(a) Except as provided in subsection (f), each municipality shall keep all funds received from the municipal street aid fund in a separate fund designated as the state street aid fund” and may expend the funds only for one (1) or more of the following purposes:

(1) Street improvements;

(2) Principal of and interest on bonds or other indebtedness incurred to pay for street improvements issued after February 19, 1953. The funds may be specifically pledged as security for the bonds or other indebtedness;

(3) The municipality's part of the cost of acquiring rights-of-way for approaches to bridges and tunnels;

(4) To pay the city's part of the cost of grade eliminations on streets and highways, including state and federal highways; and

(5) Not to exceed one third (⅓) of the total costs of rights-of-way for state or federal highways within the municipality's corporate boundaries.

(b) A municipality, in its discretion, may use the funds to pay for street improvement work by the department of transportation or by a county highway or road department or by another municipality, performed under an agreement with the state, county or municipality.

(c) Each municipality shall keep records of receipts into and expenditures from its state street aid fund, in accordance with sound municipal accounting practices, and shall have made an audit at the end of each fiscal year of the accounts of the fund by a certified public accountant, or a public accountant unless otherwise provided by law, and shall submit one (1) certified copy of the audit to the comptroller of the treasury to be reviewed for compliance with this part and minimum standards for municipal audits prescribed by the comptroller of the treasury.

(d)

(1) All purchases made with state street aid funds by a municipality shall be made in conformity with public advertisement and competitive bidding laws applicable to the particular municipality.

(2) Nothing in subdivision (d)(1) shall be interpreted as requiring any municipality to employ a licensed engineer to prepare bid specifications and estimates.

(e) Notwithstanding any other law to the contrary, funds in the municipal street aid fund may be expended by municipalities receiving the funds for the purpose of funding mass transit systems. No more than twenty-two and twenty-two one hundredths percent (22.22%) of the funds may be used for the purpose of funding mass transit.

(f) Upon written request of a municipality, the comptroller of the treasury may authorize that funds received from the municipal street aid fund may be kept and accounted for in the general fund of the municipality; provided, that revenues and expenditures related to funds received from the municipal street aid fund shall be accounted for separately in the general fund in a manner that allows identification of the source of revenue and the expenditures related to the revenue.