UNITED STATES DEPARTMENT OF AGRICULTURE

Rural Electrification Administration

**REA BULLETIN 1770-1**

**SUBJECT**: **[REA Work Order Procedure]{.underline}**

**TO**: All Telephone Borrowers

REA Telephone and Accounting Staff

**EFFECTIVE DATE**: Date of Approval

**EXPIRATION DATE**: Three years from effective date

**OFFICE OF PRIMARY INTEREST**: Borrower Accounting Division

**PREVIOUS INSTRUCTIONS**: This Bulletin replaces Telephone Operations
Manual (TOM) Section 1860, Suggested Work Order Procedure.

**FILING INSTRUCTIONS**: Discard Telephone Operations Manual (TOM)
Section 1860 and replace it with this bulletin.

**PURPOSE**: To provide a uniform system for accumulating and
distributing work order construction costs and to recognize the effects
of the revision of the Federal Communications Commission Uniform System
of Accounts.

James B. Huff, Sr. 07-16-92

Administrator Date

**TABLE OF CONTENTS**

1\. General

2\. Contributions

3\. Equipment

4\. Work Order Procedure

5\. Estimated Work Orders

6\. Construction Work Orders

7\. Blanket Work Orders

8\. Job Orders

9\. Retirement Work Orders

10\. Work Order Register or Log

11\. Labor

12\. Material

13\. Overhead

14\. Account Analysis

15\. Work Order Ledger

16\. Summary of Work Orders

17\. Sample Case

Exhibit A: Staking Sheet

Exhibit B: Daily Work Report

Exhibit C: Payroll Distribution Sheet

Exhibit D: Monthly Labor Cost Summary

Exhibit E: Calculation and Distribution of Motor Vehicle

Expense

Exhibit F: Material Used Sheet

Exhibit G: Material Recovered and Plant Displaced Report

Exhibit H: Summary of Material Items Used and Recovered

Exhibit I: Materials Register

Exhibit J: Employees\' Time and Overhead Distribution Form

Exhibit K: Account Analysis

Exhibit L: Work Order Ledger

Exhibit M: Summary of Work Orders

Exhibit N: Continuing Property Record

INDEX:

Accounting

Work Order Procedure, Telephone

**1.** **GENERAL:** The function of plant accounting is to record the
various elements of construction and retirement costs in a manner that
satisfies the requirements of Part 32, the Federal Communications
Commission\'s Uniform System of Accounts, as supplemented by 7 CFR Part
1770, Accounting Requirements for REA Telephone Borrowers (Part 1770),
and to form the basis for recording plant additions and retirements.

**1.1** The telecommunications plant accounts are designed to show the
investment in the entity\'s tangible and intangible telecommunications
plant that has an estimated service life of more than one year.

**1.2** The account numbers used in this bulletin are subaccounted to
four digits after the decimal place. The first two digits after the
decimal place are used to satisfy the requirements of Part 32 and Part
1770.

**1.2.1** The third digit after the decimal place is used to indicate
the type of cable or wire as follows:

> 0 - Not Applicable
>
> 1 - Nonmetallic
>
> 2 - Metallic

**1.2.2** The fourth digit after the decimal place is used to signify
the expense matrix category as follows:

> 1 - Salaries and Wages
>
> 2 - Benefits
>
> 3 - Rents
>
> 4 - Other Expenses
>
> 5 - Clearances

**2. CONTRIBUTIONS:** The telecommunications plant accounts do not
include the cost or other value of plant contributed to the company.

**2.1** **[Contributions in the form of money or its
equivalent]{.underline}** toward the construction of telecommunications
plant are credited to the accounts charged with the cost of such
construction.

**2.2** **[Contributions that are to be repaid,]{.underline}** either
wholly or in part, are credited to Account 4360, Other Deferred Credits,
until final determination of the amount to be refunded has been made.
Any unrefunded contributions are credited to the accounts charged with
the cost of the associated construction.

**3. EQUIPMENT:** The cost of individual items of equipment classifiable
to the following plant accounts, costing \$500 or less or having an
estimated useful service life of less than one year, should be charged
to the appropriate Plant Specific Operations Expense account:

> a\. Account 2112, Motor Vehicles;
>
> b\. Account 2113, Aircraft;
>
> c\. Account 2114, Special Purpose Vehicles;
>
> d\. Account 2115, Garage Work Equipment;
>
> e\. Account 2116, Other Work Equipment
>
> f\. Account 2122, Furniture;
>
> g\. Account 2123, Office Equipment; and
>
> h\. Account 2124, General Purpose Computers.

**3.1** **[If the aggregate investment]{.underline}** in the individual
equipment items is relatively large at the time of acquisition, the
investment may be recorded in Account 1220.1000, Materials and Supplies,
until the items have been installed. At the time of installation,
Account 1220.1000 is credited and the appropriate Plant Specific
Operations Expense account is debited.

**4.** **WORK ORDER PROCEDURE:** The work order procedure may be used to
estimate construction requirements, to budget funds, and to accumulate
the costs of additions and retirements of telecommunications plant.

**4.1** **[Costs incurred on individual construction
projects]{.underline}** should be accumulated in a systematic manner in
order to comply with

Part 32 and to substantiate disbursements. Account 2003.3000,
Telecommunications Plant Under Construction - Short-Term - Work Orders,
and Account 2004.3000, Telecommunications Plant Under Construction -
Long-Term - Work Orders, have been established to accumulate all work
order construction costs. Work orders serve as the support for advances
of REA loan funds.

**4.2** **[Costs incurred in retiring plant from service]{.underline}**
should be charged to a retirement work order and accounted for in

Account 3100.X000, Retirement Work in Progress. The cost of maintenance
activities performed in connection with a work order should be charged
directly to the appropriate operations expense accounts.

**5.** **ESTIMATED WORK ORDERS:** Estimated work orders should be
prepared, as necessary, to meet management\'s needs. The estimated work
order form should provide space for a diagram and/or description of the
work to be performed together with the justification or reasons why the
work is necessary. A staking sheet (Exhibit A) may be used instead of a
sketch. The form should provide a section for listing the quantity of
each construction unit to be installed. Unit costs are based upon
engineering estimates and are multiplied by the quantities involved to
determine the total estimated cost of the new construction.

