Fiscal and Administrative Policy

Below is a summary of the changes made to these policies. Listed is the policy number, policy title, and the changes made:

• 101 Employer-Employee Relationship: Added paragraph five about performing services. (03/15/2026)
• 110 Form 1099 Compliance: Re-write of the policy. (03/15/2026)
• 122 Leave Balances: New (03/15/2026)
• 205 Fixed Asset: The 69th Legislative Assembly repealed NDCC 54-27-21. The fixed asset threshold change will go from the current $5,000 to $10,000 or greater. (effective 07/01/2025)
• 207 Promotional Expenses: The dollar amount to $10 and added text of approval is contingent upon the specifications outlined in the request and will remain valid until changes in circumstances necessitate the submission of a new request. It is the responsibility of the agency to assess and determine when such changes occur. (03/15/2026)
• 218 Authorized Supplier Liaison: New (03/15/2026)
• 219 Fraud Prevention: New (03/15/2026)
• 220 Interfacing with PeopleSoft: New (03/15/2026)
• 221 Know Your Supplier: New (03/15/2026)
• 312 Leases and Lease-Purchase Agreements: The 69th Legislative Assembly repealed pursuant to House Bill 1081. Lease versus purchase analysis is no longer required. (effective 03/18/2025)
• 501 Expense Reimbursement Relating to Telework, Mileage and Miscellaneous Expenses:
  • Privately owned vehicle mileage reimbursement updated. (effective 01/01/2026)
  • Updated the entire Workplace Locations section. (effective 08/01/2025)
  • Employee Reimbursement section – struck out the reference to $0.45 and added GSA rate. (effective 08/01/2025)
• 502 Travel Vouchers for Non-State Employees:
  • Struck out reference to the state rate and added GSA. (effective 08/01/2025)
  • Added second paragraph reinstating that non-state employees may receive a 1099 and that agencies need to ensure the same IRS rules apply to their travel. (effective 08/01/2025)
• 505 Reimbursement for Meals and Lodging: 
  • Removed the 90% rule reference. (effective 10/01/2024)
  • Added verbiage for when the rate is not available. (effective 08/01/2025)
• 511 Use of Personal Vehicle: Mileage rate updated (effective 01/01/2026).
• 519 Charter, Lease, or Rental of Aircraft: Mileage rate for allowable private aircraft travel updated. (effective 01/01/2026)
• Appendix A: 
  • Addition of Subscription Based Information Technology Arrangements (SBITA). (effective 07/01/2022)
  • Many updates related to Information Technology. (effective 07/01/2025) 

A program has been established for deferring a portion of employees' compensation in accordance with NDCC 54-52.2.

These deferred compensation programs are made available as an option to employees to provide supplemental retirement income with favorable tax consequences on current and future income.

The provisions of federal law and the IRS require strict adherence to several regulations. To protect the integrity of the tax preferred status of deferred compensation, a uniform plan has been developed for use by state agencies. A committee, as provided for in the federal regulations and state statute, administers this uniform plan.

For information relative to deferred compensation, contact the Public Employees Retirement System.

Effective March 15, 2026

The State of North Dakota is required by law to withhold payroll taxes on compensation paid where an employer-employee relationship exists. This precludes making payments to individuals from operating expenses where there is an employer-employee relationship.

The Internal Revenue Service uses many factors to distinguish independents or independent contractors from employees. Factors such as control over method of doing work, training of new employees, place where work is done, determination of hours, source of tools and supplies, etc., are used as qualification criteria. The approach taken by the IRS varies greatly from job to job, agent to agent, and year to year.

The following minimum guidelines should be used to determine whether an individual should be classified as an employee or as an independent contractor as described in the internal revenue code:

• "Generally, there is an employer-employee relationship when the person for whom services is performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work, but also as to the details and means by which the result is accomplished. The employer does not have to direct or control the way the services are performed; it is enough if he has the right to do so. The following factors are also important in determining whether a person is an employer: right to discharge; furnishing of tools; furnishing a place to work. If the employer-employee relationship in fact exists it does not matter that the employee is called an independent contractor. Substitutes who are properly working in place of regular employees are considered employees for purposes of withholding."

When one agency is paying an employee from another state agency for services, generally these payments should be paid out of the salary line item not treated as a contract expense that is subject to 1099 reporting.

If it is determined an employee is performing services in the capacity of an independent contractor, payments to employee-suppliers (active state of ND employee) which are 1099 reportable will be made on a supplier record separate from the established seven digit employee ID. The paying agency must collect a W-9 and submit it to VRO for processing to establish the new supplier ID.

Budget requests must be prepared utilizing the above guidelines.

The payroll treatment of interagency transfers will be accomplished in accordance with the North Dakota Personnel Policies. These policies set forth the authority granted agencies under NDCC 54-51 and provide guidelines for the transfer of annual leave and sick leave.

OMB will release all non-payroll information to which it has access, such as payments for travel, expense vouchers, miscellaneous claims, etc., pertaining to any state agency, department, board, etc.

In accordance with NDCC 44-04-18.1, except as otherwise specifically provided by law, a state employee’s "personal information" is exempt from being open to the public and will not be released by OMB. "Personal information" means a person’s home address; home telephone number; photograph; medical information; motor vehicle operator’s identification number; social security number; payroll deduction information; the name, address, phone number, date of birth, and social security number of any dependent or emergency contact; any credit, debit, or electronic fund transfer card number; and any account number at a bank or other financial institution.

OMB will release, as a matter of public record, other “non-personal payroll information" not exempt. NDCC 44-04-18.2 states “Upon request for a copy of specific public records, any entity subject to subsection 1 shall furnish the requester one copy of the public records requested. A request need not be made in person or in writing, and the copy must be mailed upon request....”

A public entity may charge a “reasonable fee” for the actual cost to make the copy, including labor, materials, and equipment. Refer to NDCC 44-04-18 section 2 for more details on what and how much a public entity may charge.

The state is now using Experian verification services for all the state’s employment verifications. Requests to verify employment or salary history for current or former employees should be referred to Experian, to complete the verification process.

Exceptions 

• The "personal information" as defined in NDCC 44-04-18.1, at the discretion of OMB, can be released if there is a valid request and is necessary to conduct state business.
• Any telephone number and the home address of an employee of the Department of Corrections and Rehabilitation are confidential and will not be disclosed.
• Any "personal information" or records that would reveal the identity or endanger the life or physical wellbeing of any state undercover law enforcement officer is confidential and will not be disclosed. 

All departments and institutions of the State of North Dakota will pay to OMB one percent of the first six thousand dollars of each employee’s earnings. This assessment is to be paid from the general fund and special funds appropriated to the individual departments and institutions.

For agencies on the central payroll system, the above assessment will be automatically charged to appropriations from the monthly payroll records. A report will be issued of all salaries for which the assessment has been charged.

Agencies not on the central payroll system will be required to report all salaries paid (by employee) and pay the assessment on a monthly basis.

OMB is responsible for the collection of this assessment and for processing of reimbursements to Job Service North Dakota. However, each department is responsible for the verification of claims and the certification for payment.

OMB may suspend the above assessment upon determination that the Unemployment Compensation Fund has sufficient resources to offset anticipated obligations.

NDCC Chapter 54-14-04.3, provides for severance pay as follows:

1. For the purpose of this section, severance pay means compensation received, upon termination of employment, for reasons primarily beyond the control of the state employee or officer. Severance pay does not include payments made to a terminated employee or officer for accrued annual or sick leave, or compensatory leave, where such payments are authorized.
2. Except as provided in Subsection 3, no state employee or officer shall be entitled to severance pay upon termination of employment if the employee or officer quit employment voluntarily or resigned of his or her own accord, or was dismissed for gross neglect of duty, gross misconduct while on duty, or for other good cause. A state employee or officer may be entitled to severance pay if the employee or officer was dismissed from employment because of reductions in staff or temporary or permanent layoffs, or for other reasons primarily beyond the control of the employee or officer.
3. A state agency may, within the limits of its legislative appropriations, provide financial incentives to encourage an employee to retire or resign if the resulting departure will increase agency efficiencies or reduce expenses.

All disbursements will be made through the state’s PeopleSoft payroll and financial systems.

Manual checks will not be issued by OMB except in extreme emergencies where severe hardship or damages will result from a delay in processing the payment through normal channels.

The issuance of manual checks has a negative impact on internal control and requires additional accounting and clerical procedures. Normal delays in processing caused by data entry complications do not constitute an emergency, especially when an agency should have commenced with the payment process at an earlier date.

OMB operates the state's central payroll system. This system is operated for all state agencies except the institutions and agencies under the control of the ND University System and the ND Mill. The following policies and procedures explain the payroll deduction features of the central payroll system.

Limitation on Charitable Campaign Deductions: OMB will process deductions for charitable campaigns only when they directly benefit the citizens of the State of North Dakota.

Payroll Cycle: The central payroll system operates on a monthly cycle. Advanced payroll employees receive their checks the first working day of the month. All hourly employees and overtime payments are paid on the tenth calendar day of the month. If the tenth falls on Saturday or Sunday, payment will be made the prior Friday. The payroll is for the previous month's services.

Tenth Calendar Day of the Month Payroll Schedule: Payroll checks are released for hourly employees, overtime, and any other pay that was not paid on the first working day of the month on the tenth calendar day of the month.  

This is the normal payroll schedule. No guarantee of the payment dates can be made since mechanical problems, or other unforeseen problems could cause delays.

The key control system and card access systems are maintained for the security of the capitol complex. All capitol complex buildings are controlled and secured by a master key locking system. Keys for elected or appointed official's offices located in the capitol complex will be issued and controlled by Highway Patrol. Keys to doors in the legislative wing will be issued and controlled by the Legislative Council. Keys are needed to enter the building and offices on weekends, and weekdays after normal working hours.

Each department and agency will designate an individual to request keys and ensure the return of keys. Agencies and departments should ensure they receive all keys from employees who are terminating their employment with the State of North Dakota prior to their last day. OMB will retain a master listing identifying the keys issued by department, employee, and access allowed by the key or card for the Highway Patrol.

State employees will be issued electronic access (card or key) if approved by the agency head. If employees are granted outside-door access, they must be given a key to their office area. Each employee will be responsible for any guests who accompany them into the building.

Keys or cards issued to employees become their personal responsibility. If lost or stolen, it must be reported immediately by the employee to the agency and by the agency to NDHP security. The employee may be charged a fee for the lost key or card.

Employees issued keys and/or electronic access cards shall return them to the employing agency upon termination of employment.

Employing agencies shall request, within 10 business days, the disabling of an electronic card of an employee who terminates employment.

OMB is responsible for the assignment of office space within the capitol complex. All state agencies and departments must comply with this policy and the procedures in NDCC 54-21-24.1 except for the North Dakota University System, the Adjutant General, the Department of Transportation, and storage space for field engineers and maintenance crews.

When space is not available in the capitol, it is necessary to lease or rent additional space in buildings located off the capitol grounds. Leases for office space off the capitol grounds must be approved by OMB and reviewed by the Office of the Attorney General.

Agencies needing office space outside the capitol complex must first review locations currently rented by other agencies and attempt to secure rental space with other existing units of government prior to securing new locations. OMB has a list of office space within the Bismarck-Mandan area currently leased by state agencies and departments.

Co-location of agencies within the same building will help to ensure efficiency and shared services between units of state government. OMB limits the number of locations for state offices in rental space to help individuals who need the services of these agencies and departments.

Once an agency has decided where to locate its office, the standard lease form provided by OMB must be presented to the owner/landlord for review and approval. This standard lease will be the basis for all leases or rentals. Amendments or special additions may be identified and added to the lease if they are relevant to the function of the agency for specific services being provided by the landlord. Once the lease is signed by both the Office of the Attorney General and OMB, it will be returned to the agency for signature. One copy of the lease, with all signatures, must be retained in OMB.

