UNIT 4: CAPITAL PROJECT FUNDS

Contents
4.0 Aims and Objectives
4.1 Introduction
4.2 General Outline of Capital Projects Fund
4.3 Establishment and Operation
4.4 Financing a Capital Project
4.5 Others Considerations
4.5.1 Means of Acquisition
4.5.2 Costs Included
4.5.3 Retained Percentages
4.5.4 Encumbrances (re-establishment)
4.6 Alternative Treatment of Residual Equity or Deficits
4.7 Bond Premium, Discounts and Accrued Interests on Bonds Sold
4.8 Bond Anticipation Notes Payable and the Problem of Interest Expenditures
4.9 Investments
4.10 Accounting for a Capital Project Fund

4.0 Aims and Objectives

The objectives of creating a fund to account for a capital project is to provide a formal
mechanism to enable administrators to ensure revenues dedicated to a certain purpose are
used for that purpose and no other, and to enable administrators to report to creditors, and
other grantors of capital projects fund resources that their requirement regarding the use of
the resources were met. They are useful for holding resource manager accountable thereby
helping to assure that the resources for such projects are used legally and also in the most
economical manner. They provide information for legal compliance as well as sound financial
management and enable good reporting to source providers.

After going through this topic, the student should be able:

 understand clearly how governmental units account for construction or acquisition of
major capital facilities
 determine the sources of financing used ine the construction and acquisition of such major
capital facilities
 the accounting and reporting procedures used in from the establishment to closure of the
 closure of the capital project fund.

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4.1 Introduction

The previous unit indicates that long lived assets such as office equipment, government
vehicles and other relatively minor items may be acquired by a governmental unit by
expenditures of appropriations of the general fund or one or more of its special Revenue
funds. Long-lived assets used by activities accounted for by a governmental fund types are
called general fixed assets. Acquisitions of General Fixed Assets that require major amounts
of money ordinarily cannot be financed from general fund or special revenue fund
appropriations. Major acquisitions of general fixed assets are commonly financed by issuance
of long term debt to be repaid from tax revenues, or by special assessments against property
deemed to be particularly benefited by the long lived asset. Other sources financing the
acquisitions of long lived assets include grants from other governmental units, transfers from
other funds, gifts from individual or organizations or by a combination of several of these
sources. if money received from these sources is restricted, legally or morally to the
acquisition or construction of specified capital assets, it is recommended that a capital
projects fund be created to account for these resources to be used for major construction or
acquisition projects.

4.2 GENERAL OUTLINE OF CAPITAL PROJECTS FUND

Capital Projects Funds (CPF) account for financial resources to be used for the acquisition or
construction of major capital facilities (other than those financed by proprietary funds & trust
funds). Examples of major capital facilities are Administration Buildings, Civic Centers and
libraries etc. these funds do not account for the acquisition of smaller fixed assets, such as
vehicles, machinery & office equipment which are normally budgeted for & recorded as
expenditures in the general fund. it is also possible that a construction project could simply
have a subsidiary ledger within the General Fund, rather than its own distinct fund. the
existence of the Capital projects fund, as any other fund will depend on the legal requirements
and the need for good financial management.

CPF do not account for the fixed assets acquired only for the construction of the fixed assets.
It exists only for the period of acquisition or construction of the fixed assets. After the
acquisition or construction is completed, the Capital Projects Fund will be abolished. The

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Fixed Assets constructed are accounted for in the GFAAG. It does not also account for the
repayment & servicing of any debt obligations issued to raise money to finance the
acquisition of capital facilities. Such debt & debt related servicing activities are accounted for
in the General Long Term Debt Account Group (GLTDAG) & Debt service fund (DSF).
Since the purpose of capital projects fund is to account for the acquisition and deposition of
revenues for specific purpose, it contains balance sheet accounts for only liquid assets and for
the liabilities to be liquidated by those assets.

Virtually all-governmental buildings are constructed by the governmental unit & are mostly
financed by bond offerings. In commercial accounting, all the activities (the construction of
the building, the subsequent capitalization & accounting for the building & the servicing of
the debt incurred to finance the construction of the building is accounted using one general
ledger. In governmental, four general ledgers are used, of which two are funds & two are
account groups.

Example
* Issuance of bonds for Br 500,000
1. Capital Projects Fund (CPF) - receives cash from bond offerings & uses cash to
construct fixed assets.
2. General Long Term Debt Account Group(GLTDAG)
Group(GLTDAG) - accounts for matured General
Long Term Debt, at the maturity date, the liability is transferred to a DSF.

