Chapter 5 — Invoicing

Vendor Payment History — 18 months of CLPA-processed invoices

"As invoices are processed by CLPA, LPAs can monitor the status of their invoices by viewing the data at the Vendor Payment History website: https://dot.ca.gov/programs/accounting/vendor-payment-history. This website is updated daily and contains all invoices for projects for the past 18 months."

StanCOG and its member jurisdictions use this for self-service status checks rather than DLAE inquiries on routine processing questions.

Budget Authority → Agreement → E-76 → Allocation → Invoice Submittal → Award Package

"The following conditions must be met prior to reimbursement of costs:"

5.2.1 Budget Authority

"The State Legislature and Federal Government have provided budget authority and the projects have met all program budget conditions, e.g., timely use of funds."

5.2.2 Agreement

1. The Master Agreement must be fully executed (all required signatures obtained) if one is used
2. The Program Supplement Agreement (PSA), project agreement, or some other required applicant state agreement must be fully executed

"The State can only reimburse the agency that signed this contractual document, unless there is a covenant in the PSA authorizing another entity to bill and/or be paid on behalf of the agency signing the PSA."

5.2.3 Federal-aid Project Authorization (E-76)

"Prior to the beginning of the reimbursable work, the project phase of work eligible for reimbursement from federal funds must be formally authorized (approved) by Caltrans and FHWA. The payment of federal funds is limited to the amounts approved on the Authorization to Proceed or E-76."

5.2.4 State-only Funded Project Allocation

"For projects funded with state-only funds, reimbursable work begins the day of fund allocation."

State-only projects don't get an E-76 — fund allocation by CTC or other allocator is the analogous gate.

5.2.5 Invoice Submittal

"Each fiscal year, the Division of Local Assistance (DLA) will notify LPAs regarding projects funded from lapsing appropriations (funds that will expire/not be available for spending June 30 of that fiscal year). They will be notified of the deadline for submitting invoices for these projects."

5.2.6 Award Package — 60-Day Rule

"The LPA must submit a complete Award Package to the DLAE within 60 days of the award of the construction contract and prior to the LPA's first invoice for construction capital costs. The DLAE will forward a copy of the Award Package to DLA and Exhibit 15-L: Local Agency Contract Award Checklist to CLPA for processing."

Federal-aid Award Package contents: documents per Ch 15 §15.6.

State-only Award Package: completed Award Information for STIP Projects (LAPG Ch 25).

Phases of work, 2 CFR 200 cost principles, ICRP/ICAP via CIAO

5.3.1 Phases of Work

1. Preliminary Engineering — Initiation, design, and related work preparatory to physical construction. For local STIP and ATP projects, PE costs must be segregated into:
   • Project Approval / Environmental Document (PA&ED)
   • Plans, Specifications & Estimate (PS&E)
2. Right of Way — Acquisition of R/W, real property, or rights. R/W plans, economic studies, appraisal, condemnation, property management, relocation assistance, utility relocation, labor expenses. R/W rental income and proceeds from sale of excess land may be retained by LPAs if used for a valid Title 23 purpose. LPA responsibility to comply with Title 23 if this option selected.
3. Construction Engineering — Supervision and inspection of construction activities, additional staking, materials testing, shop drawings, measurements for pay estimates. Construction Engineering must be authorized to be eligible for reimbursement.
4. Construction — Actual costs to construct transportation facility and appurtenant facilities. Includes removal/adjustment/demolition; utilities or railroad work part of physical construction; administrative settlement cost of contract claims.
5. Administrative Settlement Costs — Service costs related to review and defense of claims against Federal-aid projects (see Ch 16).

For ineligible costs see Ch 16 §16.10 Change Orders.

5.3.2 Direct Costs

"Direct costs are costs incurred solely for a specific state/Federal-aid funded transportation project. Direct costs must be reasonable and allowable per 2 CFR 200."

Direct costs include: contractor payments, R/W acquisition, direct materials, salaries, wages, fringe benefits and related costs, approved equipment and other capital expenditures, contracted services, and other items of expense furnished specifically for the Federal-aid project.

"Refer to 2 CFR 200, Subpart E: Cost Principles and 2 CFR 200.439 for additional information regarding reasonable and allowable costs and equipment thresholds."

5.3.3 Indirect Costs — ICRP/ICAP via CIAO

Details: https://dot.ca.gov/programs/audits.

"After obtaining approval/acceptance, and at the discretion of the LPAs, indirect costs may be included when seeking reimbursement. However, any completed project with a Final Report of Expenditures (FROE) will not be eligible for retroactive indirect cost reimbursement."

