ROAD COST ACCOUNTING PLAN SOLANO COUNTY Reprinted from Association Report Numb Report on Solano County, California California Taxpayers' Association 775 Subway Terminal Bldg. Los Angeles, Calif. ROAD COST ACCOUNTING PLAN for SOLANO COUNTY Reprinted from Association Report Number 22 Report on Solano County, California California Taxpayers' Association 775 Subway Terminal Bldg. Los Angeles, Calif. PAGE 2 ROAD COST ACCOUNTING PLAN FOR SOLANO COUNTY Road Cost Accounting Plan for Solano County There are three officials who are affected by the proposed plan : (1) Auditor, (2) Surveyor, (3) Cost Accountant. The Board of Supervisors has recently employed a cost accountant to determine road costs, and it is this official who will do much of the work. At present he is working under the supervision of the Surveyor, but it is more de- sirable to combine all accounting work under one department. Inasmuch as the Auditor has under his control all general county financial rec- ords, it is recommended that the work of cost accounting for the Board of Supervisors be done under his supervision. The proposed plan covers two objects: (1) To record financial transactions and thereby con- trol budget appropriations; (2) to determine costs of doing road and bridge work. In order to show both financial transactions and costs, two related sets of forms are proposed. The first gives the necessary information for the auditor's rec- ords, while the second gives cost data. The sec- ond set cannot be made except from information given in the first. The Work of the Auditor The auditor is primarily interested in the first object given above, as it is one of the duties that regularly fall to his office. In addition, the rec- ords so kept will be needed in the preparation of his monthly statements showing the status of each budget appropriation, as required in the state budget law. The records that are necessary for Object 1 , above, are the only ones that will show segre- gated highway expenditures unless duplicate books are kept and this is not necessary. These records take the place of the auditor's present appropriation and expenditure ledger for high- ways, which could then be dispensed with. The Auditor is not primarily interested in the second object of the proposed accounting plan. /. e., determination of road costs. However, these costs are more readily obtained from the basic data recorded by the Auditor in his books than from any other source. Only two changes in the Auditor's present method of keeping accounts are suggested. The first concerns a classification or codification of the warrants, which is to be done by the cost accountant before the Auditor posts them to his books. The second is a substi- tution of several new headings, or expenditure titles, on the ledger sheet for road accounts. It is of prime importance that the accounting for capital outlay expenditures be completely separated from maintenance expenditures. The proposed accounting plan provides for this separation. Codification The Auditor should give all warrants for roads, bridges and ferries to the Cost Accountant after they have been returned from the Treasurer in Step 8, as shown in Dia- gram A. The cost accountant will classify them as will be explained laici on. Each warrant should be previously marked by the auditor to show the fund from which it was paid. Simi- larly, the road district number and the number of the road for which the expenditure was made should be placed on all warrants by the person who makes out the original claim. The auditor can help by insisting that all claims show each item of this information before approving them for payment. Posting to the Ledger The warrants are ready for posting to Form 1 after the cost accountant has codified or classified each of them. Posting can be done in the usual manner by the auditor or his assistants. Form 1 shows the type of ledger sheet needed by the auditor on which financial transactions DIAGRAM A LIHE OF TRAVEL OF CLAIMS AIJD WARRANTS FOR ROADS, BRIDGES AND PERRIES SOLANO COUNTY * Auditor Signs Claim t;o Make It A Warrant Post to (1) Warrant Register (2) Fund and Appropriation Control Ledger jCodifies or Classifies