ï»¿Capital Projects Funds Chapter 7Slide 2
Learning Objectives Understand nature of and when to utilize Capital Projects Funds (CPFs) Understand common CPF financing sources, what number of CPFs are required, and life cycle of CPF Determine expenses to be charged to CPF Understand representing long haul obligation issued in CPF, including security continues, premiums, rebates, security issue expenses, and security reckoning notes Understand essential planning and budgetary reporting for CPFs Examine commonplace diary passages of CPF Prepare CPF monetary explanations.Slide 3
Why Use Capital Projects Funds? CPFs used to represent money related assets that are utilized to develop/gain major, enduring general capital offices Examples Buildings Highways & spans Storm water waste frameworksSlide 4
Typical Capital Asset Acquisitions Not Using a CPF Routine capital resource buys – school transports and other gear Capital leases Purchases of asset particular capital advantages for be utilized as a part of Proprietary Funds or Trust FundsSlide 5
CPF Life CycleSlide 6
Financing Capital Projects General Long-term Debt Account for the issuance in CPF Debt Service Fund used to reimburse obligation Short-term obtaining (if essential) Interfund exchanges Interest and different incomes Intergovernmental gifts Special evaluationsSlide 7
Other Notes on Life Cycle CPF may keep going for a few monetary years – whatever if the life of the undertaking Expenditures are regularly all capital expense Upon end, any fundamental assets came back to suppliers of financing and leftover portion exchanged to administration obligation (DSF) or to General FundSlide 8
Budgeting for a Capital Project Usually arranged for the life of the venture – apportionments don\'t slip by at end of monetary year Separate spending plan may not be required in the event that one anticipate financed by single CPF and task expenses are controlled through determinationsSlide 9
Interim Financing Authorized security issue may take impressive time to issue Interim financing used to fill the void – known as security expectation notes (BANs) If appropriately utilized, might be long haul instead of fleeting obligation BANs issued in conjunction with legitimately approved security issue BANs are to be reimbursed (or have been reimbursed) from continues of security issueSlide 10
Interim Financing ComparisonSlide 11
Short-Term Borrowing Recorded as risk of asset Expenditure is for capital cost Results in manufactured shortage in Fund Balance BAN Financing Recorded as OFS Expenditure is for capital cost OFS and consumption counteract – no simulated shortfall Interim Financing Comparison (proceeded)Slide 12
Project Costs Overhead General government overhead infrequently charged unless reimbursable Other overhead might be charged – costs from ISFs or incremental overhead from undertaking Interest Short-term obligation premium is venture taken a toll Long-term obligation premium not promotedSlide 13
Intergovernmental Revenues Unrestricted gives generally perceived as incomes in General Fund or SRF – continues might be exchanged to CPF Restricted (capital) allows ordinarily perceived as incomes in CPF, once it is earned (grantee brought about uses that are approved for repayment)Slide 14
CPF Case IllustrationSlide 15
Sign ContractSlide 16
Issue Bonds at a Premium GASB requires that securities be recorded at face esteem. Premiums (Other Financing Source), rebates (Other Financing Use), and security issue costs (Expenditure – Debt Service) must be represented independently. Likewise, the bond is represented in the General Long-Term Liabilities accounts.Slide 17
Supplemental Order Supplemental request for fuel and materials for undertaking – far beyond the expense of the agreement.Slide 18
Financing Received The State Grant is clearly not consumption driven – that is the reason it was all gotten in advance. The financing from the General Fund (GF) might be gotten at the same time or at different times, just like the case here.Slide 19
Invoices gotSlide 20
Notes on the Invoices Fuel and materials had been hampered for $48,000, however genuine expense was $49,000 Machine Time is a suitable overhead cost Construction in advancement would be recorded in the General Capital Assets accountsSlide 21
Notes on Invoices (proceeded) Retained Percentage Done to protect culmination of the venture per the agreement Will be paid to contractual worker when last venture is acknowledged Alternate techniques for safeguarding consummation Insurance arrangements Certificates of Deposit (not subject to reasonable quality guidelines from Chapter 5) BondingSlide 22
Cash DisbursementsSlide 23
Federal Grant ReimbursementSlide 24
Note on Federal Grant Reimbursement Could be charged every time admissible charge brought about Amount got might be not as much as sum charged if Federal Government does not permit all consumptionsSlide 25
Interest on InvestmentsSlide 26
