2. Mohammad Mizanour Rahman
(Associate Professor)
Department of AIS
Comilla University
Submitted to:
REG. NO. Student’s Name Remarks
11806001 Sabeconnahar Linda
11806007 Md. Rani Miah
11806010 Md. Akram Hossain (Leader)
11806013 Md. Shahneawj Tuhin
11806027 Lutfur Nahar
11806034 Md. Abu Taher
11806041 Md. Borhan Uddin
11806043 Mahmuda Akter
11806052 Salma Jahan
11806053 Omme Habiba Chumki
COMILLA UNIVERSITY
Submitted By INVINCIBLE- X
Course Title:
Accounting For Governmental &
Non-Profit Organizations
3. Table
of
Letter of Transmittal 04
Acknowledgement 05
Executive Summary 06
Capital Project Funds 07
The Purposes of Capital Project Funds 07
Characteristics of capital projects 07
Sources of Capital Project Funds 08
Disclosures Required by GASB for Financial Statement 08
Definition of Debt 08
Notes to the Financial Statements 09
Difference Between General and Special Revenue Fund 09
Show the interrelationship among governmental fund
types and account groups – fixed asset acquisition
10
Capital Project Funding
References 12
Contents
11
4. 8th September, 2022
To,
Mohammad Mizanour Rahman
(Associate Professor)
Department of Accounting & Information Systems
Comilla University
Subject: - Submission of term paper on “Capital Project Fund.”
Sir,
With due respect and humble submission, We would like to inform you that, there
is the dissertation term paper on Capital Project Fund.
This was assigned to us to submit under the BBA program. It was a great pleasure
for us to do the assigned job. We made every endeavor to prepare this paper
accurately & try our level best to accumulate relevant and insightful information.
It helps us to gather theoretical and analytical knowledge about Capital Project
Fund. Finally, We are very grateful to you for your kind and generous guidance to
make the term paper successful.
Sincerely Yours,
Md. Akram Hossain
(On behalf of Invincible – X)
Department of AIS
Reg. No: 11806010
Comilla University
LETTER OF TRANSMITTAL
5. Term paper presentation is a crucial part of BBA program. This report is based
on practical knowledge. We have realized that practical knowledge is very much
essential for professional life and it is very different from academic knowledge.
In preparing this report first of all we express our deepest gratitude to
Mohammad Mizanour Rahman (Associate Professor), Department of
Accounting & Information Systems, Comilla University
He guided properly by giving direction at different times to prepare this report.
His guided supervision resulted in successful completion and timely submission
of the report. We are grateful to almighty Allah who has blessed us and given
strength to prepare this report successfully and smoothly.
Finally yet importantly, We would like to thanks to Mohammad Mizanour
Rahman who helped us for the wise idea throughout the Term paper.
ACKNOWLEDGEMENT
T
6. Capital project funds are used to account for financial resources used for the
acquisition or construction of capital facilities, major state-owned capital facilities
for capital assistance grants to local governments and public authorities. These
include land, improvements to land, buildings and building improvements, and
infrastructure.
The purpose of a capital projects fund is to account for the financial resources to
be used for the acquisition, construction or improvement of major capital assets
other than those acquired through proprietary or fiduciary funds. More
specifically, capital projects funds are used to account for the acquisition or
construction of capital assets and capital improvements financed through
traditional sources.
If the acquisition or construction of a capital asset extends beyond one year, it
should be accounted for in a capital projects fund. The proceeds of indebtedness
are generally the major funding source for capital projects. However, other
financing sources can include any or all of the following: grants, State aid, federal
aid, gifts and donations, budgetary appropriations (e.g., inter fund transfers, fund
balance), insurance recoveries and capital reserve funds.
EXECUTIVE SUMMARY
7. 07
Capital Project Funds
A capital projects fund is used in governmental accounting to track the financial resources used
to acquire and/or construct a major capital asset. Once the asset has been completed, the fund is
terminated.
Examples – Buildings, Highways & bridges, Storm water drainage systems
The Purposes of Capital Project Funds
The purpose of a capital projects fund is to account for the financial resources to be used for
the acquisition, construction or improvement of major capital assets other than those acquired
through proprietary or fiduciary funds. More specifically, capital projects funds are used to
account for the acquisition or construction of capital assets and capital improvements financed
through traditional sources such as special State and federal grants, the proceeds of bonds or
notes and instalment purchase contracts (IPCs) authorized by New York State (NYS) General
Municipal Law (GML) Section 109-b. The governing board is responsible for the oversight and
management of capital projects, including ensuring that projects are properly planned and
managed, project funding is authorized and costs are kept within the approved budget, while
minimizing the possibility of cost overruns which could have a negative impact on finances.
The acquisition, construction or improvement of capital assets can be accounted for in a local
government’s operating fund (e.g., general, highway, etc.) if the resources are provided through
the operating fund. However, if the acquisition or construction of a capital asset extends
beyond one year, it should be accounted for in a capital projects fund. The proceeds of
indebtedness are generally the major funding source for capital projects. However, other
financing sources can include any or all of the following: grants, State aid, federal aid, gifts and
donations, budgetary appropriations (e.g., inter fund transfers, fund balance), insurance
recoveries and capital reserve funds.
Characteristics of capital projects:
Involves long-lived assets (e.g., buildings, roads and bridges, etc.)
