Cities and Towns - Bulletins

Bands and Orchestras

Bank Deposits By Remote Capture

Barrett Law Funds

Board of Public Works and Safety

Second Class Cities

Third Class Cities

Bonds of Officers and Employees of the Department of Parks and Recreation

Bonds Registered

Bonds Forfeited - City and Town Courts

Building Permit Fees

Buy Money

BANDS AND ORCHESTRAS

Under prior law (IC 19-7-26), a common council of a city or a town council of a town could make annual appropriations for the purpose of maintaining and employing bands and orchestras to furnish music in public places and parks. Since this statute was repealed in 1981, a city or town should use the following when appropriating money for bands and orchestras.

The audit position of the State Board of Accounts is that if local units wish to provide bands and orchestras they should:

1. follow the provisions of IC 36-1-3, the Home Rule statute;
2. cite IC 36-10-2-2 and IC 36-10-2-4 in the home rule ordinance enacted; and
3. follow the provisions of the ordinance and the cited statutes.

By doing this, cities and towns would not be subjected to exception in our audit reports. IC 36-10-2-2 states:

“A unit may establish, aid, maintain, and operate public parks, playgrounds, and recreation facilities and programs. IC 36-10-2-4 states: “A unit may establish, aid, maintain, and operate libraries and museums, cultural, historical and scientific facilities and programs, and community restitution or service facilities and programs.”

BANK DEPOSITS BY REMOTE CAPTURE

A governmental unit contacted us recently to report that a warrant had cleared their bank account two years ago and then cleared the bank a second time in 2016. From the information we were provided, when the original check was issued two years ago, the citizen receiving the check used a remote capture feature to deposit the check into his personal account – similar to taking a picture with his phone and his bank processed the transaction. In 2016, the citizen found the original paper check from two years ago and did not remember depositing it before. So the citizen took the paper check to the bank and deposited it. The bank processed the check and the transaction again cleared the governmental unit’s bank account. When the unit discovered this check cleared the bank a second time, they contacted the bank and requested their account be reimbursed. The bank reported that they were not liable for the check clearing twice.

We checked with the Treasurer of State’s office and they confirmed that the bank is not responsible if a check clears the bank more than once. The Treasurer of State’s office recommended using positive pay procedures with the local unit’s bank account to prevent such occurrences in the future. If a check does clear the bank twice, the governmental unit would have to pursue collection against the check payee to recover their funds.

With new technology where an individual can use their smartphone to remote deposit checks as well as the increase in remote capture by various vendors, this has become a more prevalent problem. Each unit should have controls in place to safeguard their accounts. Positive pay procedures for warrants, electronic funds transfers, or wire transfers, along with careful monitoring of the unit’s daily bank transactions, would help to mitigate this risk. If you have any questions or concerns regarding this occurring with your bank account, we’d recommend you contact your bank and discuss what options are available. The above information was emailed to local officials in a memo from the State Examiner dated April 29, 2016.

BARRETT LAW FUNDS – OFFICIAL BOND

IC 36-9-37-7 provides that the collecting and disbursing officer of Barrett Law funds in a city or town shall give a separate official bond in an amount to be fixed by the city or town council of such city or town pursuant to the provisions of IC 5-4-1-18(c). Said bond shall be filed and recorded in the office of the county recorder, as required by IC 5-4-1-5.1.

According to IC 5-4-1-18, the fiscal body shall fix the amount of the bond of Barrett Law fund custodians at an amount equal to thirty thousand dollars ($30,000) for each one million dollars ($1,000,000) of receipts of the officer's office during the last complete fiscal year before the purchase of the bond. The amount may not be less than thirty thousand dollars ($30,000) nor more than three hundred thousand dollars ($300,000) unless the fiscal body approves a greater amount for the officer or employee.

BOARD OF PUBLIC WORKS AND SAFETY - SECOND CLASS CITIES

The board of public works and safety may be composed of three (3) members or five (5) members appointed by the executive. A member may hold other appointive positions in city government during the member’s tenure. The executive shall appoint a clerk for the board.

If the board of public works and board of public safety are established as separate boards, each board may be composed of three (3) members or five (5) members who are appointed by the executive. A member may hold other appointive positions in city government during the member’s tenure. The executive shall appoint a clerk for each board.

If the executive:

(1) Increases the number of members of a board of public works and safety, a board of public works, or a board of public safety from three (3) to five (5) members; or

(2) Decreases the number of members of a board of public works and safety, a board of public works, or a board of public safety from five (5) to three (3) members; The city shall publish notice under IC 5-3-1 of the increase or decrease in members and state the total number of members appointed to the board. [IC 36-4-9-6]

BOARD OF PUBLIC WORKS AND SAFETY – THIRD CLASS CITIES

The board of public works and safety consists of three (3) or five (5) members (as determined by executive). The members of the board of public works and safety are:

(1) the city executive; and

(2) two (2) or four (4) persons appointed by the executive.

If the executive increases the number of board members from three (3) to five (5) members or decreases the number of board members from five (5) to three (3) members, the city shall publish notice under IC 5-3-1 of the increase or decrease in members and state the total number of members appointed to the board. IC 36-4-4-2 notwithstanding, a member may hold other appointive or elective positions in city government during the member’s tenure. The city clerk is the clerk of the board.

If the city legislative body adopts an ordinance under IC 36-4-12 to employ a city manager, the executive may appoint the city manager to a position on the board of public works and safety in place of the executive.

The city executive may appoint a public safety director to:

(1) serve as the chief administrative officer of; and

(2) oversee the operations of; the police department and fire department. The city executive shall determine the qualifications of the public safety director. (IC 36-4-9-8)

BONDS OF OFFICERS AND EMPLOYEES OF THE DEPARTMENT OF PARKS AND RECREATION

IC 36-10-3-16 lists the bonding requirements for officers and employees of a department of parks and recreation.

"a. Every officer and employee who handles money in the performance of duties as prescribed by this chapter shall execute an official bond for the term of office or employment before entering upon the duties of the office or employment.

b. The fiscal body of the unit may, under IC 5-4-1-18, authorize a blanket bond or crime insurance policy endorsed to include faithful performance to cover all officers' and employees' faithful performance of duties. The amount of the bond or crime insurance policy shall be fixed by the fiscal body and, in the case of a municipality, must be approved by the executive.

c. All official bonds shall be filed and recorded in the office of the county recorder of the county in which the department is located."

BONDS - REGISTERED

IC 5-1-15 authorizes cities and towns to issue “bonds, notes, evidences of indebtedness, or other written obligations” in fully registered or book entry form.

The entity may employ any bank or trust company as paying agent or registrar, co-registrar, or depository institution. The bank or trust company need not be a depository bank under IC 5-13, and need not be located within the State of Indiana.

Notwithstanding any other provision of law, registrars or registration books or transfer records for bonds, notes, evidence of indebtedness, or other written obligations of any entity are not public records, but are only for the use of the entity, any trustee, fiduciary, paying agent, registrar, co-registrar, or transfer agent. A trust department of a bank having possession of these records shall not disclose them to a bond department, commercial department, subsidiary of the bank, or a subsidiary of the parent corporation of the bank. (IC 5-1-15-5)

Registrars of bond issues shall keep a register of ownership of bonds. (IC 5-1-15-6) In an effort to facilitate accounting procedures, the State Board of Accounts has issued the following instructions:

1. If a bank, trust company, or other financial institution has been employed as a paying agent or registrar, a properly certified listing of bondholders from the paying agent or registrar shall serve as a mailing list for the fiscal officer. There is no requirement for each individual bondholder to file a claim.

2. The mailing of the funds for bonds and coupons coming due must be mailed in such a manner to ensure receipt by the bondholder by the due date specific. Personnel of financial institutions state they usually make such mailing by first class mail one to three business days in advance of the due date. They do not mail by certified or registered mail due to costs involved. We suggest you review this with your city or town attorney.

3. Since the paying agency or the registrar shall keep a register of ownership of bonds and all bonds and coupons shall be paid when becoming due, we see no reason for the municipality to duplicate those same records maintained by the paying agent or registrar by keeping a bond register. There should be no unpaid outstanding matured bonds or coupons.

4. In all instances when employing a bank, trust company, or other financial institutions, be sure to protect the municipality from any liability arising due to any possible errors relating to names and addresses of current bondholders. This protection may be obtained by the financial institution furnishing a bond or insurance in favor of the municipality.

As stated previously, please consult your city or town attorney with questions regarding procedures for registered bonds.

FORFEITED BONDS - CITY AND TOWN COURTS

IC 35-33-8-7 provides that if a defendant was admitted to bail under IC 35-33-8-3.2(a)(2) and has failed to appear before the court as ordered the court shall declare the bond forfeited not earlier than one hundred twenty (120) days or more than 365 days after the defendant’s failure to appear and issue a warrant for the defendant’s arrest.

In a criminal case, if the court having jurisdiction over the criminal case receives written notice of a pending civil action or unsatisfied judgment against the criminal defendant arising out of the same transaction or occurrence forming the basis of the criminal case, funds deposited with the clerk of the court under IC 35-33-8-3.2(a)(2) may not be declared forfeited by the court, and the court shall order the deposited funds to be held by the clerk. If there is an entry of final judgment in favor of the plaintiff in the civil action, and if the deposit and the bond are subject to forfeiture, the criminal court shall order payment of all or any part of the deposit to the plaintiff in the action, as is necessary to satisfy the judgment. The court shall then order the remainder of the deposit, if any, and the bond forfeited.

Any proceedings concerning the bond, or its forfeiture, judgment, or execution of judgment, shall be held in the court that admitted the defendant to bail.

After a bond has been forfeited, the clerk shall mail notice of forfeiture to the defendant. In addition, unless the court finds that there was justification for the defendant’s failure to appear, the court shall immediately enter judgment, without pleadings and without change of judge or change of venue, against the defendant for the amount of the bail bond, and the clerk shall record the judgment.

If a bond is forfeited and the court has entered a judgment, the clerk shall transfer to the state common school fund:

(1) any amount remaining on deposit with the court (less the fees retained by the clerk); and

(2) any amount collected in satisfaction of the judgment.

The clerk shall return a deposit, less the administrative fee, made under IC 35-33-8-3.2(a)(2) to the defendant, if the defendant appeared at trial and the other critical stages of the legal proceedings.

The amount transferred to the State Common School Fund shall be sent to the county auditor on a monthly basis as Bond Forfeitures.

BUILDING PERMIT FEES

Since there is no statutory requirement that building permit fees be placed in a separate fund, we believe that such fees should be receipted to the General Fund and disbursements for compensation of building inspectors, the cost of building permit forms, and other such expenses should be paid from the General Fund and charged against appropriations properly made therefore.

BUY MONEY

The following procedures shall be followed if a municipality wishes to obtain an appropriation and make expenditures for buy money or payments to informants:

1. Under IC 36-1-3 an ordinance shall be passed allowing this type of program and associated expenditures;

2. An appropriation for such purpose must be obtained in the manner authorized by state statutes;

3. Petty cash fund procedures are to be followed as authorized by IC 36-1-8-3; and

4. A minimum documentation procedure must be followed, similar to either:

A. “Guidelines for the Expenditure of Confidential Funds,” published by the U.S. Department of Criminal Justice.

B. “Guidelines for Obtaining and Accounting for Confidential Funds Used in Support of Criminal Investigations,” (Revised S.O.P. PR – INV-0017), by the Indiana State Police Department

Capital Assets - Cemeteries

Cancellation or Rejection of Bids

Certified Report of Names, Addresses, Duties, and Compensation of Public Employees

Child Labor Law Restrictions

Child Restraint System Penalties

Child Support Withholdings

City and Town Courts - Judgments on Overweight Vehicles

Claims for Payments to State and Federal Agencies

Clerk Treasurer's Notary Powers

Compensation - Employee Time off for Jury Duty or as Subpoenaed Witness

Construction of Sidewalks - Funds and Appropriations

Contracts for Collection or Disposal of Solid Waste

Contributions, Donations, Gifts

Copy Fees

County Slot Machine Wagering Fees

Credit Cards

Criminal History Information

Cumulative Capital Development Fund

Cumulative Capital Improvement Fund - Uses (Cigarette Tax)

Cumulative Capital Improvement Fund

Cumulative Firefighting, Building, and Equipment and Police Radio Fund

Cybersecurity Incidents - Reporting

CAPITAL ASSETS – CEMETERIES

City or Town owned cemeteries are considered capital assets and need to be properly recorded on General Form 369 – Capital Assets Ledger. The cemeteries are to be reported on General Form 369 – Capital Assets Ledger at the actual or estimated historical cost based on appraisals or deflated current replacement cost. Contributed or donated assets are reported at estimated fair value at the time received.

An article was published in the June 2019 Cities and Towns Bulletin (Page 27) to assist in determining the estimated historical cost of the capital asset when the actual cost of the capital asset is not known.

General Form 369 – Capital Assets Ledger does not have a separate classification for cemeteries, so the cemetery ground will be recorded on the capital asset ledger under land, any structures on the cemetery grounds under buildings, and roads and drainage systems will be recorded under infrastructure. There will be no effect on the value of the asset as plots are sold. The purchase of a burial plot is a real estate transaction; however, cemetery plot deeds grant burial rights that create an easement for the specific purpose of burial but do not alter the municipality’s ownership of the cemetery as a whole.

Each city or town is required to adopt a capital asset policy that details the threshold at which an item is considered a capital asset. A complete physical inventory must be taken at least every two years, unless more stringent requirements exist, to verify account balances carried in the accounting records.

CANCELLATION OR REJECTIONS OF BIDS

IC 5-22-18-2 states that when the purchasing agency determines it is in the best interests of the governmental body:

1. A solicitation may be canceled; or

2. Offers may be rejected; in whole or in part as specified in the solicitation. IC 5-22-7-2 requires this statement to be included in an invitation for bids.

The reason for a cancellation of a solicitation or rejection of offers must be made part of the contract file.

REPORT OF NAMES, ADDRESSES, DUTIES, AND COMPENSATION OF PUBLIC EMPLOYEES

All cities and towns must file with the State Examiner on or before January 31, Form 100-R, a Certified Report of Names, Addresses, Duties and Compensation of Public Employees. This report is required by IC 5-11-13. Only the business address of each officer or employee listed is to be included on the form.

Such report must indicate whether the city or town offers a health plan, a pension, and other benefits to full-time and part-time employees. In addition, as a part of the report, each city or town must upload a copy of the policies adopted under IC 36-1-20.2 (Nepotism) and IC 36-1-21 (Contracting).

The report is to be filed electronically on the Gateway portal with the State Board of Accounts. The Attestation Statement must be signed by the official and mailed within five days of submission on Gateway.

The Department of Local Government Finance may not approve a city or town's budget or any additional appropriations for the ensuing calendar year unless such report is filed and the Nepotism and Contracting policies have been implemented.

CHILD LABOR LAW RESTRICTIONS

IC 20-33-3 places certain restrictions on work hours for children under 18 years old. For questions regarding child labor laws, please contact the Indiana Department of Labor. The Bureau of Child Labor home page is located at https://www.in.gov/dol/childlabor.htm. The preferred contact information is childlabor@dol.in.gov.

IC 20-33-3-39 through IC 20-33-3-41 list the penalties for violations of the child employment laws which can be as high as $400 per violation.

CHILD RESTRAINT SYSTEM PENALTIES

All Class D infraction collections for violations of the child restraint laws under IC 9-19-11 are to be accounted for separately by each city or town court as child restraint system fees. Such fees are to be remitted by the clerk of a city or town court to the county auditor on a monthly basis.

CHILD SUPPORT WITHHOLDINGS

IC 31-16-15-16 requires employers that employ more than fifty (50) employees and that withhold child support from more than one (1) obligor to make payments to the State Central Collection Unit through electronic funds transfer or through electronic or internet access made available by the state central collection unit.

Additional information is available on the Indiana State Central Collection Unit website at www.insccu.com.

CITY AND TOWN COURTS – JUDGMENTS ON OVERWEIGHT VEHICLES

Infraction judgments levied for overweight vehicles should be accounted for in the following manner:

1. All overweight infraction judgments shall be indicated separately as “Overweight Vehicle Fines” on City or Town Form No. 214, City/Town Court Receipt.

2. The receipts shall be posted as “Overweight Vehicle Fines” on City and Town Form No. 213, City/Town Court Cash Book.

3. Monthly, the total of all overweight infraction judgments shall be transmitted to the County Auditor (along with state fines and forfeitures) on City and Town Form No. 217, Report to County Auditor of Fines and Forfeitures Collect in City/Town Court. The total overweight infraction judgments shall be indicated separately on the transmittal as “Overweight Vehicle Fines.” They should not be included as State Fines and Forfeitures.

4. The County Auditor shall quietus the collections reported by the Clerk of the City/Town Court to a separate fund entitled “Overweight Vehicle Fines.” Such collections shall be transmitted to the Auditor of State.

5. Pursuant to IC 9-20-18-12, the Auditor of State will deposit such judgments into the State Highway Fund.

CLAIMS FOR PAYMENTS TO STATE AND FEDERAL AGENCIES

The State Board of Accounts’ audit position is that when statutory payments are due to state or federal agencies, there is no requirement for the state or federal agency to file an invoice or claim for such payments. This audit position would include payments for social security obligations, public employees’ retirement fund contributions, federal, state, or county taxes withheld, sales tax, utility receipts tax, and other such amounts due state or federal agencies.

The disbursing officer should prepare an accounts payable voucher and attach any copies of payroll deduction reports, federal or state invoices, communications, etc., to document the payment. The accounts payable voucher will provide a posting media indicating to whom paid, fund on which drawn, accounts to be charged, and the approval by the proper boards.

CLERK-TREASURER’S NOTARY POWERS

Notaries public, judges of courts, in their respective jurisdictions, mayors, clerks and clerktreasurers of towns and cities, in their respective towns and cities, clerks of circuit courts, master commissioners, in their respective counties, judges of United States district courts of Indiana, in their respective jurisdictions, and United States commissioners appointed for any United States district court of Indiana, in their respective jurisdictions, are authorized to administer oaths and take acknowledgments generally, pertaining to all matters where an oath is required.

Since it appears IC 33-42-9 grants clerks and clerk-treasurers virtually identical powers and authority as notaries public in matters involving acknowledgements and oaths, there would be no need for a clerk or clerk-treasurer to qualify as a notary public.

COMPENSATION – EMPLOYEE TIME OFF FOR JURY DUTY OR AS SUBPOENAED WITNESS

Since there are not any statutory references applying to these situations, the following is the audit position of the State Board of Accounts. Any of the following procedures would be acceptable:

1. The employee could receive the full amount of his/her regular salary and not claim compensation for serving as a juror or a witness.

2. The employee could receive the compensation for serving as a juror or witness and the amount received (excluding mileage reimbursement) could be deducted from his/her regular salary.

3. The employee could receive the full amount of his/her regular salary and then, in turn, turn over the warrant received for serving as a juror or witness to the proper fiscal officer. The fiscal officer would receipt the warrant into the fund from which the regular salary was paid. This procedure would not permit the appropriation to be increased by the amount of the receipt. (This procedure will not be possible if any mileage reimbursement is included in the warrant).

CONSTRUCTION OF SIDEWALKS

Following is a listing of funds and appropriations from which costs of constructing sidewalks
adjacent to city and town streets may be paid.

1. Current appropriation in the city or town general fund;
2. Voluntary contributions from property owners;
3. Current appropriation of proceeds from a general obligation bond issue which will be retired over a period of years by general taxation;
4. Current appropriation in the (Municipal) Cumulative Capital Development Fund if approved as one of the fund purposes (IC 36-9-15.5);
5. Current appropriation in the Cumulative Capital Improvement Fund (tax levy) [IC 36-9-16];
6. Current appropriation in the Cumulative Capital Improvement Fund (cigarette taxes) [IC 6-7-1-31.1];
7. Current appropriation in the Cumulative Street Fund (IC 36-9-16.5);
8. Special assessment under the General Improvement Fund (IC 36-9-17);
9. Special assessment under the Municipal and County Barrett Law Fund (IC 36-9-36);
10. Special assessment under the Municipal Barrett Law Fund (IC 36-9-37);
11. Barrett Law Revolving Fund established pursuant to IC 36-9-37-46;
12. Special Assessment under the Municipal Improvement District Law (IC 36-9-38);
13. Current appropriation in the Motor Vehicle Highway Fund (IC 8-14-1-5 and Attorney General Official Opinion No. 64 dated November 22, 1965); and
14. Current appropriation in the Local Road and Street Fund (IC 8-14-2-5, IC 9-13-2-167, and Attorney General Official Opinion No. 64 dated November 22, 1965).

CONTRACTS FOR COLLECTION OR DISPOSAL OF SOLID WASTE

A city or town may:

(1) Contract with persons for the collection or disposal of solid waste. The contract may provide that persons contracted with have the exclusive right to collect or dispose of solid waste under IC 36-9-30-4.

(2) Contract with any business or institution for the collection and disposal of industrial, commercial, or institutional sold waste. All fees collected by the city or town shall be deposited in the treasury of the city or town for the administration, operation, and maintenance of the solid waste collection and disposal project.

