid Fuels Funds? Pennsylvania's 2,561 local governments are responsible for approximately 78,000 miles of roads and 6,850 bridges. The Commonwealth provides money to municipalities for the local transportation system through the distribution of a portion of the state liquid fuels tax collected. 1

2 Changes to Liquid Fuels Due to Act 89 Act 89 of 2013 eliminated the state liquid fuels tax fund Funding was replaced with an increased millage rate on the Oil Company Franchise Tax Increased Estimates for Future Payments Based on estimates, annual liquid fuels payments are expected to increase by approximately $220,000,000 by $320,818, $345,931, $398,712, $447,996, $482,255, $539,913,000 Allocation Methodology The amount allocated to each municipality is based on the total municipal population and total municipal road mileage. The amount allocated to each county is based upon the county s average gas consumption over a set historical period 2

3 Funding History $350,000,000 Municipal Liquid Fuels 5 Year History $340,000,000 $330,000,000 $320,000, $310,000,000 $300,000,000 $290,000,000 $280,000,000 $34 45,931,000 $320,818,000 $325,966,000 $315,446,000 $307,854, Funding History $34,000,000 County Liquid Fuels 5 Year History $33,000,000 $32,000,000 $31,000,000 $30,000,000 $29,000,000 $28,000,000 $27,000,000 $30,847,543 $ 33,610,994 $31,837,650 $31,783,408 $29,691, Use of Funds Funds are to be used for the construction, maintenance, and repair of municipal/county roads and bridges Acceptable expenditures from the Liquid Fuels Tax Funds are outlined in Publication 9 Policies and Procedures for the Administration of the County Liquid Fuels Tax Act of 1931 and The Liquid Fuels Tax Act 655 Dated 1956 and as Amended 3

4 Allowable Expenditures Construction, reconstruction, maintenance, and repair of roads and bridges Culverts and drainage structures Costs associated with traffic signs and signals Street t lighting Equipment used for these purposes Purchase of PennDOT-approved materials Winter maintenance activities (salt, plowing) Salary and benefit costs for road crews Financial Consulting Division Kristen Sims Audit Supervisor/SC: krsims@pa.gov Dan Bowers-NW: danbowers@pa.gov Earl Helbing-SE: ehelbing@pa.gov John Mazur-NE: johmazur@pa.gov Vacant-NC: John Weaver-SW: johnweav@pa.gov PennDOT Financial Consultants (FCs) Your financial and reporting support. We are here for YOU. Municipal Services Financial Consultants Help pyou prepare p for an audit, assist in preparing p gyour liquid fuels reports, clear audit findings, and provide individual/group training sessions. PennDOT Monitoring Reviews (MRs) FCs will perform MRs to follow up on AG Findings and can also be done upon request by municipalities, central office management or district municipal services representatives. These are NOT audits they are done to assist you in preparing for an audit. 4

5 PennDOT Municipal Services Representatives Your technical support. They are here for YOU too. Located in each Engineering District Can provide assistance in the areas of: Estimating road repair costs Calculating materials needed for repair Bid packages Project approvals County Aid Road inventory and certification for accurate LF payments 5

6 Topics of Discussion Top 10 Auditor General (AG) Liquid Fuels (LF) Findings for 2013 How these problems can lead to LF Funds mismanagement Ways to avoid the problems Resources provided by PennDOT to ensure proper LF Fund management Auditing Requirements LF funds are audited by the PA Dept of the Auditor General in accordance with the requirements of Section 403 of the Fiscal Code, 72 P.S PennDOT Monitoring Reviews (MRs) BMS Financial Consultants (FCs) will perform MRs to follow up on AG Findings or Comments and can also be done upon request by municipalities Audits - 1,722 Total Completed 604 Audits contain a total of 842 findings. Findings % No Findings 1,118 65% 6

7 2013 Auditor General Findings (842 Total) 127, 15% Late Receipt Of Allocation Nonpermissible Expenditures 259, 31% Purchases Over $10, In Noncompliance With Advertising And Bidding Req Liquid Fuels Money Overexpended On Project 92, 11% Documentation For Price Quotations Was Not Available For Examination Failure To Properly Prepare Form(s) MS-965 Electronic Imaging Of Canceled Checks From The Bank Did Not Include The Back Of The Checks 74, 9% Failure To Obtain Project Approval Idle Funds Held In A Noninterest-Bearing Account 17, 2% Overexpended Equipment Purchase Tally 19, 2% 23, 3% 28, 3% 74, 9% All other findings 57, 7% 70, 8% Late Receipt of LF Allocation No. 1 Solution: Submit annual reports correctly and on time! MS-965 Actual Use Report January 31 st. DCED Report of Elected and Appointed Officials January 31 st. DCED Survey of Financial Condition March 15 th (As the date for the first release of the allocation has been changed to March 1 st, PennDOT will rely on the submission of the previous year s report) NOTE: We are here to help you with all of these forms. When in doubt, call your Financial Consultant (FC). It s free and we re here to help you. Late Receipt of LF Allocation Other Causes Outstanding AG LF Audit/FC Monitoring Review Finding Reimbursements Due Make sure you contact your FC as soon as you become aware of a reimbursable finding we can assist with payment, offsets, and in some cases setting up a two year payment plan. Ensure resolution of all Contractor Responsibility Program (CRP) holds and blocks imposed by the Departments of Revenue and Labor and Industry. Do NOT ignore these! Your municipality will NOT be able to receive any payment from the Commonwealth until they are cleared. Again, contact your FC for assistance as soon as you become aware of a CRP hold. We can help. 7