Usually involves a construction project
Usually requires long-range planning and extensive financing
Have a project life-focus, rather than a year to year
Capital Project Fund
8. 08
Sources of Capital Project Funds:
1. General Long-term Debt
• Account for the issuance in CPF
• Debt Service Fund used to repay debt
2. Short-term borrowing (if necessary)
3. Inter-fund transfers
4. Interest and other revenues
5. Intergovernmental grants
6. Special assessments
Disclosures Required by GASB for Financial Statement:
The Governmental Accounting Standards Board issued GASB Statement No. 88 (the
"Statement") in March 2018. The Statement requires increased disclosure in notes to financial
statements of all state and local governments. The new disclosure requirements are effective
for reporting periods beginning after June 15, 2018; however, GASB encourages earlier
application of the Statement requirements.
GASB's goal in issuing the Statement is to address stakeholder concerns regarding the current
inconsistency in disclosure of essential information related to debt in government financial
statements. Of particular concern to stakeholders is the need for more information regarding
the terms of direct borrowings and direct placements.
To address those concerns, the Statement defines debt and identifies what debt is subject to
disclosure requirements in notes to financial statements:
Definition of Debt:
A liability that arises from a contractual obligation to pay cash (or other assets that may be used
in lieu of cash) in one or more payments to settle an amount that is fixed [1] at the date the
contractual obligation is established. For disclosure purposes, debt does not include leases,
except for contract reported as a financed purchase of the underlying asset, or accounts
payable. The Statement also requires additional areas of summarized information related to
debt that are not currently required. The increased disclosure provides users of government
financial statements better information about the debt of the governmental entity, specifically
the effect of debt on future resource flows of the entity and the consequences that may result in
an event of default or termination.
Capital Project Fund
9. 09
Notes to the Financial Statements:
The Statement requires the following new disclosures in notes to the financial statements:
a) Amount of unused lines of credit
b) Assets pledged as collateral for debt
c) Terms specified in debt agreements related to:
1. Events of default with finance-related consequences, 2. Termination events with finance-
related consequences, and 3. Subjective acceleration clauses.
Disclosures regarding direct borrowings and direct placement of debt should be separated from
other debt in the notes to the financial statements.
Difference Between General Fund and Special Revenue Fund
General Fund
Any government, whether it be federal, state or local, has what is called a general fund that acts
as a record of all assets and liabilities. The general fund of a government serves a similar
function to a general ledger for a private company. Administrative and operating expenses are
paid from the general fund and all income is kept there that has not been designated for a
special purpose. Since the money for the majority of bills and programs comes from this fund,
it is typically much larger than a special revenue fund.
Special Revenue Fund
Think of a special revenue fund as a repository for money earmarked for a particular purpose.
Normally much smaller than the general fund, a special revenue fund might contain money set
aside for a road project, library, or parks. A special revenue fund is set up so that money spent
on whatever the project may be can be accounted for separately from the general fund. Money
reaches the special fund by being set aside from the general fund, or diverted at the time of
collection.
Similarities
The main similarity between a general fund and special revenue fund is that both are created
and maintained by the imposition of taxes and fees on citizens of the jurisdiction. Both types of
funds exist on the three main levels of governments --federal, state local--and all would be
empty if it weren't for taxes.
Capital Project Fund
10. 10
Differences
All governments have a general fund. A special revenue fund is only necessary when there are
special projects to be paid for, so often a government operates without a special revenue fund.
Another difference between the two funds lies in how the money is spent. Money from a
special fund is restricted by law or contract to be spent only on the purpose for which the fund
was created. The general fund doesn't have these limitations; any bill can be paid from it
Show the interrelationship among governmental fund types and account groups – fixed
asset acquisition
There are two types of account groups :
1. General fixed assets account group
2. General long-term debt account group
Governmental fund types
1. General fund or special revenue funds
2. Capital projects funds
3. Debt service funds
There is an interrelationship among governmental fund types and account groups – fixed asset
acquisition.
Long – lived assets used by activities accounted for by governmental fund types are called
general fixed assets. The general fixed assets may be acquired from expenditures of the general
fund, special revenue funds and capital projects funds.
For construction of general fixed assets funds are collected from general or special revenue
fund for specific purposes of construction. Account for acquisition of general fixed assets
from expenditures of annual appropriations. Cost of assets acquired is recorded in the
GFAAG.
Capital projects fund usually involves a construction project. To construct general fixed
assets funds are generally collected from capital projects funds. Account for acquisition of
general fixed assets from expenditures of debt proceeds, capital grants, special assessment
and other sources restricted for fixed asset acquisition. Cost of assets acquired is recorded in
the GFAAC.
Debt service funds are used to account for resources to be used for payment of matured
Capital Project Fund
11. 11
general debt principal and interest. Long- term debt related to general fixed asset acquisition is
accounted for in the general long- term debt account group
From the above discussion we can say that, there is interrelationship among governmental fund
types and account groups – fixed asset acquisition.
Capital Project Funding
These projects are big, take time to complete, and can cost a lot of money, meaning it is often
necessary to obtain equity or debt financing to make them happen. To receive funding, capital
projects are obligated to prove how the investment provides an improvement (additional
capacity), new useful feature, or benefit (reduced costs).
Additional funding sources for these projects include bonds, grants, bank loans, existing cash
reserves, company operation budgets, and private funding. These projects may require debt
financing to secure funding. Debt financing may also be required for infrastructure, such as
bridges. However, the bridge cannot be seized if the builder defaults on the loan. Debt
financing ensures that the financier can recover funds if the builder defaults on the loan.
Capital Project Fund
12. 12
References
I. Accounting for Governmental and Nonprofit Entities (Leon E. Hay & Earl R. Wilson)
II. https://www.accountingtools.com/
III. https://www.wikipedia.com