Program-specific restrictions: "Some programs may have special requirements or restrictions for indirect costs. For example: the Freeway Service Patrol program does not allow the use of state funds for administrative purposes pursuant to Streets and Highways Code §2564."

15% De Minimis Indirect Cost Rate — 2 CFR 200.414

"LPAs may be eligible to use the 15% de minimis indirect cost rate per 2 CFR 200.414. If LPAs would like to apply the de minimis rate of up to 15% to their modified total direct costs, then LPAs must submit both the Application form and the De Minimis Submission Certification to CIAO at [email protected]."

De minimis is faster than full ICRP/ICAP review and works well for LPAs that don't already have an audited indirect cost rate. The trade-off: capped at 15% vs potentially higher rates available through full ICRP/ICAP.

5.3.4 Underfunded Projects

"When LPA personnel request federal funding for a project, it is either:"

1. Fully funded — federal funds requested at maximum federal reimbursement rate (88.53% for STP)
2. Underfunded — federal funds requested at less than maximum rate
3. Nonparticipating work — costs not eligible for federal reimbursement

"The calculated federal reimbursement ratio is computed by dividing the amount of federal funds authorized by the total participating costs."

Example: Project CML – XXXX (XXX): Federal participating ratio 100%, normal pro rata 88.53%, total estimated costs $1M, total federal funds $750K, Federal Appropriation Code Q240. Reimbursement ratio = $750,000/$1,000,000 = 75%. If the federal funding divided by federally participating costs is less than the full pro rata share (88.53%), the project is underfunded. Progress payments reimbursed at the lower ratio (75%).

23 CFR 630.106(f)(1) and 23 CFR 630.110(b) mechanics

"23 CFR 630.106(f)(1) requires the federal share of eligible project costs to be established at the time of project agreement execution either by pro rata with the agreement stating the federal share as a specified percentage, or by lump sum with the agreement stating that federal funds are limited to a specified dollar amount not to exceed the legal pro rata."

"In requests for federal authorization to proceed, LPAs must document whether the Federal-aid share is to be pro rata or lump sum, by phase and fund type. Caltrans will then enter the pro rata or lump sum share in the Federal-Aid Data System (FADS) E-76 transmittals."

90-day post-award adjustment window: "For the construction phase of work, the pro rata or lump sum share may be adjusted before or shortly after contract award in accordance with 23 CFR 630.106(f)(2). Requests for award adjustment must be submitted by an LPA to Caltrans within 90 days of contract award."

Subsequent increase: an increase in federal funding obligation beyond the established lump sum share may be allowable as a result of an increase to total project construction cost. A prior established lump sum amount less than the legal federal share does not prohibit reimbursement up to the maximum legal share.

Pro-rata projects: Subsequent cost adjustments maintain the established reimbursement rate. If no additional federal funds added, reimbursement rate is reduced. "In no cases will the reimbursement rate be increased."

Default to pro rata: "On existing projects for which the lump sum or pro rata method had not been established during previous project agreement processing, the next request for adjustment must indicate the method to be established. Otherwise, the pro rata method will be assigned by default."

Fund Detail share lock: "Upon establishment of a pro rata or lump sum share for a specific Fund Detail line in FHWA's Financial Management Information System (FMIS), the same share method must be set for that Fund Detail line for the life of the project. While not a preferred option, a multi-funded project may have a combination of lump sum and pro rata for different types of funds within the project (under such a scenario, the different types of funding must be shown in separate rows in a project finance letter)."

"It is recommended that LPAs fully fund (meaning that a project's federal share is the maximum allowable) projects whenever possible."

Payment in Arrears (default), Lump Sum Up Front (PPM ≤$300K), EFT (10 days faster)

"LPA invoices are routinely processed for payment within 45 days after Caltrans receives a complete and accurate invoice. The State Controller's Office (SCO) issues payments within 15 days after receiving the claim schedules from CLPA. To receive reimbursement ten days sooner, see Electronic Fund Transfer (EFT) Reimbursement Method below."

"LPA invoices should be submitted no more than once per month." If they don't follow the format, they'll be returned to obtain additional information needed by Caltrans to process the payment.

5.4.1 Payment in Arrears (Default)

"State and federal law requires that all federal and most state-funded LPA project payments be done on a reimbursement basis. Therefore, the LPA must incur and pay for project costs prior to invoicing Caltrans for reimbursement. The LPA is required to submit two copies of proper documentation with their invoices to validate that the expenditures were properly incurred."