8 Non-permissible Expenditures PennDOT Publication 9, Chapter 2 (updated April 2011) outlines permissible and non-permissible LF expenditures. Examples of non-permissible expenditures: Parks, municipal buildings, or playgrounds. Police departments, fire departments, or historic, charitable, or civic projects. Private property drives. Purchases that do not comply with the applicable municipal code. Sanitary sewers, water lines, or utility costs. Administrative expenses, office supplies and furniture, telephones, meeting pay, Retainers, dues, or liability insurance. Garbage or recycling pickup. Repayments of prior year's expenditures. Purchase of right-of-way. Construction and reconstruction projects without prior PennDOT approval. Non-permissible Expenditures Examples of non permissible expenditures Continued: Undocumented payroll expenditures or expenditures not properly contracted. Gasoline purchases for private vehicles or vehicles of other departments or undocumented fuel usage. Heating oil and other building utilities. Repairs to non-road maintenance equipment and vehicles. Apparel (uniforms), except where required by employment agreements. Retroactive expenditures or repayment of other funds for prior period expenditures. Purchases of automobiles. Purchases where a name brand is used in the solicitation for quotations and proposals for competitive bids. Curbs and sidewalks (except for those needed to comply with ADA requirements). If in doubt, or you just want to clarify, call your FC! We re here to help. Noncompliance with Purchasing Thresholds Price Quotes and Advertising/Bidding combined When spending funds from LF (or General Funds) be aware of the expenditure thresholds! $0 to $10,300 price quotes not required Though not required they may still be a good practice to obtain the best value. $10,300 to $19,100 telephone quotes are required. Written records must be maintained to include vendor name, purpose of contract and the price. Keep on file minimum of three years or until audited. Faxed or quotes noting all of the appropriate information are recommended. Multiple purchases of like materials for less than $10,300 each, but are in total over $10,300 for the year is a violation of the municipal codes. 8

9 Noncompliance with Purchasing Thresholds Over $19,100 Each municipality or county shall make an annual estimate of its requirements for road construction and maintenance materials and shall advertise for bids on all items and groups of like items ordinarily supplied by a single supplier which are in excess of $19,100 per year. Advertising, bidding, and performance bond are required by statute on purchases and contracts. Each municipal code varies on the requirements for bonding. Consult your specific code book for exact amounts. Entering into several less than $19,100 purchases with the same person or several persons to avoid advertising and bidding is unlawful. Noncompliance with Purchasing Thresholds Joint Purchasing with a Council of Governments (COG) Representatives from two or more municipalities estimate the quantities of items each municipality will need over the next year. Reduced ad cost since only one ad will be placed. Deliveries will be made to each municipality with invoices and payment being made separately. Overall potential for lower costs due to increased quantities. For further information on COGs contact Linda Costa, PACOG Executive Director, lcosta@boroughs.org, , ext. 28. Noncompliance with Purchasing Thresholds Intergovernmental Contracts Cooperative Sourcing to Achieve Reduction in Spending (COSTARS) Formerly State and Local Piggyback Program Municipality may work directly with DGS for their purchasing needs. Governing body must pass and file a requesting authorization to participate in cooperative purchasing. Must resubmit a resolution with COSTARS if resolution with Piggyback was passed before Contact Information and Sample resolution can be found free of charge at 9

10 LF Funds Overexpended on Project MS-329 Project Approval Form This form is completed by a Municipal Services Rep (MSR) when investigating a project. It records the approval of the scope of work and authorizes expenditures for the project from the Liquid Fuels Tax Fund. If funding sources from the original MS-329 are going to change the municipality must contact the MSR for a revision in order to avoid this finding. The form contains a project number all costs related to the project must be charged against this number. One copy is given to the municipality and one copy is retained by the MS District Office. LF Funds Overexpended on Project MS-999 To be completed by the municipality upon completion of the project and submitted to the District Office for approval. The projected expenses from the MS-329 are compared against the actual expenses on the MS-999. Any variations must be explained and properly documented prior to being signed off on by the MSR. A partial MS-999 report is required if LF funds are expended in the year but the project carries over to the next year. LF Funds Overexpended on Project Where the issues are: MS-999 is more than MS-329 and no explanation was or can be provided. Expenses NOT charged to the project # on your record of checks. The auditors are looking for this and will add them to the project cost if over approved amount (from MS-329) will have to reimburse. You didn t complete an MS-999 when project completed. 10