Expenditures Auditor Posts to Highway Expenditure Ledger (Form 1 in Cost Accounting Outline) [Filed in Auditor's vaults Dotted line - new work or a new line of travel imposed by the proposed cost ac- counting plan. Solid line - line of travel as now In existence ROAD COST ACCOUNTING PLAN I : OR SOLANO COUNTY PAGE 3 (except capital outlay items) can be recorded and by which budgetary control can be accom- plished. The records of each road district (except for capital outlay items) will comprise three ledger sheets of I : orm 1 , each being for a different fund. FORK 1 ALL ROAD, BRIDGE AND FERRY EXHUJDirURE AND APPHOPRLATIOH ITE1B 30LANO COUHTY CALIFORNIA Fund* Road District Maintenance" Month o. J 19 Date Items Warrant No. Code No. EXffiKDITtRE AND APPROPRIATIOH ITEUS Total Expend- itures Salaries and Wages Materials and Supplies Service and Expense Gasoline Fuel Oil Lubri- cants Road Oil, Aaphaltj Bitumer Rock 3ravel Sand Equip- ment Hire Miscel- laneous Sup- plies Repair! to Machin- ery and Equip meet Replace- Kent 3 of Uachin- ery and Equip- ment Freight Rent, Insur- ance, Overheat Items, Etc. Code 10 Code 21 Code 22 lode 25 Code 23 Code 23 24 Code 33 Code 34 Code 31 32 35 (1) (2) (3) (4) 26 ?7 36 (14) (5) (6) (7) (8) (9) (10) (U) (12) (13) Judget Appropriation Cumulative Total Sxpenditures to Pirst of Month Balance Available - - - - - - - - - on First of Month - - - - - - - - - Items of Expendi- tures during cur- rent month TOTAL EXPENDITURES CURRHCT MONTH * Insert the word "General", "Road District" or "Good Roads", as Uie case may be. ** Insert the words "Maintenance", or "Capital Outlay by Force Account", as ti'.e case may be. PAGE 4 ROAD COST ACCOUNTING PLAN FOR SOLANO COUNTY Provision is made in Form 1 to obtain monthly cumulative expenditures and balances available from each appropriation item. Each column can represent an appropriation item as given in the county budget. Capital Outlay Expenditures Capital Out- lay expenditures are to be recorded somewhat dif- ferently than those for maintenance. If the capi- tal expenditure is on force account, then Form ent will recommend practical application of the unit costs found by the cost accountant. Road, Bridge and Ferry Numbers Each road and bridge should be renumbered because the present numbers arc limited in their usefulness. A simple, flexible numbering scheme is shown on the accompanying map. It is decimal in form, allowing for expansion as additional roads and bridges are built. A road can easily be found on FORM 2 CAPITAL OUTLAY EXPENDITURES Solano County Road District No.. Date Title and Description of Item Purchased and Name of Vendor I-und Cost in Dollars 1 can be used with an appropriate title given to it. One sheet should be used for each construc- tion project in each district. The information given will satisfy the Day Labor Publicity Law* as far as determination of costs of work done by the county is concerned. Entries made on Form 2 for payments on contract work and on new machinery, as capital outlay expenditures, are all that will be needed. Separate books are not necessary. The County Surveyor The chief responsibility of the surveyor in the proposed cost accounting system is to designate or name properly the roads, bridges, and ferries and to aid in the allocation or distribution of indirect expenditures found by the cost account- ant. In addition, the surveyor or the superintend - * Act 6421 of General Laws, as amended the map if its number is known, as they are numbered in sequence. An example of a complete road number can be given for the road running south from Rio Vista. The main road number is 340.0. The zero to the right of the decimal point indicates that the road is not a branch of road number 340 but is the main road itself. The branch from the main road bears the number 340.11. The northerly section of the main road is gravel and can be shown by the number 340.01. The sec- ond section is oil macadam and can be shown as number 340.02. The road numbers on the map do not show this last division of a complete number. It is believed best to let the surveyor complete the numbers as he is probably the better informed concerning the various types of