Closing Entries Year-end shutting passages not especially significant to CPFs – more worried with life of task than by end of year Financial explanations then get to be between time proclamations for CPFsSlide 27
Accounts Not Closed Use worksheet to make ace forma shutting sections which aren\'t presented on records Financial articulations arranged from worksheet – simply like ordinary Accounts Closed Use same normal as utilized as a part of prior sections Closing sections regularly bring about fake shortages Appropriated reserve parity reported for unexpended sums Options for Closing EntriesSlide 28
CPF Financial Statements Required Balance Sheet Statement of Revenues, Expenditures, and Changes in Fund Balance [Operating Statement] Optional Budgetary articulation or calendar Not required under GAAP yet might be required by government, rating offices, or bondholdersSlide 29
Balance Sheet x Note distinctive segments in the Fund Balance area Appropriated Unappropriated Unrealized assessed incomes or exchanges from different assets are not resources – prompts Unreserved Fund Balance simulated shortfall – need to disclose deficiency in notes to monetary proclamationsSlide 30
Operating Statement x Same organization as utilized for other Governmental Funds Negative abundance causes a few perusers to think change in budgetary position is poor – manufactured since quite a bit of financing originates from "other" sourcesSlide 31
Completing the Bridge: Year 2 Reverse some of conforming/shutting passages made in earlier year – gets budgetary records back in equalizationSlide 32
Invoices ReceivedSlide 33
Cash ReceiptsSlide 34
Cash DisbursementsSlide 35
Settlement with the Feds: Part ISlide 36
Settlement with the Feds: Part IISlide 37
Final SettlementsSlide 38
Project Operating Statement Governments for the most part report one year on end With finished undertaking, reporting all incomes and uses could be valuable – clarifies the fake shortages from prior year(s) xSlide 39
Other CPF Issues Bond expectation notes Investment of unmoving money Disposing of asset parity (deficiency) Reporting a few activities in single asset Combining CPF monetary proclamationsSlide 40
Bond Anticipation Notes (BANs) Reasons for use Time slack in issuing affirmed security issue when money is required quickly to begin the task Interest rates on the decay, so putting off issuing securities will spare the administration cashSlide 41
Issue the BANs were issued at standard – since the term is short, this will for the most part be the situation. The issuance can be recorded as though it were long haul obligation inasmuch as two conditions exist: The task has an approved bond issue. The legislature will reimburse the BANs from the bonds, once they are issued. There will be a relating obligation in the General Long-Term Liabilities represents the BANs.Slide 42
Issue Bonds (same section from prior) Recall that as a consequence of this occasion, the Bonds Payable will be recorded in the General Long-Term Liabilities accounts.Slide 43
Repay the BANs in the meantime the BAN key will be expelled from the General Long-Term Liabilities accounts.Slide 44
Investments & Arbitrage A lot of money can course through a CPF – income arranging is an absolute necessity Issuing securities right on time in undertaking might be ordered – need to contribute continues to expand premiumSlide 45
Arbitrage The distinction in the sum earned on putting security continues and sum paid in enthusiasm on the securities – since most governments issue charge excluded obligation, this sum can be huge.Slide 46
Arbitrage and Taxes Tax rate on arbitrage is straightforward: 100% Penalty rate on not paying expense effectively is practically as basic: half Rules are very mind boggling: governments must oversee cash and watch arbitrage necessities to minimize issuesSlide 47
Remaining Fund Balance If money is left over when task is finished, distinction is generally exchanged to DSF to help with reimbursing sums obtained If venture is in shortage (insufficient money) Additional exchanges required from different assets OR Scope of the undertaking must be curtailedSlide 48
Reporting Multiple Projects Government may choose to utilize single asset to report numerous activities Easiest approach to join data is to plan separate proclamations for every task, then solidify for reporting purposesSlide 49
Combining CPF Statements Used when government utilizes separate CPF for every venture Individual articulations should in any case be set up to finish different explanations incorporated into CAFR (see CAFR arrangement process in Chapter 2) Combining proclamations arranged to encourage this procedure – might be a piece of other consolidating proclamations for all administrative assetsSlide 50
City of Orlando, FL, Example Part of a bigger articulation for all nonmajor Governmental Funds Other assets included are Community Redevelopment Agencies (consolidate components of SRFs, DSFs, and CPFs) and Special Revenue Funds Total (not appeared) is for all nonmajor Governmental Fund
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