CPF
Cash 500,000
O.F.S Bond proceeds 500,000
3. GFAAG – accounts for fixed assets during & after construction.
* Construct new building
C.P.F
Expenditures 500,000
Cash 500,000
GFAAG
Building 500,000
Investment in F.A –CPF 500,000

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 4. D.S.F.
D.S.F. – services GLTD, making both interest & principal payments using money
obtained from tax levies on operating transfers from General Fund.
* Bond matures
GLTDAG
Bonds Payable. 500,000
Amt To Be Provided 500,000

DSF
Expenditures 500,000
Bonds payable 500,000
* Operating transfer made from GF.

DSF
Bonds payable 500,000
Cash 500,000

* Redeem Bond
DSF
Bonds Payable 500,000
Cash 500,000
4.3 ESTABLISHMENT & OPERATION

C.P.F are usually established on a project-by-project basis, because legal requirements may
vary from one project to another. So the existence of the C.P.F as any other fund will depend
on the legal requirement & the need for good financial management.

The focus of the CPF is the entire life of the project. It is by definition an expendable fund,
and all its resources are expected to be used up. However, CPFs do not have the same year-
by-year focus as the G.F because of the multi-year focus of CPFs, some accountants prefer
not to close a CPF annually, but others do. Whether or not to close the CPF annually will
depend on the unique factors of each case & will be strongly influenced by the requirement of
the financing source.

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The decision to use budgetary accounts will also depend on the features & financing source of
the particular CPF. It will be based on the particular project & be strongly influenced by the
requirement of the financing source. The decision to use or not to use budgetary accounts is
influenced by factors such as.
- The number of projects in the C.P.F
- The amount of detail in the C.P.F budget
- The use of an annual budget (rather than a project life budget) in the CPF

4.4 FINANCING A CAPITAL PROJECT

Capital projects project obviously need large amount of financing. Typically source of
financing include;
- Long term debit issue proceeds
- Grants from other governmental units
- Transfers from other funds with in the governmental entity
- Interest income from temporary investments.
- Gifts from individuals or foundations
- Special taxes or;
A combination of more than one of those

Intergovernmental grants, gifts, special taxes & investment interests are considered as
Revenues, whereas Inter Fund Transfers & Long Term Debt issue proceeds are not revenues
and are presented as Other Financing Sources and are presented that way on the statement of
changes.

Whether to have a separate capital fund for each project or to account for all capital fund for
each project or to account for all capital projects in one fund depends in part on what type of
financing involved. Different bond issues & different inter governmental transfers might well
have different legal requirements & each might require a separate C.P.F. on the other hand if
one bond issue is used to finance several projects, a single fund may be both permissible
advisable.

4.5 OTHER CONSIDERATIONS

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4.5.1 Means of Acquisition
Accomplishment of capital acquisition or construction project may be brought about in one or
more of the following ways:
1. Outright purchase from fund cash
2. By construction, utilizing the governmental units own force
3. By construction, utilizing the services of private contractors
4. By capital lease agreement.
4.5.2 Costs Included

All expenditures for getting the project ready are put in the CPF, including architect fees,
transport costs, damages etc…. usually major capital facilities are constructed by contracted
labor. Construction costs incurred are charged to expenditures. At the completion of the
project the cost of the facility is recorded as a fixed asset in the GFAAG. Until then any costs
incurred are shown as construction work in progress in the GFAAG. Generally the year-end
closing entry in the CPF triggers the recording of an amount in the GFAAG equal to the
credit to the expenditures account.

4.5.3 Retained Percentages

It is common in construction contracts for the entity to hold back the portion of the last
payment of the contract and to require contractors on large Scale contracts to give
performance bonds, providing indemnity to the Governmental Unit for any failure on the
contractors party to comply with terms and specifications of the agreement to provide more
prompt adjustment on shortcomings not legal or convincing enough to justify legal actions
and not recoverable under contractor’s bond as well as those the contractor may admit but not
be in a position to rectify, it is a common practice to withhold a portion of the contractors
remuneration until final inspection & acceptance have come about. The withheld portion is
normally a contractual percentage of the amount due on each segment of the contract.

This is to prevent the contractor from doing a poor quality work, specially in a rush to finish
at the end. Basically the entity will pay part of the final sum, then have its own engineers
come and inspect the contractors work. if the contractors work passes the inspection, the
balance of the amount owed is paid. if the engineer finds poor quality or undone work, the

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contractor must then correct the problem before the final retained sum is paid this amount
withheld by the governmental entity is known as retained percentage.

4.5.4 Encumbrances

Some governmental units include annual capital budgets as part of their annual appropriated
budget in which case the annual capital is recorded in the general ledgers of the various CPFs.
However, since the amounts involved in a capital project are usually large, an encumbrance
account is highly recommended & is very necessary in case of multiple subcontractors for a
project. Because of this, an encumbrance accounting procedures alone are usually deemed
sufficient for control purposes. So recording of the budget in the general ledger might not be
necessary. In capital projects fund, Encumbrance is also recorded by the same amount in
which the construction contract agreement is made between the governmental unit and the
contractor and also in the same manner as that of the general and special revenue fund when
items are ordered through purchase orders.