(3) Contract for the use of privately owned solid waste disposal facilities. If a contract executed under (1) or (2) will yield a gross revenue to a contractor (other than a governmental entity) of at least twenty-five thousand dollars ($25,000) during the time it is in effect, then the city or town must comply with IC 36-1-12-4 in awarding the contract. The city or town shall require the bidder to submit a financial statement, a statement of experience, the bidder’s proposed plan or plans for performing the contract, and the equipment that the bidder has available for the performance of the contract. The statement shall be submitted on forms prescribed by the State Board of Accounts. However, the requirements in IC 36-1-12-4(b)(6) do not apply. A city of town may contract with private persons that operate facilities that combine significant elements of recycling or production of refuse derived fuel. [IC 36-9-30-5]

CONTRIBUTIONS, DONATIONS, GIFTS

Following is a brief list of procedures to be followed by city and town officials in receiving and accounting for monetary contributions, donations, or gifts received by the municipality. (The term "donation" in this article includes donations, contributions and gifts.)

1. Unrestricted donations are defined as those to which the donor has not attached terms, conditions, or purposes.

2. Restricted donations are defined as those to which the donor has attached terms, conditions, or purposes.

3. The governing body of the unit has the option and responsibility to either accept or reject, in writing, any proposed donation.

4. If the donation is a restricted donation, the board must agree, in writing, to the terms, conditions, or purposes attached to the proposed donation.

5. Restricted donations can only be accepted for purposes within the scope of general statutory authority.

6. Income or revenues in the form of tax distributions, tax receipts, fees, rentals, contractual payments, etc., are not to be considered donations.

7. Donations which are accepted must be handled in one of the two following methods:

A. Unrestricted donations shall be receipted into the applicable operating fund of the unit (i.e. city or town operating (general) fund; cemetery operating fund, park and recreation operating fund, airport operating fund, etc.). Expenditure of such donated revenue from the operating fund shall be made only after an appropriation has been provided for the purpose of the expenditure. Claims must be filed and approved in the regular legal manner.

B. A restricted donation shall be placed into a separate fund after such fund is established by the legislative body of the unit. Any appropriate descriptive name may be given the donation fund. The donation can be expended only for the purpose and under the terms and conditions agreed to on accepting the donation.

Pursuant to Attorney General Official Opinion No. 68 of 1961, no further appropriation is required for expenditure of a restricted donation for the designated purpose. Even though no further appropriation is required, claims must be filed and approved in the regular legal manner before disbursements can be made from the fund.

8. If the volume of restricted donations justifies it, a "control" fund may be established for all restricted donations. Separate, individual accounts would then be established to account for each restricted donation or each type of restricted donation. The total activities of the separate accounts -- receipts disbursements, balances – should be reflected on the control fund.

9. Income from investments of restricted donations should be receipted into the same fund in which the principal of the donation has been receipted, provided it is to be used for the same purpose as the principal. However, if under the terms of the trust, the principal must be held in trust in perpetuity and only the income used by the governmental unit, there should be two funds established. One fund should be designated as "trust interest." In this situation, expenditures would only be permitted from the Trust Interest (Income) Fund".

10. The municipality's fiscal officer should be the custodian of the unit's funds and securities.

COPY FEES

The fee for copying documents may not exceed the greater of: (1) ten cents per page for copies that are not color copies and twenty-five cents per page for color copies; or (2) the actual cost of copying the document. Actual cost means the cost of paper and the per page cost for use of copying or facsimile equipment and does not include labor costs or overhead costs. A fee established under this subsection must be uniform to all purchasers. (IC 5-14-3-8) These provisions do not apply to copies of accident reports under IC 9-26-9.

COUNTY SLOT MACHINE WAGERING FEES

In those counties (Madison and Shelby) with slot machine wagering at racetracks, a county slot machine wagering fee shall be collected by the State and distributed to each city or town in such counties by the County Auditor pursuant to IC 4-35-8.5-3. IC 4-35-8.5-4 requires such distributions to be deposited in the city or town’s general fund.

CREDIT CARDS

The State Board of Accounts will not take exception to the use of credit cards by a governmental unit provided the following criteria are observed:

1. The governing board must authorize credit card use through an ordinance or resolution, which has been approved in the minutes.

2. Issuance and use should be handled by an official or employee designated by the board.

3. The purposes for which the credit card may be used must be specifically stated in the ordinance or resolution.

4. When the purpose for which the credit card has been issued has been accomplished, the card should be returned to the custody of the responsible person.

5. The designated responsible official or employee should maintain an accounting system or log which would include the names of individuals requesting usage of the cards, their position, estimated amounts to be charged, fund and account numbers to be charged, date the card is issued and returned, etc.

6. Credit cards should not be used to bypass the accounting system. One reason that purchase orders are issued is to provide the fiscal officer with the means to encumber and track appropriations to provide the governing board and other officials with timely and accurate accounting information and monitoring of the accounting system.

7. Payment should not be made on the basis of the statement or a credit card slip only. Procedures for payments should be no different than for any other claim. Supporting documents such as paid bills and receipts must be available. Additionally, any interest or penalty incurred due to the late filing or furnishing of documentation by an officer or employee should be the responsibility of that officer or employee.

8. If properly authorized, an annual fee may be paid.

CRIMINAL HISTORY INFORMATION

Local law enforcement agencies may, on request for release or inspection of a limited criminal history, do the following:

1. Require a form, provided by them, to be completed. The form shall be maintained for a period of two (2) years and shall be available to the record subject upon request.

2. Collect a three dollar ($3) fee to defray the cost of processing a request for inspection.

3. Collect a seven dollar ($7) fee to defray the cost of processing a request for release.

However, law enforcement agencies may not charge a fee for requests received from the parent locator service of the child support bureau of the Department of Child Services. Local law enforcement agencies shall edit information so that the only information released or inspected is information which has been requested and is limited criminal history information. (IC 10-13-3-30)

A local home rule ordinance would be required to enable a city or town law enforcement agency to collect such fees. All monies should be deposited in the municipality’s general fund unless otherwise stated in the ordinance.

CUMULATIVE DEVELOPMENT FUND

IC 36-9-15.5 allows the legislative body of a municipality to, with the approval of the Department of Local Government Finance (DLGF), establish a cumulative capital development fund to provide money for any purpose for which property taxes may be imposed within the municipality under the authority of:

IC 8-16-3 (Cumulative Bridge Fund)

IC 8-22-3-25 (Cumulative Building Fund-Airports) IC 14-27-6-48 (Cumulative Building Fund-Levees)

IC 14-33-14 (Cumulative Maintenance Fund-Channel Improvement) IC 16-23-1-40 (Cumulative Hospital Building Fund)

IC 36-8-14 (Cumulative Firefighting Fund)

IC 36-9-4-48 (Cumulative Transportation Fund-Buses) IC 36-9-16-2 (Cumulative Building Fund)

IC 36-9-16-3 (Cumulative Capital Improvement Fund) IC 36-9-16.5 (Cumulative Street Fund)

IC 36-9-17 (General Improvement Fund)

IC 36-9-26 (Cumulative Building Fund-Sewers) IC 36-9-27-100 (Cumulative Drainage Fund)

IC 36-10-3-21 (Cumulative Building Fund-Parks) or

IC 36-10-4-36 (Cumulative Sinking and Building Fund-Parks)

A municipality that decides to establish a cumulative capital development fund must follow the procedures of IC 6-1.1-41.

The maximum property tax rate that may be imposed for property taxes first due and payable during a particular year in a municipality that is either wholly or partially located in a county in which the county option income tax or the county adjusted gross income tax is in effect on January 1 of that year depends upon the number of years the municipality has previously imposed a tax and is determined under the table provided in IC 36-9-15.5

The money collected shall be held in a special fund to be known as the cumulative capital development fund. Expenditures from the cumulative capital development fund may be made only after an appropriation made in the manner provided by law for making other appropriations. However, in a consolidated city, money may be transferred from the fund to the fund of a department of the consolidated city responsible for carrying out a purpose for which the cumulative capital development fund was created. The department may not expend any money so transferred until an appropriation is made and the department may not expend any money so transferred for operating costs of the department.

Money held in the cumulative capital development fund may be spent for purposes other than the purposes stated in IC 36-9-15.5-2, if the purpose is to protect the public health, welfare, or safety in an emergency situation that demands immediate action or to make a contribution to an authority established under IC 36-7-23. Money may be spent only after the executive of the municipality: (1) issues a declaration that the public health, welfare, or safety is in immediate danger that requires the expenditure of money in the fund; or (2) certifies in the minutes of the municipal legislative body that the contribution is made to the authority for capital development purposes.

CUMULATIVE CAPITAL IMPROVEMENT FUND (Cigarette Tax Distributions) - USES 

IC 6-7-1-31.1 provides that the fiscal body of each city and the fiscal body of each town shall, by ordinance or resolution, establish a cumulative capital improvement fund for the city or town.

The list of permitted uses in IC 6-7-1-31.1 includes “(9) for any other governmental purpose for which money is appropriated by the fiscal body of the city or town.”

The money in the city’s or town’s cumulative capital improvement fund does not revert to its general fund.

A city or town may at any time, by ordinance or resolution, transfer to: (1) its general fund; or (2) an authority established under IC 36-7-23; money derived under this chapter that has been deposited in the city’s or town’s cumulative capital improvement fund.

The Attorney General in Official Opinion No. 15, dated May 25, 1965, held a city or town existing at the time of the last preceding U.S. decennial census continues to share in the cigarette tax distribution on this basis and not on the basis of any subsequent U.S. Census Bureau special census. Official Opinion No. 15 also states a city or town coming into existence after the last preceding U.S. decennial census is entitled to share in the cigarette tax distributions.

CUMULATIVE CAPITAL IMPROVEMENT FUND

(9) for any other governmental purpose for which money is appropriated by the fiscal body of the city or town.

In addition, IC 36-9-16-3 lists the following fourteen (14) additional purposes which cumulative capital improvement fund monies could be used for:

(1) To acquire land or rights-of-way to be used for public ways or sidewalks.

(2) To construct and maintain public ways or sidewalks.

(3) To acquire land or rights-of-way for the construction of sanitary or storm sewers, or both.

(4) To construct and maintain sanitary or storm sewers, or both.

(5) To acquire, by purchase or lease, or to pay all or part of the purchase price of a utility.

(6) To purchase or lease land, buildings, or rights-of-way for the use of any utility that is acquired or operated by the unit.

(7) To purchase or acquire land, with or without buildings, for park or recreation purposes.

(8) To purchase, lease, or pay all or part of the purchase price of motor vehicles for the use of any combination of the police, a community corrections program, or the fire department, including ambulances and firefighting vehicles with the necessary equipment, ladders, and hoses.

(9) To purchase, lease, or pay all or part of the cost of electronic monitoring equipment used by a state or local community corrections program.

(10)  To retire in whole or in part any general obligation bonds of the unit that were issued for the purpose of acquiring or constructing improvements or properties that would qualify for the use of cumulative capital improvement funds.

(11)  To purchase or lease equipment and other nonconsumable personal property needed by the unit for any public transportation use.

(12)  In a county or a consolidated city, to purchase or lease equipment to be used to illuminate a public way or sidewalk.

(13)  The fund may be used for any of the following purposes:

(A) To purchase, lease, upgrade, maintain, or repair one (1) or more of the following:

(i)  Computer hardware.

(ii) Computer software.

(iii)  Wiring and computer networks.

(iv)  Communication access systems used to connect with computer networks or electronic gateways.

(B)  To pay for the services of full-time or part-time computer maintenance employees.

(C) To conduct nonrecurring inservice technology training of unit employees.

(14)  To purchase body armor (as defined in IC 35-47-5-13(a)) for active members of a police department under:

(A) IC 36-5-7-7;

(B) IC 36-8-4-4.5;

(C) IC 36-8-9-9; and

(D) IC 36-8-10-4.5.

Such fund should not be confused with the cumulative capital improvement fund which is funded by State cigarette tax distributions under IC 6-7-1.

CUMULATIVE FIREFIGHTING, BUILDING AND EQUIPMENT AND POLICE RADIO FUND

IC 36-8-14 authorizes cities and towns to provide a cumulative building and equipment fund for the purchase, construction, renovation, or addition to buildings, or the purchase of land used by the fire department and for the purchase of firefighting equipment, including making the required payments under a lease rental with option to purchase agreement made to acquire the equipment. A municipality may also use the fund to purchase police radio equipment. The fund may also be used for the purchase, construction, renovation or addition to a building, the purchase of land, or the purchase of equipment for use of a provider of emergency medical services under IC 16-31-5 to the city or town establishing the fund.

The statute limits the tax levy to no more than thirty-three hundredths cents ($0.0333) on each one hundred dollars ($100) of assessed valuation in the taxing district. Any tax collected after establishing this tax levy shall be deposited in a special fund to be known as the "building or remodeling, firefighting, and police radio equipment fund." This fund may not be used for any purpose other than the purpose for which it was raised. Expenditures may be made only after an appropriation has been made available.

Any questions regarding procedures to establish this fund should be directed to the Indiana Department of Local Government Finance, Indiana Government Center North, Room N1058, 100 N. Senate, Indianapolis, Indiana 46204.

REPORTING CYBERSECURITY INCIDENTS

House Enrolled Act 1169 (2021) added IC 4-13.1-2-9 as a new section to the Indiana Code which requires political subdivisions, as defined in IC 36-1-2-13, to report any cybersecurity incident using their best professional judgement to the Indiana Office of Technology (IOT) without unreasonable delay and not later than two business days after discovery of the cybersecurity incident. A cybersecurity incident may consist of one or more of the following categories of attack vectors: (1) Ransomware, (2) Business email compromise, (3) Vulnerability Exploitation, (4) Zero-day exploitation, (5) Distributed denial of service, (6) Web site defacement, (7) Other sophisticated attacks as defined by the chief of information officer and that are posted on the officer’s Internet web site. (IC 4-13.1-1-1.5)

Cybersecurity incidents can be reported on IOT’s web site at the following webpage. https://www.in.gov/cybersecurity/report-a-cyber-crime/

Deferred Compensation Plans - PERF

Diptheria, Tetanus, and Rabies Vaccines

Disaster Relief Funds

DEFERRED COMPENSATION PLANS – PUBLIC EMPLOYEES RETIREMENT FUND

IC 5-10-1.1-1 allows cities and towns to contribute amounts before January 1, 1995 and continue or begin to contribute amounts after January 1, 1995, to a nonqualified deferred compensation plan on behalf of eligible employees, subject to any limits and provisions under section 457 of the Internal Revenue Code. IC 5-10-1.1-7 allows cities and towns to offer to their employees both the state deferred compensation plan and another deferred compensation plan that uses private vendors.

IC 5-10.2-2-1 further provides that it does not prohibit a city or town from establishing and providing before January 1, 1995 and continuing to provide after January 1, 1995, retirement, disability, and survivor benefits to the employees of the city or town if the city or town took action before January 1, 1995, and was not a member of the Public Employees’ Retirement Fund (PERF) on January 1, 1995.

A city or town has no authority to establish a local pension plan by ordinance, resolution, or contract after January 1, 1995, without specific statutory authority. PERF, deferred compensation plans, police and fire pension plans, and utility employee pension plans are all authorized by statute.

DIPHTHERIA, TETANUS, AND RABIES VACCINES

IC 16-41-19-2 requires all cities and towns to supply without charge diphtheria, scarlet fever, and tetanus (lockjaw) antitoxin and rabies vaccine to persons financially unable to purchase the antitoxin or vaccine, upon the application of a licensed physician.

All costs that are incurred in furnishing the aforementioned antitoxin or vaccines shall be paid by the appropriate city or town against which a physician’s application form is issued from general funds not otherwise appropriated without appropriation.

An Application and Claim for Biologist, State Form No. 43918, will be filed by the physician with the city or town fiscal officer if such antitoxins or vaccines are supplied.

DISASTER RELIEF FUNDS – ACCOUNTING AND BUDGETING

Based upon language contained in IC 10-14-3-17(j)(5) which states that a political subdivision may waive procedures and formalities otherwise required by law pertaining to the appropriation and expenditure of public funds where a national disaster or security emergency has been declared, the following procedures should be followed when disaster relief funds are received.

Money received or expected to be received form the Federal Emergency Management Agency (FEMA), the State Emergency Management Agency, or the State Lottery Commission for tornado, flood, ice storm, or other types of declared disasters should be accounted for in the following manner:

1. If the money is to be used to reimburse funds for expenditures already incurred and paid and the conditions of IC 10-14-3-12 have been met, the amount received may be added back to the appropriation balances from which the expenditures have been previously made.

2. If the money is to be used for future expenditures, a separate fund should be set up entitled “Disaster Relief Fund.” Such fund would not require appropriation or additional appropriation prior to spending the money in the fund.

It is recommended that all related expenditures records (claims, minutes, correspondence, contracts, damage survey report, etc.) be maintained in a separate file for future audits required by State and Federal agencies.

Emergency Medical Services

Establishing the Estimated Cost of Capital Assets

Expenditures of Utility Funds

Examination of Records and Statement of Engagement Cost

EMERGENCY MEDICAL SERVICES

The governing body of a city, town, township, or county by the governing body's action or in any combination may do the following:

1.    Establish, operate, and maintain emergency medical services.

2.    Levy taxes under and limited by IC 6-3.6 and expend appropriated funds of the political subdivision to pay the costs and expenses of establishing, operating, maintaining, or contracting for emergency medical services.

3.    Except as provided in section 2 of this chapter, authorize, franchise, or contract for emergency medical services. However:

A.    a county may not provide, authorize, or contract for emergency medical services within the limits of any city without the consent of the city; and

B.    a city or town may not provide, authorize, franchise, or contract for emergency medical services outside the limits of the city or town without the approval of the governing body of the area to be served.

4.    Apply for, receive, and accept gifts, bequests, grants-in-aid, state, federal, and local aid, and other forms of financial assistance for the support of emergency medical services.

5.    Establish and provide for the collection of reasonable fees for emergency ambulance services the governing body provides under this chapter.

6.    Pay the fees or dues for individual or group membership in any regularly organized volunteer emergency medical services association on their own behalf or on behalf of the emergency medical services personnel serving that unit of government. [IC 16-31-5-1]

A city, town, or county may not adopt an ordinance that restricts a person from providing emergency ambulance services in the city, town, township, or county if:

1.    The person is authorized to provide emergency ambulance services in any part of another county; and

2.    The person has been requested to provide emergency ambulance services:

A.    To the county in which the person is authorized to provide emergency ambulance services, and those services will originate in another county; or

B.    From the county in which the person is authorized to provide emergency ambulance services and those services will terminate in another county.  (IC 16-31-5-2)

ESTABLISHING THE ESTIMATED COST OF CAPITAL ASSETS

When it is not possible to determine the historical cost of capital assets owned by a governmental unit, the following procedure should be followed.

Develop an inventory of all capital assets which are significant for which records of the historical costs are not available. Obtain an estimate of the replacement costs of these assets. Through inquiry determine the year or approximate year of acquisition. Then multiply the estimated replacement cost by the factor for the year of acquisition from the Table of Cost Indexes. The resulting amount will be the estimated cost of the asset.

In some cases estimated replacement cost can be obtained from insurance policies; however, if estimated replacement costs are not available from insurance policies, you should obtain or make an estimate of the replacement costs.

If the replacement cost is estimated to be $76,000.00 and the asset was constructed about 1930, then the estimated cost of the asset should be reported as $5,320.00.

$76,000.00 X .07 = $5,320.00

(See Table of Cost Indexes)

EXAMNINATION OF RECORDS AND STATEMENT OF ENGAGEMENT COST

At the end of an audit engagement the State Board of Accounts sends a notice of Statement of Engagement Cost to each political subdivision, including the County. This statement details a summary of the engagement including the number of days spent on the audit, the daily/hourly rate, and any report processing fees. We would like to point out that this statement is not an invoice that is to be paid by the entities.

A separate invoice for payment of these audit costs will be sent to the County for payment in accordance with IC 5-11-4. Immediately upon receipt of the certified statement, the county auditor shall issue a warrant on the county treasurer payable to the treasurer of state out of the general fund of the county for the amount stated in the certificate. The county auditor shall reimburse the county general fund, except for the expense of examination and investigation of county offices, out of the money due the taxing units at the next semiannual settlement of the collection of taxes.

If the county reasonably believes or knows that it does not have on hand or will not have collected enough taxes by the next distribution date for a taxing unit included on the examination of records billing, then the county auditor will send the certified statement to the taxing unit. The taxing unit should then contact the State Board of Accounts for directions on paying for the cost of the examination directly to the State Board of Accounts, instead of using settlement. It is important that the cost be paid off prior to the next audit. If the audit costs, due the State Board of Accounts, are not paid prior to the subsequent audit, it impairs the independence of the State Board of Accounts. This will delay future audits.

