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CHAPTER 6
Transportation Accounting
Fundamentals
A comprehensive cost accounting system for community transportation services should do the
following:
· Describe in detail all costs that have been incurred and all services rendered.
· Describe in detail how the funds of all participating agencies have been spent. (This descrip-
tion should be designed to satisfy the audit and regulatory requirements of each participating
agency.)
· Provide the opportunity to distribute the costs of transportation services among those customers
(agencies or individuals) receiving services based on the actual costs of the services each has
received. It is important to recognize that some agencies have arbitrarily limited their reimburse-
ment rates to amounts that are less than their share of the costs of the services that they are receiv-
ing. Transportation providers should determine for themselves if working with such agencies
constitutes good business practices. Even if rules prevent full cost recovery in some cases, it is
still useful to determine the actual cost for each participating agency for purposes of planning
and fundraising.
To achieve these objectives, the following steps are necessary:
1. Agree on an overall approach and accounting structure.
2. Create standardized and commonly agreed upon definitions and data collection procedures
for costs and services rendered.
3. Apply a standardized chart of accounts to record and analyze financial data.
4. Develop acceptable procedures for recording, reporting, and analyzing non-financial data.
Although the merits of all of these components seem obvious, reviews of actual practices showed
little consistency or standardization among different transportation providers. This report describes
how to achieve higher levels of consistency and standardization.
Overall Approach and Accounting Structure
Full Cost Accounting
The accounting approach recommended and used by successful business operations and trans-
portation systems is called full cost accounting. Using full cost accounting means that all costs of
providing transportation services are considered, and that all the different kinds of expenses
incurred are recorded. The total costs include any commitment of or use of time, money, phys-
ical resources, and other assets of the system used in the accomplishment of program objectives.
In full cost accounting, a value is given to these commitments whether or not they result in
immediate out-of-pocket expenditures. The value of the time provided by volunteer drivers is
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