surfaces. Bridge numbers can be built up in two part*;, the first being the main number of the road on ROAD COST ACCOUNTING PLAN FOR SOLANO COUNTY PAGE 5 which the bridge is located, and the second being the number of the bridge on that road, e. g., the two bridges on road No. 70.0 can be called No. 70.0/1 and No. 70.0/2. A cross ("x") marks the location of bridges on the map. Because of lack of space they are not numbered. The sequence of bridge numbers on the map is from top to bottom and from left to right, the same as in reading a printed page. In case of diagonal roads, the numbers start at the upper end. This system should be followed to identify the bridges found on the map with those listed in Table 105. Ferries can be simply designated as Fl , F3, etc. The Work of the Cost Accountant All warrants for road expenditures are to be given to the cost accountant for classifying or cod- ifying before they are posted to the auditor's books described as Form 1. After codifying and after the auditor has posted each to Form 1, then the cost accountant is to classify and segregate fur- ther the expenditure items as found on Form 1. This last segregation is to be shown on Forms 3 and 4. Mileages of roads according to their type of surface will also be entered on these two forms, and the per mile costs obtained therefrom. The above summary of the cost accountant's work applies to maintenance expenditures. A dif- ferent set of records are to be kept for capital out- lay expenditures in order that they may be com- pletely separated from maintenance expenditures. The monthly totals in the cost accountant's book, for each district, of all posted items should agree with the same totals in the auditor's books. The records of the auditor show the financial transactions for receipts and expenditures accord- ing to funds, whereas the books of the cost ac- countant arc for determining costs of roads anu bridges, without regard to the funds from which money was obtained. Code Numbers The complete code number 10 be put on each claim, before posting to Form 1, is made up of three parts, each one of which is a code number in itself. The following diagram shows the items to be coded and the person who is to do each of the parts. Code Number Made by Item to be Coded Code Number Foreman, Supervisor Road, bridge or ferry Cost Accountant Hxpenditure Classification Cost Accountant Type of road or bridge The workmen in the field (foremen, super visors, etc.) should enter upon the claim the first part of a complete code number which is the number of the road or bridge where work was done or where materials were used. The cost ac- countant is not to do this but must be insistent that the men in the field do it. They arc the only persons who have this knowledge. The first step in cost determination is lor the cost accountant to determine the second part of the complete code number according to the fol- lowing object expenditure classification. Code Number Object of Expenditure 10 LABOR AND WAGES 20 MATERIALS AND SUPPLIES 21 Gasoline, fuel oil, lubricants 22 Road oil, asphalt, bitumen 23 Cement and lime 24 Culverts and pipe 25 Rock, gravel, sand, slag 26 Lumber 27 Miscellaneous materials (hardware, powder, water, small tools, etc.) 28 Equipment hire (take out any labor and put in No. 10) 28.1 Teams 28.2 Trucks 28.3 Equipment and machinery 30 SERVICE AND EXPENSE 31 Freight, express, mileage, transporta- tion, demurrage 32 Rents and storage 33 Repairs and upkeep of machinery and equipment 34 Replacement of machinery and equip- ment 35 Damage claims, insurance (fire, theft, liability) 36 Overhead and office expense 50 CAPITAL OUTLAY 5 1 Force account 52 Contract items 53 Real estate and rights of way 54 Buildings (not repairs) 55 Machinery and equipment (not replace- ments) The information given on a warrant should be sufficient for determination of the classification of the expenditure. An example of applying ex- penditure code numbers to warrants is given as follows : Code No. War- Expend. rant Ctassifi- Example of Items No. cation Found Upon Warrants 100 10 2 days labor grading shoul - dersof road No. 65.0 $ 12.00 10 \\i days labor repairing bridge No. 70.0/1 9.00 10 2 \ > days labor hauling rock, road No. 120 15.00 Total to John Doe , $ 36.00 124 21 500 gal. gasoline. 