MnDOT Policy FM005
View/print signed policy (PDF)
The Minnesota Department of Transportation (MnDOT) manages the projected cash balance in the Trunk Highway Fund not to be less than the cash needs for any upcoming 15-day time period.
Required financial practices where encumbrances are available funding, prior to incurring expenditures to provide cash resources to make payments. Available funding for a given accounting period is a mixture of estimated and actual revenue. Although unlikely, events could occur to affect the receipt of actual revenue, such as major disruption of petroleum supplies, substantial economic recession, and unexpected unavailability of federal reimbursement. Spending patterns must be coordinated or changed to mitigate potential shortfalls.
In addition, the potential exists to commit to use of federal advance construction funding in excess of cash resources of the Trunk Highway Fund. Until the authorization of future federal funding occurs, delays to normal reimbursement from the Federal Highway Administration are expected.
Delays in authorization of federal funding by the U.S. Congress could also affect the timing of federal reimbursement.
Good business practices require making payments from either of these two funds on a timely basis. Inability to make timely payments would affect business relationships with various suppliers as well as potentially employees paid from these two funds. The state has a prompt payment law Minnesota Statutes, section 16A.124 that requires payments within 30 days of receipts of an invoice.
- Deputy Commissioner/COO/CFO
- Financial Controller & Director, Financial Management
- Monitor cash balances in these two funds on a daily basis by staff in the Office of Financial Management.
- Produce monthly reports that depict the cash balances; this information is on the Office of Financial Management website.
- The Office of Financial Management maintains a computer system that tracks estimated receipts and expenditures, used to forecast future cash balances.
- If external conditions or information from the forecasting system indicate a potential for a cash balance below the level indicated in this policy or the balance falls below prescribed levels, as depicted in the regular monitoring, actions such as delaying expenditures, postponing project lettings for construction, suspending work on construction projects, delaying major purchases for right of way, equipment.
- The Deputy Commissioner/COO/CFO will develop recommended actions and present to the Commissioner.
- The Commissioner and Deputy Commissioner/COO/CFO will take final actions after consulting with division
directors and the Executive Budget Officer, Minnesota Management & Budget.
The Cash Balance is the amount of cash at the fund level shown in the state accounting system based on actual receipts from all sources, and includes transfers from the Highway User Tax Distribution Fund. The cash balance is a legally prescribed share of motor fuel tax, motor vehicle registration tax, and motor vehicle excise tax revenues and other ongoing revenues, reimbursements from the Federal Highway Administration for expenditures related to highway construction, and on actual expenditures made from existing encumbrances.
Projected Cash Balance
This is the estimated amount of cash taking into account anticipated revenues, transfers, and bond sales (with respect to the Trunk Highway Bond Fund), and anticipated expenditures, based on historical patterns of spending from various MnDOT programs, including transfers required to be made to the state bond fund in November of each year.
Trunk Highway Fund
This fund is the principal operating fund for MnDOT, and to some extent for the Department of Public Safety. It is a governmental fund that accounts for public monies used to construct, maintain, and operate Minnesota’s trunk highway transportation infrastructure. Annual transfers of funds to the trunk highway bond account in the state bond fund, made from the trunk highway fund.
Trunk Highway Bond Fund
Proceeds of trunk highway bonds and payments for projects authorized for funding.
- Ensures that sufficient cash balances exist for ongoing payments of legal obligations to contractors and suppliers
- Ensures that all necessary procedures exist for compliance with this policy
Financial Controller & Director, Financial Management
- Ensures compliance with the policy and reporting of balances occurs on a regular basis
Considering that funds must be encumbered before payments is made, how could the cash balance be so low that an insufficient amount of cash exists to fund the expenditure fully?
At the beginning of a fiscal year, direct appropriations are based entirely on estimated revenues. As the year progresses, actual revenues are received, but it is possible, although unlikely, that revenues may be significantly less than estimates due to unforeseen circumstances such as a recession, sudden unavailability of petroleum supplies due to a war in the middle east, a terrorist attack on refineries, and so forth.
What circumstances might lead to delayed reimbursement by the Federal Highway Administration?
The federal highway revenue portion of estimated revenue calculated on the estimated execution of federal aid highway agreements, not actual receipt of cash from the federal government. Cash received on a reimbursement basis for actual costs incurred. When federal advance construction financing is used, actual cash reimbursements are received in future years instead of in a current year. If the U.S. Congress failed to appropriate funding in a timely manner in a particular fiscal year, a significantly delay in the receipt of federal reimbursement in conjunction with advance construction agreements might result, and the amounts of expected reimbursement might be substantial.
In addition, the possibility of sudden unavailability of petroleum supplies for the same reasons as mentioned above would affect the cash available for the federal government to use to provide reimbursement to MnDOT, which might result in a delay of ongoing federal reimbursement.
Are there large cash outlays at certain times of the year?
Significant portions of MnDOT’s expenditures are made in accordance with highway construction contracts. These payments occur from the middle part of spring until the middle part of autumn. Payments in the winter months are substantially less. In addition, MnDOT is required by statute to transfer money to pay debt service on upcoming trunk highway bonds from the Trunk Highway Fund to the State Bond Fund before December 1 of each year. The current requirement is for transfers of approximately $200 million per year, which are made in late November of each year.
Policy FM005 – Cash Balance, established 1-7-2013
Policy 2.4 – Cash Balance, established 7-1-2010
Responsible Senior Officer
Acting Director, Financial Management
Office of Financial Management