All remodeling projects within the capitol complex need to be approved by the Director of Facility Management.

Effective March 15, 2026

Internal Revenue Service (IRS) Internal Revenue Code (IRC) requires a form 1099 Information Return be filed for certain payments made to a reportable payee. A reportable payee is an individual or business for which reporting requirements are determined by the entity's federal tax classification. The state is NOT responsible for issuing a 1099 for payments made with a purchasing card (P-Card). The state IS responsible for issuing a 1099 for payments made by check or Automated Clearing House (ACH).

IRS W-9/W-8: Agencies must collect the appropriate IRS Form W-9 or W-8 from eligible suppliers (payees) approved for payment which require a Supplier ID be established in PeopleSoft. This form is required for all supplier disbursements NOT paid with a P-Card and is to be filed with the paying agency. Suppliers submitting this form are certifying the Tax Identification Number (TIN) and information provided is accurate and they are not subject to backup withholding. A substitute Form W-9, which meets IRS requirements, may be used in place of the IRS W-9. Agencies using their own substitute W-9 are responsible for maintaining the form in compliance with IRS requirements.

IRS TIN/Legal Name Match: OMB performs a TIN Match using the IRS eServices application. Any supplier request that fails this TIN Match will not be approved in PeopleSoft. The paying agency conducting business with the supplier is responsible for communication with the supplier and to obtain appropriate and accurate information to re-submit to the Vendor Registry Office (VRO) for processing.

Backup Withholding/Backup Withhold “B” Program: Internal Revenue Code (IRC) § 3406 requires backup withholding start for any supplier with an incorrect TIN or where a Form W-9 or W-8 is not filed with the agency. Backup Withholding must be withheld at the current percentage rate defined by the IRS. An agency must withhold this percentage from any future payment(s) issued to the supplier ensuring IRS receives the tax due on this income. If OMB receives an IRS “B” Notice, the supplier will not have an “Approved” status or be established in PeopleSoft.

Payments and 1099 Reporting: The paying agency determines which payments issued are 1099 reportable and on which 1099 form and class. Agencies must designate a primary 1099 maintenance contact to be accountable and responsible for 1099 reporting for their agency. Review and correction of payments must be performed by this individual within established IRS and OMB deadlines and procedures. Accurate 1099 reporting of payments is the responsibility of the agency issuing the payment. In compliance with IRS Regulations, OMB electronically files PeopleSoft supported 1099 Information Returns with IRS and mails copy B forms to 1099 recipients. Questions from 1099 recipients are answered by the paying agency. Returned 1099s or requests for a copy are forwarded to the paying agency’s 1099 contact.

All monies received by the payee must be reported. It is the responsibility to report to the IRS those expenses that are business connected. Non-state employees must be paid as state employees when expenses are involved (for example, the same IRS rules apply if there is no overnight stay). Agencies that pay for these expenses must report them as taxable income.

All state agencies, departments, and institutions requesting to lease or rent a postage meter must comply with NDCC 54-06-18. Each state agency, department, or institution authorized by the director of OMB to lease or rent a postage meter shall maintain records as the director may require and allow the inspection of those records on request.

An annual report identifying total postage used during the calendar year must be submitted to the Central Mailroom by February 15 of each year.

The Central Mailroom will keep a record of the identification numbers of all postage meters authorized for usage.

The University System is exempt from this statute and policy.

Per NDCC 12-60-24, the Director of the Office of Management and Budget shall require an FBI criminal history background check for each individual who has access to personal information. For purposes of this policy, the term “personal information” applies to electronic information contained in the State’s PeopleSoft system.

This policy applies to an applicant or existing employee that is requesting access or additional access to roles in PeopleSoft that have been previously identified in the ConnectND HRMS Security Access Request (SFN 54176); ConnectND Financials Security Access Request (SFN 54418); FIN/HCM Business Intelligence Security Access Request (SFN 59165).

This policy does not apply to state employees:

• If they are transferring from one state agency to another, have had no break in service, and had the FBI criminal history background check. They are not required to have another.
• If an employee is taking on additional duties or adding additional roles to their access and they had a prior FBI criminal history background check, and the employee currently has access to specific roles that have been identified in the forms listed above.

The Risk Management Division of OMB is responsible for coordinating the FBI background checks with the Bureau of Criminal Investigations (BCI) division of the State Attorney General. See Background Checks for PeopleSoft Access on TeamND Connect intranet website.

If an employee is in custody of any of the items listed below, agencies should ensure they are returned by employees who are terminating employment with the State of North Dakota prior to their last day of employment (this is not a complete list of items):

• P-card
• State Phone Card
• State ID Card
• Keys to Capitol Complex (also see Policy 108)
• Business Cards
• State Issued Electronic Devices

OMB requires that any overpayment/repayment, made to an employee currently on the state’s payroll system, be deducted from the employee’s subsequent payroll check(s). An agency is required by NDCC 34-14-04 and NDCC 34-14-04.1 to get a signed statement from the employee that they agree the overpayment happened and that it will be corrected by deducting the overpayment from their future check(s). This signed statement should be kept in the agency’s employee payroll file. By deducting the overpayment/repayment from future check(s), the payroll system can correctly calculate current year federal and/or state taxes for the employee. The total amount that should be deducted from future check(s) should be either 1) the gross amount of the overpayment/repayment or 2) the number of hours that the employee was overpaid.

OMB recommends that any overpayment/repayment should be paid back, in full, in the month after the overpayment/repayment is discovered. An overpayment/repayment that is reported to OMB within 5 days of the check/advice issued date can be reversed and a correct check calculated and reissued.

If an overpayment occurs at the end of the calendar year, the employee may have to pay back the amount in a personal check. OMB will then manually adjust the wages and taxes and print a corrected W-2. However, this practice should be avoided whenever possible.

An employee must designate one account within the Direct Deposit section of PeopleSoft payroll with the Deposit Type of Balance. If an employee wants their paycheck distributed to multiple accounts, the employee can establish desired percentages and/or priorities for each savings and/or checking account. However, the highest priority account should be the Balance account. Designating one account as the Balance account facilitates the movement of the appropriate vendor information to PeopleSoft Financials.

As stated in NDCC 54-44.3-16 the task of certifying payroll is done at the agency level.

• “The designated personnel officer of each agency or department shall certify to the agency elected or appointed chief officer that each person holding a position in the classified service authorized for payment through payroll has been classified in accordance with the provision of this chapter and that the rate of pay is within established current salary ranges or excepted from the ranges by written authorization by the director.”

It is the agency’s responsibility to ensure that payroll is signed by a designated official certifying that all positions have been classified appropriately and paid within the assigned salary ranges. Proper certification is accomplished through the current signature process to authorize payroll. Please keep in mind that the director of Human Resource Management Services will still be able to take exception to payments if it is determined that an individual has not been classified correctly or paid within the assigned salary range.

Employees who are eligible to receive disability benefits for a lost time claim can continue to receive full salary by choosing to use leave to supplement their benefits. Any employee that is receiving worker’s compensation benefits should complete the Worker’s Compensation Leave Option form, in the Risk Management Manual 9.7-6. If an employee chooses to use leave to supplement their benefits the disability check stubs must be turned over to the agency payroll clerk to receive this benefit. The amount paid by WSI will be deducted from your paycheck. State law prohibits employees from receiving both worker’s compensation benefits and full leave benefits simultaneously.

Worker’s compensation benefits are not taxable. Therefore, when an employee turns over a copy of the disability check stub, the following adjustments should be made:

• Payroll
  • Make a negative one-time adjustment for the amount of the worker’s compensation check. (It will be a reduction of pay). The employee will keep the worker’s compensation check.
• Leave Adjustment
  • Determine difference between regular pay and amount paid by worker’s compensation for the hours gone.
  • Find out the hourly rate for the month that the person was gone, then take the hourly rate times the number of hours gone that month.
  • Determine what this amount is equal to in leave.
  • Adjust the leave taken. First annual leave and/or comp is reinstated and then sick leave.
  • If a holiday falls within the timeframe that worker’s compensation is received, the holiday needs to be docked from the hours adjusted back. The hours adjusted back are figured only on the leave hours that were taken.
• Example
  • Monthly salary $1600 – worker’s compensation paid $500
  • Employee off 9 days = 9 days X 8 hrs/day = 72 hours
  • 22 days in the month x 8 hrs/day = 176 hours in the month
  • $1600/176 = $9.09 (hourly rate)
  • $9.09 X 72 hours = $654.48
  • $654.48 - $500 (WC payment) = $154.48
  • $154.48/$9.09 = 17 hours leave employee should be docked
  • Reinstate 55 hours of leave (72 hours taken – 17 hours that should have been used)

The State of North Dakota understands the importance of maintaining morale by recognizing employee length of service or retirement. Please refer to NDAC 4-07-18 for service award types and allowable amounts. Depending on certain criteria established by the IRS, the gift may be taxable to the employee. This policy provides specific guidelines to determine if the gift is taxable or non-taxable to the employee. If the award is taxable, the award must be reported on the employee’s pay line for the month. If it is not taxable, it should be processed through Accounts Payable.

Non-Taxable: The gift is non-taxable to the employee if the award from the state agency meets all the criteria outlined below:

• Timing: NDAC 4-07-18 service awards and amounts comply with IRS rules. The value of the three-year award is considered de minimis and is not affected by the five-year rule.
• Dollar Limit: NDAC 4-07-18 service award values do not exceed the maximums established by the IRS.
• Form of Award: The award must be in the form of tangible personal property, i.e., the gift may not be in the form of cash, check, or gift card. Gift certificates that are redeemable for general merchandise are also considered cash and are taxable. Those which can be applied only to a choice of one type of item are considered non-cash and are not taxable. Note: An agency may purchase a gift (tangible item) in lieu of a gift certificate or cash on behalf of the employee as long as the gift’s value corresponds with the service award amount specified in NDAC 4-07-18. This gift would qualify as non-taxable under IRS rules.
• Meaningful Presentation: The award must be presented as part of a special event or celebration that marks the occasion.

Taxable: If any one of the following criteria is met, the award is taxable. The taxable portion of the award must be reported on the employee’s pay line using earning codes S74 or S77 for the month the award was received so that the appropriate taxes can be withheld through the payroll system and reported on their W-2:

• Form of Award: Awards given in the form of cash, check, gift card or gift certificates that are redeemable for general merchandise, are considered cash equivalents and are taxable regardless of the amount.
• Meaningful Presentation: If an award is not presented as part of a special event or celebration that marks the occasion, it is considered an ordinary gift, and the entire amount is taxable if the award value exceeds $100.

As provided in NDCC 34-14-02, all new and current employees of the State shall have wages paid with direct deposit in the financial institution of the employee’s choice.

The Bank of North Dakota will assist any employee with establishing a new checking or savings account, if desired.

Exceptions to payment of wages by direct deposit are permitted only:

• If an employee is not able to lawfully maintain a checking or savings account in the United States or upon written approval from the head of the employee’s agency, based on a determination that the direct deposit requirement would cause hardship to the employee.

All state agencies and institutions should analyze and evaluate the need to fill positions as vacancies occur in order to ensure state government operates efficiently. Agencies and institutions should look at all options for filling non-temporary positions. Examples of these options:

• Hiring temporary staff.
• The use of consultants or contracts on a temporary basis.
• Distributing workload within existing staff.

Positions that have not been filled within 6 months, should be evaluated to see if there is a need for the position.

HRMS is available as a resource for state agencies in analyzing the need to fill vacant positions.

OMB will set up a payroll deduction code and vendor for agencies that want to have an employee voluntary deduction program account for their agency. (These program accounts could be used for agency jeans day fund, office coffee fund, office birthday fund, etc.)