**5.1** **[For a retirement work order,]{.underline}** the number of
property record units to be retired and the original installed cost of
each should be entered in a section of the form entitled \"Units to be
Retired\". By multiplying the unit cost by the quantities and adding the
products, the total original cost of units retired is obtained. To
complete the work order costing, the cost of removal and the salvage
value of reusable material should be estimated.

**6.** **CONSTRUCTION WORK ORDERS:** A construction work order should
accumulate, in one record, all costs assignable to a specific addition
of telecommunications plant. The cost of all completed work orders
should be cleared to the telecommunications plant accounts on a monthly
basis.

**7.** **BLANKET WORK ORDERS:** In order to eliminate many small work
orders, a system of blanket work orders may be used. Through the use of
blanket work orders, many projects for which individual work orders were
previously prepared may be merged, decreasing the number of work orders
necessary to record plant changes.

**7.1** In normal operations, certain types of new construction and
certain replacements of retirement units recur frequently due to the
necessity of adding new subscribers and maintaining and improving
service to existing subscribers. When it is not necessary to maintain a
record of the individual costs of each job, blanket construction and
retirement work orders are often used to accumulate the costs of similar
jobs performed within a given period of time. Blanket work orders may be
closed to plant on a quarterly basis.

**8.** **JOB ORDERS:** The term \"job order\" usually refers to
maintenance activities chargeable to expense. The term, however, may be
used to identify small construction jobs that are not considered large
enough to require a separate work order. Under the blanket work order
system, job order numbers may be assigned to individual construction
projects covered by one blanket work order and maintenance job order
numbers may be assigned to individual maintenance jobs.

**8.1** A job order is used to provide documentation for subscribers\'
requests for service and is not used to accumulate the costs of any
associated construction or maintenance activity. The cost of
construction related job orders should, therefore, be accumulated on a
blanket work order.

**9.** **RETIREMENT WORK ORDERS:** Three cost elements are involved in a
retirement work order:

> a\. The original cost of the property being retired;
>
> b\. The cost of removing that property from service; and
>
> c\. The salvage value, if any, of materials recovered.

These three elements are accumulated on the retirement work order and
the net amount of these items (original cost plus the cost of removal
less salvage) is charged to the appropriate subaccount of Account 3100,
Accumulated Depreciation.

**9.1** **[To avoid undue refinement]{.underline}** in accounting for
additions, retirements, and replacements of telecommunications plant,
all property should be considered as consisting of either retirement
units or minor items of property.

**9.1.1** When a replacement involves a retirement unit, the original
cost of the unit is credited to the appropriate plant account and the
cost of replacing the item is capitalized.

**9.1.2** When the replacement involves a minor item of property, the
cost of replacing it is charged to the appropriate Plant Specific/Plant
Nonspecific Operations Expense account.

**9.2** **[To eliminate the need for many small work
orders,]{.underline}** blanket retirement work orders may be used. An
individual or blanket retirement work order, as appropriate, should be
prepared for all retirements consisting of retirement units.

**9.3** **[When construction of plant also includes plant
retirements,]{.underline}** separate construction and retirement work
orders should be prepared, cross-referenced, and listed on the same
Summary of Work Orders, REA Form 771 (Exhibit M).

**10.** **WORK ORDER REGISTER OR LOG:** Borrowers should maintain a
register or control record in which work orders are assigned a number
and listed in numerical order. As subsequent stages of the work order
are completed, the completion dates are entered in the Work Order
Register. The Work Order Register, therefore, provides the status of
incomplete work orders, provides a permanent record of the dates and
other data relative to the work accomplished, and serves as a means of
internal control to assure that all stages of each work order are
properly completed.

**10.1** **[The content of the register]{.underline}** may be expanded
or reduced to meet the organizational and control needs of each company;
however, the following items are typical of those required:

> a\. The work order number (it may include the year, exchange,
>
> tax district, or other pertinent information);
>
> b\. The job order number, when identifying individual
>
> projects under a blanket work order;
>
> c\. A description of the work or other identification;
>
> d\. The location of the work:
>
> e\. The date the work began; and
>
> f\. The date work was completed.

**10.2** The date on which a right-of-way is secured for plant additions
requiring an easement, the date staking is completed, and the date work
orders are posted to a summary of work orders may be information of
interest to management.

**11. LABOR:**

**11.1 [The Daily Work Report]{.underline}** (Exhibit B) is prepared
each day by the personnel responsible for the work being performed. It
is the basic accounting record for payroll hours, plant additions, and
plant retirements. Accuracy in reporting, attention to detail, and
promptness in preparing the Daily Work Report are essential, therefore,
to the validity of the final costs reflected in the primary plant
accounts.

The step-by-step procedure for completing the Daily Work Report is as
follows:

**11.1.1** Labor: Enter each employee\'s name and provide a description
of the work performed. In the same column as the description, enter the
work order number, if any, and the appropriate account number for the
work performed. Enter the hours worked by each employee under the
description of the work performed on the same line as the employee\'s
name. The report should be prepared daily by each crew member or the
foreman, or by an individual when working alone. An employee\'s time
should be reported by hours, with no attempt made to segregate overtime,
if any, from the regular hours. This segregation is made on the Payroll
Distribution Sheet (Exhibit C).

A separate \"Description of Work\" column should be used for each type
of work that includes costs chargeable to separate accounts. If work is
performed on more than one work order in a day, the time spent on each
work order should be recorded separately. For example, time might be
reported as \"Installing Poles, Blanket W.O. #6\", and \"Installing
Poles, W.O. #14.\"

Each person responsible for preparing a Daily Work Report should be
knowledgeable in the various categories of work in which time is
reported so that a proper analysis can be made for accounting purposes.
The determination of the proper account on the Daily Work Report is the
responsibility of the accounting department. The foreman or the
individual workmen, however, are responsible for furnishing adequate
information so that a proper determination may be made.

**11.1.2** Material Used: The Daily Work Report is the original record
of material used. If a telecommunications entity does not employ a
storekeeper to control materials, non-exempt materials and supplies
taken from stock for either construction or maintenance activities
should be reported on the Daily Work Report under the Heading \"Material
Used\". The kind of material, size or material code, and unit of
measurement, such as \"each\", \"pound\", or \"foot\", should be entered
in the spaces provided. The quantity used should be reported, by work
order number, in the column under the appropriate description of the
work performed.