5.4.2 Lump Sum Payment Up Front (Narrow Exceptions)

R/W Escrow: "Projects in which there is a request for direct deposit of funds into an escrow account must be approved by the DLAE and submitted to CLPA 30 days prior to closing escrow for the purchase of the property. CLPA will not process the invoice unless the local entity is able to provide a firm escrow closing date."

PPM and Freeway Service Patrol ≤$300K: "Agreement clauses, when used, allow lump sum advance payments to all agencies, which receive $300,000 or less per fiscal year. 60 days after all expenditures have been made by the LPA; they must submit a Final Report of Expenditures (FROE), including a final invoice, to Caltrans showing how the advance has been spent. Agencies that receive over $300,000 will be paid on a reimbursement basis."

State Match and Exchange Program (X projects): "These funds are advanced to the LPAs to be spent in accordance with the provisions in the Local Agency – State Agreement. It is the responsibility of the RTPAs to provide the DLA's Office of Implementation with an annual report on these funds. The report with an as-of date of June 30, is due August 1 of each year. It must show the amounts given to each city and/or county. Failure to provide this report will result in future exchanges being held in abeyance. The SCO will review the actual expenditures to verify compliance with state law."

5.4.3 Electronic Fund Transfer (EFT)

"Caltrans offers an EFT option to LPAs. Participation in the EFT program is limited to the LPAs that do not have a delinquent account receivable with Caltrans. EFT is the transfer of funds from the SCO to a State-contracted bank and then directly into a LPA's designated bank account."

EFT Processing Time: CLPA processing same for EFT or warrant. SCO processing reduced from 14 days to 4-6 days. "CLPA will forward the EFT claim schedules to the SCO on Mondays and Thursdays." SCO processes Monday submissions with Thursday-of-same-week deposits; Thursday submissions deposit Tuesday of following week.

Enrolling:

• Verify with financial institution that EFT payments are allowable
• First-time vendors: complete Payee Data Record Form, STD 204 and Enrollment Form FA-2656
• Existing vendors with multiple accounts: Finance and Public Works Directors jointly decide which accounts to designate for EFT
• Each account converting to EFT needs separate Enrollment Form
• Once identified, all payments to that account will be EFT
• Caltrans completes Section IV. Voided check or savings deposit slip required to verify routing/bank numbers
• 30-day pre-note test period to verify routing

Mail to: Department of Transportation, Division of Accounting - MS 33, P.O. Box 168043, Sacramento, CA 95816-8043, Attn: Payee Data Records Unit. Do NOT mail to CLPA.

LAPM 5-A, monthly cadence, April 1 lapsing deadline

"LAPM 5-A: Local Agency Invoice is used for all reimbursements (with the exception of PPM funds $300k or less which can be invoiced upfront with a single lump sum payment). It includes the invoice, billing summary, invoice checklist, and instructions. CLPA no longer accepts invoices created by LPAs" — must use LAPM 5-A.

5.5.1 General Guidelines

1. LPA may submit invoices once a month; must submit at minimum every 6 months to avoid inactivity
2. First time invoicing Caltrans: fill out Payee Data Record Form, STD 204 (required in lieu of IRS Form W-9 when doing business with State of California)
3. Progress and final invoices submitted directly to DLAE with original invoice. Submit invoices by April 1st to avoid funds lapsing on the June 30th reversion date and to allow sufficient time for CLPA and SCO year-end closing procedures
4. Final invoices must include the FROE package. DLAE verifies project completion and approves payment before forwarding the FROE package (including original final invoice) to CLPA
5. State-funded projects: PE phase must be separated into PA&ED and PS&E
6. First invoice for construction capital must include Exhibit 15-L: Local Agency Contract Award Checklist (federally-funded). State projects include Award Information checklist
7. R/W: payment to Title Company requires invoice and covenants identifying Title Company, address, escrow number, contact name; include Remarks and Covenants Form. Payment to LPA for locally acquired R/W requires R/W Report of Expenditures
8. Invoices must have current date when sent to district or CLPA. Resubmitted invoices must have revised current date and number (rejected invoice 1 becomes 1A upon submittal)
9. Invoices must be certified and signed by appropriate responsible persons in the LPA
10. Invoices must list name and phone number of contact person should Caltrans need additional information

Invoice Documents (Table 5-3)

* Electronic submittals accepted.

5.5.2 Invoice Checklist

"LPAs are required to complete and sign LAPM 5-A, Section 4: Checklist and submit as part of the Invoice Package for each invoice. Additional documents may be required per the Checklist. The DLAE will ensure that the checklist and appropriate documentation are included, will concur, and complete and sign the Section 4: Checklist."