The following guidelines should be used if an employee voluntary payroll deduction program account is set up:

• A separate bank account needs to be setup at a local bank for the agency’s employee programs. The agency will need to contact vendor registry to set up a new vendor number with their ACH information.
• The agency will be required to obtain their own Federal Tax ID number for these accounts and will not use the states or the agency’s Federal Tax ID numbers.
• The agency should establish internal policy and procedures to govern these accounts outlining authorized expenditures and authorized users.

Contact OMB’s payroll division to set up the necessary payroll deduction code. 

Effective March 1, 2026

This policy outlines the standards for accounting and reporting the State’s compensated absences, which refer to team members’ accrued leave balances. Under Generally Accepted Accounting Principles (GAAP), the State is required to report a liability on its financial statements as of June 30 each year for the value of certain compensated absences. In compliance with GASB 101, the Office of Management and Budget (OMB) will calculate compensated absences for agencies using PeopleSoft.

All types of leave including but not limited to Annual Leave, Sick Leave, and Compensatory Time, for both exempt and non-exempt employees, must be recorded in the State’s official system of record, which is PeopleSoft. If agencies use ancillary time and attendance systems, they must ensure leave balances are reconciled and accurately reflected in PeopleSoft on a monthly basis.

Agencies are encouraged to establish internal policies and controls to ensure that leave balances in PeopleSoft are accurate and reliable for financial reporting purposes. 

Every agency and institution is required to identify and record liabilities, receivables, inventories, and other financial statement data at the close of each fiscal year. The financial data must be reported in accordance with generally accepted accounting principles relating to year-end accruals of receipts and expenditures.

The accounting system allows transactions to be applied to the previous month. Expenditures incurred in June and paid in July should have an apply-back date of June. Receivables deposited in July for June activities should also have an apply-back date of June.

The general rule is that expenditures are to be charged to the fiscal year in which the goods or services were received. Guidance can be found in OMB's Fiscal and Administrative Policy 201. According to that policy, “… all goods and services ordered and received prior to June 30 must be charged to the biennial appropriation for the period ending June 30. Goods and services received after June 30 are obligations of the biennial appropriation beginning July 1.” It further states “This policy prohibits receiving goods and services in July and charging the cost to the previous biennium, as well as improperly charging a new biennium for past biennial costs.” Although the OMB policy refers to the end of a biennium, the same accounting guidance is applicable for the first fiscal year of a biennium.

In certain cases, expenditures are allowed to be paid prior to the goods or services being received. One instance is when prepayment is a requirement of the contract, such as in the case of certain rental payments or insurance payments. Another instance is when a discount is offered for early payment, such as when purchasing airline tickets. However, there are very few exceptions to the general rule. 

As stated in Policy 200, every agency and institution is required to identify and record liabilities, receivables, inventories, and other financial statement data at the close of each fiscal year.

Additional procedures are required at the close of the biennium in order to comply with legislative intent and appropriation laws.

Specifically, all goods and services ordered and received prior to June 30 must be charged to the biennial appropriation for the period ending June 30. Goods and services received after June 30 are obligations of the biennial appropriation beginning July 1.

This policy prohibits receiving goods and services in July and charging the cost to the previous biennium, as well as improperly charging a new biennium for past biennial costs.

Note: All purchase orders or contracts must be issued to include the wording “payment contingent upon availability of funds”. This will be the policy upon which OMB will approve and record appropriation expenditures, and upon which the State Auditor will base an examination.

At the start of each biennium all state agencies and institutions should distribute their appropriations on the state accounting system. These should be distributed at least at the department ID level. To allow the Budget Office to control the rate of expenditures as required in NDCC 54-44.1-03, Section 5, agencies may allot their appropriations by month. The state accounting system allows monthly expenditure estimates and will provide comparisons of monthly estimates to actual expenditures.

If the agency's total appropriation authority is adjusted during a biennium, it is the agency's responsibility to adjust the organizational budget detail that had previously been set up on the accounting system to reflect the changes in the total appropriation. OMB is responsible for adjusting the Appropriation and Appropriation Line budget amounts.

Whenever an agency or institution foresees a possible budgeting problem, OMB must be notified. The notification will, at a minimum, include the fiscal impact, the circumstances causing the possible budget problem, and alternative courses of action the agency or institution is examining to alleviate it.

These requirements are in accordance with the responsibilities and power granted the Office of the Budget by NDCC 54-44.1.

Appropriation expenditures must be consistent with the requirements of NDCC 54-27-10, which reserves 25 percent of agency budgets for salaries and operating expenses for the last six months of a biennium.

NDCC 54-44.1-11 requires that 30 days after the close of each biennial period all unexpended appropriations or balances of appropriations shall be canceled.

When an agency or institution is funded only by general fund money, the appropriation will be canceled.

When an agency or institution is funded by the general fund, and federal or other funds, a certificate is necessary to provide accurate information on the unexpended general fund authority.

This certification is required to be filed with OMB following the close of each biennium. All such certifications are subject to audit.

Requests for Emergency Commission action will be submitted to the Secretary of State as the need arises. The requests will be retained by the Secretary of State until a meeting has been arranged.

All requests for Emergency Commission action must be submitted on the standard format approved by the Commission. These forms are available from the Secretary of State.

Five copies of all Emergency Commission requests in addition to the original must be submitted to the Secretary of State. OMB receives a copy from the Secretary of State.  

OMB is the statutory counsel to the Emergency Commission, and will review, analyze, and investigate all requests prior to making a recommendation for approval or disapproval to the committee.

Agencies and institutions must submit their requests prior to accepting or obligating funds associated with the requests.

All agencies and institutions shall include all fixed assets under their control in their financial statements, except those having a value below the threshold set in the Fixed Asset Policies in Attachment A. The State Auditor is authorized to provide for the written exemption of specific fixed assets valued at or above the stated fixed asset threshold when an exemption is justified upon generally accepted accounting principles.

The director of each agency and institution is required to maintain a complete and current inventory record of all property of sufficient value and permanence as to render such inventory record practical. Each year, every agency and institution is to do a physical inventory (an actual verification of the inventory records via a physical observance of each item) and certify said inventory. This section requires the accountability of inventory of sufficient value and permanence in order to safeguard the assets and is independent of the stated capitalization threshold for financial statement reporting. Each agency and institution is to establish a policy that specifies the dollar level that will be used to implement the accountability threshold. This policy should also include the inventory of assets that are particularly at risk or vulnerable to loss.  This will include risk associated with data security on mobile or portable devices and managing small and attractive assets. (some examples - personal computers, tablets and smart phones, electronic items, cameras, power tools, firearms). The policy should also consider the agency or institution’s insurance needs. Without adequate records, insurance claims may be disallowed. Each policy will be examined for reasonableness by the State Auditor at the time of audit.

See the Fixed Asset Policies in Attachment A.

With the State’s implementation of PeopleSoft, agencies are required to complete the forms below and submit them to OMB, where they will be kept on file. The following forms can also be found at www.nd.gov/eforms.

• Agencies must submit SFN 54418 ConnectND Financials Security Access Request for any adds, deletes, or changes to security access for PeopleSoft Financials. This form contains a list of roles available to access various modules within PeopleSoft Financials. NOTE: This form will frequently change to reflect corrections or additions of new roles created.
• Agencies must submit SFN 54176 ConnectND HRMS Security Access Request for any adds, deletes, or changes to security access for PeopleSoft HCM. This form contains a list of roles available to access various modules within PeopleSoft HCM. NOTE: This form will frequently change to reflect corrections or additions of new roles created.
• Agencies must submit SFN 59165 FIN/HCM Business Intelligence Security Access Request for any adds, deletes, or changes to security access for Cognos. 

There are two methods available to agencies for submitting the above forms to OMB, either in paper format or electronically:

• The forms can be completed online, signed electronically by authorized agency personnel, and submitted via email to Fiscal Team at OMB.
• The forms can be printed, signed by authorized agency personnel, and mailed in hard copy to Fiscal Team at OMB.

Effective March 15, 2026

This policy does not apply to:

• Miscellaneous items under $10 per unit such as key chains, pens, flyers, coffee mugs, trinkets, etc., used to promote special programs or public awareness in the normal course of state business.
• Career Fairs: Booth rental and miscellaneous items under $10 per unit such as key chains, pens, flyers, coffee mugs, trinkets, etc., used to recruit potential employees.
• Trade Fairs: Booth rental and items used to promote products/services/programs offered by the agency. The $10 maximum does not apply.
• Commodity Groups for items used to promote their product.
• The purchase of such items with federal funds as long as it is an allowable expense of the federal program. The $10 maximum per unit does not apply in these instances.
• Expenses related to hosting a conference or training seminar where a registration fee was charged to cover the costs of the event. See Policy 211 – Hosting Training/Conferences, Handling Receipts and Bills.

All other types of promotional expenses will be permitted only if:

• They promote North Dakota, its goods or services; and
• OMB Fiscal Policy Waiver Request 58670 was submitted by the agency director and approval was obtained from the Director of OMB. 

Agencies are expected to use restraint and common sense in authorizing these types of expenses.

OMB may periodically review the requests on file and ask agencies to resubmit SFN 58670 to keep requests current. Approval is contingent upon the specifications outlined in the request and will remain valid until changes in circumstances necessitate the submission of a new request. It is the responsibility of the agency to assess and determine when such changes occur.

All requests, approved or denied, will be on file at the OMB.

Payment of honoraria is not authorized if there is indication that payment is being made by a department for work or presentation by a state employee who is already being paid by the state for that work.

The department requesting the work or presentation should have a contract with the individual receiving the honorarium. Language in such a contract should indicate the individual is not receiving a salary or other remuneration from the State of North Dakota for the services performed.

If the individual is on approved annual leave from a state agency job, the circumstances should be specified in the contract.

A copy of any such contract must be on file for audit purposes.

Payment by the state of dues to professional organizations is not a fringe benefit for state employees.

Wherever possible, a membership should be carried in the name of the state agency and not of an individual. The idea behind this approach is to promote transferability of the benefits of the membership.

To justify the expenditure of funds, association memberships should be related to an employee’s job duties or should be beneficial to the state.

Agencies should not process vouchers for donations to individuals or groups.

Where a donation represents an in-lieu-of payment for goods received, or a service performed, this policy may be waived with adequate supporting documentation.

Note: If an agency has budgeted for a conference and the expenses of hosting the conference have been included in the agency’s appropriation, the agency must charge their appropriation, rather than using the Conference Fund.

Agencies on PeopleSoft

When an agency must host a conference for which the costs will be covered by registration and/or other fees charged to the participants, the Office of Management and Budget, the Office of State Treasurer, and the Office of the State Auditor have established the following procedures:

• All checks and cash must be deposited with the State Treasurer into the Conference Fund on PeopleSoft, fund 212.
• Receipts must be issued for all fees collected.
• All bills must be paid by a check or the purchasing card from the Conference Fund on PeopleSoft.
• Within 60 days after the end of the conference, all expenses associated with the conference must be paid. Any excess receipts must be transferred to the favor of the general fund or special fund from which the agency is funded. Any extra costs become the liability of the host agency and can be paid by voucher against its budget.
• A complete and detailed reporting of the receipts and disbursements associated with the conference will be maintained by the department and be made available to the Office of the State Auditor upon request.
• Conference receipts may not be used to pay salary costs of any state employee.

Agencies NOT on PeopleSoft

• All checks and cash must be deposited in a special checking account at the Bank of North Dakota. The Bank will provide sufficient new account checks to permit the paying of all bills at the conclusion of the conference. Two signatures will be required on the checking account and on all checks ─ those of the department head and of the person responsible for the details of the event.
• All special checking accounts must be approved by the State Auditor and the State Treasurer.
• All registration fees will be made payable to the name of the conference. Receipts must be issued for all fees collected. It is important that no checks be made payable to the State of North Dakota or any department or agency of the State of North Dakota, as these must be deposited to the credit of the general or operating fund.
• All bills must be paid by a check drawn on the conference's special checking account at the Bank of North Dakota. All checks shall bear two signatures.
• All expenses associated with the conference must be paid 60 days after the end of the conference, and any excess receipts must be deposited to the favor of the general fund or special fund from which the agency is funded as a receipt from the hosting agency. Any extra costs become the liability of the host agency and can be paid by voucher against its budget.
• A complete and detailed reporting of the receipts and disbursements associated with the conference will be maintained by the department and made available to the Office of the State Auditor upon request.
• Conference receipts may not be used to pay salary costs of any state employee.

