April 30, 2002

To:    All County Road Commissions

From:    Richard L. Baldermann, CPA, CGFM Administrator, Local Audit and Finance Division Bureau of Local Government Services

RE:    Michigan Transportation Funds--Revenue Recognition Under GASB 34

In 1983, the State of Michigan MTF payment distributions were changed from quarterly to monthly distributions. A numbered letter was issued dated November 9, 1983 to all county road commissions requiring that the August payment received on November 5th (for 9/30 year ends) and the November payment received on January 5th (for 12/31 year ends) be accrued. Only one month was accrued due to the road commissions' concern about reporting 14 months of MTF during the first year of the change.

GASB 34 issues have surfaced concerning the differences between the 60-day guide for modified accrual and full accrual. All road commissions will be required to report this additional accrual in the year they adopt GASB 34. If the road commission chooses to, they have the option to accrue the amount earlier than the GASB 34 implementation date.

Listed below are the scheduled distributions of Michigan Transportation Funds that must be accrued:

The additional month's accrual will result in recognizing 13 months of MTF revenue in the year of implementation, if the amount is immaterial. If the amount is material to the financial statements, beginning fund balance should be adjusted to account for the change. The notes to the financial statements should disclose the change in the first year of implementation. All subsequent years should recognize only 12 months of distributions as revenue.