Capital Projects FundsLearning ObjectivesWhy Use Capital Projects Funds?Typical Capital Asset Acquisitions Not Using a CPFCPF Life CycleFinancing Capital ProjectsOther Notes on Life CycleBudgeting for a Capital ProjectInterim FinancingInterim Financing ComparisonInterim Financing Comparison (continued)Project CostsIntergovernmental RevenuesCPF Case IllustrationSign ContractIssue Bonds at a PremiumSupplemental OrderFinancing ReceivedInvoices receivedNotes on the InvoicesNotes on Invoices (continued)Cash DisbursementsFederal Grant ReimbursementNote on Federal Grant ReimbursementInterest on InvestmentsClosing EntriesOptions for Closing EntriesCPF Financial StatementsBalance Sheet xOperating Statement xCompleting the Bridge: Year 2Invoices ReceivedCash ReceiptsSlide 34Settlement with the Feds: Part ISettlement with the Feds: Part IIFinal SettlementsProject Operating StatementOther CPF IssuesBond Anticipation Notes (BANs)Issue the BANsIssue Bonds (same entry from earlier)Repay the BANsInvestments & ArbitrageArbitrageArbitrage and TaxesRemaining Fund BalanceReporting Multiple ProjectsCombining CPF StatementsCity of Orlando, FL, ExampleCapital Projects Capital Projects FundsFundsChapter 7Chapter 7Learning ObjectivesLearning ObjectivesUnderstand nature of and when to use Capital Understand nature of and when to use Capital Projects Funds (CPFs)Projects Funds (CPFs)Understand typical CPF financing sources, how Understand typical CPF financing sources, how many CPFs are required, and life cycle of CPFmany CPFs are required, and life cycle of CPFDetermine costs to be charged to CPFDetermine costs to be charged to CPFUnderstand accounting for long-term debt issued Understand accounting for long-term debt issued in CPF, including bond proceeds, premiums, in CPF, including bond proceeds, premiums, discounts, bond issue costs, and bond discounts, bond issue costs, and bond anticipation notesanticipation notesUnderstand basic budgeting and budgetary Understand basic budgeting and budgetary reporting for CPFsreporting for CPFsExamine typical journal entries of CPFExamine typical journal entries of CPFPrepare CPF financial statements.Prepare CPF financial statements.Why Use Capital Projects Why Use Capital Projects Funds?Funds?CPFs used to account for financial CPFs used to account for financial resources that are used to resources that are used to construct / acquire major, long-construct / acquire major, long-lived general capital facilitieslived general capital facilitiesExamplesExamples–BuildingsBuildings–Highways & bridgesHighways & bridges–Storm water drainage systemsStorm water drainage systemsTypical Capital Asset Typical Capital Asset Acquisitions Not Using a Acquisitions Not Using a CPFCPFRoutine capital asset purchases – Routine capital asset purchases – school buses and other school buses and other equipmentequipmentCapital leasesCapital leasesPurchases of fund-specific capital Purchases of fund-specific capital assets to be used in Proprietary assets to be used in Proprietary Funds or Trust FundsFunds or Trust FundsCPF Life CycleCPF Life Cycle20X2 20X3RepayGeneral Long-TermDebt Issue ProceedsShort-Term DebtIssue ProceedsInterfundTransfersInterest &Other RevenuesInter-GovernmentalGrantsTHE CAPITAL PROJECTS FUNDFundTerminatedProjectAuthorizationCapitalExpendituresCapitalExpendituresRefundsDebt ServiceFundUnusedProceedsDebt IssueGeneral Capital Assets&General Long-Term Liabilities AccountsLegendResource FlowsOther Funds or Accounts AffectedFinancing Capital Financing Capital ProjectsProjectsGeneral Long-term DebtGeneral Long-term Debt–Account for the issuance in CPFAccount for the issuance in CPF–Debt Service Fund used to repay debtDebt Service Fund used to repay debtShort-term borrowing (if necessary)Short-term borrowing (if necessary)Interfund transfersInterfund transfersInterest and other revenuesInterest and other revenuesIntergovernmental grantsIntergovernmental grantsSpecial assessmentsSpecial assessmentsOther Notes on Life Other Notes on Life CycleCycleCPF may last for several fiscal years CPF may last for several fiscal years – whatever if the life of the project– whatever if the life of the projectExpenditures are typically all capital Expenditures are typically all capital outlayoutlayUpon termination, any necessary Upon termination, any necessary funds returned to providers of funds returned to providers of financing and remainder transferred financing and remainder transferred to service debt (DSF) or to General to service debt (DSF) or to General FundFundBudgeting for a Capital Budgeting for a Capital ProjectProjectUsually prepared for the life of the Usually prepared for the life of the project – appropriations do not project – appropriations do not lapse at end of fiscal yearlapse at end of fiscal yearSeparate budget may not be Separate budget may not be required if one project financed by required if one project financed by single CPF and project costs are single CPF and project costs are controlled through specificationscontrolled through specificationsInterim FinancingInterim FinancingAuthorized bond issue may take Authorized bond issue may take considerable time to issueconsiderable time to issueInterim financing used to fill the void – Interim financing used to fill the void – known as bond anticipation notes (BANs)known as bond anticipation notes (BANs)If properly used, may be long-term If properly used, may be long-term rather than short-term debtrather than short-term debt–BANs issued in conjunction with legally BANs issued in conjunction with legally authorized bond issueauthorized bond issue–BANs are to be repaid (or have been repaid) BANs are to be repaid (or have been repaid) from proceeds of bond issuefrom proceeds of bond issueInterim Financing Interim Financing ComparisonComparisonShort-Term Borrowing  BAN Financing        Cash 50,000   Cash 50,000  NotesPayable  50,000   OFS--BANPrincipal  50,000        Expenditures--CapitalOutlay 50,000   Expenditures--CapitalOutlay 50,000  Cash  50,000   Cash  50,000        UnreservedFundBalance 50,000   OFS--BANPrincipal 50,000  Expenditures--CapitalOutlay  50,000   Expenditures--CapitalOutlay 