**11.1.3** Plant Removed or Abandoned: This section of the Daily Work
Report is used to record the kind of material removed from service, its
unit of measurement, and the quantity of units removed. The quantity
should be reported, by work order number, in the column under the
appropriate description of the work performed. The \"Condition of
Material\" removed should be reported as \"G\" if good and reusable, or
as \"W\" if worthless or nonusable. Materials representing major
components of property record units that have been abandoned should also
be reported in this section.

**11.1.4** Motor Vehicle: The foreman, or the individual workmen when
working alone, should distribute the total hours a vehicle was used
during the day under the same columnar heading on the Daily Work Report
as the labor and material. If a vehicle made one trip to a job on which
several types of work were performed, distribution of the vehicle time
is made on the same basis as the direct labor hours for each type of
work. This distribution should be made by the foreman or individual
plant employees so that the accounting department can properly
distribute costs.

**11.2** **[Payroll Distribution Sheet]{.underline}:** The hours worked
by each employee, as reported on the Daily Work Report (Exhibit B),
should be posted to the individual employee\'s Payroll Distribution
Sheet (Exhibit C) to calculate payroll and distribute labor costs to the
appropriate accounts.

**11.2.1** Although individual plant account numbers are shown on the
Daily Work Report, all labor costs applicable to work order construction
or retirement are charged first to the respective construction
(2003.3000/2004.3000) and retirement work in progress (3100.X000)
accounts.

**11.2.2** Upon completion of the work order, the costs are then cleared
to the appropriate telecommunications plant in service and accumulated
depreciation accounts. Time chargeable to maintenance is distributed
directly to the appropriate Plant Specific/Plant Nonspecific Operations
Expense accounts on the Payroll Distribution Sheet.

**11.2.3** The payroll Distribution Sheet may be designed to accommodate
payrolls calculated on a weekly, biweekly, semi-monthly, or monthly
basis. Exhibit C illustrates a form designed for a semi-monthly or
monthly payroll period.

**11.2.4** Each Payroll Distribution Sheet should show the employee\'s
name, occupation, regular pay rate, overtime rate, social security
number, period covered, and any other information pertinent to issuing
payroll checks and maintaining payroll records. Each day\'s labor hours
should be posted on the appropriate lines at the bottom of the form to
show the amount of time to be calculated at the regular pay rate and the
amount to be calculated at the overtime rate. These total daily labor
hours should be classified by accounts in the center section of the
form.

**11.2.5** The labor cost for each account may be calculated by applying
the hourly pay rate to the total hours associated with each account. The
lower portion of the employee\'s Payroll Distribution Sheet is used to
summarize the regular and overtime hours for the pay period to determine
total compensation due for the period and to accumulate all regular and
overtime labor hours within the month. The final distribution on each
employee\'s Payroll Distribution Sheet should be posted to a Monthly
Labor Cost Summary (Exhibit D).

**11.3 [Monthly Labor Cost Summary]{.underline}:** The accounting
distribution of each employee\'s gross pay should be posted from the
individual Payroll Distribution Sheets to the Monthly Labor Cost Summary
(Exhibit D).

**11.3.1** All labor costs chargeable directly to construction and
retirement work orders should be entered in the columns designated as
\"Direct\" under Accounts 2003.3000, 2004.3000, and 3100.X000.

**11.3.2** Labor costs that are chargeable to construction and
retirements, but which are not related to a specific work order are
classified as indirect labor and are entered in the column entitled
\"Overhead\". Columns have been provided for the various expense
accounts, as necessary.

**11.3.3** By using a Payroll Distribution Sheet and a Monthly Labor
Cost Summary, it is possible to immediately post payroll checks to the
Check Register without determining the accounting distribution of the
payments. This distribution is usually determined after the end of the
month. As payments are made to the employees, gross wages are charged to
Account 4010.2500, Accounts Payable - Payroll.

**11.3.4** After all Payroll Distribution Sheets have been completed and
posted to the Monthly Labor Cost Summary, a journal entry is made, based
upon the totals thereon, charging the appropriate general ledger
accounts and crediting the payroll clearing account.

**11.3.5** If gross earnings are debited to Account 4010.2500 when the
payroll checks are issued, the account balance at the end of the month
represents the total accrued unpaid labor costs, if any. A balance in
the account usually indicates that the last payroll period in the month
did not end on the last day of the month. This condition usually exists
when a weekly or biweekly pay period is used.

**11.3.6** This form may also be used to determine and distribute costs
for payroll taxes, payroll insurance, vacation and holiday time, and
other employee benefits such as pension, group life insurance, and
health insurance. To simplify the determination of the cost of
workmen\'s compensation and public liability insurance, employee labor
costs may be tabulated by rate groups and subtotaled.

**11.3.7** Employee benefits are listed in the employee column of the
Payroll Distribution Sheet. The total benefit accrual is calculated by
multiplying the rates for each benefit item by each employee\'s total
earnings. The total benefits chargeable to the various plant,
retirement, and expense accounts are calculated by multiplying the rates
for each benefit item by the employees\' earnings charged to those
accounts.

**12.** **MATERIAL:**

**12.1** **[Material Used]{.underline}:** The type of material used
should be posted from the Material Used section of the Daily Work Report

(Exhibit B) and Service Orders to the Material Used sheet (Exhibit F).
The various types of material used should be grouped by account number.
Quantities of each item used should be entered in a column headed with
the date of usage. The columns should be added to obtain the \"Total\"
quantity used for each item. The total should be multiplied by the
\"Price\" (average unit value from the stock record cards) to obtain the
\"Amount\" for the last column. The amounts should then be totalled by
plant account.

**12.1.1** Separate Material Used sheets should be used for each Work
Order. All material used for maintenance should be classified by account
number and recorded on one sheet.

**12.1.2** If an exempt material procedure is in effect, only non-exempt
material items should be reported on the Daily Work Report and tabulated
on the Material Used sheet.

**12.1.3** The employee responsible for keeping the cost records should
determine that the materials posted from the Daily Work Report agree
with those materials required for each particular job as shown by the
staking sheet (Exhibit A) or work sketch. The totals of the individual
Material Used sheets should be posted to the Materials Register (Exhibit
I), and the material costs should be posted to the construction Work
Order Ledger (Exhibit L) by plant account.

