Capital Projects Fund Accounting

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Capital Projects Fund Accounting

• WASBO Annual Conference 2006 Presented by
  Christie Hazlett, OSPI, Supervisor School
  District and ESD Accounting

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Capital Projects Fund

• A Governmental type fund.
• It is used to account for the acquisition of
  financial resources to be used for construction
  of major capital facilities (other than those
  financed by proprietary funds and trust funds).
  GASB Cod. Sec 1100.103a3.

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Capital Projects Fund

• School Districts in the state of Washington have
  two funds considered Capital Project funds. Can
  you name them?
• Capital Projects Fund
• Transportation Vehicle Fund

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How is the CPF financed?

• Generally from proceeds of the sale of bonds.
• Voter approved bond issues proposition must
  include a description of the projects for which
  the money is being raised.
• RCW 28A.530.010 authorizes School Districts to
  issue bonds for certain capital projects.
• The acquisition of school buses is not a capital
  project therefore, bonds issued pursuant to this
  RCW cannot be used to acquire school buses.
• State matching revenues.
• Special Levies.

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What is the focus of CPF Accounting?

• Modified Accrual Basis (except cash basis
  districts).
• Earned, measurable, and available (same for all
  governmental fund types).
• Accrual basis Earned and measurable only.
• Sources and uses available resources.
• Amounts are recorded as revenues or other
  financing sources when they are both measurable
  and available.

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What are the allowable expenditures in the CPF?

• Revenue source Sale of Bonds.
• Restricted to sites and buildings as authorized
  by law or as necessary or proper to carry out the
  function of a school district.
• Improvement of energy efficiency and installation
  of energy systems and components.
• Structural changes and additions to buildings and
  sites.
• The purchase of initial equipment as defined in
  this section is also allowable.

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What are the allowable expenditures in the CPF?

• Revenue Source Special Levies.
• Same purposes as bond proceeds.
• Major renovations of buildings.
• Renovation and rehabilitation of playfields.
• Costs associated with implementing technology
  systems, facilities and projects, including
  acquiring hardware, licensing software, and
  on-line applications and training related to the
  installation of the foregoing.
• Additional major items of equipment and furniture
  (RCW 28A.320.330).
• The resolution approved by the voters authorizing
  the special levy must include the purpose of
  raising the moneys.

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What are the allowable expenditures in the CPF?

• Revenue Source Investment earnings.
• Investment earnings from bond proceeds and the
  proceeds from special levies are restricted to
  the same purposes.
• The purchase of initial equipment is also
  allowable.

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What are the allowable expenditures in the CPF?

• Revenue Source Insurance Proceeds.
• Insurance proceeds that represent reimbursement
  for loss of a building and contents shall be
  deposited to the CPF.
• Insurance proceeds for business interruption
  insurance shall be credited to the general fund.
• Expenditures for the replacement of the building
  and contents shall be expended from the CPF.

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What are the allowable expenditures in the CPF?

• Revenue Source State Apportionment.
• State apportionment may be used for the same
  purposes as special levies and bond proceeds.
• Revenue Source Sale of Real Property.
• The sale of real property may be used for any
  legal purpose of the CPF.

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What are the allowable expenditures in the CPF?

• Revenue Source Lease, Sale, or Rental of
  Surplus Property.
• Expenditures necessary to transact the sale of
  real estate or the lease, sale, and/or rental of
  surplus property are charged to the CPF.
• Include attorney fees, sales commissions, and
  appraisal fees.

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What are Capital Outlay Expenditures?

• Those expenditures which result in the
  acquisition of capital assets or additions to
  capital assets
• Land
• Existing buildings
• Improvement to grounds
• Construction of buildings
• Additions to buildings
• Remodeling
• Initial equipment

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What Other Items are considered Capital Outlay in
the CPF?

• Facilities to house students during the
  construction or remodeling of a school building.
• Legal fees for capital projects.
• Election costs upon passage of the levy.
• Failed levy election costs are charged to the GF,
  however, the CPF may reimburse the GF for these
  expenditures if the levy passes at a later time
  within the same fiscal period.

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Are repair charges charged to the CPF?

• Typically no.
• Repairs for building structures that do not add
  to existing facilities are recorded in the GF.
• Rule of thumb, if changes involve roof,
  structure, or walls the expenditure would be
  recorded to the CPF as remodeling.