As the amount of federal funding to local governments has increased so has the need for single audits and more frequent audits which has helped drive up audit costs. We are now beginning to see this result in semiannual tax distributions that are not sufficient to pay the audit costs. It is important to plan and budget accordingly for these costs. It might be beneficial once an examination of records has been completed for the taxing unit to go directly to the county auditor if sufficient taxes will not be collected to pay the estimated costs of the examination of records. Having this conversation before receiving the certified statement from the county auditor can prepare the taxing unit for the payment of these costs. You can discuss with your field examiner during the exit, how you may best meet the costs. This may involve the use of other funds such as Rainy Day or if there are ARPA funds remaining under the revenue loss category, those can also be used to pay audit costs. If you have questions after the exit, please feel free to reach out to your State Board of Accounts Director for further assistance in looking for funds that can pay the audit costs.

When determining how these costs will be paid, it is also important to plan for the next year. During this determination, take into consideration the amount of federal assistance that you have disbursed during the year. If you have expended $750,000 or more of federal awards (whether the award is direct or passed-through another entity) in a year the taxing unit is required to have a single audit conducted in accordance with the Federal Office of Management and Budget’s Uniform Guidance. Single audits require an annual audit. If your unit does not need a Single Audit, there may be a longer time between your examinations. Since these costs could become an annual expense for the taxing unit, future budgets would need to be adjusted for those costs.

EXPENDITURES OF UTILITY FUNDS

Expenses paid from utility funds should be directly related to the operation of the municipally owned utility. Expenditures for city and town operating costs should not be paid from utility funds. Furthermore, utility funds should not be used to pay for personal items. The cost of shared employees and equipment between a city or town and its utilities or between utilities should be prorated in a rational manner.

Establishment of a Cash Reserve Fund permits transfer of surplus utility funds to the city or town general fund. After appropriation, such transferred funds may then be used for any legal general fund purpose.

Facsimile Transmission Fees

Federal Assistance - Data Collection Form

Federal Excise Taxes

Filing and Docketing Claims

Final Action on Budgets 

Funding and Refunding Indebtedness

FACSIMILE TRANSMISSION FEES

Currently, IC 5-14-3-8(d) authorizes the fiscal body to establish a fee schedule for the certification or copying of documents. Prior to July 1, 2007 this subsection allowed for the inclusion of a facsimile machine transmission fee. Effective July 1, 2007 the reference to the inclusion of a fee for facsimile machine transmission was deleted from this subsection and so it is our position that this subsection no longer supports such a fee.

IC 5-14-3-8(f) states in part:

"Notwithstanding subsection…(d)….. a public agency shall collect…. Facsimile machine transmission fee… that is specified by statute or is ordered by a court".

We are not aware of any statute that specifies a facsimile machine transmission fee.

Per State Court Administration, Trial Rule 81(A) does not allow for a standing court order for facsimile fees.

As to the amount of a facsimile machine transmission fee which a court may order on an individual basis, State Court Administration recommends that it should adopt a fee amount that is reasonable and substantially in conformance with those authorized by existing statutes. The parameters specified in IC 5-14-3-8(d) could be used as a guide. A court may decide that a reasonable facsimile fee may be so small as to not be worth collecting.

In an audit, if a facsimile machine transmission fee is collected we would look for either a specific statute authorizing the fee or a court order

FEDERAL ASSISTANCE – DATA COLLECTION FORM 

Form SF-SAC, Data Collection Form for Reporting on Audits of States, Local Governments, Indian Tribes, Institutions of High Education, and Nonprofit Organizations is required to be filed with the Federal Audit Clearinghouse for all Single audits.

A part of our service, Field Examiners will complete the form at the time of audit. The fiscal officer will need to certify the form.  Instructions on the certification process will be provided.

FEDERAL EXCISE TAXES

As a general rule, governmental units are exempt from any federal excise tax. To obtain an exemption, a properly executed exemption certificate must be filed with the vendor from whom the purchase is made. This exemption certificate may be prepared at the time the order is placed or at the time payment is made. The exemption certificate may be a printed or copied form and should be substantially in the form currently used. For information concerning the form of the exemption certificate, contact the Internal Revenue Service.

Claims and invoices should be carefully audited to see that no federal excise taxes are included and paid. Disbursing officers should require that invoices show separately the gross price, the amount of the excise tax, and the final price to the governmental unit.

In some instances, a city or town may have erroneously paid the excise taxes from which they are exempt. In such instances, the city or town has three years from the date the tax was paid to the Federal Government in which to file for a refund.

To obtain a refund, the city or town should submit to the seller an exemption certificate for each item on which excise tax was paid accompanied with documentary evidence that the exemption had not been claimed or received. Such evidence may be copies of invoices, affidavits, records, etc. The Internal Revenue Service will provide forms on which the original taxpayer may claim reimbursement for excise tax erroneously paid by a city or town.

Any questions concerning federal excise tax should be directed to the Internal Revenue Service.

FILING AND DOCKETING CLAIMS

Indiana Code 5-11-10-2 states in part:

“(a) Claims against a political subdivision of the state must be approved by the officer or person receiving the goods or services, be audited for correctness and approved by the disbursing officer of the political subdivision, and, where applicable, be allowed by the governing body having jurisdiction over allowance of such claims  before they  are paid. If the claim is against a governmental entity as defined in section 1.6 [IC 5-11-10-1.6] of this chapter, the claim must be certified by the fiscal officer.

(b) The state board of accounts shall prescribe a form which will permit claims from two (2) or more claimants to be listed on a single document and, when such list is signed by members of the governing body showing the claims and amounts allowed each claimant and the total claimed and allowed as listed on such document, it shall not be necessary for the members to sign each claim.

(c) Applies to solid waste management districts.

(d) The form prescribed under this section shall be prepared by or filed with the disbursing officer of the political subdivision together with… the supporting invoices or bills...

(e) Where under any law it is provided that each claim be allowed over the signatures of members of a governing body, or a claim docket or accounts payable voucher register be prepared listing claims to be considered for allowance, the form and procedure prescribed in this section shall be in lieu of the provisions of the other law.”

The State Board of Accounts has prescribed General Form No. 364, Accounts Payable Voucher Register, which shall be prepared by, or filed with, the disbursing officer of the city or town, together with the supporting accounts payable voucher, and all such documents shall be carefully preserved by the disbursing officer as a part of the official records of the office.

IC 36-4-8-5(a)(2) applies to cities and IC 36-5-4-4(a)(2) applies to towns. Both statutes require claims to be filed in the manner prescribed by IC 5-11-10-2 at least five (5) days before the meeting of the applicable approving body. However, if the city or town council has passed an ordinance to allow certain claims to be paid by the fiscal officer between board meetings in accordance with IC 36-4-8-14 (cities) or IC 36-5-4-12 (towns), then the five (5) day requirement does not apply for those particular types of claims.

If members of the governing body would rather approve and sign each individual accounts payable voucher in lieu of signing the Allowance of Vouchers section of General Form 364, this procedure is acceptable.

Indiana Code 5-11-10-1.6 states, in part:

“(c) The fiscal officer of a governmental entity may not draw a warrant or check for payment of a claim unless:
(1) there is a fully itemized invoice or bill for the claim;
(2) the invoice or bill is approved by the officer or person receiving the goods and services;
(3) the invoice or bill is filed with the governmental entity's fiscal officer;
(4) the fiscal officer audits and certifies before payment that the invoice or bill is true and correct; and
(5) payment of the claim is allowed by the governmental entity's legislative body or the board or official having jurisdiction over allowance of payment of the claim…

(d) The fiscal officer of a governmental entity shall issue checks or warrants for claims by the governmental entity that meet all of the requirements of this section. The fiscal officer does not incur personal liability for disbursements:

(1) processed in accordance with this section; and
(2) for which funds are appropriated and available.

(e) The certification provided for in subsection (c)(4) must be on a form prescribed by the state board of accounts.”

City and town fiscal officers have the option of certifying either on each Accounts Payable Voucher or by signing the certification section of the Accounts Payable Voucher Register.

FINAL ACTION ON BUDGETS

If any reduction is made by the Department of Local Government Finance in the city or town’s budget and tax levy, the appropriating body should comply with the section of the budget law found in IC 6- 1.1-18-4 which is quoted below:

“Appropriations not to exceed budget – Except as otherwise provided in this chapter, the proper officers of a political subdivision shall appropriate funds in such a manner that the expenditures for a year do not exceed its budget for that year as finally determined under this article.”

FUNDING AND REFUNDING INDEBTEDNESS

Any city or town whose indebtedness is evidenced by bonds, notes, judgments, or other obligations issued, rendered, or negotiated by the city or town, may, for the purpose of funding or refunding the indebtedness, or any part thereof, reducing the rate of interest thereon, extending the time of payment and canceling so much thereof as may be or become due, by the vote of two-thirds (2/3) of members of the fiscal body of the city or town, issue its bonds, for an amount not exceeding in the aggregate the whole amount of the indebtedness of the city or town. (IC 5-1-9-1)

Garbage Collection and Disposal

General Improvement Fund

Grant Anticipation Notes

GARBAGE COLLECTION AND DISPOSAL

After a review of relevant statutes, there appear to be three methods available for providing trash or solid waste collection and disposal:

1. Under IC 36-9-23, the service charges can be a part of the sewage utility fees. IC 36-9-25 also authorizes all second class cities and all municipalities in Lake County to make this service a part of the sanitary district service fees.

2. IC 36-9-30 authorizes a separate utility along with a separate fund for solid waste collection, treatment, and disposal.

3. IC 36-9-30 also allows a unit to pay for this service by general taxation.

To summarize, if a unit wishes to either establish a pickup service or to change from taxsupported service to a user fee service, the foregoing statutes should be reviewed by the unit’s legal counsel. The unit’s attorney should prepare an ordinance expressing the governing body’s wishes, the ordinance should be advertised, public hearings should be conducted, and the legislative body should act thereon. The ordinance should set out such provisions as:

1. The service to be provided.

2. The area in which the service is to be provided.

3. The method by which the service is to be provided.

4. The charges for the service. The charges should be billed separately even if established as a service of the sewage utility.

5. The method of payments of user charges, period covered, due dates, location of places payments are to be received, etc.

6. Any penalties to be assessed for late payments.

7. The method of accounting for service charges. The Home Rule statute, as well as the other statutes cited, requires the revenues to be restricted to the amount reasonably related to the cost of providing the services. None of the statutes authorize a profit to be made or for any surplus to be transferred to another fund for other uses. Accounting shall be such that documentation will be provided to comply with the foregoing provisions.

GENERAL IMPROVEMENT FUND

IC 36-9-17 authorizes any city or town to establish a permanent revolving fund to be used for financing public improvements which are to be paid for by special assessments. This fund is to be known as the General Improvement Fund.

All collections on such assessments shall be receipted to this fund and any appropriation made from the general fund or from taxes levied for such purposes. The aggregate sum which may be appropriated and levied shall not exceed the equivalent of sixteen and sixty-seven hundredths cents ($0.1667) on each one hundred dollars ($100) of net taxable valuation.

The Board of Public Works, Board of Public Works and Safety, or Town Council shall fix the time within which assessments shall be paid which time shall not extend beyond a period of five (5) years. All interest and penalties collected on assessments are to be receipted to the City or Town General Fund.

Accounting for the financing of public improvements handled through this revolving fund requires the use of the regular Barrett Law forms that are applicable.

GRANT ANTICIPATION NOTES

IC 5-19-1.5 authorizes municipalities to borrow funds for a period of not to exceed three years and may pledge for the payment of principal and interest therefore, the proceeds of a grant and any revenue which may be derived from the facility being constructed or improved by the proceeds of the note or notes.

The maximum amount of any loan shall not exceed eighty percent (80%) of the estimated amount of the grant in anticipation of which the loan is made.

Your city or town attorney should review the provisions of IC 5-19-1.5 for legal guidance of the municipality prior to utilizing this type of temporary loans.

Handling Law Enforcement Continuing Education Program Fees

• Filing Verified Statement of Cause Numbers

Health Savings Account Payments

HANDLING LAW ENFORCEMENT CONTINUING EDUCATION PROGRAM FEES

1. Each court is to assess a $4 law enforcement continuing education program fee on each action in which a defendant is found to have:

A. committed a crime;

B. violated a statute defining an infraction; or

C. violated an ordinance of a municipal corporation. (IC 33-37-5-8(c))

2. Monthly, a county, city, or town court clerk is to transmit the law enforcement continuing education fees collected to the county, city, or town fiscal officer. (IC 33-37-4-1, IC 33-37-4-2, IC 33-37-4-3)

3. The fiscal officer shall deposit the fees into either the County User Fee Fund or the City or Town User Fee Fund. (IC 33-37-4-1, IC 33-37-4-2, IC 33-37-4-3)

4. A law enforcement agency may receive funds from a County User Fee Fund or a City or Town User Fee Fund or a City or Town User Fee Fund by filing a claim with the county, city, or town fiscal officer. The claim shall include a “verified statement” of cause numbers for fees collected that are attributable to the law enforcement efforts of that agency. Payment of the claimed amount from a County User Fee Fund or a City or Town User Fee Fund may be made without appropriation.

5. Claims should be filed monthly, quarterly, or semiannually.

6. On receipt of the amount claimed by the law enforcement agency, the city or town fiscal officer shall place the amount received into the Local Law Enforcement Continuing Education Fund. (IC 5-2-8-2)

7. Funds received by a law enforcement agency shall be used for the continuing education and training of law enforcement officers employed by the agency and for equipment and supplies for law enforcement purpose. (IC 5-2-8-6)

8. Amounts claimed for expenditures for the Local Law Enforcement Continuing Education Fund must have been appropriated prior to expenditure either through the normal budget process or by additional appropriation. (IC 33-37-8-4)

9. Any funds remaining in the Local Law Enforcement Continuing Education Fund at year end do not revert.

LAW ENFORCEMENT CONTINUING EDUCATION PROGRAM FEES – FILING VERIFIED STATEMENTS OF CAUSE NUMBERS

Since the statutes (IC 5-2-8, IC 33-37-8) are silent regarding by whom or in what manner the “verified statement of cause numbers” will be prepared, the State Board of Accounts has adopted the following suggested procedures to handle such filings:

1.  The applicable law enforcement agency should prepare the claim. At a minimum, the claim should indicate each fee collected by date of payment, cause number, defendant name, and receipt number if available.

2.  The claim should be filed by the law enforcement agency with the fiscal office of the governmental unit.

3.  The fiscal officer shall transmit the claim to the court clerk in order for the claim to be verified.

4.  Once the court clerk verifies the fees claimed on the claim, the claim shall be transferred back to the fiscal officer for processing in the same manner as all other claims, i.e. submitted for board approval and subsequent payment.

5.  An alternative to steps 3 and 4 has been approved for some units. In this instance, when the court clerk transmits the monthly collection of law enforcement continuing education fees to the fiscal officer, the court clerk includes a listing of the fees transmitted by date of payment, cause number, defendant name, and the law enforcement agency to which the fees are attributable. By doing this, the fiscal officer is able to verify the fees claimed by the various law enforcement agencies and is not required to go back to the court clerk.

It would also be permissible for the law enforcement agency to attach a copy of such listing that is provided by a court to a claim once the law enforcement agency verified the accuracy of the data contained in the listing.

HEALTH SAVING ACCOUNT PAYMENTS

It has come to our attention that some units are not using payroll withholding funds to account for the employee directed Health Savings Account payments. Instead, the units make direct deposits to the Health Savings Accounts in a similar manner to the process of making net pay direct deposits to the employee’s bank account. Historically, our audit position has been to take exception to this accounting practice because all payroll transactions were not being recorded in the financial records. The State Board of Accounts has revised the audit position on this process and we will not take audit exception to amounts approved by employees being deposited directly into Health Savings Accounts without the use of a payroll withholding fund, provided the following criteria are observed:

1) Unit is following state and federal guidelines of Health Savings Accounts;

2) Reports of amounts deposited into Health Savings Accounts are produced in detail by employee for each individual payroll period and maintained for audit; and

3) Amounts deposited into Health Savings Accounts (employee and employer share) are approved by the governing board

Judges - Pro Tempore

CITIES AND TOWNS - PRO TEMPORE JUDGES

Trial Rule 63, which deals with the disability and unavailability of a judge, allows for a judge pro tempore that was appointed locally to be paid twenty-five dollars ($25) for each day or part thereof actually served in a city or town court. A judge pro tempore is to be paid from the city or town general fund, without appropriation, upon allowance by the city or town council.

Law Enforcement Cont Education Program Fees

Lease-Purchase Agreements

Leave of Absence - Indiana National Guard or Reserves

Levy Excess Fund

Loans

Between Utilities

From Municpally Owned Utilities

From Utilities to Cities and Towns

Local Law Enforement Continuing Education Fund - Uses

HANDLING LAW ENFORCEMENT CONTINUING EDUCATION PROGRAM FEES

1. Each court is to assess a $4 law enforcement continuing education program fee on each action in which a defendant is found to have:

A. committed a crime;

B. violated a statute defining an infraction; or

C. violated an ordinance of a municipal corporation. (IC 33-37-5-8(c))

2. Monthly, a county, city, or town court clerk is to transmit the law enforcement continuing education fees collected to the county, city, or town fiscal officer. (IC 33-37-4-1, IC 33-37-4-2, IC 33-37-4-3)

3. The fiscal officer shall deposit the fees into either the County User Fee Fund or the City or Town User Fee Fund. (IC 33-37-4-1, IC 33-37-4-2, IC 33-37-4-3)

4. A law enforcement agency may receive funds from a County User Fee Fund or a City or Town User Fee Fund or a City or Town User Fee Fund by filing a claim with the county, city, or town fiscal officer. The claim shall include a “verified statement” of cause numbers for fees collected that are attributable to the law enforcement efforts of that agency. Payment of the claimed amount from a County User Fee Fund or a City or Town User Fee Fund may be made without appropriation.

5. Claims should be filed monthly, quarterly, or semiannually.

6. On receipt of the amount claimed by the law enforcement agency, the city or town fiscal officer shall place the amount received into the Local Law Enforcement Continuing Education Fund. (IC 5-2-8-2)

7. Funds received by a law enforcement agency shall be used for the continuing education and training of law enforcement officers employed by the agency and for equipment and supplies for law enforcement purpose. (IC 5-2-8-6)

8. Amounts claimed for expenditures for the Local Law Enforcement Continuing Education Fund must have been appropriated prior to expenditure either through the normal budget process or by additional appropriation. (IC 33-37-8-4)

9. Any funds remaining in the Local Law Enforcement Continuing Education Fund at year end do not revert.

LEASE - PURCHASE AGREEMENTS

In purchasing equipment from budgeted funds, the purchasing agent for a city or town has the right to enter into a rental with option to purchase agreement if the rental charge is fair and reasonable.

Before such an agreement can be legally entered into, there must be a sufficient appropriation balance available for payment of the current year’s rental charge. This agreement should not obligate the city or town for payment of rental beyond the current year’s appropriation. Provision may be made in the agreement for renewal for succeeding years by rental payments subject to appropriations being available therefore.

If the original gross cost of the equipment (without consideration of any trade-in) exceeds one hundred fifty thousand dollars ($150,000) the purchasing agent must advertise for bids and award a contract with reasonable promptness by written notice to the lowest responsible and responsive bidder in compliance with the Public Purchases Law (IC 5-22).

If the original gross cost of the equipment (without consideration of any trade-in) is at least fifty thousand dollars ($50,000) and not more than one hundred fifty thousand dollars ($150,000), the purchasing agent must invite quotes from at least three (3) persons known to deal in the equipment to be purchased under a lease with option to purchase agreement.

Only by awarding a contract pursuant to IC 5-22 would the city or town have authority to purchase the equipment at a later date. A lease-purchase agreement will often contain an option to purchase at the end of the lease term for nominal consideration or no additional consideration.

The specifications for the equipment must be recognized standard specifications to allow competitive bidding and should provide for the bidder to quote the total purchase cost, the rental charge to be made, and the percentage of the amount of the rental charge that will be credited toward the purchase cost should the city or town exercise the option to purchase. Any interest or carrying charges must be made a part of the original bid price without specific reference made thereto.

Compliance with the above requirements will allow the purchasing agency to exercise the option to purchase at any time a sufficient appropriation for the equipment is available.

Remember, as mentioned above, whether or not the equipment should be bid is based on the original cost of the equipment and is not based on cost less trade-in or on the annual lease rental payment amount.

LEAVE OF ABSENCE – OFFICERS AND EMPLOYEES WHO ARE MEMBERS OF THE INDIANA NATIONAL GUARD OR RESERVES 

All officers and employees of the state or any county, township, municipality, or school corporation in Indiana who are members of the Indiana National Guard, a reserve component, or a member of the retired personnel of the naval, air or ground forces of the United States are entitled to the following leaves absence.

A member is entitled to receive from the member’s employer a leave of absence from the member’s respective duties in addition to regular vacation period without loss of time or pay from the time that the member is:

1.    on training duties of the state under the order of the governor as commander in chief;  or

2.    a member of any reserve component under the order of the reserve component authority;

for any consecutive or nonconsecutive period that does not exceed a total of fifteen (15) days in any calendar year.  The entitlement to a leave of absence without loss of time or pay provided is not at the discretion of the member’s employer.