11 Failure to Properly Prepare Liquid Fuel Reports The MS-965 is the municipal report of LF activity over the prior calendar year. The MS-991 is the county report of LF activity over the prior calendar year. These reports serve as the basis for the AG audit and must be prepared correctly. Failure to Properly Prepare Liquid Fuel Reports dotgrants Allows municipalities to eliminate Copies, signatures, seals, and mailing expense when submitting the paper report. Corrections can be made in minutes rather than days or weeks Provides instant notification when required entries are missing or have been over expended (equipment balance for example) Obtaining access is simple! click on New User and complete the required information Failure to Properly Prepare Liquid Fuel Reports dotgrants (Continued) Revised website released April 15, 2013 More intuitive interface User experience during the submission of the 2013 reports was positive Help document link available at the top of each page as report is completed Training for completing reports using the revised dotgrants system is available! Please call your Municipal Service Representative or Financial Consultant 11

12 Failure to Properly Prepare Liquid Fuels Report dotgrants (Continued) How to obtain a access. Electronic Access Licensing Agreement (EALA) Resolution (not required for boroughs) Samples of the EALA and Resolution are available on the BMS website. Please note that electronic submission of the documents is not allowed When completed, mail to: Bureau of Municipal Services 400 North Street, 6th Floor P.O. Box 8211 Harrisburg, PA Auditor General Findings (842 Total) 127, 15% Late Receipt Of Allocation Nonpermissible Expenditures 259, 31% Purchases Over $10, In Noncompliance With Advertising And Bidding Req Liquid Fuels Money Overexpended On Project 92, 11% Documentation For Price Quotations Was Not Available For Examination Failure To Properly Prepare Form(s) MS-965 Electronic Imaging Of Canceled Checks From The Bank Did Not Include The Back Of The Checks 74, 9% Failure To Obtain Project Approval Idle Funds Held In A Noninterest-Bearing Account 17, 2% Overexpended Equipment Purchase Tally 19, 2% 23, 3% 28, 3% 74, 9% All other findings 57, 7% 70, 8% Electronic Imaging of Cancelled Checks PA Directive Acceptance of Imaged Documents Dated June 16, 1997 Agencies shall accept imaged documents from other agencies or any other person or entity obligated, required, or requested to provide such documents provided that the imaging system of such person or entity complies with the requirements of this directive. Such imaging system shall comply with the IRS proposed procedures for recordkeeping with electronic imaging systems or any successor procedures and the provisions of the Uniform Photographic Copies of Business Records as Evidence Act, 42 Pa. C.S.A. 6109(b). Imaged Document. A duplicate of the original input/source document retrieved from the imaging system. Images must contain all the recorded information that appears on the original document and be able to serve the purpose for which the original was created or maintained. 12

13 Failure to Obtain Project Approval A Project Approval form (MS-329) is issued by your Municipal Services Representative (MSR)and must be done prior to the start of a project and prior to the use of LF funding to pay for any work done on a project. Project approval is NOT required for non-project items. Failure to obtain approval will result in the expenditure of LF Funds either being disallowed (if not yet paid) or having to be reimbursed via the municipal General Fund (if already paid). This is pretty easy to solve call your MSR or FC when you are getting ready to do any municipal job that is covered on the next slide. They will help you to determine if you need a project approval or not, and again, its why we are here to help YOU! Failure to Obtain Project Approval Criteria To Determine When Project Approval Is Required Bituminous surface Concrete surface One inch thickness or greater 50 square yards or more Widening A new lane and/or more than two feet on either or both sides of existing roadway. Relocation Bridges Other Traffic signals and lighting All For bridge maintenance/preservation activities, confer with Municipal Services to determine if a project approval is required. All rehabs, replacements or any other work that affects the carrying capacity of the structure or the waterway areas require project approval. Reconstruction, such as removal and replacement of one inch or more of existing road material, including base and surface. This includes cold-mill recycling and reclamation work. New Installations Guiderail, pipe, and related items New Guiderail, pipe and replacement of existing items with a better or larger type. Idle Funds Held in a Noninterest Bearing Account According to the Liquid Fuels Tax regulations, the funds should be invested so that they earn interest, providing additional monies to be used for road maintenance and repairs 13

