Revenues and Expenditures in the Capital Projects Fund
A modified accrual basis of accounting is generally used to determine when an entry is made to a particular revenue account. This stricter than normal accrual accounting requires that the revenue be earned, measurable and available before it is recorded in the relevant account. Under normal accrual accounting, funds that are earned and measurable are entered in the appropriate revenue account, but for a capital projects fund the revenue must be actually available for use on the project before it is recorded.
A revenue account is required for investment revenue earned on the funds available to the capital projects fund. As not all of the funds raised would be used immediately, it may be expected that some funds are put on deposit or invested in another way to earn investment returns. These would need to be shown in a separate account and would only be used for the purposes of the capital project. If insurance proceeds are received as a result of damage to property that is part of the project, these would be accounted for in a separate account within the capital projects fund.
The revenue raised from a bond issue may only be used on certain specific items such as the construction, addition or structural changes to buildings and sites. Certain other improvements to the buildings, such as the installation of systems to improve energy efficiency, might also be permitted as part of the project and accounts would be set up to show this type of expenditure from the capital projects fund. Expenditure on certain initial equipment may also be permitted within strictly regulated limits and this expenditure would also be accounted for as part of the capital project fund expenditure.
Certain types of projects might be authorized to use funds for a wider range of expenditures, for example a local authority project related to a school might be authorized to spend funds on renewing playing fields, purchasing computer hardware and software or making purchases of furniture or equipment for the school. It might also be possible for initial expenditure on books for a school library to be made from the capital projects fund. This should all be made clear to the taxpayers before the project begins. For example, if the funds are raised by a special levy, the purposes for which funds are raised would be clarified when the levy is announced. The items of expenditure would be accounted for in the capital projects fund under the relevant expense account headings. However, repairs to a building that do not actually add to the existing facilities would normally be paid out of a general fund and would not be included in a capital projects fund account.
Certain accounts would be set up to record necessary expenses of the project. It may be necessary to find a specialized project manager for carrying out the project and the expenses of hiring the manager would be accounted for in an expense account in the fund. People working or studying in buildings may need to be relocated while a capital project is under way and the cost of hiring additional facilities for this would be accounted for under a separate heading. Professional fees in connection with arranging to lease additional premises or renting out surplus property would be chargeable to the capital projects fund.