Navigating the Changes to Motor Vehicle Highway Accounting Procedures

Navigating the Changes to Motor Vehicle Highway Accounting Procedures
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Every County, City, and Town has been affected by the Indiana House Enrolled Act 1002 – P.L. 218-2017, which was passed during the most recent session of the Indiana General Assembly. This new legislation, among other things, increased the gas tax by $0.10/gallon, and raised/instituted additional user fees, all of which are being designated for the construction, reconstruction and maintenance of roads throughout the state.

Most communities will eventually see additional funding to aid in much needed and long overdue projects; however, the Act also mandates that 50% of all funds received after July 1, 2017 are restricted to the construction, reconstruction and maintenance of roads.

In order to ensure that the funds were being allocated as directed, the State Board of Accounts (SBOA) initially provided audit guidance in June which included several new forms and procedures for documenting how all MVH funds were used for their intended and now restricted purpose. This led to a period of concern and challenges for many communities – providing the requested documentation associated with these suggested record-keeping initiatives was perceived as tedious and unnecessary tasks that would prove to be daunting. This new mandate could be nearly impossible for smaller communities to put into place with such little notice.

Within hours of the SBOA’s presentation to the Indiana League of Municipal Clerks and Treasurers (ILMCT), the idea of establishing a keeping separate fund, which is designated for restricted monies outlined in the statue, was proposed. This simple and straight forward approach would allow appropriate records to be kept that would adequately document how the restricted funds were used, while eliminating the complicated forms and onerous process that was initially proposed by the state. LWG agrees with those Clerk-Treasurer’s that the creation of an additional fund to account for the restricted monies provides a simple and easy to implement process for fulfilling the legislature’s intent

Shortly after the conference, several communities across the state took immediate action to pass an ordinance to create this additional fund. The SBOA, after some additional consideration, took the position that while an additional fund might not be required, they would “stay” their initial audit position for the time being and continue to work towards a revised audit position. However, in that same memo, the SBOA was clear to state that the requirement of restricting post July 1, 2017 MVH distributions for the construction, reconstruction and maintenance of road had not changed and left local officials on their own on how to proceed in the interim.

We understand the value of understanding our clients’ needs and working with them in devising a plan that meets those needs. We applaud those officials that quickly developed an alternative solution to work within the legislative intent. We’re confident that eventually an effective and efficient audit position will be developed by the SBOA. In the interim, the suggested solution should prove to be the best option for all communities.

As we continue to monitor this situation, check back here for more updates, and feel free to contact Jim Higgins at 317-777-7023 or via email:  jim.higgins@lwgcpa.com  with questions or concerns.

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