A member is entitled to receive from the member’s employer a leave of absence from the member’s respective duties in addition to the member’s regular vacation period for the total number of days that the member is on active duty under section IC 10-16-7-7.  Such leave of provided may be with or without loss of time discretion of the member’s employer.  [IC 10-16-7-5]

LEVY EXCESS FUND

Each year the Department of Local government Finance will certify to each city and town figures which show one hundred two percent (100%) of the tax levy for each fund. If the property taxes received exceed one hundred two percent (100%) of the levy, the excess shall be receipted to a levy excess fund. However, if the amount is less than one hundred dollar ($100), no transfer is required. Please see Indiana Code 6-1.1-18.5-17 for more information.

Detailed instructions on setting up a levy excess fund are contained in the “Accounting and Uniform Compliance Guidelines Manual for Cities and Towns” beginning on page 22 of Chapter 7.

LOANS BETWEEN UTILITIES

IC 8-1.5-3-11(f) authorizes loans between two (2) municipally owned utilities as long as the ordinance establishing a cash reserve fund in utility loaning the money allows for such loans.  The loan must be repaid within five (5) years at any interest rate and all repayments, including interest, must be returned to the utility’s cash reserve fund.

LOANS FROM MUNICIPALLY OWNED UTILITIES (WATER, GAS, AND ELECTRIC UTILITIES)

IC 8-1.5-3-12 states:

“(a) A municipality may, by ordinance of its legislative body, borrow money from a utility owned by the municipality for any of the following purposes:

(1) Current purposes in anticipation of taxes levied and to be collected during the current or following year.

(2) Carrying out an eligible efficiency project (as defined in IC 36-9-41-1.5) within the municipality.

(b) The board may by resolution lend money to the municipality if the utility has on hand:

(1) a surplus of cash exceeding by at least the amount loaned the sum of all amounts required to pay the indebtedness of the utility falling due during the current calendar year and the following year;

(2) the amount necessary to meet current expenses during the year; and

(3) the amount necessary to pay for improvements contemplated to be made during the current calendar year minus the estimated receipts during the calendar year.

(c) A loan made under subsection (a)(1) may not be made for a sum in excess of fifty percent (50%) of the amount estimated to be collected from anticipated taxes.

(d) A loan under this section:

(1) must be evidenced by an obligation of the municipality;

(2) must be signed by the executive;

(3) is due:

(A) on or before thirty (30) days after the last day for the payment of anticipated taxes, in the case of a loan made under subsection (a)(1) ; and

(B) on a date determined by the board (but not more than six (6) years after the date of the loan), in the case of a loan made under subsection (a)(2); and

(4) may bear interest at any rate as determined by the board, payable at maturity.

IC 8-1.5-3-11(f) states:

“A cash reserve fund, if authorized by ordinance, may be used to make loans to another utility owned by the same municipality, for periods not to exceed five (5) years, at any interest rate. The repayment of the loan and interest shall be returned to the reserve fund.”

NOTE: A municipality could borrow money from or loan money to its wastewater utility under the provisions of the Home Rule statute contained in IC 36-1-3.

LOANS FROM UTILITIES TO CITIES AND TOWNS 

IC 8-1.5-3-12 states that a municipality may, by ordinance of its legislative body, borrow money from a water, gas, or electric utility owned by the municipality for current purposes in anticipation of taxes levied and to be collected during the current or following year or to carry out an eligible efficiency project within the municipality. Eligible efficiency project is defined in IC 36-9-41-1.5.

The board may by resolution lend money to the municipality if the utility has on hand:

1.    a surplus of cash exceeding by at least the amount loaned the sum of all amounts required to pay the indebtedness of the utility falling due during the current calendar year and the following year;

2.    the amount necessary to meet current expenses during the year; and

3.    the amount necessary to pay for improvements contemplated to be made during the current calendar year minus the estimated receipts during the calendar year.

A loan made for current purposes in anticipation of taxes may not be made for a sum in excess of fifty percent (50%) of the amount estimated to be collected from anticipated taxes.  The loan:

1.    must be evidenced by an obligation of the municipality;

2.    must be signed by the executive;

3.    is due:

(A)    on or before thirty (30) days after the last day for the payment of anticipated taxes, in the case of a loan made for current purposes in anticipation of taxes; and

(B)    on a date determined by the board (but not more than six (6) years after the date of the loan), in the case of a loan made for to carry out an eligible efficiency project; and

4.    may bear interest at any rate as determined by the board, payable at maturity.

We recommend that when loans are made from a municipal wastewater (sewage) utility to a municipality, the aforementioned procedures be followed.  However, since there are no statutory guidelines included in IC 36-9 23 for such loans, other loan provisions would be acceptable as set out in home rule ordinance adopted under IC 36-1-3

LOCAL LAW ENFORCEMENT CONTINUING EDUCATION FUND – USES

Money in the local law enforcement continuing education fund may be used for continuing education and training of law enforcement officers employed by a city or town and for equipment and supplies for law enforcement purposes.  [IC 5-2-8-6]

It is our audit position that the local law enforcement continuing education fund will require local council appropriation.  Furthermore, if it can be shown that law enforcement officers worked overtime in order for other officers to receive training, the cost of such overtime could also be paid from the fund.

Major Moves Contruction Fund

Meal Expense Advances

Mileage Rates

Mileage Expense

Money Market Mutual Funds

Monthly Bank Reconcilement

Motor Vehicle HIghway Funds

Municipal Utilities - Clerk-Treasurer Duties

MVH and MVH Restricted Sub-fund Information

Construction, Reconstruction, and Preservation

General Administration and Unallocated

Maintenance and Repair

LOCAL MAJOR MOVES CONSTRUCTION FUND

Indiana Code 8-14-16 requires cities and towns in counties traversed by the Indiana Toll Road to set up a local major moves construction fund for deposit of a distributions from the County Auditor under IC 8-14-6-3. Money in the fund may be expended only for the following purposes:

1. Construction of highways, roads and bridges.
2. In a county that is a member of the northwest Indiana regional development authority, or in a city or town located in such a county, any purpose for which the regional development authority may make expenditures under IC 36-7.5.
3. Providing funding for economic development projects (as defined in the specified statutes referenced in IC 8-14-16-5).
4. Matching federal grants for a purpose described by statute.
5. Providing funding for interlocal agreements under IC 36-1-7 for a purpose described in statute.
6. Providing the city's or town’s contribution to a regional development authority established under IC 36-7.6-2-3.

Such fund must be appropriated as part of the annual budget for the calendar year in accordance with IC 6-1.1-17.

MEAL EXPENSE ADVANCES

IC 5-11-10-1.6 allows cities and towns to make meal expense advances to city or town employees who will be traveling on official city or town business if the city or town fiscal body has adopted an ordinance allowing the advance payment. The ordinance must specify a maximum amount that may be paid in advance and specify the required invoices and other documentation that must be submitted by city or town employees. The ordinance must provide for reimbursement from the wages of city or town employees if the employees do not submit the required invoices and documentation.

FEDERAL AND STATE MILEAGE RATES

The Federal business mileage rate is available at www.irs.gov. The State mileage rate is available at  https://www.in.gov/idoa/2459.htm.

MILEAGE EXPENSE

In Official Opinion No. 74 of 1953 the Attorney General held that statutes do not authorize payment of a fixed travel allowance (fixed amount regardless of the number of miles traveled) to city officers and employees. It is our audit position that this same reasoning would apply to town officers and employees.

The opinion states in part:

“… I can find no statutory authority for the payment of a fixed monthly travel allowance to municipal employees and the employment relationship does not change the fact that such a “travel allowance” is in the nature of extra compensation to the employees involved.”

This opinion is limited to the payment of a fixed monthly travel allowance and should not be considered as touching upon the authority of a city to reimburse its employees for travel upon a mileage basis, or by any other proper method based on the expense of the travel.”

Based on the foregoing opinion, the State Board of Accounts has taken the audit position that city and town officers and employees may be reimbursed for actual miles traveled in their own motor vehicles on official business of the city or town at a reasonable rate per mile as fixed by an ordinance of the common council or the town council. If such an ordinance has not been enacted, we believe that the mileage reimbursement rate should be fixed by the board or commission having the authority to approve the accounts payable vouchers/claims. There is no statute limiting the rate per mile for mileage reimbursement and the amount fixed is up to the discretion of the local officials. The common council or town council should also determine if parking fees, toll fees, and other mileage related costs are to be reimbursed in addition to their mileage reimbursement. All mileage related costs should be included in the adopted ordinance/travel policy.

MONEY MARKET MUTUAL FUNDS

An officer designated in IC 5-13-9-1 may invest or reinvest funds that are held by the officer and available for investment in investments commonly known as money market mutual funds that are in the form of securities of or interests in an open-end, no-load, management-type investment company or investment trust registered under the provisions of the federal Investment Company Act of 1940, as amended (15 U.S.C. 80a et seq.).

The investments described in subsection (a) shall be made through depositories designated by the state board of finance as depositories for state deposits under IC 5-13-9.5.

The portfolio of an investment company or investment trust described in subsection (a) must be limited to the following:

(1) Direct obligations of the United States.

(2) Obligations issued by any of the following:

(A) A federal agency.

(B) A federal instrumentality.

(C) A federal government sponsored enterprise.

(3) Repurchase agreements fully collateralized by obligations described in subdivision (1) or (2).

The form of securities of or interests in an investment company or investment trust described in subsection (a) must be rated as one (1) of the following:

(1) AAAm, or its equivalent, by Standard and Poor's Corporation or its successor.

(2) Aaa, or its equivalent, by Moody's Investors Service, Inc. or its successor.

The form of securities in an investment company or investment trust described in subsection (a) is considered to have a stated final maturity of one (1) day.

The State Board of Accounts may rely on transaction confirmations evidencing ownership of the form of securities of or interests in an investment company or investment trust described in subsection IC 5-13-9-2.5(a). (IC 5-13-9-2.5)

MONTHLY BANK RECONCILEMENTS

Indiana Code 5-13-6-1(e) states that all local investment officers shall reconcile at least monthly the balance of public funds, as disclosed by the records of local officers, with the balance statements provided by the respective depositories.

In addition to compliance with statute, monthly bank reconcilements provide internal controls to achieve the safeguarding of public assets. We have received numerous reports that bank routing and account information is being used to create false checks that are clearing bank accounts and stealing public funds. If the unauthorized payments from the account are brought to the attention of the bank in a timely manner, the bank will replace the amount that was stolen. However, if you are not reconciling monthly, you would not be aware of these fraudulent transactions and the delay in reporting these fraudulent transaction to the bank may make it more difficult to get the bank to restore the funds to the bank account. Review the bank statement monthly and verify that all of your recorded deposits are credited to your account and all withdrawals from the account are transactions that trace to checks prepared by your office or electronic funds transfers that you have authorized. By doing this, you would catch any bank errors in a timely manner. In addition you would be able to identify any fraudulent activity as early as possible.

MOTOR VEHICLE HIGHWAY FUNDS

Official Opinion No. 27-1965, issued by the Office of the Attorney General, held that cities and towns may construct, purchase and lease buildings with funds distributed to them from the Motor Vehicle Highway account, to be used exclusively for purposes which are incidental to the purposes expressly stated in IC 8-14-1-5.

MUNICIPAL UTILITIES – CLERK-TREASURER’S DUTIES

IC 8-1.5-3-4 requires the board over a municipally-owned water, gas or electric utility to deposit all money collected with the municipality’s fiscal officer and to make monthly reports to the fiscal officer of the receipts and disbursement of money belonging to each utility.

This section, as well as the language contained in IC 36-9-23 for wastewater utilities, does not appear to require a clerk-treasurer to perform any duties other than to maintain a bank account for each utility and to sign utility warrants. It is our audit position that the board over the utilities decides which person is responsible for utility billing and collection. Such person may be the clerk-treasurer or someone else.

MVH AND MVH RESTRICTED SUB-FUND INFORMATION

The following are definitions and examples as provided in the Annual Highway Operational Report for items related to MVH and specifically the MVH Restricted sub-fund. These were developed to bring professionally based standardized application to the statutory definitions provided under IC 8-14-1-1(4) through IC 8-14-1-1(7) and were compiled by a committee chaired by the Local Technical Assistance Program at Purdue University (LTAP). It is these definitions that the Indiana State Board of Accounts will consider when determining compliance with the MVH Restricted sub-fund. Items identified under the heading of Construction, Reconstruction, and Preservation would be considered in compliance with expenditures allocated to the MVH Restricted sub-fund. Expenditure items identified under either the heading of Maintenance and Repair or General Administration and Unallocated would not be considered in compliance if allocated to the MVH Restricted sub-fund expenditures.

Construction, Reconstruction, and Preservation (CRP)

CRP activities are defined as expenses for work performed by internal forces or outside contractors that result in a new or improved roadway - paved or unpaved, including capacity enhancements. Activities result in the structural improvement of a roadway improving its ability to support vehicle traffic. Costs include personnel, material, and equipment expenses.

Preservation:

Defined as actions or strategies applied to existing infrastructure that prevent, delay or reduce further deterioration and maintain or improve the functional condition of the system without increasing structural capacity and extend the service life of the infrastructure. Preservation activities are intended to correct infrastructure problems before the structural integrity is impacted.

Preservation is a broad category of treatments that include activities such as thin overlays or micro surfacing. Nonstructural preservation treatments are usually less than 2 inches in depth and are designed to address age-related problems (such as block cracking) or distress caused by exposure to the elements (such as transverse cracking). Crack sealing and patching of pavement and deck patching for bridges would be included in this category. Costs include materials, personnel, contracted services and equipment rental/operation expenses.

Within preservation, costs can be defined more specifically to their associated categories:

Pavement: Costs associated with activities that retain or extend the current roadway condition. Includes treatments to curbs, gutters, and paved shoulders and alleys. Pavement preservation is a broad category of treatments that include nonstructural treatments that are usually less than 2 inches in depth and are designed to address age-related problems (such as block cracking) or distress caused by exposure to the elements (such as transverse cracking). Some examples of such treatments are thin overlays, wedge and leveling, mill and overlays, chip seals, fog seals, scrub seals, slurry seals, microsurfacing, and crack sealing. Activities such as grinding, grading unpaved sections, line striping, raised payment markers, and similar activities are also considered pavement preservation.

Bridges: Costs associated with activities that preserve a bridge and its approaches. Activities include: deck patching, sealing, painting, repairing and maintaining bearing assemblies and joints, clearing brush and debris accumulations at piers, deck overlays, scour repair, substructure repair, repairing approach slabs and guardrails, and repairing bridge railings. Work on culverts, pipes, and other small drainage structures underneath roads and streets are included in this category.

Right of Way: Costs associated with activities that occur in the area between pavement (including paved shoulders) and right-of-way boundaries. This would include, but not be limited to, preservation, replacement and repair of standard MUTCD signs, traffic signals, barriers, guardrails, sidewalks and ramps, unpaved shoulders (e.g. berming), vegetation control for infrastructure preservation purposes only, and inspection of roadside assets for the purpose of asset management planning. It would also include work performed on drainage assets such as ditches, pipes, catch basins, underdrains and their outlets, etc.

General Administration and Unallocated (these are not considered CRP)

Costs of an administrative nature and not allocated to any specific road or bridge project. These expenses, referred to as overhead, includes supervisory and support staff personal services, supplies and equipment, general office expenses (rent, printing, utilities, insurance, etc.), facility expenses (repairs, maintenance, insurance), and vehicle expenses. Other type of general expenses would include utilities for traffic signals and street lights, capital outlays (acquisition of land, buildings, and improvements other than buildings, including the acquisition of equipment) and annual pavement and bridge inspections. In the subcategory "Other Services and Charges", disbursements would include incidental expenses not associated with roads or bridges but performed by agency forces, such as mowing grass in a county or city park, or snow and ice removal at a government facility.

Maintenance and Repair (these are not considered CRP)

Disbursements associated with the routine maintenance and repair of paved and unpaved roads, streets, bridges and highways. Maintenance & Repair disbursements retain the asset above a certain condition level established by a unit and encompasses work that is performed in reaction to an event, season, or activities that are done for short-term operational need that do not have preservation value. Costs include materials, personnel, and equipment rental/operation expenses.

Within maintenance, costs can be defined more specifically to their associated categories. Of special interest is snow plowing and related costs (salt, sand, etc.) are “winter operations” and are considered a maintenance activity:

Winter Operations: Costs associated prior to, during, and following winter events, such as planning, material purchases, and management, equipment preparation and usage, and human resources. Also includes the use of external resources and services contracted in winter operations.

Pavement: Pavement maintenance includes activities such as graffiti removal, cleaning, pothole filling and patching, event cleanup, repairs due to vehicular accidents or storm damage to roadways.

Bridges: Bridge maintenance includes activities such as graffiti removal, deck cleaning, repairs due to vehicular accidents, or storm damage to bridges.

Right of Way Operations: Costs associated with routine activities that occur in the area between pavement (including paved shoulders) and right-of-way boundaries. This would include, but not be limited to, maintenance and repair of signs damaged from accidents, grass cutting, tree trimming, litter control (including dead animal removal), and inspection of resident complaints.

Nepotism and Contracting with a Unit

New Hire Reporting Requirements

NEPOTISM AND CONTRACTING WITH A UNIT

Starting in July 2012, statutes regarding nepotism and contracting with relatives went into effect. Some confusion still exists surrounding the differences between ICs 36-1-20.2 (Nepotism) and 36-1-21 (Contracting with a Unit). While they are somewhat similar in that they deal with relationships involving family members in certain situations, they both consist of different circumstances and requirements.

Nepotism

IC 36-1-20.2 on nepotism involves employing persons who are related to one another with one of those people being in the direct line of supervision of the other. IC 36-1-20.2-8 defines “relative” as a spouse; parent or stepparent; child or stepchild; brother, sister, halfbrother, half-sister, stepbrother or stepsister; niece or nephew; aunt or uncle; and daughter-inlaw or son-in-law. Adoptive children are considered the same as a natural child.

IC 36-1-20.2-4(a) states a person is in the “direct line of supervision” of an elected officer or employee

“if the elected officer or employee is in a position to affect the terms and conditions of the individual's employment, including making decisions about work assignments, compensation, grievances, advancement, or performance evaluation.”

The legislative body is required to adopt a policy on nepotism as per IC 36-1-20.2-9(a). The policy adopted can be more restrictive than the requirements set forth in IC 36-1-20.2. This adopted policy is to be uploaded in Gateway at the time the Certified Report of Names, Addresses, Duties and Compensation of Public Employees (Form 100-R) is electronically submitted.

Each elected officer of a city or town is to annually certify in writing that they have not violated IC 36-1-20.2 (see IC 36-1-20.2-16). Such certification shall be done not later than December 31st. This certification should not to be confused with the policy referred to in the preceding paragraph. The elected official’s certification is maintained locally and should not be uploaded into Gateway – only the nepotism policy should be uploaded in Gateway.

If the State Board of Accounts finds that a city or town has not implemented a nepotism policy, such information shall be forwarded to the Department of Local Government Finance, who may not approve a city or town’s budget or additional appropriations for the ensuing calendar year (ICs 36-1-20.2-17 and 36-1-20.2-18).

Contracting with a Unit

IC 36-1-21 permits entering into a contract with a person who is a relative of an elected official or a business that is wholly or partially owned by a relative of an elected official in certain situations. IC 36-1-21-5(a) states a city or town may

“enter into a contract or renew a contract for the procurement of goods and services or a contract for public works with: (1) an individual who is a relative of an elected official; or (2) a business entity that is wholly or partially owned by a relative of an elected official; only if the requirements of this section are satisfied and the elected official does not violate IC 35-44.1-1-4.” (emphasis added; IC 35-44.1-1-4 is the conflict of interest statute)

IC 36-1-21-2 defines an elected official as the executive or a member of the executive body of the unit, a member of the legislative body of the unit, and a member of the fiscal body of the unit. IC 36-1-21-3 defines relatives as a spouse; parent or stepparent; child or stepchild; brother, sister, half-brother, half-sister, stepbrother or stepsister; niece or nephew; aunt or uncle; and daughter-in-law or son-in-law. Adoptive children are considered the same as a natural child.

The legislative body is required to adopt a policy on contracting with a unit per IC 36-1- 21-4. The policy adopted can be more restrictive than the requirements set forth in Indiana 36- 1-21. The adopted policy is to be uploaded in Gateway at the time the Certified Report of Names, Addresses, Duties and Compensation of Public Employees (Form 100-R) is electronically submitted.

Each elected officer of a city or town is to annually certify in writing that they have complied with IC 36-1-21 (see IC 36-1-21-6). Such certification shall be done not later than December 31st. This certification is not to be confused with the policy referred to in the preceding paragraph. The elected official’s certification is maintained locally and should not be uploaded into Gateway.

We see a lot of cities and towns upload the incorrect documents in Gateway concerning contracting with a unit when completing their Certified Report of Names, Addresses, Duties and Compensation of Public Employees (Form 100-R). Some units have uploaded actual contracts with vendors, others have uploaded the annual certifications discussed in the preceding paragraph, and others have uploaded documents seemingly unrelated to contracts at all. For completing the 100-R, only the adopted policy (required by IC 36-1-21-4) should be uploaded in Gateway.

