Capital outlays financed from general obligation bond proceeds should be accounted for through a capital projects fund

Capital outlays financed from general obligation bond proceeds should be accounted for through a capital projects fund

Code 300 – Capital Projects Funds – should be used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays including the acquisition or construction of capital facilities or other capital assets. Capital project funds exclude those types of capital-related outflows financed by proprietary funds or for assets that will be held in trust for individuals, private organizations, or other governments (private-purpose trust funds).

Use enterprise funds (400) or internal service (500) for capital payments related to utilities and other business type activities

Code 700 – Permanent Funds – should be used to account for and report resources that are restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs – that is for the benefit of the government or its citizens (public-purpose). Permanent funds do not include private-purpose trust funds which account for resources held in trust for individuals, private organizations, or other governments.

Enterprise funds are required for any activity whose principal revenue sources meet any of the following criteria:

Code 400 – Enterprise Funds – may be used to report any activity for which a fee is charged to external users for goods or services.

  • Debt backed solely by a pledge of the net revenues from fees and charges.
  • Legal requirement to recover cost.An enterprise fund is required to be used if the cost of providing services for an activity including capital costs (such as depreciation or debt service) must be legally recovered through fees or charges.
  • Policy decision to recover online payday loans new Harrison cost.It is necessary to use an enterprise fund if the government’s policy is to establish activity fees or charges designed to recover the cost, including capital costs (such as depreciation or debt service).

The term activity generally refers to programs and services. This term is not synonymous with fund. As a practical consequence, if an activity reported as a separate fund meets any of the three criteria, it should be an enterprise fund. Also, if a “multiple activity” fund (e.g., general fund) includes a significant activity whose principal revenue source meets any of these three criteria, the activity should be reclassified as an enterprise fund.

The determination of an activity’s principal revenue source is a matter of professional judgement. A good indicator of the activity’s significance may be comparing pledged revenues or fees and charges to total revenue. For example, consider a county auditor’s office that charges fees to provide a payroll service to various taxing districts. Even if the fee is meant to cover the cost of the service, the county auditor function as a whole is primarily supported with tax dollars from the general fund. It would be allowable in this case to leave the activity all within general fund.

Finding an appropriate fund type requires a careful analysis since there is not always a clear choice. For example, building permit fees may be accounted for in the general fund or a special revenue fund in certain circumstances, such as when they are partially supported by taxes. However, if there is a pricing policy to recover the cost of issuing those individual building permits, they should be reported in an enterprise fund.

In addition, GAAP mandate the use of enterprise funds for the separately issued financial statement of public-entity risk pools. Public-entity risk pools also are accounted for as enterprise funds when they are included within a sponsoring government’s report, provided the sponsor is not the predominant participant in the arrangement. Otherwise, they can use the general fund.

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