Note: Policy 211 refers to internal training sessions only. Policy 211 does not apply to regional or national conferences of established associations held in North Dakota. (An example would be the Midwest State Budget Officers Association.) These types of conference expenses are not generally appropriated and therefore should not be processed through Fund 212. The agency hosting a regional or national conference should open a checking account at a local financial institution. These accounts should not be opened in the name of the state, be in any way associated with a state agency, or impose any liability on the state.

Per NDCC 54-06-29, all funds collected on behalf of a state agency by a collection or credit agency must be deposited with the State Treasurer. An amount equal to the fees paid to the collection agency is appropriated as a continuing appropriation from the fund where the revenue was deposited.

When paying the collection agency, use the following PeopleSoft coding:

• Account: 474015 – Fees Paid to Collection Agency
• Fund: Use the same fund that was used on the original deposit

The above coding will not draw down appropriation authority. 

Agencies are responsible for monitoring their federal funds to ensure all activity is recorded and reported properly. There are three main types of federal grants – reimbursement grants directly from a federal agency and advanced revenue grants direct from a federal agency (direct grants), and pass-through grants from another state agency/university (which should generally also be reimbursement grants).

It is recommended that a new federal fund be assigned to each new federal award to ease tracking and accountability. This is especially necessary for reimbursement grants. (There are limited instances of a “payment by unit of service” that may deviate from this procedure as approved by OMB.) Funds should be closed out once they are completed.

Reimbursement grants should always have a negative cash balance on PeopleSoft. Federal funds should only be requested after expenditures have been incurred and paid, in accordance with federal agreements.

Direct grants should have all year end accruals reported to OMB on closing packages. This includes, but is not limited to accounts payable, due to other state agencies and receivables (reimbursement grants) or deferred revenue (advance grants). For pass-through grants, agencies will report payables on closing packages, but will not report any receivables – those are determined by OMB based on the due to other state agencies amounts reported.

Agencies should monitor to ensure that each reimbursement grant at June 30 has assets equal to liabilities, when including the trial balance from PeopleSoft plus all related closing package amounts.  For advanced grants, at June 30 the liabilities will be greater than the assets by the amount reported as deferred revenue.

Agencies should also be monitoring their pass-through grants for propriety.

An Attorney General's opinion issued October 21, 1964, is as follows:

• "It is our opinion that a line-item appropriated account may not be credited with refunds except where the refund is the result of an accounting or bookkeeping error. The error referred to would include instances where a warrant check has been canceled after charging same to an account or in instances where the refund is the result of an erroneous overcharge for merchandise and the overpayment is corrected by refund, or where an account was erroneously charged with an expenditure which should have been charged to another account and is so corrected."

Therefore, the only time an appropriation can be credited is as follows:

1. Emergency Commission Action.
2. The voiding of a warrant written in the current biennium.
3. A current biennium payment made in error and refunded by a vendor.
4. An overpayment made in the current biennium and refunded by a vendor.
5. Two warrants are generated in the current biennium relative to the same claim.

If a prior biennium expenditure is refunded by the vendor or a prior biennium warrant is canceled, the transaction should be recorded as revenue in the current biennium and should be budgeted accordingly.

Alcoholic beverages will not be provided by the agency at an agency-sponsored activity such as a staff picnic, Christmas party, etc. Attendees may be permitted to bring alcoholic beverages to the event if the attendees comply with the regulations of the facility where the event is being held.

Internal Control & Fraudulent/Significant Dishonest Acts

Fraud is defined as intentional workplace deception, lying, cheating, and stealing or the use of one’s position for personal enrichment through the deliberate misuse or misapplication of the State’s resources or assets. Fraud is a crime and is also a civil law violation.

Internal control is a process affected by management and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. Internal control also plays an important role in the prevention and detection of fraud. Examples of internal controls are, but not limited to:

• Segregation of Duties: Separating authorization, custody, and record keeping roles to limit risk of fraud or error by one person.
• Authorization of Transactions: Review of particular transactions by an appropriate person.
• Retention of Records: Maintaining documentation to substantiate transactions.
• Supervision or Monitoring of Operations: Observation or review of ongoing operational activity.
• Physical Safeguards: Usage of items such as cameras, locks, physical barriers to protect property.
• Analysis of Results: Periodic and regular operational reviews, inventories, metrics, and other key performance indicators.
• IT Security: Usage of items such as passwords and access logs to ensure access restricted to authorized personnel.

Agency management must establish and maintain effective internal controls within their agency. A guide to effective internal controls is the “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States (Green Book).

Everyone in an organization has responsibility for internal control to some extent. Virtually all employees produce information used in the internal control system or take other actions needed to effect control. Also, all personnel should be responsible for communicating upward problems in operations, noncompliance with the code of conduct, or other policy violations or illegal actions. Each state agency has a particular role to play and is ultimately responsible for implementing proper internal controls within their organization.

An employee with a reasonable basis for believing that fraudulent or other significant dishonest acts have occurred in the workplace has a responsibility to report the suspected act in a timely manner.

Reports should be made to the employee’s immediate supervisor or manager, unless the employee suspects that the supervisor or manager has participated in or condoned the act. In that case, the employee should report the matter to the next highest level of supervision or management.

Reporting of Fraudulent/ Significant Dishonest Acts

This policy does not prohibit prompt notification to appropriate authorities when an immediate threat to personal safety exists or other circumstances justify such notice. Upon discovering evidence of possible fraudulent or other significant dishonest acts, employees should not confront individuals suspected of wrongdoing or initiate fraud investigations on their own because such actions may compromise any ensuing investigation.

Employees should not make statements or disclosures knowing they are false or in reckless disregard of the truth. Such false reports may be cause for disciplinary action up to and including termination.

All state agencies need to perform a fraud risk assessment for each of their functions and divisions. OMB’s fraud risk assessment policy and forms can be found in Fiscal Management’s website.

The Internal Control Guidelines, Fraud Risk Assessment and Fraud Risk Assessment Form are accessible to state agencies on the Accounting page in Team ND Connect.

This policy does not apply to meals included as part of a registration fee.

According to IRS Publication 463 Travel, Entertainment, Gift, and Car Expenses, meals are not taxable if it is necessary to stop for substantial sleep or rest to properly perform one’s work duties while traveling away from home on business. Worded another way, if there is not an overnight stay, any meals paid for or reimbursed to an employee are taxable and will be reported on the employee’s W-2 as gross pay.

In order to tax the meal and report it on the W-2, the employee needs to submit a travel expense voucher for reimbursement. The accounting system is designed to process the voucher and send the appropriate data to payroll. For these reasons, employees are to pay for meals and be reimbursed. Working lunches were an exception in the past but this is no longer the case.

A waiver to this policy may be granted by OMB under extenuating circumstances. For example, during an emergency, meals are provided to individuals who work 12-hour shifts and cannot leave the command center. To obtain a waiver in non-emergency situations, complete and submit to OMB the SFN 58670 OMB Fiscal Policy Waiver Request. The request will be reviewed for approval/denial.

Effective March 15, 2026

Agency Supplier Liaison

Each agency shall designate a Supplier Liaison, which will serve as the point of contact between the agency and Vendor Registry. Liaisons relay Vendor Registry Office (VRO) policy, procedure and program information to their internal and external audiences, which may include other internal agency staff or suppliers (payees, established or pre-established).

Supplier Liaisons are individuals trained on VRO policies and procedures which allows them to serve and fulfill the needs of their agency programs and eligible suppliers (payees). These individuals are responsible and accountable for the requests and information submitted to the VRO to add or update a supplier’s profile within the state’s supplier database. Supplier Liaisons must do their due diligence in obtaining current and accurate information and paperwork from suppliers and ensuring all documents are accurate and complete prior to submitting to VRO for processing and/or approval.  

Each agency’s Fiscal Officer or Accounts Payable Manager must identify a primary and up to two (2) alternate Supplier Liaisons. Larger agencies with legitimate business needs may request additional Supplier Liaisons by emailing Vendor Registry and stating the need for three (3) or more alternate supplier liaisons for their agency.

Requirements for the Supplier Liaison are as follows:

• Obtain required forms and/or documentation from the supplier.
• Ensure current versions of forms are being used.
• Signature and dated fields on forms must be within one year of current date.
• Validate the information provided is accurate and complete (with supporting documentation, as required).
• Submit work request for processing and attach any received and verified paperwork following VRO established procedures.

System Access & Training

Agency staff designated as a Supplier Liaison must review and sign the Agency User Acknowledgement prior to gaining access to the applications. Supplier Liaisons will need role security assigned and access to the following systems to perform the functions of their position.

• PeopleSoft Financials with Limited Vendor Inquiry and Managed Invitation roles and approvals.
• PeopleSoft 1099 Maintenance role if user is to perform 1099 maintenance tasks.
• Supplier Liaisons cannot have the PeopleSoft Finance Voucher Approval role.
• Vendor Registry Work Request System.
• PeopleSoft Supplier Registration work queue.
• Team ND Connect Intranet website.
• Microsoft Teams: -TM-SoND-Fiscal.

Effective March 15, 2026

OMB staff performs due diligence to identify potentially fraudulent requests, in conjunction with various system checks and safeguard procedures. These procedures are continually reviewed for improvements. Any request deemed potentially fraudulent or questionable will not be processed.

Communication for denial is purposely left vague – what is wrong or suspicious will not be disclosed to a (potential) fraudster. Rather, they will be instructed to work directly with the agency with which they are conducting business. Additional information about suspected fraud will only be shared with key agency personnel to assist in mitigation of the supplier’s approved status, should it be necessary.

Automated Clearing House (ACH) verification is critical and changes or additions to a supplier’s (payee’s) payment method and bank information must be verified by the paying agency. Verification methods may require:

• Verbal confirmation with the supplier’s authorized representative that initiated the ACH request or another known contact within the supplier’s organization you have previously conducted business with.  
• A signed ACH authorization form accompanied by a voided check or bank-issued account verification letter which can be verbally confirmed with the bank.

Updates to banking information require accompanied supporting documentation which all reconciles to the payee name and bank information on the form.

OMB is not responsible for payments issued and found to be fraud or related to identity theft. The agency that issued payment must work directly with their supplier, Bank of North Dakota and/or State Treasurer’s Office to resolve the matter. OMB will assist with coordinating communication and research as needed or requested.

Effective March 15, 2026

When launching a new program or implementing a software application that may need to interface with PeopleSoft, agencies must contact the Office of Management and Budget (OMB) as soon as they are aware an integration is needed. Agency team members should be prepared to share and discuss business and technology needs, security, IRS 1099 reporting requirements, labor resources, project schedule and development needs in the planning.

Ancillary systems interfacing with PeopleSoft’s supplier (payee) profile data must ensure the data in their ancillary system is updated as supplier profile information changes in PeopleSoft. PeopleSoft remains the state’s system of record for supplier profile information. Supplier additions and updates will be done following established OMB policies and procedures.

Effective March 15, 2026

The Office of Management and Budget (OMB) Vendor Registry Office (VRO) oversees a centralized database of supplier profile information, ensuring compliance with internal controls, policies, procedures, and IRS regulations so North Dakota state agencies may issue their purchases and disbursements, and report 1099 payments to the Internal Revenue Service (IRS). PeopleSoft is the state’s system of record for supplier profile information and associated financial transactions. Security and accurate setup are critical, and restrictions are in place to limit access and final approval of database updates to supplier information to the VRO.