"Provided LPAs adhere to the format described in this chapter, invoices are typically paid by warrant within 60 days after being received by the DLAE, or 50 days if the agency is signed up for EFT. Please refer to and use Section 4: Checklist prior to sending invoices to the district for reimbursement. Invoices with significant errors will be returned to the LPAs for correction."

6-month deadline, person in responsible charge signs, April 1 lapsing override

"If the final invoice is returned to the LPA for error correction, it must be re-dated with a current date and number before being resubmitted to the DLAE."

Final Expenditure Report Content

Follow Ch 17 instructions. At minimum:

• Show for each phase of work: Total Costs, Participating Costs, Nonparticipating Costs, Federal Funds, Other Funds (local, state, etc.)
• Costs shown by phase of work must be the same on:
  • Final Invoice
  • Exhibit 15-M: Detail Estimate (federal-funded projects)
  • Exhibit 15-M: Detail Estimate Summary (pg.2 of 4) (federal-funded projects)
  • Exhibit 17-M: Final Project Expenditures Report (state-funded projects)
• If there are Liquidated Damages, shown on both Final Invoice and Final Detail Estimate. If none, write "None"
• Change Order Summary provided whether there were change orders or not. If none, write "None"
• Contractor Claims listed. If none, write "None"

3-year records, $1M single audit, $500K IOAI risk-based audit

5.7 Final Project Costs

"The final project cost listed in the LPA's Final Report of Expenditures will be analyzed by Accounting's Local and Reimbursement Final Vouchering Section to determine if the costs reported for each phase of work are eligible for federal reimbursement. Eligible amounts for each phase of work, as determined from the analysis, are reconciled with the costs recorded in the Caltrans financial system. If it is determined that the funds paid to the LPA are more than the amount eligible for reimbursement, Accounting's Local and Reimbursement Final Vouchering Section will initiate an Accounts Receivable billing to the LPA for recovery of the overpayment."

5.8 Audit of LPA Expenditures — 3-Year Retention & $1M Single Audit

The Ch 2 retention statement says 3 years from Caltrans final voucher transmission to FHWA. The Ch 5 statement says 3 years from "final voucher submission to FHWA by the State." Same trigger, slightly different wording — both reference 2 CFR 200.334.

5.9 FROE for State-Administered Projects

"The FROE for state-administered Local Assistance projects is prepared by a Caltrans Project Manager. On some projects, the state performs only specific phases of work associated with a Local Assistance project. For example, design engineering, R/W acquisition, or striping may be performed by the LPA for a construction project administered by the state. In such instances, the Caltrans Project Manager is responsible for preparing a Final Report of Expenditures for the work performed by state staff. The LPA is responsible for preparing the FROE for work it performed and for any expenditure it incurred."

5.10 Audit of State Expenditures — $500K Risk-Based Audit Threshold

"Caltrans internal procedures and controls for major contracts do not require a formal audit of each construction project. However, projects may be selected on a random basis for an audit of extra work paid by a force account method of payment (see Chapter 12: PS&E)."

"State expenditures for Local Assistance Federal-aid major construction contracts (greater than $500,000) may be audited based on a risk assessment established by IOAI, as well as by the California State Auditors when they perform the annual single Audit of the State of California."

5.11 Final Project Costs of State-Administered Projects

"Each final report of contract expenditures for state-administered Local Assistance projects is analyzed by Accounting's Local and Reimbursement Final Vouchering Section to determine the final amount of federal, state, and LPA funds expended for the project. The final expenditure of LPA funds is compared to the LPA deposit for the project. Refunds or billings are made upon completion of the Final Voucher analysis."

"When all pending claims by the contractor have been settled, the Final Voucher package is prepared and submitted to FHWA via FADS."

"The Final Project Cost Adjustment analysis is prepared concurrently with the Final Voucher to determine the final allocation of federal, state, and LPA funds for each phase of work. Budgeted amounts are adjusted to reflect the actual amount of funds expended for the project."

"If during the final adjustment it is determined that the deposit of LPA funds is less than the agency's share of expenditures, Accounting's Local and Reimbursement Final Vouchering Section will initiate an Accounts Receivable Invoice... If the deposit exceeds the agency's share of expenditures, the excess funds are refunded to the LPA."

Caltrans Service Contracts — invoice routed to designated program manager

"Invoices for work performed by LPAs, consultants, or other contractors under Caltrans Service Contracts must be submitted to the designated program manager (e.g., Railroad Crossing Program Manager) for review and verification. The manager then forwards the invoice to CLPA for payment."

Service contracts route differently than standard project invoices — they bypass the DLAE and go through the program manager directly. Used for Caltrans Service Contracts where the LPA isn't the prime contractor with Caltrans but is performing work under a Caltrans-administered contract.