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Capital Projects Fund Expenditures

• Type Codes
• See Handout

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Capital Projects Fund Expenditures

• What type code would you use for expenditures to
  pave the parking lot?
• 12 - Improvements

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Capital Projects Fund Expenditures

• The school district has incurred election costs
  for the bond/levy election. The election was
  successful.
• Can the CPF pay for the election costs?
• Yes
• What expenditure type code would be appropriate?
• 63

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Capital Projects Fund Expenditures

• The school district is going to hire a
  construction manager to oversee the construction
  of a new building.
• Can the costs associated with hiring the
  construction manager or management company be
  charged to the CPF?
• Yes
• What expenditure type code should be used?
• 21

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Capital Projects Fund Expenditures

• Is it ok to pay the rent for another facility
  from the CPF if you have to relocate students for
  a remodeling project?
• Yes
• What expenditure type code do you use?
• 22

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CPF Expenditure Object Codes

• The only difference in the classification of
  objects of expenditures between the CPF and the
  General Fund are the following definitions
• Object 5 Supplies, Instructional Resources, and
  Noncapitalized Items.
• Object 9 All Other Capital Outlay.

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CPF Expenditure Object Codes

• Object 5 Supplies, Instructional Resources, and
  Noncapitalized Items.
• Only initial expenditures for new buildings for
  the purchase of nonconsumable library, text, and
  reference books are allowable in the CPF.
• Items of a consumable nature are not allowed in
  the CPF (i.e. workbooks).

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CPF Expenditure Object Codes

• Object 9 All Other Capital Outlay.
• Since all expenditures of the Capital Projects
  Fund are of a capital outlay nature, Object 9 is
  labeled All Other Capital Outlay in the CPF.

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CPF Expenditure Source/Use Codes

• As we discussed earlier, school districts receive
  and use resources that have restrictions or
  conditions attached.
• When revenues are received, the school district
  must account for amounts received and expended
  for that purpose. The source/use code provides a
  common coding classification for both
  restricteduse revenues and expenditures.

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CPF Expenditure Source/Use Codes

• A one-digit source/use code should be assigned as
  follows
• 0 Unrestricted and undesignated.
• 1 Derived from the sale of bonds and investment
  proceeds and used for the purposes expressed in
  the bond proposition.
• 2 Received from capital project levies and used
  per levy propositions.
• 3 Received from state agencies and used for
  funded projects.
• 4 Received from federal agencies and used for
  federal portions of individual grants.

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CPF Expenditure Source/Use Codes

• 5 Other sources and uses not described above.
• 9 Amounts to be distributed.
• This is an intermediate code for use during the
  fiscal year and does not have a balance at budget
  preparation time or when year-end reports are
  issued.

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CPF Expenditure Source/Use Codes

• Revenues and Other Financing Sources that are not
  restricted in their use should be coded with
  source/use code 0.
• For example, state apportionment revenues
  (Revenue 3100) that have been redirected from the
  General Fund to the Capital Projects Fund are not
  restricted and should be accounted for by using
  the 0 source/use code.
• If the district puts restrictions on these
  resources, then source/use code 3 should be
  used.

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Reservation of Fund Balance Using Source/Use Codes

• Establishing reservations of fund balance is done
  by closing Account 960 Revenues and Account 965
  Other Financing Sources to the reserve accounts
  listed below through the use of the source/use
  code.
• To set up reservations of fund balance, the third
  digit in the revenue or other financing source
  account number must match the third digit in the
  reserve account section of the balance sheet.

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Reservation of Fund Balance Using Source/Use Codes

• Closing expenditures that were expended on the
  restricted use reduces the restriction on Capital
  Projects Fund resources.
• So the account 530 Expenditures that were
  restricted are closed to the general ledger
  reserve accounts representing that restriction.

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Reservation of Fund Balance Using Source/Use Codes

• The applicable general ledger reserve accounts
  are
• 861 Reserve of Bond Proceeds
• 862 Reserve of Levy Proceeds
• 863 Reserve of State Proceeds
• 864 Reserve of Federal Proceeds
• 865 Reserve of Other Proceeds
• 869 Reserve for Undistributed Proceeds

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Reservation of Fund Balance Using Source/Use Codes

• The portion of G/L 960 Revenues and G/L 965 Other
  Financing Sources representing unrestricted
  resources should use source/use code 0 and must
  be closed to 890 Unreserved, Undesignated, Fund
  Balance.
• Examples include redirected state apportionment
  and revenue from the lease of real property.

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Reservation of Fund Balance Using Source/Use Codes

• The following are general guidelines in
  determining which reserve account to use
• Investment earnings have the same expenditure
  restrictions as do the underlying resources
  generating the revenue.
• Assume that the most restrictive resources were
  expended first.

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Example Journal Entries

• See Handout