Supplier (Payee) Additions and Updates

Only eligible payees who have an approved procurement contract or application for payment and are actively engaged in business with an agency are to be established and active in the state’s supplier database. Invitations to a payee for setup or updates to their supplier information are initiated by the paying agency. Onus is on the agency to know their supplier and ensure the information used for payment and 1099 reporting is correct. Notifications of incorrect supplier information should pause further payments until the issuing agency has contacted the supplier to obtain accurate and current information and submitted the changes to VRO for processing. The paying agency must perform their due diligence in verifying who they are communicating with as responsibility is on the agency for accuracy and validity of the information being processed.

Suppliers (payees) must work directly with the paying agency for all inquiries or questions to complete a procedure. Communications to an agency’s potential payees should include agency-specific contact information for assistance on their procedures or program. OMB will direct inquiries received from suppliers back to the agency issuing payment. VRO does not have a relationship or conduct business with suppliers. Nor does VRO have information on the type of payments to be issued or access to an agency’s ancillary system, if applicable.

VRO works directly with a state agency’s authorized Supplier Liaison to ensure requests to add or update supplier data complies with internal controls and procedures. Final review and approval of additions or updates to the PeopleSoft database is solely with the VRO. This review and approval ensure database consistency and data integrity in accurate supplier setup; it does not verify the validity of the request itself.

Auditable Supplier Information

Additions or changes to supplier information must be auditable. VRO electronically files supplier-related paperwork for proper records retention and auditability. All supplier requests and Submissions outside these established procedures will not be processed and documents may be destroyed if they contain sensitive information.

Documentation and Forms

Forms used to obtain accurate and current supplier information must be the most recent dated version of the form. Any supporting documentation accompanying the form must be signed and dated within 12 months of current date. Documentation not in compliance will not be processed and may be returned.

IRS TIN/Legal Name Match

OMB performs a Tax Identification Number (TIN) Match using the IRS eservices application. See Fiscal Policy 110 – Form 1099 Compliance.

The state has authorized the use of a purchasing card for individual transactions. Use of the purchasing card does not exempt the agency or its employees from the purchasing/procurement requirements of the State of North Dakota.

Even though a purchasing card is issued in an employee’s name, it is considered the property of the State of North Dakota and must be used only for state business. Failure to use the purchasing card in accordance with applicable policies and procedures may result in revocation of the purchasing card and may involve appropriate disciplinary action, up to and including termination and prosecution. Only the person whose name appears on the purchasing card, is authorized to make purchases with that card.

To ensure the adequacy of internal control surrounding agency purchasing card programs, the agency purchasing card administrator will not be a cardholder. If an agency size or other constraints make this unfeasible, OMB may assume card maintenance duties for an agency. Contact OMB for more information regarding card maintenance.

The state IS NOT responsible for issuing 1099s for the purchases made with a purchasing card. When the purchasing card is used as the form of payment, the merchant’s issuing bank is responsible for issuing the 1099.

The purchasing card can be used for all reimbursable travel expenses except meals. Travel must be for official business for the State of ND. Under no circumstances should the card be used for personal purchases. Allowable types of travel expenses are:

• Conference registration fees;
• Airline tickets;
• All lodging costs; and
• All ground-related transportation costs.

Any personal expenses are the responsibility of the employee and should not be charged to the purchasing card.

Reconciliation Process:

• After cardholders have reconciled their receipts to their monthly statement, they will sign it and submit it to their supervisor for review and approval.
• The supervisor will sign the cardholder’s statement certifying that the purchases were made for the use of state business and that they comply with appropriate procurement rules and regulations. Cardholder statements and original receipts must be submitted to the agency card administrator and maintained on file.
• Card administrators should run an agency statement with the state’s current card provider and reconcile it to the individual statements. They should sign the agency statement denoting reconciliation.

All political subdivisions are eligible to participate in the state’s purchasing card program. Contact OMB-Fiscal Management at 701-328-4936.

The Sixty-Ninth Legislative Assembly passed House Bill 1081 with an emergency provision, which repealed NDCC 54-27-21.1 effective 03/18/2025. Lease versus purchase analysis is no longer required. 

Effective January 1, 2026

Workplace Locations

Approval of alternate work locations is managed by the agency director or their designee, in collaboration with managers to determine eligibility based on job duties and agency needs. Available work locations include:

• In Office: Team member works in a state-operated facility with the option for occasional remote work and may have a dedicated workstation.
• Hybrid: Team member works in a state-operated facility fewer than three (3) days per week and utilizes a shared workstation.
• Remote: Team member works from an approved alternate location on a full-time basis.
• On the Go: Team member works from varying locations due to the nature of their job duties that require their work location to change frequently.

Office Work Location

The office work location is the designated state facility, within the State of ND, applicable to the position (this cannot be an employee’s home). If an agency maintains office locations at multiple sites, the agency will determine the most appropriate office work location applicable to the position. Regardless of when the hire was done, where the employee’s home is geographically located, or what the agency defines as the employee’s Primary Work Location, every state employee must have an Office Work Location assigned to their position, which is designated by the agency. For example, if the position or agency currently has or historically has reported to an in-office location at the State Capitol in Bismarck, the State Capitol remains the designated office work location for the position for purposes of determining reimbursement under this policy.

Employee Reimbursement

Necessary official travel by state employees will be reimbursed at a rate not to exceed the Privately Owned Vehicle (POV) Mileage Reimbursement Rate established by the U.S. General Services Administration (GSA) for an automobile if no state-owned vehicle is available, or if the employee has obtained prior approval. As of January 1, 2026, the GSA rate is 72.5¢ per mile. Effective Aug 1, 2025, state employees permanently located outside the state or on assignments outside the state for an indefinite period of time, exceeding at least 30 consecutive days, will be allowed and be paid the GSA rate for each mile traveled in the performance of official duty; the 300-mile restriction imposed by Subsection 3 does not apply.

The following table includes expense descriptions and indicates if the state will reimburse the team member based on their location of departure/arrival for mileage. Pursuant to NDCC 54-06-09 and Policy 511, state-owned vehicles should be used whenever possible when performing official state business. To use a personal vehicle when performing official state business, employees must obtain agency approval prior to departing.

Regular Commute

OMB is defining “regular commute" as the round-trip distance between the team member’s home and their designated office work location, regardless of how far the distance is between the two. This follows guidance defined in IRS Publication 463 for Commuting expenses.

• Not Reimbursable
  • Travel expenses between home and your office work location. This is considered regular commute and is not reimbursable regardless of geographical distance between the two locations or purpose of travel.
  • Home Internet
  • Home Utilities
  • Home Mortgage or Rent
  • Home Office Furniture and Supplies
• Reimbursable
  • Travel expenses for official business departing from the office work location to an alternate worksite location.
  • Travel expenses for official business departing from home to an alternate worksite location, mileage is paid less the regular commute mileage. This mileage reduction will be applied once a day/trip (if away for multiple, consecutive days and driving).
    • Example 1: Team member’s regular commute from their home to office work location is 10 miles round-trip. If they leave from their home to the alternate worksite and return to home totaling 25 miles round-trip, the team member must deduct their normal commute of 10 miles, allowing them to claim 15 miles.
    • Example 2: Team member’s regular commute is 5 miles round-trip. They leave home and stop at 2 alternate worksite locations in the morning, return home, then go to 3 alternate worksite locations in the afternoon, totaling 25 miles total for the day. Reduction of the regular commute will be applied once per day, so total mileage claim would be for 20 miles.
    • Example 3: Team member’s regular commute is 15 miles round-trip. They leave from their home and travel to an out-of-town worksite 200 miles away and are there for two overnights. Total round-trip mileage is 400; the employee would claim 385 miles.

Expenses for mileage only, which are routinely incurred in the performance of employment duties, should not be claimed until a minimum of $10 in reimbursement is due. However, such reimbursement should be made at least monthly, without regard for the dollar amount.

Non-state employees will be paid the same rates as state employees, whenever possible. In order to obtain the GSA rate for a non-state employee, a state agency may pay the lodging facility directly for his/her lodging expense. Account code 521060, Non- State Employee Travel, should be used.

All monies received by the non-state employee must be reported. It is their responsibility to report to IRS those expenses that are business-related. The same IRS rules apply if there is no overnight stay. Agencies that pay for these expenses must report them as taxable income, when applicable, and the non-state employee may receive a 1099 if it surpasses the defined thresholds. 

Since memberships on work groups or committees are based primarily on the relationship of the agency to the subject the committee deals with, it is only proper that the costs involved be reflected in that agency's budget.

It is the policy of OMB that the travel expenses of a state employee representing an agency be paid from that agency budget.

If a state employee is requested to travel by a state agency other than the employee's hiring agency, it is proper that the agency requesting the travel pay for the expenses.

NDCC 44-08-04 provides for reimbursement of employee expenses for meals and lodging while an employee is away from their normal working and living residence.

If meals are included as part of a registration fee for a conference, seminar, or other meeting, the employee should be reimbursed for the entire registration fee, if paid by the employee. However, the employee cannot claim reimbursement for the applicable meal allowance for that quarter. An employee should be reimbursed for meals paid by the employee while attending a meeting at the request of, or on behalf of, the state or any of its subdivisions, agencies, bureaus, boards, or commissions, up to the allowable rates established below.

Chapter 44-08-04 provides that reimbursement is allowed only for overnight travel and other travel while away from the normal place of employment for four hours or more. Employees will not be reimbursed for the first quarter if travel began after 7:00 a.m. In order to claim expenses for the second and third quarters, the employee must have been in travel status one hour before the start of the quarter being claimed, and travel status must extend at least one hour into the quarter being claimed. The expense allowance for each quarter of any 24-hour period effective August 1, 2023, is as follows:

Meal Allowance (In-State / Out of State)

1. First quarter, 6 a.m. to 12 noon = $9.00 / 20% of GSA M&IE rate
2. Second quarter, 12 noon to 6 p.m. = $14.00 / 30% of GSA M&IE rate
3. Third quarter, 6 p.m. to 12 midnight = $22.00 / 50% of GSA M&IE rate
4. Fourth quarter, 12 midnight to 6 a.m.        

In-State Lodging: The GSA rate for lodging in North Dakota is the maximum rate allowed, plus applicable state and/or mandatory fees. As of October 1, 2025 the GSA rate for lodging in ND will be $110. Effective Aug 1, 2025, the “In-State Lodging rate” of 90% of the GSA has been struck from NDCC and is no longer applicable.

The GSA will update their rates periodically during the biennium and the allowable lodging reimbursement will also change at that time. The state purchasing card should be used for all lodging costs whenever possible. By using the p-card, state lodging expenses should be tax exempt from ND tax.

When the GSA rate is not available, the traveler must document they checked a minimum of three hotels within the vicinity their work is being conducted and choose the most cost-effective option. This will not always mean the cheapest rate. Examples include, but are not limited to:  

• Commuting distance/time should be taken into consideration; 
• Trying to centrally locate the hotel if multiple stops are required while in travel status; and/or,
• If continental breakfast is included. 

It is realized smaller, more remote communities may not have three options to choose from; document this and include with the travel reimbursement.

Out-of-State Lodging: Actual lodging expense. Those persons engaged in travel outside of North Dakota shall be reimbursed for meals equal to the per diem meals rate in the city of final destination. The state purchasing card should be used for all lodging costs whenever possible. However, out-of-state lodging expenses may not be tax exempt. A claim is made on that day as established by rule for federal employees as follows:

Within the contiguous 48 states:

• The U.S. General Services Administration Domestic Per Diem Rates
  • Click on the map to view rates by state
  • Use the Meals & Inc. Exp.
  • If not found, use the standard rate for the continental United States which is $59

In non-continental United States and overseas non-foreign areas, including Alaska, Hawaii, and Guam:

• The U.S. Per Diem Committee as published on the Department of Defense website
  • Use the rates from Outside CONUS, Non-Foreign Overseas, and Foreign
  • Enter Country/State from the drop-down menu
  • Exclude military installations
  • Use the Local Meals Rate plus the Local Incidental Rate

All other: (Includes Canada)

• The U.S. Department of State Foreign Per Diem Rates by Location
  • Enter the country where traveling
  • Use the M&IE Rate with the applicable effective date

Verification of claims via receipt is not required for the first three quarters but is required for lodging (also see Policy 513). Receipts are also required for each taxi fare in excess of $10 and for other miscellaneous expenses in excess of $10. Parking fees may be claimed only with a receipt from a hotel/motel or airport.

