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Accounting and financial management

Clean Water Fund Program and Safe Drinking Water Loan Program

The following is intended to provide general guidance for financial management.

Generally accepted accounting principles

Sections NR 162.12 and NR 166.15 of the Wisconsin Administrative Code provide that, as a condition for providing project funding, the Environmental Improvement Fund (EIF) as a lender requires that municipalities maintain their books in accordance with generally accepted accounting principles (GAAP) and have an adequate financial management system. This includes subsystems for accounting, records retention, financial reporting, equipment replacement fund (ERF), user charge system (UCS), and information related to the specific project being funded by the EIF.

GAAP standards should be discussed with the municipality's auditor or accountant if there are any questions. For more information, go to s. 73.10, Wis. Stats., Municipal Finance.

If assistance is needed in setting up an accounting system, review the Department of Revenue's manual Uniform Chart of Accounts for Wisconsin Municipalities. It provides an accounting framework that complies with GAAP.

Supporting documentation

All entries in the accounting system should be supported by appropriate source documentation. For a municipality to receive a payment from the Clean Water Fund Program (CWFP) or Safe Drinking Water Loan Program (SDWLP), it must complete and submit a Request for Disbursement form with supporting invoices and documentation. Examples of source documentation are invoices, payroll registers, and time records.

The files of supporting documentation should contain all information necessary to explain every transaction. It should also be cross-referenced so the transaction can be tracked from any documentation dealing with the transaction.

Record retention

The municipality should establish a record retention schedule for the records of the municipality, per s. 19.21, Wis. Stats., Custody and Delivery of Official Property and Records. The Financial Assistance Agreement (FAA), executed by the municipality and the state, calls for a minimum retention of records for a period of three (3) years from the date of project completion or resolution of all appeals, disputes or litigation pertaining to the CWFP/SDWLP project.

Internal control

Internal control is the means by which the accounting, procurement and management systems are regulated. It serves to assure management that proper procedures are being followed with respect to all project operations, as well as the receipt and disbursement of public funds. The municipality should review and approve all contractor and engineering invoices before submitting a request for disbursement.

Example of internal control

A municipality should require that an invoice for construction services be accompanied by a monthly progress report from the consulting engineer certifying that the work for which they are requesting payment be properly completed in accordance with approved plans and specifications. Municipal officials should then review the billing and engineering firm's certification and authorize payment based on their knowledge of the progress being made on the project.

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Force account

Force account refers to a municipality using its own employees, equipment or both for work on its CWFP/SDWLP project.

Eligible costs

In general, costs eligible for force account consideration include costs for work that is typically contracted out but can be more economically performed by qualified municipal staff. For example, application preparation, planning, design, construction, construction-related activities, landscaping and inspection costs may be included as force account if performed by municipal staff.

Ineligible costs

Costs that are ineligible for force account consideration are ordinary operating expenses of local government such as salaries and expenses of elected officials and on-staff municipal attorneys or an annual financial audit.

Requests for disbursement

Environmental Loans recipients may request reimbursement for project-related force account work. A DNR loan project manager must review and approve proposed force account work prior to preparing the FAA. The department may approve financial assistance for force account work if the applicant submits an executed Force Account Certification Form 8700-245. If the department approves force account work, the municipality must have a financial management system that provides accountability and control for all financial transactions associated with the municipality's CWFP/SDWLP project.

Documentation

Since no independent invoice is generated for force account work, the municipality needs to document how the cost is calculated. If force account work is funded by the CWFP/SDWLP, personnel time and equipment usage records should include the details described below.

Personnel time records should include the hours, rates and dates of work of each employee who worked on the project:

  • document the hours spent on eligible and ineligible parts of the project and the type of work performed; and
  • the employee and supervisor must sign the timesheets, attesting to the hours and type of work performed.

Machine or equipment usage records should include the hours, rates, dates of usage and the project function for which the equipment was used:

  • keep daily logs of time equipment records;
  • make sure the equipment charge reflects the number of hours the piece of equipment is operated throughout the CWFP/SDWLP project; and 
  • do not charge equipment that is present on a job site but standing idle; charge equipment on a utilization basis only.
Contact information
For information on this topic, contact:
DOA Capital Finance Office staff at DOAEIF@wisconsin.gov or the project's assigned DNR loan project manager.

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