14 Overexpended Equipment Purchase Tally Per Publication 9, the amount of Liquid Fuels Funds expended for major equipment in a given year cannot exceed the sum of the prior year equipment balance, 20% of the current year allocation, and any PennDOT approved adjustments Auditor General Findings (842 Total) 127, 15% Late Receipt Of Allocation Nonpermissible Expenditures 259, 31% Purchases Over $10, In Noncompliance With Advertising And Bidding Req Liquid Fuels Money Overexpended On Project 92, 11% Documentation For Price Quotations Was Not Available For Examination Failure To Properly Prepare Form(s) MS-965 Electronic Imaging Of Canceled Checks From The Bank Did Not Include The Back Of The Checks 74, 9% Failure To Obtain Project Approval Idle Funds Held In A Noninterest-Bearing Account 17, 2% Overexpended Equipment Purchase Tally 19, 2% 23, 3% 28, 3% 74, 9% All other findings 57, 7% 70, 8% Other Finding Types Related Party Transactions: Under the Ethics Law, no public official or public employee can enter into a contract valued at $500 or more with their governmental body, unless the contract is awarded through a public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. Varies by municipal type refer to your solicitor for clarification of related party transactions prohibited. 14

15 Other Finding Types Duplicate Payment of Invoice: Ensure that adequate documentation is maintained for each payment from the fund Always make sure to mark invoices as being paid Other Finding Types Fuel dispensation records not maintained: Publication 9, Chapter 2, Section Non-permissible Expenses, Item #12 Gasoline purchases for private vehicles or vehicles of other departments or undocumented fuel usage. For bulk storage, fuel tanks must be METERED and usage must be documented then retained for audit purposes. Log Sheets are to include: Date Vehicle ID Gallons Purpose Signed by person dispensing Other Finding Types Inadequate Control Over Signature Stamp: If signature stamps are used on checks, ensure that they are only used by the person whose name is represented Others keeping these stamps = presigned checks 15

16 Other Finding Types Vendor Overcharges: Ensure that invoice prices are compared to contract prices before payments are made on vendor invoices These reimbursements should be requested from the vendor and deposited into your Liquid Fuels account Other Finding Types Authorized Check Signers Are Related: Related parties cannot be co-signers of checks The signatures of at least two unrelated municipal officials should be required on all disbursements from the Liquid Fuels Tax Fund account. Other Finding Types Retroactive Expenditures: The law does not permit the Repayment of prior year's expenditures with liquid fuels funds. Caveat: The AG will allow you approximately 60 days to pay an invoice received at the end of the year. That is 60 days from receipt of invoice not 60 days from Dec 31 st. Best Practice pay as soon as you receive the invoice and don t allow your fund to run into the next calendar year. Keeps it simple and without question legal. 16

17 2013 Auditor General Findings (842 Total) 127, 15% Late Receipt Of Allocation Nonpermissible Expenditures 259, 31% Purchases Over $10, In Noncompliance With Advertising And Bidding Req No more audit Findings! This is our common goal! 92, 11% 74, 9% Liquid Fuels Money Overexpended On Project Documentation For Price Quotations Was Not Available For Examination Failure To Properly Prepare Form(s) MS-965 Electronic Imaging Of Canceled Checks From The Bank Did Not Include The Back Of The Checks Failure To Obtain Project Approval Idle Funds Held In A Noninterest-Bearing Account 17, 2% 19, 2% 23, 3% 28, 3% 74, 9% Overexpended Equipment Purchase Tally All other findings 57, 7% 70, 8% How to Avoid Findings PennDOT Provides personnel and reference materials to assist municipalities so that these findings can be prevented ahead of time rather than corrected later. If you have any questions contact your FC or MSR. Again, we are here for you. Our job is to assist you in any way that we can. There are no dumb questions. Liquid Fuels Reference Materials PennDOT Publication 9 Contains do s and don ts on spending LF funds PennDOT Publication 408 Contains lists of approved road materials PennDOT Publication 447 Contains lists of approved products for lower volume, local roads PennDOT Bulletin 15 Contains lists of approved suppliers DCED Purchasing Handbook Contains processes to be followed when purchasing ANY goods or services. 17

18 Municipal Services Website From the Municipal Services Website Electronic Contracts and Forms dotgrants Registration Forms (EALA and Resolution) Estimated LF Payment (list posted in October) Actual LF Payment (list posted in March) PC Requirements Links to other PennDOT resources, publications, forms. Wrap up and Questions! If there is anything you are unsure about, utilize the resources available to you PennDOT Publications (Pub 9, Pub 408, Pub 447) Contact your District Municipal Services Rep Contact your Municipal Services Financial Consultant Remember, the sooner you contact us the sooner we can help you. If you wait, and the auditor shows up, more likely than not we won t be able to help until the audit is complete. Questions??? 18