The head of any department, institution, or agency may set a rate for out-of-state travel, which is less than that set forth by statute.

Note: Before any allowance for such mileage or travel expenses will be made, the official, deputy, assistant, clerk, or other employee will file with the agency, an itemized statement showing mileage traveled, the purpose thereof, and such other information and documentation as may be prescribed by the IRS, or an agency. Statements such as “to attend a meeting” etc., should not be accepted as sufficient documentation for purpose of travel.

If an employee is not claiming reimbursement for lodging, please indicate such on the Travel Expense Voucher. A fillable and printable Adobe (.pdf) Travel Expense Voucher can be used.

If an employee is claiming reimbursement for meals for travel when no overnight stay is involved, the meal reimbursement is taxable. When completing the Travel Expense Voucher, taxable meals must be noted accordingly. The employee will receive the full meal reimbursement, and the taxes will be withheld through the payroll system during the next payroll cycle.

The following allowances are made for travel advances pursuant to NDCC 44-08-04.2.

"Any state agency shall advance at the request of the agency head for employees of that agency funds to be used for payment of meal and lodging expenses incurred while the official or employee is traveling on official business of this state, provided that such travel must be planned to be in excess of five days per month, whether or not consecutive, and provided that the funds advanced do not exceed eighty percent of estimated expenses for the period. Travel advances must be approved by the chief executive officer or a designee of the agency involved. Funds advanced for meals and lodging under this section shall be accounted for as required under section 44-08-04 for travel.”

These funds must also be reflected on the travel voucher subsequent to the dates of travel.

NDCC 44-08-04.1 provides for per diem allowance for long-term travel as follows:

“With the approval of the office of the budget, any state agency may adopt a per diem allowance in lieu of expenses as allowed by section 44-08-04 for its officials and employees whose official duties require that they remain on travel status away from their normal working and living residence for extended periods of time. No per diem allowed may be in excess of the total allowance for meals and lodging as allowed by section 44-08-04. Travel status of one week or less may not be considered long-term or extended travel. Rental receipts must be used to verify travel status under this section.”

Employees may be reimbursed for actual airfares paid for travel on official state business. This reimbursement should occur as soon as possible after the purchase is made. Proper supporting documentation must be attached to the travel voucher as a receipt.

A ticket may be issued electronically or by paper copy.

Charges to Travel Agents: If a department allows employees to charge airfare to the state via a travel agency, the following control procedures must be utilized to assure internal control and proper payment and credit:

1. The travel agent should be advised of the proper state billing procedures and accurate address.
2. Employees must submit proper supporting documentation verifying the purchase to their departmental personnel responsible for payment of bills.
3. The department's fiscal personnel will match all travel agency charges to the ticket to assure proper charges and should also verify that the tickets have actually been used.
4. Unused tickets which have been charged to the state must be submitted to the department's fiscal personnel or travel coordinator for refund, not directly to the travel agency. The fiscal staff should make appropriate note of the return ticket prior to payment of the travel agency billing to assure proper credit.

Prepayment of Airfare: Agencies may purchase airline tickets in advance of anticipated travel to take advantage of reduced or discounted fares. The state purchasing card should be used to purchase airfare.

Payment of Luggage Charges: Employees should be reimbursed for their first piece of checked luggage. It is up to each agency to decide if employees should be reimbursed for additional checked luggage, overweight luggage, and subsequent charges. The cost for the checked luggage should be charged to account code 521070, Out of State – Air Transportation Cost.

The State of North Dakota is participating in a discount program with Delta Airlines. If airline tickets are purchased with Delta, those tickets should be booked using the “Delta EDP” link accessed through the PeopleSoft Employee Hub. At this time Delta Airlines is the only airline offering the state a discount program. The state purchasing card should be used for all commercial air travel expenses.

Effective January 1, 2026

Per NDCC 54-06-09: "An official, deputy, assistant, clerk, or other employee, when required to travel by motor vehicle or truck in the performance of official duty, shall use a state-owned vehicle, whenever possible, unless exempted under NDCC 4-02-03.3."

When an employee drives a state fleet vehicle, the State's liability coverage is primary should an accident occur. If an employee drives a personal vehicle on state business, the employee's personal insurance is primary. If an employee must drive a personal vehicle because no state fleet vehicles are available, then the State would have primary responsibility.

If use of a privately owned automobile is authorized or if no government-furnished automobile is authorized and available, reimbursement will be made according to the rates below. Reimbursement for mileage for use of personal vehicles within the state use the Privately Owned Vehicle (POV) Mileage Reimbursement Rate established by the U.S. General Services Administration (GSA). As of January 1, 2026, the POV rate is 72.5¢ per mile.

• The sum of 72.5¢ per mile actually and necessarily traveled in the performance of official duty when such travel is by motor vehicle.
• The sum of one and one-half times the personal vehicle rate per mile when such travel is by private airplane. (Also refer to Policy 519.)

Reimbursement for mileage for use of personal vehicles outside of the State is allowed as follows:

• When airplane and taxi fares are accepted in lieu of mileage.
• When reimbursement is at a rate of 72.5¢ per mile to a geographic point 300 miles each way from the borders of the state, and 18¢ per mile for the remaining distance.

PROVIDED THAT the lesser amount of (1) or (2) above shall be allowed. If more than one state employee travels in the same vehicle, 72.5¢ per mile for the entire trip will be allowed.

The rate for aircraft is subject to provisions of NDCC 54-06-09.
 
When official travel is done by motor vehicle or airplane that is owned by the state or by any department or political subdivision thereof, no allowance will be made or paid for such mileage.              

If a personal vehicle is used in lieu of air, for the employee's convenience, meals and motel expenses will be allowed for a maximum of one day each way.

Effective August 1, 2025, state employees permanently located outside the state or on assignments outside the state for an indefinite period of time, exceeding at least 30 consecutive days, will be allowed and paid the GSA rate for each mile traveled in the performance of official duty when such travel is by motor vehicle. The 300-mile restriction in subsection 2 of this section does not apply in this instance.

State agencies may set a rate for personal car mileage that is less than the rates stated in this policy.

This policy assumes that, generally, personal vehicles are used for out-of-state travel for reasons of personal convenience.

Vehicle Coverage FAQs

Only receipts from bona fide lodging establishments should be accepted for reimbursement by the agency. Receipts from relatives for the provision of lodging services will not be acceptable. The receipt must be the official receipt from the lodging establishment and not a charge slip from a credit card system.

Bona fide lodging establishments include hotels, motels, college dormitories, hospitals, military facilities, and similar institutions.

• Lodging charges when accompanied by an individual not eligible for reimbursement: When accompanied on a state authorized trip by a spouse or traveling companion, the state employee must have the lodging establishment clearly certify the room rate for a single person and only that amount may be claimed.
• Lodging charges - two employees sharing lodging: If two state employees are sharing lodging accommodations, the actual cost of the room must be split evenly, and each must have a separate receipt.
  • Example: Where a double rate is $100 and a single rate is $60, the state will reimburse only the actual cost to the travelers, or $60 each (not $100 each).
• Lodging prepaid or billed directly to agency: If a state agency, board, bureau, or institution makes travel plans involving a lodging expense, the agency, board, bureau, or institution may arrange with the lodging provider or travel agency to have the expense prepaid by the agency or billed directly to the agency.
• State payment for guaranteed lodging: If an employee or an agency guarantees a room in-state or out-of-state by making an irrevocable commitment to pay for it and the individual subsequently does not travel, the state may make the payment upon the receipt of a verified statement from the individual, approved by the supervisor, which details why the travel did not take place as planned. The P-card should be used to guaranty the room and, if required, pay for the first night’s lodging.
• The state P-card should be used whenever possible for lodging.

Per NDCC 54-06-26. Use of state telephones by state officials and employees:

“Notwithstanding any provision of law, an appointed or elected state official or a state employee may use a state telephone to receive or place a local call for essential personal purposes to the extent that use does not interfere with the functions of the official’s or employee’s agency, department or institution. When an appointed or elected state official or state employee is away from the official’s or employee’s residence for official state business and long-distance tolls would apply for the official or employee to call the official’s or employee’s city of residence, the official or employee is entitled to make at least one long-distance call per day at state expense. Each state agency, department, or institution may establish guidelines defining reasonable and appropriate use of state telephones for essential personal purposes.”

Personal Cell Phones

It is at the discretion of each state agency whether to reimburse their employees for state business phone calls made on an employee’s personal cell phone. If yes, OMB recommends an internal policy be developed outlining the rules and procedures to be followed.

Cellular Devices

Cellular devices are provided to improve customer service and enhance department efficiencies. They are not a personal benefit and should only be provided to employees who have a demonstrated business need. This policy provides guidance to agencies regarding the use and payment of cellular devices and services by agency staff. Cellular devices include cellular telephones, satellite phones, air cards, smart phones, or other personal devices with cellular communications capabilities.

Agencies that need to provide cellular devices to their employees may do so using any of the options shown below.

State Owned Services

• A state agency may acquire a device and appropriate service plans directly from the service provider. Under the current state contract devices are eligible for discounted upgrades more frequently than under personal plans. Also, under the current state contract, minutes are pooled, and data is unlimited.

Employee-Owned Services

• A state agency may reimburse employees for state use of a personal cellular device. The purpose of reimbursement for state use of a personally owned device is based solely on improving efficiency and savings for the State.
• Standard employee reimbursement are as follows:  
  • Voice Plan $20
  • Data Plan $20
  • Voice and Data Plan $30
  • The employee must provide a copy of the billing statement as support for the reimbursement. Reimbursement will be limited to the lesser of actual expense incurred by employee and the rates established above.
• An agency may consider additional reimbursement when an employee incurs a substantial expense due to an extra-ordinary event or when it is in the State’s best interests to utilize a personal device and plan at rates higher than the standard reimbursement rate. Agencies must document the business reason for the additional reimbursement.

Publishing Cellular Numbers

• State-owned cellular numbers are occasionally transferred (ported) to personal devices when employees leave employment with the state. Accordingly, to ensure continuity of service provided by the State, state owned landline numbers should be published as the primary access for services. Rather than publishing cellular numbers, agencies should coordinate with ITD on available options to extend landline numbers to mobile devices.

Usage and Compatibility Policies - All Cellular Devices (Employee and State Owned)

• State policy requires that devices accessing the state network and storing state data (e.g., e-mail synchronization) have a power-on password and automatic device locking and erasing.
• Access to State resources will be terminated when an employee terminates employment with the State. Steps should be taken to remove any business communications from an employee-owned device.
• Agencies that wish to allow staff to access State resources with mobile computing devices should coordinate with ITD to determine what devices and operating systems are supported by the State.

It is realized that coffee and soft drinks are an important part of meetings required by state agencies to inform and train the general public, interested parties, consultants, etc. Payment for coffee and soft drinks will be honored for processing by submitting a travel expense voucher. Coffee and soft drinks for state employees' during staff meetings are not allowed.

(Reimbursable and Non-reimbursable Expenses)

On travel vouchers, whenever a charge is made under the “Miscellaneous” column, it requires detailed explanation, and a receipt must be attached if the item is greater than $10.

