Capital projects, debt service, special revenue funds
Introduction
Capital project
Capital project fund refers to a government fund that is utilized by the state and the local governments for the purpose of fund accounting. This fund is normally created for accounting purposes regarding capital and financial resources which are incurred on roads, buildings or equipments acquisitions. These accounts are maintained during the existence of the project, after the completion of the project the account is closed. (Hay, 1980)
Institutions of higher learning like universities and even elementary schools in the US have a division for capital projects fund. This division has the responsibility of renovating and expanding the schools assets or premises. Every source of revenue is restricted to certain specific expenditure. For instance, when bonds are sold to raise money for capital projects funds then the expenditure will be restricted to development matters e.g. buildings, renovations and other purchases restricted to hardware’s. Capital project funds are normally allocated each year for infrastructure development. (Earl, Reck & Kattelas, 2006) Examples of capital projects are; Changes in the balances of the fund i.e. non major capital projects funds and expenditures budgeted or actual capital projects funds. And also the project length schedule of incomes. Capital project funds normally account for either the acquisition or long term construction of larger capital facilities that have been financed by the bond proceeds.
http://doa.alaska.gov/dof/reports/resource/fy12/2012cafr.
Debt Service Funds
Debt Service Funds is an accounting concept that bills, distributes, trucks and also accounts for all the taxes paid that have been levied to specifically pay for bonded indebtedness that’s often calculated yearly and it’s also utilized to account for the total accumulation of resources and the general payment of long term debt’s principal and also the interest. It can only be used if it’s legally mandated. Or if all the financial resources are generally being accumulated for future years payments of interests and principal. Examples of Debt Service Funds are the comparative balance sheet, Comparative income statements, expenditures and also changes in fund balance, also the schedule of revenues, expenditures and other changes in the fund balance. (Klatt, 2011)
The Debt Service Fund is usually established by some ordinances that authorize the general issuance of obligation bonds. (Throop, 2006) For instance, the city of West university place in the year 2012 utilized debt financing to fund and subsidize large capital expenditures. Streets, sewage, drainage, waste and storm water drainage systems are generally constructed with almost 100% borrowed money. The water and sewage fund also provide other sources of funds. Debt service funds are basically used in accounting for the following issues a) Accumulation of resources b) the payment of the long-term debt principal together with the interest.
http://doa.alaska.gov/dof/reports/resource/fy12/2012cafr.
Special Revenue Fund
It refers to an account that is normally established by the government whose goal is to collect money that has to be used for a specific project. The special revenue fund aims at providing extra level of transparency and accountability. For instance, a municipality may decide to renovate and develop the general storm water channel. This money that has been paid for by the government can only be used for specified projects or other related projects like street cleaning that enhance the construction of the project. Examples of special revenue; Changes in fund balances i.e. non major special income or revenue funds. Combining statement of incomes, revenues and expenditures. Special revenue funds are applied in accounting for the proceeds of specified revenue sources that are mostly restricted legally to expenditures for specific purposes. (Riley, 2009) Examples include, public school trusts funds and the Alaska Mental Health trust authority funds and restricted net assets.
http://doa.alaska.gov/dof/reports/resource/fy12/2012cafr.
To conclude, most of fund accounts are found in government offices as well as in other institution whose major objective is to provide service not to make profit.
Reference
Earl, W., Reck, J. & Kattelas, S. (2006). Accounting for Governmental & Nonprofit Entities, 14th edition. p. 163. McGraw-Hill. ISBN 0-07-310095-1.
Hay, L.E (1980). Accounting for Governmental and Nonprofit Entities, Sixth edition, page 5.
Klatt, G.R (2011) “What is the Comprehensive Annual Financial Report (CAFR)?”. Property Rights Research. Retrieved 2011-03-21.
Riley, T. (2009). The Accountancy Model See chapters 16–20 (p. 207–232) for a quick reference to journal entries and math useful for state and local government fund accounting. The “Funds Characteristics Tree” on p. 207 illustrates relationships between funds.
Throop, J. (2006). “Fund Accounting—making sense of church finances”. Christianity Today. Retrieved 2010-03-15.
http://doa.alaska.gov/dof/reports/resource/fy12/2012cafr.pdf
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