If the State Board of Accounts finds that a city or town has not implemented a contracting with a unit policy, such information shall be forwarded to the Department of Local Government Finance, who may not approve a city or town’s budget or additional appropriations for the ensuing calendar year (ICs 36-1-21-7 and 36-1-21-8).

NEW HIRE REPORTING REQUIREMENTS

Federal and State law requires employers to report newly hired and re-hired employees in Indiana to the Indiana New Hire Reporting Center. Please see www.in-newhire.com for more information.

Officials' Responsibility for Disbursing Public Funds

Optical Images of Checks

Ordinance Violations Bureau

Out-going Officials

Overdrawn Funds and Appropriations

Overpayment of Wages - Reimbursement by Employee

OFFICIALS’ RESPONSIBILITY FOR DISBURSING PUBLIC FUNDS

One of the most common inquiries received by the department concerns the obligation of a fiscal officer in the matter of drawing a warrant for claims approved.

The official surety bond requires faithful performance of duty. Every claim should be evaluated for compliance with state statute. If there is uncertainty on the correctness or legality of a claim, the bonded official should proceed with caution and, if needed, seek the advice of the city or town attorney. In those situations, documentation should be maintained. The following statutes, among others, provide guidance on the correctness and legality of claims:

Cities: IC 36-4-8-4 and IC 5-11-10

Towns: IC 36-5-4-2; IC 36-5-4-3; IC 36-5-4-4; IC 36-5-4-6; and IC 5-11-10

OPTICAL IMAGES OF CHECKS

The Indiana State Board of Accounts is of the audit position both sides of a check are part of the original record. Therefore, both sides of an "optical imaged check" should be available for public inspection and audit. Encoding, printing and bank certification should exist to ascertain that the back side of a check is part of a particular check, i.e. endorsements should belong to the front side of a check presented.

Indiana Code 5-15-5.1-10(a) states in part: “Each . . . local government shall: (1) Make and preserve records containing adequate and proper documentation of . . . essential transactions of the . . . local government to protect the legal and financial rights of the government. . . “

An optical image copy of a check would be treated as an original as long as the foregoing was followed.

Furthermore, Indiana Code 26-2-8-111 states in part: "(a) If a law requires that certain records be retained, that requirement is met by retaining an electronic record of the information in the record that: (1) accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and (2) remains accessible for later reference. . . (e) If a law requires retention of a check, that requirement is satisfied by retention of an electronic record of the information on the front and back of the check in accordance with subsection (a)."

ORDINANCE VIOLATIONS BUREAU

The legislative body of a municipal corporation may establish, by ordinance or code, an ordinance violations bureau. Upon the creation of a bureau, the legislative body shall provide for the appointment of a violations clerk (who may be the clerk or clerk-treasurer of the municipal corporation) to be the administrator of the bureau.

If the legislative body does not establish an ordinance violations bureau, the clerk or clerktreasurer of the municipal corporation is designated the violations clerk.

The violations clerk may accept written appearances, waiver of trial, admissions of violations, and payment of civil penalties of not more than two hundred fifty dollars ($250) in ordinance violation causes, subject to the schedule prescribed under IC 33-36-3.

Upon the appointment or designation of the violations clerk as provided by IC 33-36-2-1, the legislative body shall designate, by ordinance or code, a schedule of ordinance and code provisions of the municipal corporation that are subject to admission of violation before the violations clerk and the amount of civil penalty to be assessed a violator who elects to admit a violation. Civil penalties shall be paid to, receipted, and accounted for by the clerk under procedures provided for by the state board of accounts. Such payments should be receipted to the general fund. Payment of civil penalties may be made in person, by mail, or to an agent designated by the legislative body.

A person charged with an ordinance or code violation is entitled to a trial before a court as provided by law, unless the person waives the right to trial and enters an admission of the violation with the violations clerk. Upon such an admission, the clerk shall assess and receive from the violator the amount prescribed by the schedule of civil penalties established under IC 33-36-3-1.

If a person charged with a violation wants to exercise the right to trial, the person shall appear before the violations clerk and deny the violation or enter a written denial with the clerk.

In a county having a consolidated city, the schedule of ordnance violations designated by a municipal corporation must also be approved by the city-county legislative body.

If a person:

1. denies an ordinance or code violation;

2. fails to satisfy a civil penalty assessed by the violations clerk after having entered an admission of violation; or

3. fails to deny or admit the violation. the clerk shall report this fact to the official having the responsibility to prosecute ordinance violation cases for the municipal corporation.

Proceedings in court against the person shall then be initiated for the alleged ordinance violations.

All sums collected by the violations clerk as civil penalties for ordinance violations shall be accounted for and paid to the municipal corporation as provided by law.

An ordinance violation admitted does not constitute a judgment for the purposes of IC 33-37, and an ordinance violation costs fee may not be collected from the defendant under IC 33-37-4. In addition, an ordinance violation processed may not be considered for purposes of IC 33-37-7-6 when determining the percentage of ordinance violations prosecuted in certain courts. (IC 33-36-3-6)

IC 36-1-6-3 excludes moving vehicle traffic violations from being enforced under this procedure. State Examiner Directive 2015-1 also addresses the proper procedures for moving traffic violations.

OUTGOING OFFICIALS - YEAR END DUTIES

As some officials approach the end of their term in office, we thank you for your service to your communities and its citizens. Below are some items to consider prior to year end.

Outgoing Clerk-Treasurers and Controllers should completely post and balance their records before turning them over to their successors in office on January 1.

If there are any investments or undeposited cash in the office on December 31st the new ClerkTreasurer should sign a receipt therefore to be attested to by the outgoing officer. Both the outgoing ClerkTreasurer and the successor in office should each receive a copy. Any cash change fund should be returned to the fund from which it was advanced on or before December 31st.

It is also suggested that the outgoing officer prepare in triplicate an itemized list of equipment in the office on December 31st to be signed by his successor and attested to by the outgoing Clerk-Treasurer. Disposition of the copies should be the same as outlined in the preceding paragraph.

The outgoing Clerk-Treasurer should also refer to the new officer the reports that must be prepared in January and offer assistance in preparing the reports, and in reconciling the depository accounts at the close of the year. Among the reports to be prepared are Withholding Taxes (Federal and State), Social Security, Utility Receipts Tax, Sales Tax (if any), Annual Financial Report to be filed on the Gateway, annual and monthly uploads of various item to Gateway, Utility Reports to be filed with the Indiana Utility Regulatory Commission and Form 100-R, Certified Report of Names, Addresses, Duties and Compensation of Public Employees.

If it is necessary for the outgoing official to assist the incoming official after December 31, it is permissive for the outgoing official to be compensated assuming (a) a position and salary has been established in the salary ordinance; (b) an appropriation is available for the position; and (c) funds are available. Instead of becoming an employee, an outgoing official could contract with the city or town for transition services. Such a contract would (a) have to be in writing and state the rate of pay, duration of the contract, and detailed services provided; (b) be paid from an available appropriation; and (c) be paid from available monies.

OVERDRAWN FUNDS AND APPROPRIATIONS 

The overdraft of a fund or appropriation of a city or town is prohibited by law.  Expenditures are limited to the balance in the particular fund and, in the case of budgeted funds, to the balance of the appropriation therefore. Please see IC 6-1.1-18-4, IC 5-11-10, IC 36-4-8-2 (cities) and IC 36-5-4-2 (towns).

OVERPAYMENT OF WAGES – REIMBURSEMENT BY EMPLOYEE 

If an employer has overpaid an employee, the employer may deduct from the wages of the employee the amount of the overpayment.  A deduction by an employer for reimbursement of an overpayment of wages previously made to an employee is not a fine under IC 22-2-8-1 or an assignment of wages under section 2 of this chapter.  An employer must give an employee two (2) weeks notice before the employer may deduct, under this section, any overpayment of wages from the employee's wages.

(b)    An employer may not deduct from an employee's wages an amount in dispute under IC 22-2-9-3.

(c)    The amount of a wage deduction made by an employer under subsection (a) is limited to the following:

1.    Except as provided in subdivision (2), the maximum part of the aggregate disposable earnings of an employee for any work week that is subjected to an employer deduction for overpayment may not exceed the lesser of:

A.    twenty-five percent (25%) of the employee's disposable earnings for that week; or

B.    the amount by which the employee's disposable earnings for that week exceed thirty (30) times the federal minimum hourly wage prescribed by 29 U.S.C. 206(a)(1) in effect at the time the earnings are payable.

In the case of earnings for a pay period other than a week, the earnings must be computed upon a multiple of the federal minimum hourly wage equivalent to thirty (30) times the federal minimum hourly wage as prescribed in this section.

2. If a single gross wage overpayment is equal to ten (10) times the employee's gross wages earned due to an inadvertent misplacement of a decimal point, the entire overpayment may be deducted immediately. [IC 22 2-6-4]

Park and Recreation

Board Member Salaries, Conferences, Meetings

Daily Deposits

Nonreverting Operating Fund - Use of Program Balances

Salaries and Appropriation Transfers

Payments

Banks of Compensation Due Employees

Claims Prior to Board Allowance

Street Lighting from MVH Fund

Payroll Fund

Penalties on Utility Billings

Police and Fire Pension Plans - Records

Police Pension Fund - Official Bond Requirements

Public Work Projects

Financing Certain Projects and Eligible Efficiency Projects

Police Officers and Firefighters

Clothing and Equipment Allowance

Political and Personal Expenditures Prohibited

Primary and Election Expenses

Promotion of City and Town Business

Property Tax Advances

Public Purchases Contracts - Renewal

Public Records - Retention Schedules

Public Works Projects Costing Less than $150,000

Publication of Annual Report in Pamphlet Form - Second Class Cities

PARK AND RECREATION - BOARD MEMBER SALARIES, CONFERENCES, MEETINGS

Indiana Code 36-10-3-9 allows for salaries to be paid to board members and also provides that per diems could be paid to board members for attending meetings of the board in amounts appropriated and approved by the council.

In addition, if the board determines that members or employees should attend a state, regional, or national conference dealing with park and recreation problems, the board may authorize the payment of the actual expenses involved in attending the conference. However, the amount must be available as part of the board's appropriation.

Also, the unit (city or town) shall provide suitable quarters for holding meetings and conducting the work of the board.

DAILY DEPOSITS – PARK AND RECREATION DEPARTMENTS

IC 36-10-3-22 requires a park and recreation department to deposit monies it receives with the city or town fiscal officer at least once each month. However, it is our audit position that this provision would not relieve a park and recreation department from making daily deposits in a city or town depository selected under IC 5-13-6-1 (d) before turning the monies over to the city or town fiscal officer.

PARK NONREVERTING OPERATING FUND – USE OF PROGRAM BALANCES

Questions are received on the audit position of the State Board of Accounts regarding use of program activity balances within the special nonreverting operating fund. Specifically, can revenues generated from various programs within the special nonreverting operating fund be used to pay expenditures and obligations of other programs within the fund that have operated at a loss?

IC 36-10-3-22 states in part: "(a) Park and recreation facilities and programs shall be made available to the public free of charge as far as possible. However, if it is necessary in order to provide a particular activity, the board may charge a reasonable fee. (b) The unit's fiscal body may establish by ordinance, upon request of the board: (1) a special nonreverting operating fund for park purposes from which expenditures may be made as provided by ordinance … " (Our Emphasis)

After receiving a request from the Park and Recreation Board, the Common Council or the Town Council should set out in the ordinance the types of expenditures approved and any other conditions and procedures related to such expenditures.

It is our audit position that the special nonreverting operating fund provide a means of funding a "particular activity" with a reasonable fee. Each such activity is to be more or less self-supporting. The fund was never intended to be a revenue producing mechanism enabling the Park and Recreation Board to operate outside of review of the Common Council or the Town Council.

The State Board of Accounts has never objected when immaterial project or activity surpluses have been generated and used to help other park activities within the special nonreverting operating fund. Of course, this assumes the Common Council or the Town Council has granted such authority within the enabling ordinance. As a general rule, when a program activity generates a large balance or surplus, we have instructed units to transfer this to the park operating fund. Conversely, if a program activity is unable to generate enough revenue to fund the program, the Board would have to appropriate and make expenditures from the park operating fund to make up the shortfall.

If, however, the legislative body approves in the enabling ordinance the practice of using moneys from various events for funding other approved events, the State Board of Accounts would not take audit exception. The approval must be set out in such detail that there is no question as to intent and the manner in which such funding is allowed.

PARK AND RECREATION BOARDS – SALARIES AND APPROPRIATION TRANSFERS 

The following Official Opinion, No. 89-10, which was issued by the Office of the Attorney General,  on May 5, 1989, is still applicable to city and town park and recreation boards created under IC 36-10-3.

“It is, therefore, my Official Opinion that:

1.    The Board of Park and Recreation Department may create new positions during the year without the approval of the City Common Council, if the annual appropriation to the Park and Recreation Department for the year is sufficient to compensate persons employed in the new positions.

2.    Salaries may be increased without the approval of the City Common Council if the annual appropriation to the Park and Recreation Department for the year is sufficient to pay the increased salaries.  The Board of the Park and Recreation Department may pay overtime or compensatory time wages.  Vacation pay, sick leave, paid holidays and other similar benefits may be granted only by ordinance of the City Common Council.  (emphasis added)

3.    and (4)  Annual monies appropriated by the City Common Council may be transferred between series 100, 200, and 300 accounts of the Board of the Park and Recreation Department without the consent of the city council.  If the annual appropriation to the series 400 capital outlay account includes any appropriation to the special nonreverting capital fund for the purpose of making specific capital improvements, appropriations for payment of bond principal and interest, or funds in the cumulative building fund, the series 400 account may not be transferred and used for a purpose other than those provided by the statutes creating the funds and limiting the use of the funds with or without the consent of the city council.  A gift or grant of money deposited in a special non-reverting fund may be used only for the purposes specified by the donor or grantor.”

PAYMENTS TO BANKS OF COMPENSATION DUE EMPLOYEES

Pursuant to IC 5-10-9, an employee of a municipal corporation may make a written request that any compensation due the employee from the municipal corporation be deposited to his/her account in a bank or trust company.

The statute further provides the fiscal officer on receipt of request may:

1. draw a check in favor of the bank or trust company set forth in the request for the credit of the employee; or

2. in the event more than one employee of the same municipal corporation designates the same bank or trust company, draw a single check in favor of the bank or trust company for the total amount due the employees and transmit the check to the bank or trust company identifying each employee and the amount to be deposited in each employee's account.

PAYMENT OF CLAIMS PRIOR TO BOARD ALLOWANCE

IC 36-4-8 and IC 36-5-4 list various conditions which must be met prior to issuing warrants in cities and towns. IC 36-4-8-14 and IC 36-5-4-12 permit a city or town council to adopt an ordinance allowing the city or town fiscal officer to pay certain types of claims prior to board allowance.

The types of claims which could be paid before board allowance include:

1. property or services purchased from the U.S. Government,

2. license or permit fees,

3. insurance premiums,

4. utility payments or connect charges,

5. general grant programs where advance refunding is not prohibited and the contracting party posts sufficient security to cover the amount advanced,

6. grants of State funds,

7. maintenance or service agreements,

8. leases or rental agreements,

9. bond or coupon payments,

10. payroll,

11. state, federal, or county taxes,

12. expenses that must be paid because of emergency circumstances, and

13. expenses described in an ordinance.

Each payment of expenses must be supported by a fully itemized claim and certified by the fiscal officer and must be reviewed by the proper board at its next regular or special meeting.

PAYMENT FOR STREET LIGHTING FROM MOTOR VEHICLE HIGHWAY FUND

In Official Opinion No. 20 of 1950 the Attorney General held that if the installation of ornamental street lighting is a matter of traffic safety, it is within the permission of the statute. Whether it is a matter of traffic safety is a question of fact to be determined in each instance from all the surrounding facts and circumstances.

Based upon the foregoing, it is our audit position that if in the written opinion of a city or town attorney it is held that street lighting is a matter of traffic safety, we would not take exception to a city or town using motor vehicle highway funds for such a purpose.

PAYROLL FUND

In order to simplify the handling of withholdings from employee's salaries and wages, we recommend the use of a "Payroll Fund" where the number of employees will justify it.

The following procedures should be used where a "Payroll Fund" is established:

1. "Payroll Fund" is to be printed or typed on each payroll warrant.

2. Each office and department shall submit a payroll schedule and voucher on prescribed General Form No. 99 (or an approved form used in lieu of the prescribed one), covering the personal services of that office or department. This form shall include all compensation of the office or department, including salary and wages of the officer, deputies, clerks and other employees.

3. The individual payrolls will be summarized by the clerk-treasurer or city controller for each fund, using General Form No. 99, but indicating "SUMMARY" on the form. This will compile in total the payrolls for all officers and departments in each fund for each payroll period. Show the payroll claim number in the column headed "Class Title," and the name of the officer or department in the column headed "Name of Employee".

4. Total the payroll "SUMMARY" for each fund and issue a regular city or town warrant from such fund for the total gross pay and receipt this amount into the Payroll Fund.

5. Issue payroll warrants from the Payroll Fund based upon the information on the individual payroll schedules and vouchers submitted by each office and department. Each warrant must be completed in full, showing the gross pay and applicable payroll deductions. It is not necessary to indicate on the payroll warrant the appropriation account to which the warrant is chargeable.

6. Payroll deductions will be accumulated in the Payroll Fund, and then disbursed from this fund at the proper time to the various receiving agencies by payroll warrants. The Payroll Fund ledger sheet should be supported by subsidiary ledger sheets for each type of payroll deduction in order to see that no unidentified balance is allowed to accumulate in the payroll fund.

7. At the close of each month the payroll warrants for the month should be totaled and proved to the totals of the payroll summaries for the month. Enter the totals of the payroll warrants for the month on the payroll warrant register immediately after the last warrant issued, showing separately the totals of gross pay, each of the payroll deduction columns, and the net amount of the payroll warrants. These totals may then be posted to a "Control Account" in the payroll deduction record, Employee Earnings Record, General Form 99B, thereby furnishing a proof of posting to this record.

8. Posting to appropriation accounts is to be made from the individual payroll schedules and vouchers for the gross amount of the pay. Posting to the respective fund accounts is to be made from the regular city or town warrants for transfer of funds to the payroll fund. The totals of amounts posted to the appropriation accounts and the respective fund accounts must agree. Posting to the payroll fund is to be made from the payroll warrants.

9. The individual office or department payroll schedules and vouchers are to be filed in the regular manner. The payroll summaries are to be filed in good order in a suitable post binder.

PENALTIES ON UTILITY BILLINGS

Situations sometimes arise where utility customers are charged penalties on late fees. There has been some question as to whether or not late fees in subsequent billings for those customers should include previously assessed penalties.

IC 36-9-23-31, which requires penalties on late fees for sewage utilities, states, in part:

“If fees assessed against real property under this chapter or any statute repealed by IC 19-2-5-30 (repealed September 1, 1981) are not paid within the time fixed by the municipal legislative body, they are delinquent. A penalty of ten percent (10%) of the amount of fees attaches to the delinquent fees.”

We are not aware of provisions in the Indiana Code specifically addressing late fees for water, gas, and electric utilities organized under IC 8-1.5. The amount and manner of charging late fees on such utilities should be set out in the various bond ordinances, rate ordinances, or other ordinances, resolutions or policies adopted by the governing body.

It is our audit position that the 10% penalty specified in IC 36-9-23-31 should be assessed one time and one time only. Subsequent billings should not include additional assessments on this penalty. Similarly, unless specifically directed by statute, ordinance, or other legal directives, penalties on late fees for water, gas, and electric utilities organized under IC 8-1.5 should be charged only one time. Future late charges should not include additional charges added to the penalties on late fees.

The following is an example of a penalty on late fees calculation. Assume that a sewage utility account is billed $10 each month, but no payment has been received for the January or February billings:

January bill:
January usage                                      $ 10

February bill:
February usage                                    $ 10
plus 10% late fee on January billing         1
plus outstanding amount not yet paid     10
Total February bill                                 $ 21

March bill:
March usage                                        $ 10
plus 10% late fee on February billing       1
plus outstanding amount not yet paid    21
Total March bill                                    $ 32

Note: We do not recommend assessing an additional ten percent for the unpaid January bill on the March billing since the 10% penalty has been charged in February.

POLICE AND FIRE PENSION PLANS - RECORDS

The secretary of the pension fund should keep records for the board which would include the minute record and a statement of each member’s account on General Form No. 315, General Ledger Sheet. A separate sheet should be opened for each member and assessments deducted from the payroll each month should be posted as credits to this form. General Form No. 315 should also be used for posting payments of pensions and a separate sheet should be opened for each pensioner. Pensions should be posted as debits on General Form No. 315.

The secretary should prepare a schedule of pensions to be paid from the fund on General Form No. 355, Schedule of Pension and Disability Payments, and each schedule should be signed by the President and Secretary of the fund. Claims other than for pensions should be filed on the prescribed claim form, City Form No. 201 or Town Form No. 39.

All pension fund receipts and disbursements should be posted by the secretary on General Form No. 358, Ledger of Receipts, Disbursements and Balances. The balance at the close of each month as shown on this form should be reconciled with the Clerk-Treasurer or Controller.