80.00 128 100 tons rock @ SI. 80 del. 200.00 25 (75 tns. rd. 130.0-S150) 25 (25 tns rd. 25.0-$ 50) 141 27 1 doz. shovels _ 24.00 145 4 days truck and driver. road No. 60.0 60.00 28.2 (truck @ S10 S40) 10 (driver @ $ 5 $20) 153 26 200ft. b. m. lumber, bridge 80.0/1 @ 7c 14.00 150 10 3 days surveying road No. 215 and setting stakes @ $8.00 24.00 PAGE 6 ROAD COST ACCOUNTING PLAN FOR SOLANO COUNTY 159 160 10 Example Continued Cost accounting clerk sal'y $100.00 Repairs to road roller by blacksmith 4 bolts $ .25 1 bar 2.00 3 rings .50 4 hrs. @ $1.50 6.00 170 171 52 Total $ 8.75 (23) 100 sacks cement to build new bridge No. 75.0/3 @ 90c 90.00 Third payment on contract paving roadNo. 185 $2,050.00 Expenditures for salaries and wages will bear code No. 1 as shown on warrant No. 1 00 above. The warrant should show the length of time and the road or bridge upon which work was done in order to apportion the expense accordingly. Where supplies are used on more than one road, the foreman or supervisor must show the ratio for prorating the amounts to each road as shown on Warrant No. 128 above. Where pos- sible, all labor items should be put into account No. 10 as shown on Warrant No. 145. How- ever, outside labor to repair trucks and machinery should be charged to the same expenditure class as the item itself, just as in the case of warrant No. 160. Warrant No. 170, in the above example, pre- Form 3. DIRECT ROAD UAINTEliAKCE COSTS (All Funds) SOLAKO COUNTY CALIFORNIA Road District No. Direct Costs Type f tiles of this type Year * Objects of Expenditures Labor and Wages Road Oil Asphalt and Bitumen Rock Gravel Sand Equip- ment Hire Total Direct Cost Indirect Cost from Form 4 Grand Total 1 Cost Per liile Code No. 10 22 25** 26** 28 Total Monthly Direct Costs from Form 1. 19 July August September October November December 19 January February liarch April i Lay June TOTALS FOR YEAR Si Insert the words "hard (surfaced) roads," "dirt," "gravel" or "soft (unsurfaced) roads", "long-lived or short-lived bridges", as the case may be* * Insert the word "road", "bridge" or "ferry", as the case nay be. ** If this sheet is for bridges, change item to lumber (code 26) and charge any gravel coots to Indirect Sheet, Form 4. ^ Insert the word "area" if shee t is for bridges. IJI Insert the words "cost per sq. ft." if sheet is for bridges. ROAD COST ACCOUNTING PLAN FOR SOLANO COUNTY PAGE 7 sents a double classification arising oui of a capi tal outlay improvement with the work being done by the county's own labor and materials (force account). Items in this account should be the exception rather than the rule for most capital improvements will be done by contract. The costs of work done by force account should be accurately determined to compare with original bids. The items given in the above examples may be found singly upon the warrants or may come through as a number of items upon one warrant. In the latter case, each expenditure item is to be classified so that it can be charged against the proper account. The second step in cost determination is to complete the code number upon the warrant. This code number is to show the type of road or bridge on which the expenditure was made. The purpose of this classification is to provide for segregating costs of maintaining different types of roads and bridges. Fora 4* INDIRECT ROAD MAINTENANCE C03TS Road District Ho. (All Funds) Indirect Coats SOLANO COUNTY CALIFORNIA Year Repairs Replace- Gasoline to ments of Freight Objects of Expenditures Fuel Oil Lubri- Miscel- laneous Machinery and machinery and Insurance Overlie ad Total Indirect cants Supplies Equipment Equipment Items Cost Code No. 21 23 33 34 31 24 32 25 35 26*-* 36 27 Total Monthly Indirect Costs from Form 1. 