(a) The department in conjunction with the Federal Highway Administration may spend for the improvement of a road not in the state highway system money appropriated by the United States Congress and allocated by the United States secretary of transportation to the department for expenditure on the road. That federal money may be matched or supplemented by an amount of state money necessary for proper construction and performance of the work.
(b) State money may not be used exclusively for the construction of a road not in the state highway system.

(c) The expenditure of state money is limited to the cost of construction and engineering, overhead, and other costs on which the application of federal money is prohibited or impractical.