The actual payroll deductions will be handled by the Clerk-Treasurer or Controller and the total of such deductions receipted monthly to the Pension Fund on the Clerk-Treasurer’s or Controller’s records as well as the secretary’s record.

1925 POLICE PENSION FUND – OFFICIAL BOND REQUIREMENTS

The pension secretary shall, in a manner prescribed by IC 5-4-1, execute a bond conditioned upon the faithful discharge of duties [IC 36-8-6-3(d)].  Indiana Cod 5-4-1 states that the fiscal body of the unit shall fix the amount of the bond in accordance with provisions in IC 5-4-1.

FINANCING CERTAIN PUBLIC WORKS PROJECTS AND ELIGIBLE EFFICIENCY PROJECTS

IC 36-9-41 allows cities and towns to borrow the money necessary to finance a public work project under two million dollars ($2,000,000) or an eligible efficiency project under three million dollars ($3,000,000) from a financial institution in Indiana by executing a negotiable note under IC 36-9-41-4.

A city or town shall provide notice of its determination to issue the note under IC 5-3-1.

Money borrowed is chargeable against the city or town’s constitutional debt limitation.

A city or town borrowing money under IC 36-9-41-3 shall execute and deliver to the financial institution the negotiable note of the city or town for the sum borrowed. The note must bear interest, with both principal and interest payable in equal or approximately equal installments each year over a period not exceeding ten (10) years.

The city or town shall appropriate an amount for and levy a tax each year sufficient to pay the obligation under the note according to its terms.

An obligation of a city or town under the note is a valid and binding obligation of the city or town notwithstanding any tax limitation, debt limitation, bonding limitation, borrowing limitation, or other statute to the contrary.

IC 36-9-41-6 through IC 36-9-41-8 set out the provisions for taxpayers to file a petition against the issuance of such note.

POLICE OFFICERS AND FIREFIGHTERS – CLOTHING AND EQUIPMENT ALLOWANCE

IC 36-8-4-4 states:

“(a) A city shall provide the active members of the police and fire departments with all uniforms, clothing, arms, and equipment necessary to perform their duties. Except as provided in section 4.5 of this chapter, after one (1) year of regular service in either department, a member may be required by the city to furnish and maintain all of the active member's uniforms, clothing, arms, and equipment upon payment to the member by the city of an annual cash allowance of at least two hundred dollars ($200). The city may credit the uniform allowance to each member against the active member's purchases during the calendar year and provide for the payment of any cash balance remaining at the end of the calendar year.

(b) All uniforms, clothing, arms, and equipment provided by the city under this section remain the property of the city. The city may sell the property when it becomes unfit for use, and all money received shall be paid into the general fund of the city. Any property lost or destroyed through the carelessness or neglect of an active member shall be charged against the active member and the value deducted from the active member's pay.”

In response to recurring inquiries, the following audit positions have been established.

1. The city shall provide active members of the police and fire department with clothing and equipment. After one year of regular service the city may require the department members to maintain their clothing and equipment by payment of a cash allowance.

2. The cash allowance is “at least two hundred dollars ($200)”; however, the common council has authority to establish, by ordinance, the amount of clothing allowance payable to each police officer and firefighter.

3. The cash payments shall be made only after service has been rendered.

4. Volunteer firefighters do not qualify for this allowance since IC 36-8-12-5 establishes statutory amounts authorized for clothing and auto allowance. See following article.

5. Town police officers do not qualify for this allowance. See following article.

POLITICAL AND PERSONAL EXPENDITURES PROHIBITED

Governmental funds and assets should not be used in a manner unrelated to the functions and purposes of the governmental unit. This prohibition includes expenditures for political purposes, contributions to political campaigns, directly or indirectly which are not authorized by statute. Public funds used for political or personal reasons shall be the personal obligation of the responsible official or employee.

PRIMARY AND ELECTION EXPENSES

ALL CITIES AND ALL TOWNS WITH A POPULATION OF 3,500 AND OVER

The expenses of city or town primaries and elections are paid by the county with each city or town conducting a primary or election being billed for its share of the expenses. Each city and town should include an item under "Other Services and Charges" (Account No. 439.07, Election Expense) in the budget for the election year for the total estimated amount to be paid to the county. The county auditor or clerk of the circuit court can supply information as to the amount to be included for primary and election expenses. IC 3-5-3-8 and IC 3-5-3-9 provide the procedure for the county to allocate primary and election costs to all cities and those towns with populations of 3,500 and over.

The City or Town Attorney and the State Election Board should be consulted for guidance on questions related to city or town elections.

TOWNS UNDER 3,500

The expenses of a town primary and election in a town with less 3,500 population are to be paid directly by the town. It is recommended that the total amount of such expenses be budgeted as one item under "Other Services and Charges" (Account No. 439.07, Election Expense) in the General Fund. [IC 3-10-7-16 and IC 3-10-7-17]

A county election board and a town may enter into a written agreement providing that the county election board will conduct a municipal primary or a municipal election, or both, in the town. A county election board that enters into such agreement shall conduct the municipal election in the same manner as it conducts a general election in a town that has a population of three thousand five hundred (3,500) or more. (IC 3-10-7-4)

The Town Attorney and the State Election Board should be consulted for guidance on any questions related to town elections.

PROMOTION OF CITY AND TOWN BUSINESS

IC 36-7-2-7 allows cities and towns to promote economic development and tourism. Such statute replaced a prior law which authorized cities and towns to budget and appropriate funds from the general fund to pay the expense of, or to reimburse city or town officials as the case may be, for expenses incurred in promoting the best interest of the city or town. Accordingly, a Home Rule ordinance needs to be adopted in accordance with IC 36-1-3 in order to enable a city or town to pay for such expenses. Additionally, an appropriation for such expenses must also be obtained.

In an effort to assist cities and towns that have not passed an enabling ordinance but who wish to establish the promotion of business ordinance, we are repeating wording contained in the old statute. Many municipalities have used similar wording in their enabling ordinance.

“City and town councils are authorized to budget and appropriate funds from the general fund of the city, or town, to pay the expense of or to reimburse city officials or town officials, as the case may be, for expenses incurred in promoting the best interest of the city or town. Such expenses may include, but not necessarily be limited to, rental of meeting places, meals, decorations, memorabilia, awards, expenses incurred in promoting industrial, commercial, and residential development, expenses incurred in developing relations with other units of government and any other expenses of a civic or governmental nature deemed by the mayor or the town council to be in the interest of the city or town.”

This is furnished only for your information. Each city and town should establish, by ordinance, the parameters for such appropriations and expenditures. Such ordinance should list the specific types of promotional expenses which can be paid from moneys appropriated for such purpose. Please note that excessive amounts expended for employee meals, awards, gifts and similar expenses could be considered an audit result and comment item in an audit.

PROPERTY TAX ADVANCES

Indiana Code 5-13-6-3(b) requires the county treasurer to advance property taxes to any municipal corporation prior to the semiannual distribution of taxes, where the funds are needed, upon receipt of a written request from the proper officer of the municipal corporation. The county treasurer shall, no later than thirty (30) days after receipt of the written request, advance such property taxes requested. Any such advances may not exceed 95% of the taxes collected at the time of the advance or 95% of the amount to be distributed at the semiannual distribution.

PUBLIC PURCHASES CONTRACTS – RENEWAL

A contract that contains a provision for escalation of the price of the contract may be renewed if the escalation is computed using:

(1) a commonly accepted index in the contract; or

(2) a formula set forth in the contract.

Subject to funds being appropriated and available under IC 5-22-17-5 and with the agreement of the contractor and the purchasing agency, a contract may be renewed any number times. However, the term of the new contract may not be longer than the term of the original contract. (IC 5-22-17-4)

When the fiscal body of the governmental body makes a determination that funds are not appropriated or otherwise available to support continuation of performance of a contract, the contract is considered canceled. (IC 5-22-17-5)

PUBLIC RECORDS – RETENTION SCHEDULES

The website address for the Indiana Archives and Records Administration (IARA) is www.in.gov/iara.

The IARA website contains approved retention schedules for city and town financial records. Also published on the website is the Guide to Preservation and Destruction of Local Public Records.

Any records not listed on the retention schedules may be destroyed only with permission of your county commission on public records and the Indiana Archives and Records Administration.

Please contact IARA for questions regarding record retention at www.in.gov/iara or (317) 232-3380.

PUBLIC WORKS PROJECTS COSTING LESS THAN $150,000

IC 36-1-12-4.9 states: (a) This section applies to a public work for the routine operation, routine repair, or routine maintenance of existing structures, buildings, or real property if the cost of the public work is estimated to be less than one hundred fifty thousand dollars ($150,000). (b) The board may award a contract for public work described in subsection (a) in the manner provided in IC 5-22

We will not take audit exception to expenditures for projects under $150,000 that maintain the existing condition of the asset or restore the asset to normal operating efficiency and which might qualify as routine operation, routine repair, or routine maintenance of existing structures, buildings, or real property under IC 36-1-12-4.9. Included in our audit position could be expenditures for the replacement and repair of elevators, flooring, ceiling, tile, bathroom fixtures, windows, sidewalks parking lots and roofs which would not be part of another public works project. Additionally, the costs associated with reconfiguring the interior of offices (additions/deletions of wiring for electrical outlets, lighting, data lines, and telephones, cubicle walls, etc.) and reconfiguring offices with movable walls which would not be part of another public works project, could be considered. Not included would be additions to the structure, reconfiguring offices with permanent walls, change of purpose of an area that involves substantial addition or removal of plumbing or gas lines (adding a kitchen area or bathroom), addition of elevator shafts, parking lots and other like changes to the interior or exterior that involve changes to the structural integrity of the building or improvements to real property, etc. or expenditures for which a determination has been made of the applicability of other provisions of the Public Works Law, IC 36-1-12-1 et seq. Our audit position is with the assumption a determination has been made by the governmental unit in a public meeting of the applicability of IC 36-1-12-4.9 to the proposed public works project.

PUBLICATION OF ANNUAL REPORT IN PAMPHLET FORM - SECOND CLASS CITIES

IC 36-4-10-5(b)(5) requires the city fiscal officer of a second class city to “submit under oath to the city legislative body a report of the accounts of the city published in pamphlet form and showing revenues, receipts, expenditures, and the sources of revenues.” Please note that this statute does not apply to Towns or Third Class Cities.

Rainy Day Fund

Ransomware

Rates and Charges - Municipal Utilities

Record of Hours Worked

Record Retention

Redevelopment Commission - Tax Levy

Reimbursement for Travel Expense for Spouse

Report of Misappropriation

Retainage on Public Contracts in Excess of $200,000

Revenue Bond Ordinances - Bank Accounts - Reports to Bondholders

Riverboat

Fund

Gambling - Admission Taxes

Gambling - Wagering Taxes

RAINY DAY FUND

Questions surrounding which funds can transfer monies to the Rainy Day Fund have been raised recently. The term “dedicated fund” has been used throughout the state and the officials have asked for a meaning of that term as it relates to Rainy Day transfers. Our audit position is as follows:

Dedicated fund is a generic term not defined in statute, but is generally construed to mean a fund set aside for a specific purpose. For purposes of transferring to the Rainy Day fund, we are limiting our position to those dedicated funds that result from statutory authority but do not include home rule funds or clearing accounts. Debt service funds are already specifically prohibited from transfer in the Rainy Day statute and so are not considered here either.

In order to determine whether or not monies in a fund may be transferred to the Rainy Day fund, an analysis would need to be made of the authority creating the fund in light of IC 36-1- 8-5.1. It would be up to the political subdivision to show SBOA how money transferred to the Rainy Day fund met the criteria for transfer. However, we can provide general guidance based on our position.

Tax levy and LOIT funds have different criteria than other statutorily created funds in regard to transfer to the Rainy Day fund. The key words to tax levy and LOIT funds are: whenever the purposes of a tax levy have been fulfilled and unencumbered balance remains in the fund and unless a statute provides that it be transferred otherwise. In general it will be up to the unit of government to define when the purposes have been fulfilled. There are certain funds that are raised by levy that have very specific language that the balance may not be transferred, such as the assessment fund. For those funds, we would take exception if there were a transfer to Rainy Day fund. Also, for some cumulative funds such as those found under IC 6-1.1-41-1, balances in these funds may only be transferred to the General fund per IC 6-1.1-41-15 and again we would take exception if they were transferred to the rainy day fund.

For other funds, the statute allows for transfer to Rainy Day fund if the funding source is specified in the ordinance or resolution and the transfer is not otherwise prohibited by law. It is our general position that if the statute provides definitive restrictive language on the use of the funds or that the balance is not to be transferred, whether Rainy Day fund is specifically included or not, that the monies are not to be transferred to Rainy Day fund. For example, for MVH funds IC 8-14-1-3(1) provides that for cities or towns, no part of such sum shall be used for any other purpose than for the purposes defined in this chapter. IC 8-14-1-4 provides similar restrictions for counties. For LRS funds, IC 8-14-2-5 defines the exclusive uses of the funds and IC 8-14-2-7 further restricts transfers of certain towns’ LRS to General fund after these monies have not been spent for 24 months. Transfers from MVH and LRS (or any other fund with similar statutory restrictions) to Rainy Day would be prohibited and we would take exception if monies were so transferred. Where there is not such restrictive language or prohibition of transfer, we will consider the unit attorney’s written opinion as to why the other fund would not fall under the category of prohibited and so be transferred.

RANSOMWARE

Ransomware is a type of malicious software designed to block access to a computer system until a sum of money is paid. The principle of ransomware is that the malware encrypts files on a system’s hard drive using an unbreakable key, and this is decrypted by the attacker once a ransom is paid.

There have been increased instances of ransomware recently, both locally and nationally. Beware of unexpected or suspicious emails, especially those containing a link or requesting a reply. Most ransomware is delivered via email and the typical overall themes are shipping notices from delivery companies. Also, many attacks are delivered by mass random emails because the intention is to infect as many as possible to maximize the chances of getting a result.

Consider your city’s or town’s policies related to the protection of computer information. The most common advice to recover from an attack by ransomware relies largely on whether a good backup policy is employed. Backup expectations are discussed in the Accounting and Uniform Compliance Guidelines for Cities and Towns. Governmental entities also should keep their anti-virus software up-to-date and apply security patches in a timely manner.

If you become a victim of ransomware or any cybersecurity incidents, effective July 1, 2021, IC 4- 13.1-2-9 will require you to report cybersecurity incidents to the Indiana Office of Technology (IOT) within 2 business days after discovery. The IOT will be developing a format by which such notifications will be made. We would also recommend contacting local law enforcement agencies, your software vendor, and the State Board of Accounts.

RATES AND CHARGES – MUNICIPAL UTILITIES

IC 8-1.5-3-8 (water, gas, and electric utilities) and IC 36-9-23-25 (wastewater utilities) require utility rates and charges to produce sufficient revenue to pay all of the expenses incident to the operation of the utility, including maintenance, operating charges, repairs, depreciation, and interest changes on bonds or other obligations. Such rates should also provide money to be used as working capital and provide adequate money for making extensions and replacements. IC 8-1.5-3-8(d) states that rates and charges too low to meet these requirements are unlawful.

Each city and town that owns and operates municipal utilities should review the utilities’ rates and charges to ensure sufficient revenues are generated to satisfy the requirements of the laws. General Fund moneys or other similar city and town funds should not be used for the operation, maintenance, and other expenses of a municipally owned utility.

RECORD OF HOURS WORKED

For officers and employees of cities and towns who are employed by more than one (1) public agency or in more than one (1) position by the same public agency, detailed time records are to be maintained for the hours worked for each public agency or each position at the same public agency. (IC 5-11-9-4)

An employee who works for more than one (1) governmental unit should not be paid by more than one (1) governmental unit for the same period of time worked. Such employee should use his/her accumulated leave time from one (1) governmental unit while serving the other governmental unit when there is an overlap in a work schedule. For example, a city police officer, who is also a member of a school board, attends a school board meeting during his/her normal police work shift. The police officer would be expected to use his/her leave time accumulated at the city while attending such meeting.

In cities and towns where time cards are not used, this requirement can be met by preparing an endorsement on the payroll claim form showing the general work schedule and listing the specific affected employees who worked hours different from the general work schedule. Each elected office or head of each department would be responsible for preparing such endorsement on the payroll claim for their office or department.

Another alternative is to add a statement on each affected Employee’s Service Record, General Form 99A and/or Employee’s Earning’s Record, General Form 99B indicating the specific hours to be worked daily by that employee or official. (Example: 8 a.m. to 4 p.m.) In cities and towns where time cards are used, each elected officer or head of each department should be approving the time cards of each of the employees that they are responsible for.

RECORD RETENTION

Indiana Code 5-15-6-3 states:

“No financial records or records relating to financial records shall be destroyed until the earlier of the following actions:

(1) The audit of the records by the state board of accounts has been completed, report filed, and any exceptions set out in the report satisfied.

(2) The financial record or records have been copied or reproduced in accordance with a retention schedule or with the written consent of the administration.”

Indiana Code 26-2-8-111 states in part:

“(a) If a law requires that certain records be retained, that requirement is met by retaining an
electronic record of the information in the record that:

(1) Accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and

(2) Remains accessible for later reference…

(e) If a law requires retention of a check, that requirement is satisfied by retention of an electronic record of the information on the front and back of the check in accordance with subsection (a).”

More information on record retention is available on the Indiana Archives and Records Administration website at www.in.gov/iara, including retention schedules and electronic records management.

REDEVELOPMENT COMMISSION – TAX LEVY

Indiana Code 36-7-14-28 provides for the establishment of a “Redevelopment District General Fund” and “Redevelopment District Capital Fund.” The statutes contemplate separate budgets for these two funds for which the total combined rate for both funds could not exceed ($0.0333) per $100.00 of assessed valuation. The budgets should be prepared on the same forms and in the same manner as the budget estimates for other executive departments of the city or town and submitted to the city or town council, tax adjustment board and Department of Local Government Finance.

REIMBURSEMENT OF TRAVEL EXPENSE FOR SPOUSE

State statutes authorize reimbursement of business travel expenses when a municipal official or employee is in travel status on behalf of the municipality. The authorization includes mileage reimbursement for use of a personal automobile when used for municipal purposes.

There are only a few instances wherein State statutes provide for travel expense reimbursements by a government unit for individuals other than officials or employees of the governmental unit. Almost all such statutes are related to reimbursing travel costs for interviewing of a prospective employee of a governmental unit. We know of no such permissive statues for a municipality.

Under Home Rule, there could be instances wherein spouses' travel expenses have been reimbursed from a "promotion of business" appropriation. This would be proper only if the enabling Home Rule ordinance makes such provision.

In the absence of statutory authority or a "Home Rule" authorizing ordinance, an audit exception would be taken when expenses for spouses' travel costs are paid from public funds. (Of course this assumes the spouse is not also an official or employee of the governmental unit).

REPORT OF MISAPPROPRIATION 

Indiana Code 5-11-1-27(l) requires a public officer who has actual knowledge or reasonable cause to believe that there has been a misappropriation of public funds or assets to immediately send a written notice to the state board of accounts and the prosecuting attorney.

Indiana Code 5-11-1-27(l) states:

(l)    A public officer who has actual knowledge of or reasonable cause to believe that there has been a misappropriation of public funds or assets of the public office, including:

(1)    information obtained as a result of a police report;

(2)    an internal audit finding; or

(3)    another source indicating that a misappropriation has occurred;

shall immediately send written notice of the misappropriation to the state board of accounts and the prosecuting attorney serving in the area governed by the political subdivision.

The State Examiner Directive 2015-6 also addresses this statute.

The policy must also consider Ind. Code § 5-11-1-27(l), which requires public officials who have actual knowledge of or reasonable cause to believe that there has been a misappropriation of public funds to immediately send written notice of the misappropriation to the State Board of Accounts and the prosecuting attorney. There is no materiality threshold applicable to Ind. Code § 5-11-1-27(l). Thus, whenever a political subdivision has actual knowledge or is reasonably certain that a misappropriation of public funds has occurred (regardless of the dollar amount), the political subdivision must send written notice of the misappropriation to the State Board of Accounts and the local prosecuting attorney. Misappropriation occurs when an employee or in-house contractor of the political subdivision wrongly takes or embezzles public funds. When there is a known misappropriation or embezzlement of public funds by an internal actor, materiality is irrelevant. Indiana law requires the political subdivision to report the activity to the State Board of Accounts and the local prosecutor. Ind. Code § 5-11-1-27(l).

We are finding that the requirements of this statute are not being followed consistently.  If a public official fails to report the misappropriation of funds or assets in a timely manner, this will result in a finding in the audit report.  This may also result in additional audit costs.    Also, be aware that reporting the misappropriation to a law enforcement agency does not fulfill the requirements of the statute. Even when you have notified law enforcement officials, you must still notify the State Board of Accounts and the prosecutor. If there are any concerns on the response the State Board of Accounts will take after a report is received or how they will liaison with the law enforcement investigation, you can contact our Director of Special Investigations at (317) 232-2513.