Examples of non-reimbursable expenses are:

• Alcoholic beverages
• Entertainment
• Late check-out charges
• Parking tickets or other traffic tickets
• Laundry

Exceptions to this policy may be made by an agency director for unusual or extenuating circumstances such as international travel or travel extending ten days or longer.

In some instances, the State may pay the reasonable costs of interviewees for jobs with the state, provided reimbursement for meals and lodging is at the same rate as for employees. Reimbursement of airfare or passage by common carrier will be permitted.

The state discourages car rentals unless their cost effectiveness is self-evident. The state will pay for car rental if the use of the vehicle is sufficient to justify that mode of travel.

When renting a vehicle, the following procedures are to be used:

• Agencies must use state contracts that include insurance and damage waiver as part of the base rental rate. Exceptions are allowed if agency administrators determine, in consultation with the Risk Management Division, that alternative arrangements will result in cost savings considering the availability and cost of any recommended additional insurance.
  • For more information go to NDBuys State Contracts (search on keywords: CTR000487 Passenger Vehicle and Box Truck Rental).
• If a vehicle is not available through a state contract, agencies must purchase the additional insurance and damage waiver protection. See Vehicle Coverage Frequently Asked Questions.

In those instances where additional insurance is not available, coverage for renting a car for state business and operating the vehicle within the scope of employment is provided under the Risk Management Fund. Personal use of a rental car is not covered under the Risk Management Fund and would be the responsibility of the employee’s personal insurance.

Effective January 1, 2026

The philosophy governing the necessary travel of state employees must be to transport personnel to and from meetings in the most cost-effective manner possible.

NDCC 54-06-09 provides the following requirements for travel by aircraft:

• The mileage rate for allowable private aircraft travel is one and one-half times the Privately Owned Vehicle (POV) Mileage Reimbursement Rate established by the U.S. General Services Administration (GSA). Use the applicable rate for an automobile if no Government Owned Vehicle is available. As of January 1, 2026, the POV rate was 72.5¢ per mile, so the reimbursable rate for private aircraft would be $1.09 per mile (.725 x 1.5 = 1.09). The GSA will change this rate periodically during the biennium. Previous mileage rates/periods are published on their website. Use the rate applicable to when the travel occurred. Mileage by private aircraft shall be computed by actual air mileage when only one state employee or official is traveling; if two or more state employees or officials are traveling by private aircraft, the actual mileage shall be based on the road mileage between the geographical points. Reimbursement for private airplane travel shall be calculated as follows:
  • If reimbursement is for one properly authorized and reimbursable passenger, reimbursement shall be paid on a per-mile basis as provided in this subsection.
  • If reimbursement is claimed for a chartered private aircraft, reimbursement may not exceed the cost of regular coach fare on a commercial flight, if one is scheduled between the point of departure, point of destination, and return, for each properly authorized and reimbursable passenger on the charter flight; or, where there is no such regularly scheduled commercial flight, the actual cost of the charter.
• If a community has more than one fixed base aviation operator, price quotes are required from all of them.

Permanent Employees: NDCC 44-08-04.3 allows for payment of moving expenses for “a permanent employee who has been employed in that department, institution or agency not less than one year” when the employee is transferred to another city for new duty assignment “of a permanent nature within that department, institution or agency.”

Per the IRS, ALL moving expenses are now taxable and should be processed on a voucher in PeopleSoft as follows:

PeopleSoft Account 521055: Reimbursement for taxable moving expenses reportable to the IRS -

• All actual costs of moving personal household goods and furnishings, not to exceed 11,000 lbs. (4,989.60 kilograms).
• Transportation, of one vehicle, (to be reimbursed at state mileage rates, see Policy 511) and lodging expenses incurred by the employee and immediate family while in route to the employee's new duty station.
• Meal expense incurred by the employee and immediate family while in route to the new duty station.
• Transportation expenses are limited to one round trip, and actual meal and lodging costs for a pre-move, house-hunting trip, for the employee and spouse, for three days.
• The expenses for the employee and immediate family while occupying temporary quarters within the state are not to exceed 30 days.

Limitation: Reimbursement for the relocation of permanent employees is limited to $5,000 by statute. Verification for expenses will be a paid receipt from a licensed moving company, highway mileage between duty stations, meal, and lodging receipts.

New Employees: Payment of moving expenses for newly hired employees is not specifically addressed by statute. However, it is recognized that market conditions for some higher-level, professional positions involve competitive recruitment activity that often requires payment of moving expenses as a part of the employment agreement.

Agency administrators may include moving expense reimbursement as part of a job offer when it can be demonstrated that local employment market conditions and job requirements are such that recruitment outside of the immediate geographical area was necessary and where such reimbursement is necessary to attract the best candidate.

Reimbursement is not limited to $5,000 for new employees.

Capitalization Policy: Fixed assets should be capitalized when the following criteria are met:

• The asset is tangible or intangible in nature, complete in itself, and is not a component of another capitalized item.
• The asset is used in the operation of the State's activities.
• The asset has a useful life in excess of one year and provides benefit throughout that period.
• Equipment should be capitalized if its cost is $10,000 or more.
• Building and Building Improvements should be capitalized if the cost is $10,000 or more.
• Infrastructure should be capitalized if the cost is $10,000 or more.
• Land and Land Improvements should be capitalized if the cost is $10,000 or more.
• Intangible assets such as easements, water rights, patents, and trademarks should be capitalized if the cost is $25,000 or more.
• Software purchased from outside vendors and internally developed software should be capitalized if its cost is $10,000 or more.
• GASB Reportable Lease and SBITAS with total payments over $25,000.

The cost of a fixed asset should include ancillary charges necessary to place the asset into its intended location and condition for use. Ancillary charges include costs that are directly attributable to asset acquisition - such as freight and transportation charges, site preparation costs, and professional fees.

Per GASB 89, interest costs incurred before the end of construction should be recognized as an expense in the period it is incurred and should not be capitalized.

Donated fixed assets should be reported at acquisition value.  Acquisition value is the price that would be paid to acquire an asset with equivalent service potential or the amount for which a liability could be liquidated at the acquisition date.

Group or Mass Purchase of Similar Assets: If your agency purchases a group of similar assets that, individually are below the applicable capitalization threshold, but, in the aggregate, exceed $1,000,000, please email acfr@nd.gov to determine if the group or mass purchase of assets should be capitalized. These purchases will be handled on a case-by-case basis.

Capital Asset Held for Investment: If a capital asset is held for investment, it should be measured at fair value. GASB defines an investment asset as “a security or other asset that a government holds primarily for the purpose of income or profit and its present service capacity is based solely on its ability to generate cash or to be sold to generate cash.” The investment designation would be made at acquisition and would remain for the life of the asset, even if usage changes over time. An asset initially reported as a capital asset and later held for sale would not subsequently be reclassified as an investment.  

Fixed Asset Categories (Classes): To disclose fixed asset activity, eight asset classes will be used:

1. Equipment
2. Construction-in-Progress
3. Building and Building Improvements
4. Infrastructure
5. Land and Land Improvements
6. Intangible Assets
7. Lease
8. Subscription Based IT Arrangement (SBITA)

1. Equipment: Equipment includes costs of equipment, office equipment, machinery, furniture and fixtures, furnishings, and similar items. For trade-ins, if an asset is being traded for a similar asset to the asset that is being purchased. The following calculation can be used.

If similar: book value of trade-in plus monetary consideration equals value of new asset. Example: Book value of traded-in asset is $10,000, plus additional monetary consideration equals $25,000, which will be the value of the new asset: $10,000 plus $25,000 equals $35,000. Donated equipment should be reported at acquisition value at the time of its donation.

2. Construction-In-Progress: Construction-In-Progress (CIP) contains amounts expended on an uncompleted building, infrastructure, capital construction project, or intangible software project. Fixed assets that are substantially complete and available for use on June 30 of any year are not CIP. When assets are substantially complete, the Construction in Progress status needs to be removed and an asset needs to be added to asset records. The asset should be properly classified as Buildings and Improvements, Infrastructure, Equipment, or Intangible based upon the nature of the constructed asset(s).

3. Building and Building Improvements: Buildings are permanent structures housing persons or personal property. Building Improvements are long-lived attachments to buildings that significantly increase the building’s life, usefulness, or value. One cannot move or separate Building Improvements from the building. Building Improvements include assets such as elevators, central air conditioning, heating, and fire alarm systems. Building and Building Improvements include the value of all buildings at purchase price or construction cost (including all charges applicable to the building, which includes capitalizable costs at and subsequent to the date of asset acquisition). Donated Buildings and Building Improvements should be reported at acquisition value at the time of donation.  

4. Infrastructure: Infrastructure assets are long-lived fixed assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most fixed assets. Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems. Buildings, except those that are an ancillary part of a network of infrastructure assets, should not be considered infrastructure assets. Donated infrastructure should be reported at acquisition value at the time of donation.

5. Land and Land Improvements: Land – land purchased or otherwise acquired by the State. Purchased land should be carried on the books at cost (purchase price) plus any additional costs needed to place the land in its intended condition for use. Donated land should be reported at acquisition value at the time of its donation.

Land Improvements are permanent in nature and include costs directly related to preparation of existing land for its intended use. Land Improvements should not include infrastructure type assets.

6. Intangible Assets: Intangible Assets are assets that lack physical substance, are nonfinancial in nature, and their initial useful life extends beyond a single reporting period. Examples of intangible assets include easements, water rights, patents, trademarks, computer software. Donated intangible assets should be reported at acquisition value at the time of its donation.

7. Leased Assets: A lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset as specified in the contract for a period of time in an exchange or exchange-like transaction. For a contract to qualify as a lease it must meet the following criteria:

• A lease must be a contract
• A lease must control the right to use the present service capacity and the right to determine the nature and manner of use of an asset.
• The lease must be for a nonfinancial asset. Example: buildings, land, vehicles, and equipment.
• The contract must have an end date.
• Examples of contracts not considered a lease under this policy:
  • Intangible assets – Examples: copyrights, mineral rights, or software and patents
  • Supply contracts – such as power purchase agreements
  • Short term lease – a maximum possible lease term of 12 months
  • Leases between State Agencies
  • Inventory
  • Biological assets – plants, animals, and timber
  • Leases that transfer ownership of the underlying asset to the lessee by the end of the contract and have no termination options
• This type of lease should be reported to OMB as a purchase agreement as debt.
  • Service concession arrangements
  • Supply contracts and leases with the underlying asset financed with outstanding conduit debt are excluded. 

Each qualifying lease will also need a fixed asset recorded with the lease.

8. Subscription Based Information Technology Arrangements (SBITAs): A SBITA is defined in GASB 96 as “a contract that conveys control of the right to use another party’s (a SBITA vendor’s) IT software, alone or in combination with tangible capital assets (underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.” To qualify as an SBITA, the following criteria must be met:

• The subscription term must be for longer than 12 months
• Your agency has control of the right to use the SBITA asset
• The agreement includes fixed or fixed-in-substance payments
• The payments are for an exchange or exchange-like transaction
• The total payments and capitalizable implementation costs are $25,000 or more
• Examples of SBITAs:
  • SaaS (Software as a Service):  provides customer the ability to use a SBITA vendor’s software through the cloud.
  • PaaS (Platform as a Service):  allows customer to use a SBITA vendor’s tools or coding language (software) to create applications that run on SBITA vendor’s cloud infrastructure.
  • IaaS (Infrastructure as a Service):  allows customer to remotely access SBITA vendor’s network, server, and other computing tools to process, store and operate the customer’s data.
  • DWaaS (Data Warehouse as a Service):  a service provider sets up, maintains, secures, and upgrades a data warehouse.
• Examples of arrangements that are excluded from GASB 96 include:
  • Contracts meeting the definition of a lease in GASB 87, in which the software component is insignificant when compared to the cost of the underlying asset.
  • Agencies that provide the right to use their IT software to other external entities through SBITAs (as a passthrough and therefore not the end user).  
  • Contracts that meet the definition of public-private and public-public partnerships in GASB 94. (GASB 94 was implemented in FY2023.)
  • Licensing arrangements that provide a perpetual license (recorded under GASB Statement 51, Accounting and Financial Reporting for Intangible Assets).
  • Non-subscription components of a contract, such as IT support services and maintenance costs.
  • Contracts that are not an exchange or exchange-like transaction.
  • SBITAs defined as “short-term.”
    • Short term SBITA - a maximum possible term of 12 months

Additional information to determine if you have a reportable SBITA can be found on TeamND Connect, the State's intranet site.