**12.2** **[Material Recovered and Plant Displaced]{.underline}:** A
separate Material Recovered and Plant Displaced report (Exhibit G)
should be used for each work order. This report is used for recording
plant retired and non-exempt material salvaged. Plant removed or
abandoned as shown on the Daily Work Report (Exhibit B) should be posted
to this summary by primary plant account and its condition should be
rated as \"G\" for Good, if reusable; or \"W\" for Worthless, if
nonusable. Quantities should be extended to the \"Total\" column
adjacent to the account number. Items of material that are reported as
good and considered reusable should be priced at original cost,
estimated if not known. Reusable material (non-exempt) comprising minor
items that, when installed or in service, were neither retirement units
nor principal components of assemblies that were retirement units,
should be priced at replacement cost new.

**12.3** **[Summary of Material Items Used and Recovered]{.underline}:**
The quantities of material used each month are posted to the stock
record cards from the Material Used form. If the various non-exempt
material items used and salvaged are summarized on a Summary of Material
Items Used and Recovered form (Exhibit H), only one entry should be made
to the individual stock record cards for each month.

**12.4** **[Materials Register]{.underline}:** The Materials Register
(Exhibit I) is used to summarize the amount of all non-exempt materials
used and recovered so that only one journal entry is required for
posting to the general ledger accounts. The Materials Register should
list all Material Used and Material Recovered Summaries in numerical
order, for a given month.

**12.4.1** The total of each Material Used sheet is credited to Account
1220.1000, Materials and Supplies. The debit is dependent upon the use.
If the materials were used on a construction work order, the amount is
charged to either

Account 2003.3000 or Account 2004.3000. Any materials used in connection
with maintenance activities should be charged to the appropriate
operations expense accounts in the miscellaneous columns of the
register.

**12.4.2** The salvage value of material shown on the Material Recovered
and Plant Displaced report (Exhibit G) should be debited to Account
1220.1000, and credited to Account 3100.X000. If material is salvaged
during maintenance work, the credit is to the appropriate operations
expense account. The net non-exempt materials charged out and salvaged
each month should agree with the total shown on the Summary of Material
Items Used and Recovered (Exhibit H).

**12.4.3** If the Materials Register is a permanent record, the totals
in the account columns for Material and Supplies

(Account 1220.1000), Telecommunications Plant Under Construction-Work
Orders (Accounts 2003.3000 and 2004.3000), Retirement Work in Progress
(Account 3100.X000), and the various operations expense accounts may be
posted directly to the general ledger.

**13.** **OVERHEAD:**

**13.1** **[Employees\' Time and Overhead Distribution
Form]{.underline}:** The Employees\' Time and Overhead Distribution Form
(Exhibit J) is used to distribute the labor and overhead costs charged
to the construction and retirement work in progress accounts to the
primary plant and accumulated depreciation accounts. A separate form is
used to distribute the labor and overhead charges for construction and
retirement activities. The work order numbers, account numbers, and
hours are posted to this form from the Daily Work Report. The hours
should be posted separately for each work order by account number. The
total for the month, divided by the associated \"Total Labor Hours\"
results in an average hourly rate. This rate multiplied by the total
labor hours applicable to each account provides the labor value charged
to the individual plant accounts and accumulated depreciation accounts.

**13.1.1** Direct costs are those that can be readily identified and
associated with specific work orders.

**13.1.2** Indirect or overhead costs are those pertaining to
construction, but not readily identifiable with specific projects, such
as:

> a\. Plant operations and administrative expense;
>
> b\. Engineering expense;
>
> c\. Motor vehicle expense;
>
> d\. Aircraft expense;
>
> e\. Special purpose vehicle expense;
>
> f\. Other work equipment expense;
>
> g\. Payroll taxes;
>
> h\. Employee benefits; and
>
> i\. Insurance expense.

**13.1.3** Total overhead costs may be determined by analyzing charges
and credits to Accounts 2003.3000 and 2004.3000, and Account 3100.X000,
Retirement Work in Progress (Exhibit K). These various overhead costs
should be totalled separately for Accounts 2003.3000, 2004.3000, and
3100.X000.

**13.1.4** Overheads may be distributed on the basis of labor hours by
dividing the total overhead costs charged to each account by the \"Total
Labor Hours,\" and by multiplying the resulting dollar amount per hour
by the total number of labor hours applicable to each account. The total
of the two columns entitled \"Labor Value\" and \"Overhead\" should
equal the total of the costs in Accounts 2003.3000 and 2004.3000, and
the similar totals for retirement work orders should equal those in
Account 3100.X000. This reconciliation should be made prior to posting
labor and overhead to the work order forms.

**13.1.5** These costs are transferred to the Work Order Ledger sheet
for the work orders involved and are entered in the columns entitled
\"Labor\" and \"Overhead\" opposite the appropriate account number. This
form requires only one posting to each work order for a given month, and
should, therefore, reduce the possibility of error in labor and overhead
distribution and simplify the process of reverifying, when necessary.

**13.2** **[Summary and Distribution of Transportation Costs and Special
Machine Services]{.underline}:** All costs associated with the
operations and maintenance of motor vehicles (cars, trucks, vans, buses)
should be charged to Account 6112, Motor Vehicle Expense; costs incurred
in operating and maintaining aircraft (airplanes, helicopters) should be
charged to Account 6113, Aircraft Expense; costs incurred for special
purpose vehicles (boats, motor scooters, snowmobiles) should be charged
to Account 6114, Special Purpose Vehicles Expense; and costs incurred
for other work equipment (bulldozers, fork lifts, all-terrain vehicles,
back hoes, trenchers, and tractors) should be charged to Account 6116,
Other Work Equipment Expense.

**13.2.1** Clearances from these accounts should be charged to
construction, retirement (accumulated depreciation), and the other Plant
Specific Operations Expense accounts on the basis of the direct labor
hours of the employees operating the vehicles and equipment.

**13.2.2** A separate calculation should be made for each classification
of plant (motor vehicles, aircraft, special purpose vehicles, and other
work equipment). Exhibit E demonstrates the calculation and subsequent
distribution of motor vehicle expense. This same method may be used for
the other types of vehicles and equipment. The totals in the \"Amount\"
column for Account 2003.3000, Account 2004.3000, and

Account 3100.X000 are distributed to the various telecommunications
plant and accumulated depreciation accounts with other overhead charges
on the Employees\' Time and Overhead Distribution forms (Exhibit J).

**13.2.3** Depreciation charges on the vehicles and equipment detailed
above should be charged to Account 6561, Depreciation
Expense-Telecommunications Plant in Service.