19 July August September October November Decenber 19 January February uarch April Kay June TOTALS FOR EAR w - Distribution of total cost at end of year to be transferred to Form 3, as follows: ROADS % of total. BRIDGES % of total FERRIES n f totfll. Amount $ Amount $ Amount $ Hard $ LonA-lived Ferry No. 1 $ Gravel Short-lived $ Ferry No. 2 $ Dirt $ etB . ' All bridge lumber items should be charged directly to bridge account (Form 3) and any gravel (code 25) purchases for bridges should be charged to Miscellaneous Supplies on Form 4. PAGE 8 ROAD COST ACCOUNTING PLAN FOR SOLANO COUNTY Code numbers for road types are as follows: T 1 HARD OR SURFACED ROADS. Til Asphaltic concrete T12 Cement concrete Tl 3 Oil macadam T14 to T19 Other types of hard surfaces T20 SOFT OR UNSURFACED ROADS T21 Gravel T22 Dirt T23 to T29 Other unsurfaced types Code numbers for bridges are as follows: T50 LONG LIVED BRIDGES T5 1 Concrete slab T52 Concrete arch T53 Steel Truss T54 to T59 Other types of long lived bridges T60 SHORT LIVED BRIDGES T6 1 Wood platform or plank T62 Wood pier T63 Wood truss T64 to T69 Other types of short lived bridges The surveyor is to prepare sufficient data for the accountant to know the type of surface of each road, as well as the type of each bridge. Costs After the three code numbers are en- tered on each warrant, they are then to be re- turned to the auditor for posting, as explained above. When the auditor has completed posting all the warrants, then the cost accountant can make the final analysis from the auditor's books to determine unit costs for maintenance. Further reference to the warrants should not be necessary. This final analysis can be made on Forms 3 and 4. Costs for maintenance are to be determined in each district for groups of roads of the same type on a per mile basis, '. e., the unit costs for each type of road is to be determined. Bridge costs will be obtained on a square foot basis, as well as on a type basis. The entries on Forms 3 and 4 are merely totals of expenditures for maintenance only, taken from Form 1, either under the same classification or under an expanded classification, as determined by the surveyor. Expenditures given in Columns 5, 7, 8 and 9 of Form 1 can be charged directly to the road or roads whereon work was done. These are direct costs and can be transferred to Form 3. On the other hand, expenditures given in Columns 6, 10, 11, 12 and 1 3 of Form 1 will be allocated to the various roads and bridges only with difficulty. These are indirect costs, and ac- curate distribution of them for any one month will hardly be possible, unless much time and thought is given to it. This, though interesting, is not necessary in a county with small total expenditures as in Solano. However, at the end of the year, such items should be prorated to each of the road and bridge types. This proration is necessarily arbitrary, but should be based on the best information and judgment of those who have been in close touch with the work. Form 4 has been devised to aid in recording and pro- rating the indirect costs as transferred from Form 1. It is to be noted in using Forms 3 and 4 that they merely summarize and collect the total monthly expenditure items from Form 1. The final answers and data from Form 3 are the unit costs of maintenance work that are needed by road officials. Five sheets of Form 3 will be needed for the cost accounts of each road district. They will be used as follows: 1 sheet for all hard (surfaced) roads 1 sheet for all dirt (unsurfaced) roads 1 sheet for all gravel (unsurfaced) roads 1 sheet for all long-lived bridges 1 sheet for all short-lived bridges One additional sheet will be needed for the Fifth District for recording costs of ferries. Only one sheet of Form 4 will be needed in each district. Capital outlay records kept by either the cost accountant or the auditor can be summarized on Form 2. It does not show the distribution or objects of expenditures, as these are not required in keeping records for capital outlays except in the case of force accounts. Totals of capital out- lay expenditures from force accounts, as deter- mined upon Form 1, should be transferred to Form 2. This provides for a complete history of all capital outlay items on one ledger sheet. A summary of totals of all districts from Forms 2, 3 and 4 is to be made at the end of each month to determine a total for the county. The collection of summarized monthly costs will give all the necessary information for yearly costs at the end of each fiscal year.