RETAINAGE ON PUBLIC CONTRACTS IN EXCESS OF $200,000

Pursuant to IC 36-1-12-14, it is required that when public works contracts are awarded by a city or town for certain public works or improvements and such contracts exceed $200,000, such contracts shall include provisions for the retainage of portions of payments by the board to contractors, by contractors to subcontractors, and for the payment of subcontractors. This statute applies to the construction, alteration, or repair of all buildings or other improvements the cost of which is paid from public funds or from special assessments imposed and levied on real estate, land and lots benefited thereby but shall not include highways, roads, streets, alleys, bridges and appurtenant structures situated on streets, alleys and dedicated highway right-of-way.

At the discretion of the contractor, the retainage shall be held by the board or shall be placed in an escrow account with a bank, savings and loan institution, or the state as escrow agent. The escrow agent shall select by mutual agreement between the board and contractor or contractor and subcontractor under a written agreement among the bank or savings and loan institution and

1. the board and the contractor; or

2. the subcontractor and the contractor.

Where an escrow agent is selected, it is required that at the time any retainage is withheld the amount of the retainage shall be placed in an escrow account with the escrow agent, to be promptly invested by the escrow agent in its discretion. The escrowed principal and the income from the investments shall be held by the escrow agent until receipt of a notice releasing the funds in accordance with the terms of the law and the agreement.

When a bank or savings and loan institution is selected as escrow agent, the amount of the retainage withheld shall be paid by warrant to the escrow agent and, when paid, shall be treated in the same manner as any other payment on the contract, with the escrow agent being required to deposit, invest and otherwise account for the escrowed principal and interest, in accordance with the law and the terms of the agreement. The escrow account will not be carried on the records of the city or town.

The law provides that the escrow agent shall be compensated for its service as the parties may agree in an amount comparable with fees being charged for the handling of escrow accounts of similar size and duration. The fee shall be paid from the escrowed income of the escrowed account.

To determine the amount of retainage to be withheld the board shall:

1. Withhold no more than ten percent (10%) nor less than six percent (6%) of the dollar value of all work satisfactorily completed until the public work is fifty percent (50%) completed and nothing further after that; or

2. Withhold no more than five percent (5%) nor less than three percent (3%) of the dollar value of all work satisfactorily completed until the public work is substantially completed.

If upon substantial completion of the public work minor items remain uncompleted within sixty-one (61) days after the date of substantial completion, an amount equal to two hundred percent (200%) of the value of each item as determined by the architect-engineer shall be withheld until the item is completed.

There is also a requirement that the contractor furnish a performance bond equal to the contract price.

If the contractor chooses to have the retainage held by the board, then the board is not required to pay interest on the amounts of retainage it holds. However, such amounts held by the board will be carried on the records of the city or town as an agency fund.

REVENUE BOND ORDINANCES – UTILITY BANK ACCOUNTS – REPORTS TO BONDHOLDERS

When drafting a revenue bond ordinance for a city or town utility bond issue, we recommend such ordinance not require the establishment of separate bank accounts for each utility fund. The interests of bondholders are adequately protected and the handling of the funds would be less complicated if the revenue bond ordinance would provide that funds of each municipal utility be deposited in only one depository account separate from all other city or town funds.

Some revenue bond ordinances provide that the Construction Fund is to be deposited in a separate depository account and all other funds of the utility are to be deposited in another depository account separate from all other funds of the city or town. We would not object to such an arrangement since the Construction Fund is usually cleared out within a few months.

One of the covenants often found in contracts between a city or town and the holders of the bonds requires that the officials will prepare and furnish to the original purchasers of the bonds and to any subsequent holder of the bonds, upon written request, complete financial statements of the utility for the preceding fiscal year. These statements must be certified by the clerk-treasurer or controller. Copies of such statements and reports should be kept on file in the office of the clerk-treasurer or controller.

RIVERBOAT FUND

Each unit that receives tax revenue under Indiana Code 4-33-12-6, Indiana Code 4-33-13, or an agreement to share a city’s or county’s part of the tax revenue or a development agreement under Indiana Code 36-1-8-9.5, may establish a riverboat fund. Money in the fund may be used for any legal or corporate purpose of the unit.

The riverboat fund established shall be administered by the unit’s treasurer, and the expenses of administering the fund shall be paid from money in the fund. Money in the fund not currently needed to meet the obligations of the fund may be invested in the same manner as other public funds may be invested. Interest that accrues from these investments shall be deposited in the fund. Money in the fund at the end of a particular fiscal year does not revert to the unit’s general fund. [Indiana Code 36-1-8-9]

If a riverboat fund is not established, admissions taxes and wagering taxes would be deposited in the unit’s general fund and may not be used to reduce the unit’s maximum or actual tax levy. [Indiana Code 4-33-12-9 and Indiana Code 4-33-13-6]

RIVERBOAT GAMBLING – ADMISSION TAXES

Admission tax money paid to a unit of local government:

1. must be paid to the fiscal officer of the unit and deposited in the unit's general fund or riverboat fund established under IC 36-1-8-9 or both;

2. may not be used to reduce the unit's maximum or actual levy under IC 6-1.1-18.5 but may be used at the discretion of the unit to reduce the property tax levy of the unit for a particular year;

3. may be used for any legal or corporate purpose of the unit, including the pledge of money to bonds, leases, or other obligations under IC 5-1-14-4, and

4. is considered miscellaneous revenue. (IC 4-33-12-9)

RIVERBOAT GAMBLING – WAGERING TAXES

Wagering tax money paid to a unit of local government:

1. Must be paid to the fiscal officer of the unit and deposited in the unit's general fund or riverboat fund established under IC 36-1-8-9, or both;

2. May not be used to reduce the unit's maximum or actual levy under IC 6-1.1-18.5; and

3. May be used for any legal or corporate purpose of the unit, including the pledge of money to bonds, leases, or other obligations under IC 5-1-14-4.

IC 4-33-13 does not prohibit the city or county designated as the home dock of the riverboat from entering into agreements with other units of local government in Indiana or in other states to share the city's or county's part of the tax revenue received. (IC 4-33-13-6)

Seatbelt Violations

Special Death Benefit Fund - Public Safety Officers

Special Fuel Taxes

Spreadsheet Software Utilitzation to Generate Exact Replicas of Prescribed Forms

State Distributions

State Matching Grants

State Sales Taxes

State-Called Meetings - Travel Expenses

Statement of Engagement Cost

SEATBELT VIOLATIONS

For each seatbelt violation under IC 9-19-10-2 or IC 9-19-11-2, a person commits a Class D Infraction. IC 34-28-5-4 allows a court to enter a judgment of up to twenty-five dollars ($25) for each Class D Infraction. All seatbelt violation cases would be considered moving traffic violations under IC 9-30-3-14 and would be required to be heard in a circuit, superior, county, city or town court or traffic violations bureau designated by these courts. Furthermore, IC 34-28-5-5(c) states that all funds collected as judgments for violations of statutes defining infractions shall be deposited in the state general fund.

IC 36-1-3-8 states that a unit of government does not have the power to prescribe a penalty by local ordinance for conduct constituting an infraction.

SPECIAL DEATH BENEFIT FUND – PUBLIC SAFETY OFFICERS

A Special Death Benefit Fund is maintained by the State for the purpose of paying a lump sum death benefit of one hundred fifty thousand dollars ($150,000) to the surviving spouse, or, if there is no surviving spouse, to the surviving children of a public safety officer who dies in the line of duty.

The term “Public Safety Officer” is defined in IC 5-10-10-4 and includes a city or town police reserve officer, town marshal, deputy town marshal, a probation officer, certain emergency medical service providers, an eligible chaplain of a police or fire department. Please see IC 5-10- 10-4 for a complete listing of positions covered.

The Special Death Benefit Fund consists of special death benefit fees collected by county, city, and town courts and other sources listed in IC 5-10-9.8-2. (IC 5-10-10)

SPECIAL FUEL TAXES

Please note the Indiana Department of Revenue's latest guidelines are available at www.in.gov/dor. The guidelines concern the taxation, licensing, and reporting on special fuels.

Inquiries may be directed to the Department of Revenue, Special Tax Division, at (317) 615-2630 or at www.in.gov/dor.

Questions pertaining to Federal requirements should be directed to the Internal Revenue Service at 1 (800) 829-1040 or 1 (866) 699-4096 or www.irs.gov.

Please contact these agencies for any applicable questions if your city or town uses special fuels.

SPREADSHEET SOFTWARE UTILIZATION TO GERNERATE EXACT REPLICAS OF PRESCRIBED FORMS

The Indiana State Board of Accounts prescribes the forms to be utilized in accounting systems, but does not specify the source from which the prescribed forms must be obtained. With the current capabilities of spreadsheet software, the use of spreadsheet software may, in some instances, be an acceptable method of generating exact replicas of prescribed forms.

Spreadsheets may not be utilized to replace functionality that should be an integral function of a computerized accounting system or replace a controlled document for the entry of accounting information. Examples of this type of form include forms that are required to be either prenumbered by an outside printing supplier or numbered by the accounting system with sufficient controls to prevent unauthorized generation of the form or duplication of control numbers on the forms. These forms include receipts, checks, purchase orders and material receiving documents. In addition, spreadsheets should not be utilized to generate control documents such as ledgers, receipt registers, check registers, outstanding check lists and similar reports.

Under no circumstances is it acceptable to implement an electronic interface from spreadsheet software directly to the information files of an accounting system without being processed through the same edit and control features as are utilized to ensure the accuracy of information entered manually into the accounting system.

Exact replicas of prescribed forms generated by spreadsheet software may be utilized for forms incidental to the computerized accounting system. Examples of these forms include travel vouchers, attendance records, and capital asset records.

If you have any questions on the utilization of spreadsheet software to replicate a specific prescribed form, please contact our Information Technology Services department at (317) 232- 2513.

STATE DISTRIBUTIONS

The following is a listing of the state distributions which most cities and towns receive along with the applicable state fund and account number, account name, frequency of distribution, and city and town fund to which the distribution should be receipted:

Any questions should be directed to localgovernment@auditor.in.gov.

STATE MATCHING GRANTS

If a political subdivision other than a school corporation receives state grant money requiring local matching money, the political subdivision shall create a special fund and deposit the grant money and matching money into the special fund. The money in the fund may be used only for the purposes of the grant.

If a political subdivision completes the project for which the state grant money was provided and money remains in the fund:

(1) the political subdivision shall transfer the state's share of the remaining money to the treasurer of state for deposit in the fund from which the grant was made; and

(2) the political subdivision's pro rata share of the remaining money reverts to the political subdivision's general fund. [Indiana Code 36-1-8-12]

STATE SALES TAXES

Governmental units are eligible for an exemption from the state sales tax on purchases. To obtain the exemption, a Sales Tax Exemption Certificate must be obtained from the Department of Revenue. Application should be made to the Sales Tax Division of the Department of Revenue. This certificate must be presented at the time a purchase is made to avoid paying sales tax. If sales tax is paid erroneously, a refund application may be obtained from the Sales Tax Division.

Lodging for individuals in hotels and motels is usually not exempt from state sales tax. Therefore, reimbursements for lodging in approved travel status may include state sales tax. However, it should be kept in mind that claims for all such reimbursements must be supported by a fully itemized receipt showing date(s) of lodging, the name(s) of the person(s) occupying the room and the amount paid.

STATE CALLED MEETINGS – TRAVEL EXPENSES

IC 5-11-14-1 allows for city and town officials who attend State-called meetings to be reimbursed for travel expenses from unappropriated funds and provides that a claim for reimbursement of travel expenses incurred while attending a State-called meeting may not be denied by the body responsible for the approval of the claim if the claim complies with IC 5-11-10-1.6 and IC 5-11-14-1.

STATEMENT OF ENGAGEMENT COST

For City and Town Engagements other than Utility Departments

At the end of an audit engagement the State Board of Accounts sends a notice of Statement of Engagement Cost. This statement details a summary of the engagement including the number of days spent on the audit, the daily/hourly rate, and any report processing fees. We would like to point out that this statement is not an invoice that is to be paid. An invoice for payment of these audit costs will be sent to your County for payment in accordance with IC 5-11-4. You should not send any payments for the engagement costs because this amount will be taken out of the school’s next distribution from the County. Please keep this statement as documentation.

When your next distribution does arrive, the amount will be reduced by the engagement cost noted in this Statement. We have decided to not take exception to schools using any of the property tax funds to cover State Board of Accounts audit costs. We are also not taking exception to the General fund reimbursing the property tax fund in which it was withheld by the County.

For Utility Departments

At the end of an audit engagement the State Board of Accounts sends a notice of Statement of Engagement Cost, along with an invoice for payment. These will be two separate documents. Utility Departments are responsible to pay for their audit costs directly. The County will not pay this portion of the audit costs. Once you receive the Statement of Engagement Costs, along with the invoice for payment, please remit payment within 30 days.

Temporary Transfers to Depleted Funds

Timely Filing of Required Reports

Town Marshals

Clothing and Equipment Allowances

Town Official's Duties

Transfer of Surplus Property to a Volunteer Fire Company

Transfers of Town Funds

Travel Expense

Parking and Toll Fees

Tuition Reimbursement

TEMPORARY TRANSFERS TO DEPLETED FUNDS

IC 36-1-8-4(a) states:

“The fiscal body of a political subdivision may, by ordinance or resolution, permit the transfer of a prescribed amount for a prescribed period, to a depleted fund in need of money for cash flow purposes from another fund of the political subdivision if all these conditions are met:

(1) It must be necessary to borrow money to enhance the depleted fund that is in need of money for cash flow purposes.

(2) There must be sufficient money on deposit to the credit of the other fund that can be temporarily transferred.

(3) Except as provided in subsection (b), the prescribed period must end during the budget year of the year in which the transfer occurs.

(4) The amount transferred must be returned to the other fund at the end of the prescribed period.

(5) Only revenues derived from the levying and collection of property taxes or special taxes or from operation of the political subdivision may be included in the amount transferred.”

IC 36-1-8-4(b) states:

“If the fiscal body of a political subdivision determines that an emergency exists that requires
an extension of the prescribed period of a transfer under this section, the prescribed period
may be extended for not more than six (6) months beyond the budget year of the year in
which the transfer occurs if the fiscal body does the following:

(1) Passes an ordinance or a resolution that contains the following:

(A) A statement that the fiscal body has determined that an emergency exists.

(B) A brief description of the grounds for the emergency.

(C) The date the loan will be repaid that is not more than six (6) months beyond the budget year in which the transfer occurs.

(2) Immediately forwards the ordinance or resolution to the State Board of Accounts and Department of Local Government Finance.”

Funds advanced shall be derived from taxes on property, special taxes, or any other revenue received from any operation of the municipal corporation.

Such temporary transfers should be affected by issuing a warrant and receipt for the amount of the transfer. The warrant should be endorsed and deposited in the depository account designated for the depleted fund. No appropriation is required either for the transfer or the repayment. Also, no interest should be charged on any such temporary transfer.

TIMELY FILING OF REQUIRED REPORTS

The Certified Report of Names, Addresses, Duties and Compensation of Public Employees (100R) and Annual Financial Report (AFR)

Pursuant to IC 5-11-13-1, all governmental units in the state must file the certified personnel report (Form 100R) in January of each year with the State Board of Accounts. Also, pursuant to IC 5-11-1-4, all local governmental units in the state must file an Annual Financial Report (AFR) not later than 60 days after the close of each fiscal year. The Indiana Gateway for Government Units (Gateway) system was created to collect both of these reports.

Due to the importance of these reports, the State Examiner has established the following procedures for reports not filed timely:

If either the 100R or the AFR are not filed by the statutory due date, the State Board of Accounts will subpoena the fiscal officer to appear in our Indianapolis office with the information necessary to complete the 100R or AFR, as applicable. This subpoena will be served either by certified mail or through personal service by a representative of the Office of the Attorney General (OAG).

If the fiscal officer does not appear or does not submit the 100R or AFR in response to the subpoena, the State Examiner will send a notification to the OAG requesting the OAG to compel the fiscal officer to appear in court to answer as to his or her failure to file the report. The State Examiner may also send notification of the officer’s failure to comply with the law to the local prosecuting attorney.

Indiana Code 5-11-1-10 addresses the penalty for not filing a required report and not following the directions of the State Examiner:

A public officer who:

1. fails to make, verify, and file with the state examiner any report required by this chapter;

2. fails to follow the directions of the state examiner in keeping the accounts of the officer's office;

3. refuses the state examiner, deputy examiner, field examiner, or private examiner access to the books, accounts, papers, documents, cash drawer, or cash of the officer's office; or

4. interferes with an examiner in the discharge of the examiner's official duties; commits a Class B infraction and forfeits office.

If you need submission rights or have any questions regarding the use of Gateway, please contact our help desk at gateway@sboa.in.gov. Also, please feel free to contact our Directors of Audit Services if you are having difficulty completing your 100R or AFR. Contact information is available on our website at www.in.gov/sboa.

TOWN MARSHALS – CLOTHING AND EQUIPMENT ALLOWANCES

We find no specific statutory reference authorizing a clothing allowance for a town marshal or his/her deputies. However, it appears if the proper action was taken under provisions of the Home Rule statute, such allowances could be provided.

Under Home Rule, IC 36-1-3, a town could provide necessary items of uniforms, clothing, arms, and necessary equipment for the performance of duties for the town marshal and his/her deputies. This can only be made after an appropriation is provided and all such items provided remain the permanent property of the town.

TOWN OFFICIAL’S DUTIES

A number of inquiries have been made regarding the statutory powers of the Town Council and the Town Clerk Treasurer. The following is a listing of some of the applicable statues. The list does not include IC 36-1-3, the Home Rule provisions.

IC 36-5-2-8 Town Clerk-Treasurer as clerk; ex-officio member for casting tie breaking vote

IC 36-5-2-9 Powers of legislative body

IC 36-5-2-10.2 Recording of adopted ordinance; presumptive evidence

IC 36-5-2-11 and IC 36-5-2-12  Bonds, issuance; purpose; payments; procedures; loans; requirements

IC 36-5-3-2 Compensation for officers and employees

IC 36-5-3-3 Formulation of budget estimate

IC 36-5-3-4 Report of budget estimates; ordinances fixing tax rate and appropriations

IC 36-5-4 Miscellaneous town fiscal and administrative provisions

IC 36-5-6 Town Clerk-Treasurer

IC 8-1.5-3 Municipally-owned utilities

TRANSFER OF SURPLUS PROPERTY TO A VOLUNTEER FIRE COMPANY

A governmental body may transfer title of surplus property to a volunteer fire company for the volunteer fire company’s use in providing fire protection or emergency services. A volunteer fire company located in the same county as the governmental body offering the surplus property for transfer has the right of first refusal for all surplus property offered. Surplus property that is refused by the volunteer fire companies located in the same county as the governmental body may be transferred to any volunteer fire company in Indiana.

A governmental body may transfer title of surplus property to a volunteer fire company by:

(1) Sale

(2) gift; or

(3) another arrangement acceptable to the governmental body and the volunteer fire company. (IC 5-22-22-12)

IC 5-22-22-12(a) defines surplus property to include fire trucks, emergency service vehicles, and firefighting or emergency services equipment.

TRANSFERS OF TOWN FUNDS

Town with a Population of 500 or Less

Notwithstanding the provisions of any other statute, a town may transfer money from any town fund to another town fund after the passage of an ordinance or a resolution by the town legislative body specifying the:

1. amount of the transfer;

2. funds involved;

3. date of the transfer; and

4. general purpose of the transfer. [IC 36-5-4-13(a)]

Town with a Population of More Than 500 But Less Than 2,000

Notwithstanding IC 8-14-1 and IC 8-14-2, a town may transfer money distributed to the town from:

1. the motor vehicle highway account under IC 8-14-1;

2. the local road and street account under IC 8-14-2 or

3. the:

A. motor vehicle highway account under IC 8-14-1; and

B. local road and street account under IC 8-14-2; to any other town fund after the passage of an ordinance or a resolution by the town legislative body that specifies the amount of the transfer, the funds involved, the date of the transfer, and the general purpose of the transfer. However, the total amount of all money transferred by a town may not exceed forty thousand dollars ($40,000). [IC 36-5-4-13(b)]

IC 36-5-4-13(c) contains specific exceptions for municipalities in a county with a population of 15,000 to 15,500 and for certain towns in a county with a population of 37,125 to 37,500.

TRAVEL EXPENSE

The following sets forth the audit position of the State Board of Accounts with regard to reimbursements made by local governmental units to their officers and employees for travel and meal expenses.

A local unit may reimburse such persons for actual miles traveled in their own motor vehicles on official business of the local unit at a reasonable rate per mile as fixed by an ordinance or resolution of the unit’s legislative body. The mileage rate should be fixed by the board or commission having authority to approve claims for travel expenses. No particular mileage rate has been set by the State of Indiana for local units of government and, consequently, the mileage rate lies within the discretion of legislative body, board or commission, unless otherwise provided by statute. The body setting the mileage rate should also determine whether parking fees and toll charges are included in the rate or, on the other hand, whether such expenses are to be reimbursed separately based on the submission of receipts.