**14.** **ACCOUNT ANALYSIS:** To verify the accuracy of the Work Order
Ledger sheets, a complete and current running analysis of the charges
and credits in general ledger control Accounts 2003.3000, 2004.3000, and
3100.X000 should be maintained. This analysis may be maintained on the
ledger sheet itself or on a fly-sheet inserted in the general ledger
immediately preceding the account. A column should be provided for each
column included in the Work Order Ledger. Exhibit K contains sample
account analyses.

**14.1** After all postings have been made to Accounts 2003.3000,
2004.3000, and 3100.X000, and to the Work Order Ledger sheets, the total
of the individual Work Order Ledger sheets should equal the total of the
general ledger control balances. Likewise, if an analysis of the general
ledger control accounts has been prepared in a format similar to Exhibit
K, the totals of all of the individual Work Order Ledger sheets for
\"Material\", \"Provisioning Expense\", \"Labor\", \"Overhead\", and
\"Other Charges\" should equal the totals of the corresponding columns
on the general ledger control sheets. This analysis assists in locating
differences when, after posting, the individual Work Order Ledger sheets
do not immediately agree with the general ledger control account.

**14.2** All completed construction work orders should be cleared
monthly by crediting Accounts 2003.3000 and 2004.3000, and debiting the
appropriate plant accounts. Completed retirement work orders should also
be cleared monthly by crediting Account 3100.X000 and debiting the
appropriate accumulated depreciation accounts. The information necessary
to record this entry is taken directly from each work order or if there
are several work orders, a summary may be prepared to clear the costs of
the completed work from the control account.

**14.3** After these entries are posted to the general ledger control
accounts, the detail columns should be subtotaled and balanced with the
individual Work Order Ledger sheets for incomplete work orders.

**14.4** As work orders are completed and transferred from

Accounts 2003.3000, 2004.3000, and 3100.X000, the individual Work Order
Ledger sheets should be transferred to the \"Completed Work Orders\"
section of the Work Order Ledger.

**15.** **WORK ORDER LEDGER:** The Work Order Ledger (Exhibit L) is used
to accumulate the costs of a specific work order. A separate Work Order
Ledger sheet should be prepared for each work order for each month work
is in progress to show the monthly accumulation of charges to the plant
accounts. A separate Work Order Ledger sheet may be used to summarize
the costs of a single work order that has taken several months to
complete.

**15.0.1** Work Order Ledger sheets for incomplete work orders should
show costs for each month in which any work is performed. Amounts posted
to Work Order Ledger sheets for incomplete work orders should reconcile
with the balances in Accounts 2003.3000, 2004.3000, and 3100.X000.

**15.1** **[The Construction Work Order portion]{.underline}** of the
form is completed as follows:

**15.1.1** Column 1 - The account numbers for all plant accounts
affected by the work order are listed in this column.

**15.1.2** Column 2 - The cost of materials used on a specific work
order is posted in this column. All material charges, as shown on the
Work order Ledger sheets for a given month, should equal the total in
the \"Debit\" column under the heading \"Construction Work In Progress
(2003.3000, 2004,3000)\" on the Materials Register (Exhibit I).

**15.1.3** Column 3 - Provisioning expenses chargeable to the work order
are recorded in this column.

**15.1.4** Column 4 - The total of the amounts in columns 2 and 3 is
extended to this column.

**15.1.5** Column 5 - Labor costs, by individual plant account, are
posted to this column from the Employees\' Time and Overhead
Distribution Form (Exhibit J).

**15.1.6** Column 6 - Overhead costs, by individual plant account, are
posted to this column from the Employees\' Time and Overhead
Distribution Form (Exhibit J).

**15.1.7** Column 7 - If a work order includes charges specific to one
work order only, such costs are shown in this column. Examples of such
special charges include consulting engineering services and contract
work relating to an individual work order and often to specific
accounts.

**15.1.8** Column 8 - The total of the amounts in Columns 5, 6, and 7 is
extended to this column.

**15.1.9** Column 9 - The total of the amounts in Columns 4 and 8 is
extended to this column.

**15.1.10** Column 10 - All amounts not required for advance are
reported in this column, including loan funds previously advanced under
the exempt material procedure and contributions in aid of construction.

**15.1.11** When replacements or plant improvements are made that
include plant retirements, a related retirement work order is prepared.
When the retirement is performed in connection with construction
activities, the retirement work order number should be the same as the
corresponding construction work order number followed by an X. (Example:
Construction Work Order No. 42; Retirement Work Order No. 42X).

**15.1.12** Whenever there is a retirement work order related to a
construction work order for a system improvement, the retirement work
order should be completed and accounted for on the same Summary of Work
Orders (Exhibit M) on which the construction work order is listed.

**15.1.13** If an estimated work order has been prepared for the
project, the estimated cost should be included in the space provided at
the top of the Work Order Ledger sheet.

**15.1.14** The journal entry transferring the costs of completed
construction to the classified plant accounts is prepared by
summarizing, by plant account, the amount shown in Column 9, Cumulative
Total, of the Work Order Ledger sheets for all work orders completed and
placed in service during the month.

**15.2** Because the data necessary for recording plant retirements is
different from that used for recording construction, a separate section
at the bottom of the work order is provided. A separate Work Order
Ledger sheet should be used to record the costs applicable to each
retirement work order. When retirements relate to replacements or system
improvements, a related construction work order exists, the number of
which should be indicated in the space provided on the Work Order
Ledger. The Retirement Work Order portion of the form is completed as
follows:

**15.2.1** Column 11 - The account numbers for all accumulated
depreciation accounts affected by the work order are listed in this
column.

**15.2.2** Column 12 - Labor costs, by accumulated depreciation account,
are posted to this column from the Employees\' Time and Overhead
Distribution Form (Exhibit J).

**15.2.3** Column 13 - Overhead costs, by accumulated depreciation
account, are posted to this column from the Employees\' Time and
Overhead Distribution Form (Exhibit J).

**15.2.4** Column 14 - Other charges such as the rental of special or
extra equipment necessary to remove certain items of telecommunications
plant are entered in this column.

**15.2.5** Column 15 - The total of the amounts in Columns 12, 13, and
14 is extended to this column.

**15.2.6** Column 16 - The original cost of plant retired is posted in
this column from the Material Recovered and Plant Displaced report
(Exhibit G).

**15.2.7** Column 17 - The salvage value of materials retired is posted
in this column from the Material Recovered and Plant Displaced report.