SBITAs that meet the requirements of GASB 96 must be reported in the Lease and SBITA Administration module in Peoplesoft for contracts that started on or before 7/1/2022.

Capitalizable costs associated with asset acquisition that should be included in the original capitalizable cost of the asset include (not all-inclusive):

• Land
  • Original purchase price
  • Brokers' commissions
  • Closing fees, such as title search, and legal fees
  • Real estate surveys
  • Grading, filling, draining, clearing
  • Demolition costs (e.g., razing of an old building)
  • Assumption of liens or mortgages
  • Judgments levied through suits
• Buildings
  • Cost of construction
  • Expenses incurred in remodeling, reconditioning, or altering a purchased building to make it available for its intended purpose
  • Design and supervision costs
  • Building permits
  • Legal and architectural fees
  • Insurance costs during construction phase
• Construction in Progress
  • Contractor’s fees
  • Freight and transportation costs
  • Professional fees attributable to the construction
• Infrastructure
  • Cost of construction
  • Design and supervision costs
  • Building permits
  • Legal and architectural fees
• Equipment
  • Original contract or invoice price
  • Freight, import duties, handling, and storage costs
  • Specific in-transit insurance premiums
  • Assembling and installation costs
  • Reconditioning costs related to used equipment to make it available for its intended use
• Intangibles
  • Design of chosen path, including software configuration and interfaces
  • Coding
  • Installation to hardware
  • Testing, including parallel processing
• Lease and SBITAS
  • Contract Payments greater than $25,000 over the life of the contract.

Fixed asset components that have a unit cost under stated capitalization levels should be capitalized if they are originally acquired as part of a system and the system cost equals or exceeds capitalization levels. Assets not capitalized should be tracked for insurance and control purposes. A system is defined as a group of interacting, interrelated, or interdependent components forming a whole. For example, the components of computer hardware would include the computer monitor, the keyboard, the Central Processing Unit, and the modem. These components should be considered part of the computer system and capitalized as a unit. The logic behind capitalizing each individual component as part of the entire system is that the component, standing alone, cannot function or serve its intended purpose by itself.

Any components, with a cost greater than the capitalization thresholds, subsequently added to a system should be capitalized as part of the entire system.

Not all expenditures incurred relating to placing an asset in its intended use should be capitalized. The following are types of expenditures that should not be capitalized.

• Cost relating to the removal or demolition of buildings, structures, equipment, or other facilities. Two exceptions are as follows:
  • Cost to remove or demolish a building or other structure existing at the time of acquisition of land when the intention of the removal or demolition is to accommodate the land’s intended use (such cost is considered part of the land).
  • Cost to remove or demolish a building or other structure with the intention of replacing the old asset (such costs are considered a part of the cost of the new building).
• Cost incurred on assets that are not purchased, e.g., surveying, title searches, legal fees, and other expert services on land not purchased.
• Extraordinary costs incidental to the construction of fixed assets such as those due to strike, flood, fire, or other casualties.
• Cost of abandoned construction.

Internally developed software should be capitalized beginning with software development completed after June 30, 2003. The internally developed software should be capitalized if the capitalizable cost is $10,000 or greater. The software should be amortized (depreciated) over the estimated useful life of the software.

Not all costs associated with developing software should be capitalized. Training costs, and administrative and overhead costs should not be capitalized. Costs of development that are capitalizable include:

• External direct costs of material and services (e.g., purchased “base” software, payments to non-state entity for development)
• Direct payroll costs, including salaries, fringes, and travel
• Data Conversion costs only to the extent it is determined to be necessary to make the software operational. Otherwise, data conversion costs should not be capitalized

Not all phases of software development are capitalizable. Preliminary project costs, including determination, evaluation, and selection of alternatives, should not be capitalized. Phases that are capitalizable include:

• Design of chosen path, including software configuration and interfaces
• Coding
• Installation to hardware
• Testing, including parallel processing

Capitalization should cease at the point at which a computer software project is substantially complete and ready for its intended use. Computer software is ready for its intended use after all substantial testing is completed.

North Dakota Information Technology Department (NDIT) Projects

Many agencies use NDIT to create software programs for them. For those projects, it has been determined that approximately 65% of the total project cost is capitalizable (based on the criteria above). Therefore, NDIT projects for the development of a new program/software where the total charge to the agency is approximately $16,000 should be capitalized ($16,000 x 65% = $10,400).

Software/programs developed within an agency will require the agency to accumulate capitalizable costs and capitalize, as necessary.

NDIT frequently purchases software, hardware, subscription-based IT agreements, or IT maintenance contracts on behalf of state agencies. These costs are then billed to the agencies in their monthly NDIT bill. This policy outlines the responsibilities for capitalizing such costs when applicable, reporting prepaid agreements, and coding payments to NDIT.

When NDIT makes a purchase on behalf of an agency that creates an asset, NDIT will notify the agency by indicating the charge on the invoice as DP 935 – Agency Specific Hardware/Software. This designation indicates the purchase was made by the request of the agency and the accounting responsibility should be handled at the agency level.

If multiple state agencies share the cost of software for a system, only one agency should capitalize the system, and the involved agencies must agree on which agency will do so.

For internally developed systems, the software purchase is not the only cost; there are also implementation costs to make the software usable for the agency. NDIT may contract with consultants to work on the new system. These consultant costs may be paid by NDIT and billed back to the state agency, but the agency will need to capitalize these costs if they are responsible for capitalizing the software system.

When NDIT purchases an IT maintenance agreement on behalf of your agency, the agreement is paid in advance, and extends past June 30th, the state agency, rather than NDIT, is responsible for reviewing this agreement to determine if it should be reported on the ACFR Prepaid Closing Package.

Agencies should code payments to NDIT for software and consultant costs to the expenditure accounts for software and IT consultants. NDIT will provide the agency with copies of the invoices for these costs along with the billing. NDIT developer costs for their work on new programs/software should be coded as data processing costs on the NDIT bill,  even though the agency will capitalize 65% of these costs, as noted under the internally developed software policy.

NDIT may also charge agencies for server installation, upgrades, etc. (hardware). Agencies should code these costs as data processing costs since NDIT is responsible for maintaining the hardware and is considered the owner of the hardware.

Improvements/upgrades to internally developed software should be capitalized if the capitalizable cost is $10,000 or greater, and it results in increased functionality of the software. Programming to change calculations or criteria to comply with new state or federal regulations does not increase the functionality of the software. Adding an entirely new component (i.e., eligibility determination) or a complete overhaul of the existing software does constitute increased functionality. Agencies should follow the above guidelines to determine which costs should be capitalized.

Note: All NDIT major projects ($500,000 or greater) should be considered enhancements and capitalized unless approved by OMB.

Costs incurred to achieve greater future benefits (e.g., improves efficiency, or materially extends the useful life of the asset, etc.) and which costs greater than the asset class capitalization level should be capitalized, whereas expenditures that simply maintain a given level of service should be expensed. Generally, three major types of costs subsequent to original construction are incurred relative to existing fixed assets.

• Additions (extensions, enlargements, or expansions). Any addition (costing greater than the asset class capitalization level) to a fixed asset should be capitalized since a new asset has been created. For example, the addition of a wing to a hospital or the addition of an air conditioning system to an office building increases the service potential of that facility and should be capitalized. Other examples of additions include:
  • an elevator or dumbwaiter
  • fire alarm systems
  • security windows
  • sprinkler systems (internal)
  • acoustical treatment
• Improvements and replacements. The distinguishing feature between an improvement and a replacement is that an improvement is the substitution of a better asset – having superior performance capabilities – (e.g., a concrete floor for a wooden floor) for the one currently used, whereas a replacement is the substitution of a similar asset (a wooden floor for a wooden floor).

In both of these instances agencies should determine whether the expenditure increases the future service potential of the fixed assets or merely maintains the existing level of service. When the determination is made that the future service level has been increased, the new cost is capitalized.

• Repairs (Ordinary and Major). Repairs maintain the fixed asset in its original operating condition.
• Ordinary repairs are expenditures made to maintain plant assets in operating condition. Preventive maintenance, normal periodic repairs, replacement of parts, structural components, and other activities such as repainting, equipment adjustments, that are needed to maintain the asset so that it continues to provide normal services should not be capitalized but rather charged to an expense account.
• Examples of ordinary repairs include:
  • roof and/or flashing repairs
  • window repairs and glass replacement
  • painting
  • masonry repairs
  • floor repairs

Major repairs are relatively large expenditures that benefit more than one operating cycle or periods. If a major repair, e.g., an overhaul, occurs that benefits several periods and/or extends the useful life of the asset, then the cost of the repair should be capitalized.

For all transfers, agencies should account for the transfers as additions and deletions of fixed assets. For additions, agencies should record the asset at their cost to obtain the asset and not at the original historical cost of the asset.

Note: Agencies are required to follow the policies and procedures in the State Property Disposal Manual for all retirements and disposals of state-owned property.

Transfers to Surplus Property Section are to be removed from the agency’s accounting records three years after the asset is transferred to Surplus Property, for audit purposes.

Depreciation is the concept of allocating the cost of fixed assets over their estimated useful lives. Land, land improvements, and construction in progress are not depreciated. In addition, intangible assets with indefinite useful lives should not be depreciated. An intangible asset should be considered to have an indefinite useful life if there are no legal, contractual, regulatory, technological, or other factors that limit the useful life of the asset. All other assets are to be depreciated over their estimated useful life or, in some cases of intangible assets, for the contractual time period.

Agencies may use any rational systematic depreciation method, such as the straight-line or composite methods of depreciation. PeopleSoft calculates depreciation using the straight-line method, based on the months the asset was in use during the year.

Agencies using their own system to calculate depreciation may base the calculation on months the asset was in use during the year or may use an alternative rationale method to apply depreciation in the years the asset is acquired and disposed. For example:

• If the asset was acquired in the first half of the reporting period, a full year of depreciation should be taken.
• If the asset was acquired in the second half of the reporting period, one-half year of depreciation should be taken.
• If the asset was disposed in the first half of the reporting period, one-half year depreciation should be taken.
• If the asset was disposed of during the second half of the reporting period, a full year of depreciation should be taken.

All fixed asset records should be maintained for audit purposes. Documentation for fixed assets should be maintained until the asset is disposed of plus three years.

Agencies are to maintain a listing of any assets lost, stolen, or completely destroyed and removed from the fixed asset records. Additions to this listing must be authorized by the agency head or agency representative. This listing should be retained by the agency for audit review.

Agencies are required to maintain records to calculate and report by class of fixed assets:

• Fixed assets by class.
• Depreciation expense by department number. (Some department activities may be assigned a unique department number for reporting purposes. For example, DOT will need to account for Fleet Services separately since it is a “business type activity.”)
• Gains and losses from disposal of fixed assets.
• Additions and deductions of fixed assets by class.
• Accumulated depreciation by class as of July 1, 2001, and additions to and deductions by fixed asset class.
• Acquisition value of donated assets.

For annual ACFR reporting, agencies using PeopleSoft Asset Management will only need to complete closing packages for Construction in Progress information, if applicable. Agencies not using PeopleSoft Asset Management will continue to report all fixed asset information using closing packages, based on data recorded in the agency’s own system. All assets held for investment will need to be reported on a closing package.