Reimbursed mileage should not include travel to and from the officer’s or employee’s home and regular place of employment. If more than one person rides in the same vehicle, only one mileage reimbursement is allowable. General Form 101 (or an approved substitute) should be used for claiming mileage. The odometer reading columns on this form are to be used only when the distance between points cannot be determined by fixed mileage or official highway maps.

When traveling outside the local unit’s boundaries on official business, officers and employees may also be reimbursed for meals, lodging, and incidental expenses as defined in the travel policy. The claim for reimbursement should be supported by itemized receipts from hotels, restaurants, and taxi cabs used by the officer or employee while traveling on official business.

It is permissible for the legislative body of the local unit or the board or commission having the authority to approve claims to adopt an ordinance or resolution establishing a reasonable per diem rate intended to cover travel expenses other than hotel and mileage costs and the officer or employee may be reimbursed on the basis of such a per diem rate in lieu of submitting receipts. If a fixed per diem rate is established by policy, the policy should clearly indicate which type of expenses, in addition to meals, are included in the rate and which related expenses are to be reimbursed on the basis of actual receipts being submitted by the officer or employee. The policy should also define the local unit’s boundaries for purposes of reimbursing travel; i.e. outside a 50-mile radius of the office, outside of the county, etc. The policy should cover a proportionate reduction in the per diem rate when meals are provided by an outside party.

When state statutes govern the amounts of allowable travel reimbursements, those statutes supersede local policy. Also, when determining the reasonableness of a mileage rate or per diem rate, consideration should be given to rates established by the State of Indiana and the Federal government. The local unit should, however, consider the income tax implications of setting its rates higher than the current Federal rates.

In all cases, an officer or employee requesting reimbursement for overnight travel is required to submit a receipt from the hotel or other meeting place where such accommodations were provided.

TRAVELING EXPENSES – PARKING AND TOLL FEES

There is no statute limiting city and town employees to the sum per mile paid to state officers and employees. City and town councils have the authority to set the sum per mile which officials and employees of the unit are to receive. Councils also have the authority to determine whether parking and toll fees shall be included in the mileage rate or whether officials and employees are to be reimbursed for toll charges and parking fees in addition to their mileage. In an audit, the State Board of Accounts will not take audit exception to payments for mileage, toll charges, and parking fees as long as they are made pursuant to an existing travel reimbursement ordinance enacted by the unit's legislative body.

TUITON REIMBURSEMENT

Under the provisions of the Home Rule statute contained in IC 36-1-3, a city or town could by ordinance authorize tuition reimbursement for qualified training costs directly related to providing city or town services. This assumes sufficient appropriations and funds are available to cover the costs to be reimbursed.

At a minimum, sufficient documentation of course completions and the related tuition cost should be required prior to any reimbursement.

Consideration should be given to the possible tax consequences to the employees and the reporting requirements of the city or town as employer. It will be necessary to contact the Indiana Department of Revenue and the Internal Revenue Service to find out their positions regarding these reimbursements. Pursuant to IC 36-8-1-11, the reimbursements would not be included in salaries in computing pension assessments or pension benefits for police officers and firefighters.

Uniform System of Accounts for Utilities

Unpaid Parking Ticket Fines

Utilities - Payments in Lieu of Taxes

UNIFORM SYSTEM OF ACCOUNTS FOR UTILITIES

Water, Wastewater, Electric and Gas Utilities

Municipally owned water, wastewater (sewage), electric and gas utilities are required to use the systems of accounts published by the National Association of Regulatory Utility Commissioners.

Water and wastewater (sewage) utilities are divided into three classes, A, B and C.

Electric and gas utilities are divided into four classes, A, B, C and D.

In accordance with the instructions found in the Uniform Systems of Accounts, the class to which any utility belongs shall originally be determined by the average of its annual operating revenues for the last three consecutive years. Subsequent changes in classification shall be made when the annual operating revenues for each of the three immediately preceding years shall exceed the upper limit, or be less than the lower limit of the annual operating revenues of the classification previously applicable to the utility.

The Uniform System of Accounts pertaining to any particular type or class of utility may be obtained from the website of the National Association of Regulatory Utility Commissioners at www.naruc.org.

UNPAID PARKING TICKET FINES

If it appears from the records of a court that has jurisdiction to enforce ordinances that regulate parking violations that three (3) judgments concerning a motor vehicle have not been paid before the deadlines established by a statute, an ordinance, or a court order, the clerk of the court shall send a notice to the person who is the registered owner of the motor vehicle. The notice must inform the person of the following:

1. That the clerk will send a referral to the bureau of motor vehicles if the judgments are not paid within thirty (30) days after the notice was mailed.

2. That the referral will result in the suspension of the motor vehicle's registration if judgments are not paid.

A clerk may send a referral to the bureau of motor vehicles if the judgments are not paid not later than thirty (30) days after a notice was mailed. The referral must include the following:

1. Any information known or available to the clerk concerning the following of the motor vehicle:

A. The license plate number and year of registration

B. The name of the owner.

2. The date on which each of the violations occurred.

3. The law enforcement agencies responsible for the parking citations.

4. The date when the notice required under IC 9-30-11-3 was mailed.

5. The seal of the clerk. (IC 9-30-11-3 and IC 9-30-11-4)

If the city or town enforces parking violations through an ordinance violations bureau, then the city or town attorney would be required to bring action to enforce nonpayment of parking fines in county, city or town court before the provisions of IC 9-30-11 could be used.

MUNICIPAL UTILITIES - PAYMENTS IN LIEU OF TAXES

IC 8-1.5-3-8(g) provides the Indiana Utility Regulatory Commission (IURC) shall approve rates and charges which are sufficient to compensate the city or town for the taxes due the city or town which would be paid on the utility property were it privately owned. Such payments are included within the definition for “reasonable and just rates and charges.” These rates and charges in lieu of taxes may be transferred to the municipal general fund, if the legislative body so elects.

It is our audit position that municipal utilities not under the jurisdiction of the IURC could also elect to make payments in lieu of taxes under IC 8-1.5-3-8.

IC 36-9-23-25(d)(9) permits municipal wastewater utilities to make payments in lieu of taxes to a city or town.

Volunteer Fire Companies

Proration of Insurance

VOLUNTEER FIRE COMPANIES SERVING MORE THAN ONE UNIT – PRORATION OF INSURANCE

If any volunteer fire company serves more than one (1) unit under a contract or agreement, each unit that the company serves shall pay the amount for the insurance coverage determined under the following formula:

STEP ONE: For each census block or other area in a unit that is served by more than one (1) volunteer fire company, divide the population of the area by the number of volunteer fire companies serving the area, and round the quotient to the nearest one thousandth (.001).

STEP TWO: Add the quotients determined under STEP ONE for the unit.

STEP THREE: Determine the sum of the STEP TWO amounts for all of the units served by the same volunteer fire company.

STEP FOUR: Divide the STEP TWO amount for a unit by the STEP THREE amount and round the quotient to the nearest one thousandth (.001).

STEP FIVE: Multiply the costs of the insurance coverage for the volunteer fire company by the quotient determined under STEP FOUR, rounded to the nearest dollar. (IC 36-8-12-6)

Weed Cutting Assessments

Worker's Compensation Insurance

WEED CUTTING ASSESSMENTS

The legislative body of a municipality may by ordinance require the owners of real property located within the municipality to cut and remove weeds and other rank vegetation growing on the property. The term “weeds and other rank vegetation” does not include agricultural crops, such as hay and pasture.

An ordinance adopted must specify the following:

(1) The department of the municipality responsible for the administration of the ordinance.

(2) The definitions of weeds and rank vegetation.

(3) The height at which weeds or rank vegetation becomes a violation of the ordinance,  specifying the appropriate heights for various types of weeds and rank vegetation.

(4) The procedure for issuing notice to the owner of real property of a violation of the Ordinance, including any procedures for issuing a continuous abatement notice under subsection IC 36-7-10.1-3(d).

(5) The procedure under which the municipality, or its contractors, may enter real property to abate a violation of the ordinance of the owner fails to abate the violation.

(6) The procedure for issuing a bill to the owner of real property for the costs incurred by the municipality in abating the violation, including administrative costs and removal costs. The cost of sending notice under subsection (c) is an administrative cost that may be billed to the owner under this subdivision.

(7) The procedure for appealing a notice of violation or a bill issued under the ordinance. [IC 36-7-10.1-3]

Methods of Collection are discussed in IC 36-7-10.1-4, as follows:

(a) Except as provided in subsection (b), if the owner of real property fails to pay a bill issued under section 3 of this chapter within the time specified in the ordinance, the department specified in the ordinance shall certify to the county auditor the amount of the bill, plus any additional administrative costs incurred in the certification. The auditor shall place the total amount certified on the tax duplicate for the property affected, and the total amount, including any accrued interest, shall be collected as delinquent taxes are collected and shall be disbursed to the general fund of the municipality or county.

(b) If the owner of real property fails to pay a bill issued under section 3 of this chapter within the time specified in the ordinance, the municipality or county may bring an action in an appropriate court to collect the amount of the bill, plus any additional costs incurred in the collection, including court costs and reasonable attorney's fees. If the municipality or county obtains a judgment under this subsection, the municipality or county may obtain a lien in the amount of the judgment on any real or personal property of the owner.

Notwithstanding IC 36-7-10.1-4, the municipality may provide that the amounts collected shall be disbursed to the general fund of the department specified to enforce the ordinance. [IC 36-7-10.1-5]

WORKER’S COMPENSATION INSURANCE

Under IC 22-3-6-1 it is permissible to cover the officers of a municipal corporation in the contract of insurance. The following is quoted from that statute:

“….An executive officer of a municipal corporation or other governmental subdivision….may, notwithstanding any other provision of IC 22-3-2 through IC 22-3-6, be brought within the coverage of its insurance contract by the corporation by specifically including the executive officer in the contract of insurance. The election to bring the executive officer within the coverage shall continue for the period the contract of insurance is in effect, and during this period, the executive officers thus brought within the coverage of the insurance contract are employees of the corporation under IC 22-3-2 through IC 22-3-6…”

In view of the foregoing provisions, it is the position of the State Board of Accounts that worker’s compensation premiums based on salaries of officials and deputies could be included in the payroll audits, provided such officials and deputies are specifically included in the terms of the insurance policy. Where not so included, however, we question payment of such premiums since the city or town is expending funds for this protection without the insurance company having any liability therefore under the terms of the policy.

We suggest, before making payment of any premiums for worker’s compensation insurance involving the payrolls of officials and deputies, that you check the insurance policy closely to see that the officials and deputies are specifically included under its terms.

Year-End Duties

Monthly and Annual Engagement Uploads

Annual Operational Report of Local Road and Street Operations

Audit Preparation

Cancellation of Warrants - Old Outstanding Checks

Certification of Names and Addresses to County Treasurer

Nepotism Annual Certification

Contracting with a Unit Annual Certification

Encumbered Appropriations - Balance Available

Dormant Fund Balances - Transfers Authorized

Fire Protection Contracts with Volunteer Fire Companies

Internal Control Considerations

YEAR-END DUTIES

The following is a listing of duties and reports that occur each year end. All of the articles have
been published in this issue.

• Monthly and Annual Engagement Uploads
• Annual Operational Report of Local Road and Street Operations
• Audit Preparation
• Federal and State Mileage Rates
• Cancellation of Warrants – Old Outstanding Checks
• Certification of Names and Addresses to County Treasurer
• Nepotism Annual Certification
• Contracting with a Unit Annual Certification
• Encumbered Appropriations – Balance Available
• Dormant Fund Balances – Transfers Authorized
• Fire Protection Contracts With Volunteer Fire Companies
• Internal Control Considerations

MONTHLY AND ANNUAL ENGAGEMENT UPLOADS

In keeping with State Examiner Directive 2018-1, the following files and governmental unit information are required to be uploaded annually:

• Year-end bank statement
• Year-end outstanding check list
• Year-end investment statements
• Detail of receipts for the year
• Detail of disbursements for the year
• Current year salary ordinance
• Annual vendor history report

Annual files are due to be uploaded on Gateway no later than February 29, 2020.

SBOA personnel have developed a user guide for the Upload App located at: https://gateway.ifionline.org/userguides/engagementguide. If, after consulting the user guide, you still have questions, please contact the helpdesk at gateway@sboa.in.gov.

Exceptions to certain requirements set forth in this Directive, such as for manual records, units audited by private CPA firms, and other exceptions, are discussed in the user guide. Contact information for questions and other help, including a "Frequently Asked Questions" section, is also available on the user guide.

More information is available on the SBOA website by clicking the Political Subdivisions link on the left hand menu and then by selecting the appropriate unit type. Then scroll down and select the Gateway section and the Gateway Upload Application link.

Also, SBOA has separate youtube videos on how to navigate the Monthly and Annual Upload application for both the monthly upload process and the annual upload process. Please see the articles entitled SBOA YouTube Channel and Newly Elected Official Training Videos in this Bulletin for more information.

ANNUAL OPERATIONAL REPORT OF LOCAL ROAD AND STREET OPERATIONS

Indiana Code 8-17-4.1 requires an operational report shall be prepared by all cities and towns having a population of 15,000 or more with road and street responsibilities. Please note the statutory change in population threshold; previously the reports were only required for populations of 20,000 or more. The report shall be prepared on forms prescribed by the State Board of Accounts and must disclose all information considered necessary to reflect the financial condition and operations of the department.

The annual operational report will be electronically filed with the Indiana State Board of Accounts through an online data management system developed and maintained by LTAP. The report is also to be filed with the governing body of the municipality and should be available to the public and media.

The annual operational report shall be prepared and filed on City and Town Form Number 225, entitled Highway (Local Road and Street) Annual Report. Form 225 has been revised significantly in order to be integrated into LTAP’s data management system. A copy of the form can be obtained on our website at www.in.gov/sboa by clicking on “Political Subdivision", then either "Cities" or "Towns", then "Highway Annual Operational Report". 

Written instructions and videos are available in this section to aid you in the preparation and filing of this report. Due to the revisions of the form, please do not use last year’s report and simply update the data – you will need to download the revised form to use for reporting. Older versions of the form will not be accepted.

INDOT issued a memo dated November 1, 2016, encouraging all local entities (even those not required to by Indiana Code 8-17-4.1) to file the appropriate information annually with INDOT’s Financial Management Unit. Specific questions regarding the INDOT memo can be addressed to financialmanagementunit@indot.in.gov.

AUDIT PREPARATION

When we arrive to conduct an audit, oftentimes officials have to spend time gathering information, records, and other documentation per our requests. Year-end is a good time to consider preparing some of those items in advance of our arrival so they can easily be produced when we arrive – saving time for you and the examiners.

Here are some items you can get ready at year-end that should help your engagement get off to a good
start:

• Minutes of Council and other Board meetings
• Bank reconcilements complete and bank information (statements, etc.)
• Claims in order with supporting documentation available
• Copies of new ordinances, resolutions, or significant contracts from the year
• Written policies and procedures (internal controls, accrued leave, travel, etc.)
• Financial reports filed with other state or federal agencies
• Grant awards and agreements (federal and state)

For more information on preparing for an audit, please see the SBOA video entitled “How to Prepare for an Audit.” This video may be accessed on our website or through the SBOA YouTube Channel.

CANCELLATION OF WARRANTS – OLD OUTSTANDING CHECKS

Pursuant to IC 5-11-10.5, all checks outstanding and unpaid for a period of two years as of December 31 of each year are void.

Not later than March 1 of each year, the clerk-treasurer shall prepare, or cause to be prepared, a list in duplicate of all checks outstanding for two or more years as of December 31 last preceding. The original copy shall be filed with the city or town council and the duplicate copy maintained by the clerktreasurer of the city or town. The clerk-treasurer shall enter the amounts so listed as a receipt to the fund or funds upon which they were originally drawn and remove the checks from the list of outstanding checks. If the fund from which the check was originally drawn is not in existence or cannot be ascertained, the amount of the outstanding check shall be receipted into the general fund of the city or town.

The list prepared must include:

1. the date of issue of each warrant or check;

2. the fund upon which the warrant or check was originally drawn;

3. the name of the payee;

4. the amount of each warrant or check issued; and

5. the total amount represented by the warrants or checks listed for each fund.

CERTIFICATION OF NAMES AND ADDRESSES TO COUNTY TREASURER

IC 6-1.1-22-14 states that on or before June 1 and December 1 of each year, the disbursing officer of each political subdivision shall certify the name and address of each person who has money due the person from the political subdivision to the county treasurer of each county in which the political subdivision is located. Upon the receipt of this information, the county treasurer shall search the records to ascertain if any person so certified is delinquent in the payment of property taxes.

IC 6-1.1-22-15 states that if the county treasurer finds that a person whose name is certified to him under 6-1.1-22-14 is delinquent in the payment of taxes, he shall certify the name of that person and the amount of delinquency to the official of the political subdivision who is to make payment to the person. The disbursing officer shall periodically make deductions from money due the person and shall pay the amount of these deductions to the county treasurer.

NEPOTISM ANNUAL CERTIFICATION

Indiana Code 36-1-20.2-16: “Each elected officer of the unit shall annually certify in writing, subject to the penalties for perjury, that the officer has not violated this chapter. An officer shall submit the certification to the executive of the unit not later than December 31 of each year.” [emphasis added]

CONTRACTING WITH A UNIT ANNUAL CERTIFICATION

Indiana Code 36-1-21-6: “Each elected officer of the unit shall annually certify in writing, subject to the penalties for perjury, that the officer is in compliance with this chapter. An officer shall submit the certification to the executive of the unit not later than December 31 of each year.” [emphasis added]

ENCUMBERED APPROPRIATIONS – BALANCE AVAILABLE

With the opening of a new budget year and a new set of ledgers, it is advantageous to review the unpaid purchase orders and contracts which remain on the ledgers as “encumbered.”

Unpaid purchase orders and those items under contract are to be added for each appropriation account and the total carried to the new yearly corresponding account. The actual unpaid amount of the purchase orders or contracts should be totaled and shown as a separate amount on the appropriation ledger sheet for the new year, with proper explanation, and added to the the new year's appropriation for the same purpose. By properly carrying out this procedure, the new year's budget will not be expected to stand any expense not anticipated in making the budget.

We suggest the proper officials of the city or town make a listing of these encumbered items and make it part of the minutes in the last business meeting of the year. The Department of Local Government will request this information from each unit. The information will be used to validate the current year financial worksheet during following year’s budget cycle.

Keep in mind the appropriations encumbered and carried forward can be used for no other purpose other than the purchase order or the contract for which they were appropriated.

DORMANT FUND BALANCES - TRANSFERS AUTHORIZED

IC 36-1-8-5 gives the city and town council the authority to order the transfer to the general fund or rainy day fund any unused and unencumbered balance in any fund raised by a general or special tax levy, the purposes of which have been fulfilled. This action may be taken by a city or town council at any public meeting.

IC 36-1-8-5 states in part:

“(a) This section applies to all funds raised by a general or special tax levy on all the taxable property of a political subdivision.

(b) Whenever the purposes of a tax levy have been fulfilled and an unused and unencumbered balance remains in the fund, the fiscal body of the political subdivision shall order the balance of that fund to be transferred as follows, unless a statute provides that it be transferred otherwise….

(2) Funds of a municipality, to the general fund or rainy day fund of the municipality.” Please see the September 2015 Cities and Towns Bulletin, page 4 for more information about transfers to the Rainy Day fund.

FIRE PROTECTION CONTRACTS WITH VOLUNTEER FIRE COMPANIES

IC 36-8-12-3 authorizes cities and towns to enter into agreements with one or more volunteer fire companies that maintain adequate firefighting service for the use and operation of firefighting apparatus and equipment owned by the volunteer fire company, including the service of operators of the apparatus and equipment.

IC 36-8-12-4 states the contract must provide an amount determined by negotiation between the municipality and volunteer fire company. The consideration must include the amounts the unit is required to pay under IC 36-8-12 for insurance premiums and clothing, automobile, and other allowances.

If the contractual agreement is properly drawn, the problem of the governmental unit reporting clothing and auto allowances to the Internal Revenue Service and the Indiana Department of Revenue may be eliminated. Since the contractual payments are lump sum to the volunteer fire company, the volunteer fire company assumes the responsibility for making the payments of allowances to the volunteer firefighters and for reporting of such payments.

Year end is a good time to review existing contracts for fire protection. If renewals or changes in contracts are necessary, such renewals or changes should be made under the guidance of the city or town attorney. All agreements for fire protection should be in writing and the agreements must be preserved as any other public documents. There is no statutory authority to make contractual payments to volunteer fire companies unless an agreement has been entered into.

INTERNAL CONTROL CONSIDERATIONS

At the end of the year, it is a good idea to evaluate the effectiveness of the internal controls of your city or town and determine whether changes are necessary to provide reasonable assurance that the objectives of your city or town are met. We also recommend documenting internal control procedures and reviewing for evidence of procedures being performed as intended. Please note that IC 5-11-1-27 requires all “personnel,” as defined in the statute, to be trained on internal controls. Please make sure that all “personnel,” including newly hired employees in 2019, have viewed the SBOA approved training video. The SBOA approved training is required only one time, but we do always recommend additional training on internal controls as determined by your city or town.