**15.2.8** Column 18 - The sum of the amounts in Columns 15 and 16 less
the amount in Column 17 is extended to this column.

**15.2.9** The journal entry transferring the net charges on all
retirements for the month to Account 3100, Accumulated Depreciation, is
prepared by summarizing the amount shown in Column 18, \"Net Charge to
Reserve for Depreciation\".

**15.2.10** Property record units should be summarized on the reverse
side of the final Work Order Ledger sheet of the construction work
order.

**15.2.11** In order to maintain continuing property records, however,
it is also necessary to determine the number of property record units
installed and removed. This information may be obtained from the
Material Used sheet (Exhibit F), the Staking Sheet (Exhibit A), and the
Material Recovered and Plant Displaced report (Exhibit G). The units of
property retired do not appear on the Work Order Ledger. They are
recorded on the Material Recovered and Plant Displaced report (Exhibit
G) and are posted to the continuing property records from that report or
a summary of these reports. Exhibit N of this bulletin contains a sample
continuing property record.

**16.** **SUMMARY OF WORK ORDERS:** The Summary of Work Orders

(Exhibit M) is used to summarize the costs of completed work orders and
to requisition loan funds from REA. A Summary of Work Orders should be
prepared each month. See 7 CFR Part 1753, Telecommunications System
Construction Policies and Procedures, Subpart I, Minor Construction, for
work order summary requirements.

**16.1** Exhibit M reflects the actual cost of each work order in two
categories - labor and overhead costs and material. These costs are
obtained from the Work Order Ledger.

**16.2** Whenever there is a retirement work order prepared in
connection with a construction work order, both work orders should be
completed and accounted for on the same Summary of Work Orders.

**16.3** Any material or items for which advances have previously been
made (except for amounts expended from the Work Order Fund) are deducted
from the total cost of the applicable work order in order to determine
the net advances required.

**16.4** Before REA loan funds may be advanced, the Summary of Work
Orders, with an attached schedule describing the work orders, should be
dated and certified by the manager, dated and approved by the REA
general field representative, and submitted to REA.

**16.5** The \"Net Advances Required\", Column \"h\", may then be
requested on the next Financial Requirement Statement.

**16.6** All costs relating to work orders reported on the Summary of
Work Orders are subject to verification by the REA field accountant
during the performance of the Loan Fund and Accounting Review.

**17.** **SAMPLE CASE:** The remainder of this bulletin focuses on a
sample case that illustrates the work order procedure and demonstrates
the relationship of the exhibits included in this lesson. The forms
contained the attached exhibits are designed for both overhead and
underground construction and retirement activities. This sample case,
however, illustrates only overhead construction and retirement
activities because the construction and retirement is less technical
and, as a result, easier to understand and illustrate.

**17.1** This sample case is designed solely for the purpose of
illustrating the concepts relating to work order construction and to
show the interrelationship of the various forms. This sample is not
designed to indicate what REA will finance, nor is it designed to
promote the use of a specific form. Only the REA forms that are
referenced are required to be used, all other forms are provided for
illustrative purposes only. REA telephone borrowers are free to design
their own forms provided such forms contain sufficient information so as
to allow for the proper accumulation and distribution of work order
construction costs.

**17.2** In this sample case, the Mill Valley Telecommunications Company
replaced three pairs of aerial wire and extended a pole line and
circuits to serve two new subscribers on Pine Street. The construction
crew completed the job in two days. The construction was included in
Blanket Construction Work Order

No. B5 and the related retirement in Blanket Retirement Work Order No.
B5X. The costs incurred replaced three pairs of aerial wire and six pair
aerial distribution wire, extended the pole line, and added three pair
distribution wire to serve two new subscribers.

**17.3** In this case, REA is primarily concerned with the accounting
for the costs of the Pine Street construction. The costs of other job
orders included in the blanket work order, however, appear on some of
the forms to demonstrate the manner in which the costs of material,
labor, and overhead are determined when several job orders are involved.
It should be noted that additional maintenance and line construction
activities may have been performed on the same days as the Pine Street
construction and that work on a particular job may cover longer periods
of time.

**Sample Staking Sheet**

Exhibit A illustrates the construction and retirement activities to be
performed on the Pine Street extension and provides information relative
to the rebuilding and extension of the line.

**Sample Daily Work Report**

Outside plant employee, John Johnson, completed the Daily Work Report
and assigned the labor, truck usage, and material to the proper plant
accounts. The company uses an exempt material procedure in which most
minor material items are charged to the plant and maintenance accounts
at the time of purchase. Therefore, only non-exempt material items were
reported on the Daily Work Report. The sample Daily Work Report for May
9, the second day of the job, reports labor and truck usage, as well as
all non-exempt material items used, all property units retired, and all
materials salvaged. The Daily Work Report for May 8, not shown, reports
only labor and truck usage for that day.

**Sample Payroll Distribution Sheet**

The Mill Valley Telecommunications Company uses a semi-monthly Payroll
Distribution Sheet showing the earnings, deductions, and the amount paid
for each half-month period. The total amount earned for the month is
allocated to the various accounts, in the columns at the right, on the
basis of the average hourly rate for the entire month. Total payroll
costs are distributed by dividing gross pay (\$3,680.00) by total work
hours (184). The resulting average hourly rate (\$20.00) is entered in
the lower right-hand portion of the form. Since John Johnson reported no
overtime for the month, his average hourly rate equaled his regular
rate. The payroll hours assigned to each account are then multiplied by
the average hourly rate (\$20.00) to distribute gross pay for the month
to the various accounts.

It should be noted that John Johnson\'s time is charged, in total, to
Telecommunications Plant Under Construction - Short-Term - Work Orders
(Account 2003.3000) on Exhibit C even though specific plant account
numbers are shown on the Daily Work Report.

**Sample Monthly Labor Cost Summary**

The accounting distribution of John Johnson\'s gross pay for the month
of May and for each of the other employees is posted to the Monthly
Labor Cost Summary from the individual Payroll Distribution Sheets
(Exhibit C). The journal entry distributing labor costs for May is as
follows:

2003.3000 Telecommunications Plant Under

Construction - Short-Term -

Work Orders \$ 6,147.82

3100.X000 Retirement Work in Progress 1,113.59

4120.6000 Other Accrued Liabilities-

Accrued Vacation & Holidays 901.04

6212.0001 Digital Electronic Expense -

Salaries 802.40

6311.0001 Station Apparatus Expense -

Salaries 844.22

6411.0001 Poles Expense - Salaries 1,076.20

6421.0021 Aerial Cable Expense -

Metallic - Salaries 1,415.51

6431.0021 Aerial Wire Expense -

Metallic - Salaries 841.58

6512.0001 Provisioning Expense -

Salaries 219.48

6534.0001 Plant Operations

Administration Expense -

Salaries 2,569.60

6535.0001 Engineering Expense -

Salaries 4,792.16

4010.2500 Accounts Payable - Payroll \$ 20,723.60

Journal entry to distribute labor costs for May 19X2,

in accordance with the Monthly Labor Cost Summary.

In the sample case, Exhibit D is used to calculate, distribute, and
summarize costs associated with payroll. The other items for which costs
are to be determined are listed in the employee column. The rates for
each item multiplied by the applicable portion of the total earnings
provides the total accrual amount and the rate times the earnings
applicable to the various accounts provides the charges to those
accounts. As an example, the accrual of the employer\'s share of FICA
taxes for the month of May is calculated as 7.65% of \$20,723.60 or
\$1,585.35. The FICA taxes charged to construction (Account 2003.3000)
are calculated as 7.65% of \$6,147.82 or \$470.31

Payroll insurance (workmen\'s compensation and general liability
insurance) is computed by using a fixed rate per hundred dollars of
total straight time payroll for each category of employees. A different
rate is used for each employee group based upon their occupational
risks. Exhibit D shows two categories, outside employees, and inside
employees, with the associated rates applied to each category.

Each employee accrues two weeks vacation and seven paid holidays each
year. The seven percent rate used for accruing vacation and holidays is
determined by dividing 17 non-work days by 243 work days. The accrual of
\$1,387.58 is calculated by applying seven percent to wages of
\$19,822.56 (\$20,723.60 less \$901.04 applicable to the holiday
received by all employees on May 30). No accrual is made for wages
applicable to paid holidays and leave taken.

The journal entry for the accrual and distribution of these associated
payroll costs is as follows:

2003.3000 Telecommunications Plant Under

Construction - Short-Term -

Work Orders \$ 1,253.38

3100.X000 Retirement Work in Progress 227.02

6212.0002 Digital Electronic Expense -

Benefits 163.54

6311.0002 Station Apparatus Expense -

Benefits 172.16

6411.0002 Poles Expense - Benefits 219.38

6421.0022 Aerial Cable Expense -

Metallic - Benefits 288.55

6431.0022 Aerial Wire Expense -

Metallic - Benefits 171.63

6512.0002 Provisioning Expense -

Benefits 44.75

6534.0002 Plant Operations

Administration Expense -

Benefits 484.86

6535.0002 Engineering Expense -

Benefits 904.18

1310.0000 Prepaid Insurance \$ 272.62

4080.2000 Other Taxes Accrued -

Employer\'s Portion - FICA 1,585.35

4080.3000 Other Taxes Accrued -

Federal Unemployment 165.79

4080.4000 Other Taxes Accrued -

State Unemployment 518.11

4120.6000 Other Accrued Liabilities -

Accrued Vacation and Holidays 1,387.58

Journal entry to distribute payroll overhead costs for

May 19X2, in accordance with the Monthly Labor Cost

Summary.

**Calculation and Distribution of Motor Vehicle Expense**

Direct labor hours associated with the operation of motor vehicles for
the month of May 19X2, totalled 200 hours which were charged to the
construction, retirement, and Plant Specific Operations Expense accounts
as follows:

[Account]{.underline} [Direct Labor Hours]{.underline}

2003.3000 92

3100.X000 17

6212 12

6311 12

6411 31

6421 20

6431 [16]{.underline}

Total 200

Total motor vehicle expense incurred during the month of May 19X2, was
\$450.00, consisting of the following:

Labor \$ 175.00

Payroll overhead 75.00

Repairs, gas, etc. [200.00]{.underline}

Total \$ 450.00

Motor vehicle expenses incurred during the month of May 19X2, are
distributed to construction, retirement, and Plant Specific Operations
Expense Accounts at the rate of \$2.25 per direct labor hour, calculated
by dividing the total costs incurred (\$450.00) by the total direct
labor hours (200). The resulting allocation of vehicle expense is as
follows:

[Account]{.underline} [Hours]{.underline} [Rate]{.underline}
[Amount]{.underline}

2003.3000 92 \$2.25 \$ 207.00

3100.X000 17 2.25 38.25

6212 12 2.25 27.00

6311 12 2.25 27.00

6411 31 2.25 69.75

6421 20 2.25 45.00

6431 [16]{.underline} 2.25 [36.00]{.underline}

Total 200 \$450.00

The journal entry to record the distribution of motor vehicle expense
for the month of May 19X2, is as follows:

2003.3000 Telecommunications Plant Under

Construction - Short-Term -

Work Orders \$ 207.00

3100.X000 Retirement Work in Progress 38.25

6212.0005 Digital Electronic Expense -

Clearances 27.00

6311.0005 Station Apparatus Expense -

Clearances 27.00

6411.0005 Poles Expense - Clearances 69.75

6421.0025 Aerial Cable Expense -

Metallic - Clearances 45.00

6431.0005 Aerial Wire Expense -

Metallic - Clearances 36.00

6112.0001 Motor Vehicle Expense -

Salaries \$ 175.00

6112.0002 Motor Vehicle Expense -

Benefits 75.00

6112.0004 Motor Vehicle Expense -

Other 200.00

Journal entry to distribute motor vehicle

expenses incurred during the month of May 19X2.

**Sample Material Used Sheet**

The material used on the work order, as reported on the Daily Work
Report (Exhibit B), are posted to the Materials Used sheet, by account,
in a column headed May 9, the date of the Daily Work Report. A job order
number or other identification may be used in place of the date.
Materials used on four other job orders, all part of the same blanket
work order, are recorded on the same sheet for illustrative purposes.

**Sample Material Recovered and Plant Displaced Report**

The materials reported under \"Plant Removed or Abandoned\" on the Daily
Work Report (Exhibit B) are posted to the Material Recovered and Plant
Displaced report, by account, in a column headed May 9. The reusable
items are priced in the \"Salvage Value\" column. All of the items,
except the transportation brackets, represent retirement units removed
from plant and are priced in the \"Original Cost in Plant\" column at
the average unit cost taken from the continuing property records.

**Sample Summary of Material Items Used and Recovered**

The material items recorded on the Material Used sheet

(Exhibit F) and the Material Recovered and Plant Displaced report
(Exhibit G) are posted to the Summary of Material Items Used and
Recovered. It should be noted that the stock record cards could have
been posted directly from these reports since only a few forms were
involved.

**Sample Materials Register**

The Materials Register is used to summarize material transactions for
the month. The totals from the Material Used sheet

(Exhibit F) and Materials Recovered and Plant Displaced report (Exhibit
G) are entered here.

**Sample Employees\' Time and Overhead Distribution Form**

Labor hours are posted from the Daily Work Reports (Exhibit B) to the
Employees\' Time and Overhead Distribution sheets, by work order and
plant account. The total man hours applicable to work orders reported on
the Daily Work Reports for May 9 are posted in the \"Date of the Month
and Number of Hours Reported\" column, Column 9, opposite the
appropriate plant account numbers (page 42 for construction and page 43
for retirements). The labor hours of the other job orders comprising the
blanket work order for the month of May and Work Orders 7, 12, and 14
are also posted. The hours are then totalled for each account.

The total direct labor costs (\$6,147.82) and the total overhead costs
(\$1,460.38) applicable to construction work orders are then divided by
the total direct labor hours (349) to arrive at the average rate per
hour (\$17.6155 for direct labor and \$4.1845 for overhead). The charge
to each primary plant account is determined by multiplying the labor
hours applicable to each account by the average rates and entering the
results in the appropriate column at the right hand side of the sheet.
These costs are then transferred to the Work Order Ledger sheet (Exhibit
L).

Distribution of labor and overhead for retirements (page 43) is
accomplished in the same manner as above. These costs are then posted in
the lower portion of the Work Order Ledger sheet.

**Sample Account Analysis**

In the sample case, the charges and credits to Account 2003.3000,
Telecommunications Plant Under Construction - Short-Term - Work Orders,
and Account 3100.X000, Retirement Work in Progress, are made through the
general journal, check register, and other books of original entry. An
analysis of these accounts in shown on pages 45 (construction) and 46
(retirement). The charges and credits for material are posted from the
Materials Register (Exhibit I); labor costs are posted from the Monthly
Labor Cost Summary (Exhibit D), which also shows the costs of payroll
taxes, insurance, and vacations and holidays; motor vehicle expenses are
posted from the Summary and Distribution of Transportation Costs
(Exhibit E); and the original cost of plant retired is posted from the
Material Recovered and Plant Displaced report

(Exhibit G). Provisioning expense is posted directly from the
provisioning expense account. The total charges to the provisioning
expense account for the month are divided by the total materials issued,
as reported on the Materials Register (Exhibit I). The resulting rate of
5.8% is applied to the dollar amount of materials issued during the
month. Other charges of \$500.00 represent a cash disbursement for
plowing cable.

**Sample Work Order Ledger**

Since a retirement work order was associated with the construction, both
work orders are recorded on the same Work Order Ledger sheet. Labor and
overhead costs are transferred to Columns 5 and 6 and Columns 12 and 13
on the Work Order Ledger sheet from the respective Employees\' Time and
Overhead Distribution Forms (Exhibit J). Column 2 data is posted from
the Material Used sheet (Exhibit F). Provisioning expense is distributed
in Column 3 on the basis (5.8%) of the material charges in Column 2.
Columns 16 and 17 are posted from the Material Recovered and Plant
Displaced report (Exhibit G). In the upper portion, Column 2 + Column 3
= Column 4;

Columns 5 + 6 + 7 = Column 8; and Columns 4 + 8 = Column 9.
Contributions in aid of construction, advances previously made, and
other nonloan fund requirements are shown in Column 10. In the lower
portion Columns 12 + 13 + 14 = Column 15; and

Columns 15 + 16 - 17 = Column 18.

A journal entry is prepared from the Work Order Ledger sheets
transferring the costs of the completed telecommunications plant to the
classified plant accounts. The journal entry for Construction Work Order
B5 completed on May 31 is as follows:

2411.0000 Poles \$ 1,868.74

2421.0020 Aerial Cable - Metallic 9,950.19

2431.0020 Aerial Wire - Metallic 3,087.68

2003.3000 Telecommunications Plant Under

Construction - Short-Term -

Work Orders \$ 14,906.61

Journal entry to transfer the costs of completed work

orders to the classified plant accounts.

The journal entry for Retirement Work Order B5X also completed on May 31
is:

3100.2411 Accumulated Depreciation -

Poles \$ 920.21

3100.24212 Accumulated Depreciation -

Aerial Cable - Metallic 1,442.77

3100.24312 Accumulated Depreciation -

Aerial Wire - Metallic 3,847.83

3100.X000 Retirement Work in Progress \$ 6,210.81

Journal entry to charge the net loss due to retirement

to the appropriate accumulated depreciation accounts.

The property record units installed under the blanket construction work
order are tabulated on the reverse side of the Work Order Ledger sheet.
The quantities are taken from the Staking Sheet (Exhibit A), checked
against the Material Used sheet (Exhibit F), and reported on the first
line identified as A-1. Each of the staking sheets listed represents a
job order and all of them comprise Blanket Work Order B5. The total
property units installed are posted to the continuing property records.

**Sample Summary of Work Orders**

In preparation for requisitioning funds from REA, the costs reported on
the Work Order Ledger sheet (Exhibit L) are posted to the Summary of
Work Orders, REA Form 771 (Exhibit M). In this case, construction work
orders B12 and B5 and retirement work order B5X are reported. The REA
Form 771 is certified by the manager and approved by the REA general
field representative, as required, prior to submission to REA.

REA Form 771 is used by REA telephone borrowers having 3,000 or less
main stations. Those telephone borrowers having more than 3,000 main
stations are required to use Summary of Work Orders, REA Form 771a. The
REA Form 771a is certified by a licensed consulting engineer or the
borrower\'s staff engineer.

When minor contract construction is reported on the REA Form 771 or
771a, the contract costs should be supported by REA Form 773,
Miscellaneous Construction Work and Maintenance Services Contract.

**Sample Continuing Property Record**

The Continuing Property Record for aerial cable is posted with the units
installed taken from the reverse side of the Work Order Ledger sheet
(Exhibit L) and the units retired from the Material Recovered and Plant
Displaced report (Exhibit G).