Re-establishment of Encumbrance-
Encumbrance- the year end closing procedures for use by capital
projects funds artificially chops the construction expenditures pertaining to each continuing
projects into fiscal year segments rather than allowing the total cost of each project to be
accumulated in a single Construction Expenditures Account. Similarly closing the
encumbrance account of each project to fund balance at year-end creates some procedural
problems in accounting in the subsequent year. the procedures illustrated for general and
special revenue funds (using separate Encumbrance, Fund Balance Reserved for
Encumbrances, and Expenditure Accounts for each year) could be followed. The
authorization (Appropriation) for a capital projects fund however does not expire at the end
of a fiscal year but continues over the life of the project. Accordingly, it appears desirable to
re-establish Encumbrance account at the beginning of each year in order to facilitate
accounting for expenditures for goods and services ordered in one year and received in a
subsequent year.

4.6 ALTERNATIVE TREATMENT OF RESIDUAL EQUITY OR DEFICITS

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If necessary expenditures & O.F.U are planned carefully & controlled carefully so that actual
does not exceed plans. Revenues & O.F.S of the C.P.F should equal or slightly exceed the
expenditures and other financing uses leaving a residual equity (surplus) and if long term debt
had been incurred for the purposes of the capital projects fund and under this case, There are
three possible options;
1. The balance could be transferred to the DSF, as residual equity transfer for retiring the
debt, which has been incurred for the purpose of the project.
2. If the residual Equity is were deemed to have come from grants or shared revenues
restricted for capital acquisitions or constructions, legal advice may indicate that any
residual equity may return to its source in proportionate amount or;
3. The balance might be retained for future maintenance purpose.

In some situations, in spite of careful planning and cost control, Expenditures and OFU of a
CPF may exceed its revenues and OFS resulting in a negative fund balance (deficit). If the
deficit is small an additional transfer will probably be requested from one or more other
funds. If the deficit is relatively large and/or intended transfers are not feasible, the
governmental unit may seek additional grants or shared revenues from other governmental
units to cover the deficits if no other alternative is available, the governmental unit would
need to finance the deficit by issuing bonds. And under these circumstances, a legal or
disciplinary action might have been sought against the project manager, since public money
was being used.

4.7 BOND PREMIUMS, DISCOUNT AND ACCRUED INTEREST ON BONDS SOLD

Issuance of Bonds at a Premium

Bond premiums arise because of adjustments to the interest rates. The bond indenture
agreements usually specify that any bond premium is to be set-aside in the related DSF. This
is desirable because it remains the incentive to spend more on a project than is authorized
merely by raising additional cash by increasing the interest rate in the CPF. There are two
ways of accounting the bond proceeds and the associated premium.

1. The proceed including the premium could be recorded in the CPF as OFS-Bond proceeds
Cash 110,000

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 OFS- Bond proceeds 110,000
2. Or, only the par value of the bond is considered as OFS of the CPF

Cash 110,000
OFS- bond proceed 100,000
Due to DSF 10,000
In the first case the transfer of the premium to the DSF is reported as an Operating Transfer
Out in the CPF and an Operating Transfer In in the DSF.

C.P.F
O.F.U-
O.F.U- operating transfer out 10,000
Cash 10,000

DSF
Cash 10,000
OFS –operating transfer in 10,000

Whereas in the second case, the bond premium is accounted as a liability of the CPF because
it must be remitted to the DSF. Similarly, when bonds are sold between interest payment
dates the amount of accrued interest is included in the total selling price. conceptually accrued
interest sold is an off set to the interest expenditure on the first interest payment date.

Following the sale of the bonds generally in practice, however accrued interest sold is
recorded as a revenue of the DSF.

Issuance of Bonds at a Discount

Bond discount are rare because the stated the interest rate is usually set enough set high
enough so that no discounts may result (many Governmental units are legally propitiated
from issuing bonds at a discount). If a discount does result, theoretically there should be a
transfer from the related DSF to the CPF to cover the shortfall. In practice such a transfer
may not be possible because money may not be available in the related DSF or because of
legal restraints. In such case, the project may be curtailed or the shortage may be covered by
an operating transfer from the GF.

E.g.

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 Cash 100,000
Due from 10,000
OFS- bond proceed 110,000

Accrued Interest on Bonds Sold

When bonds are sold between the interest payment dates the amount of accrued interest is
included in the total selling price. Conceptually, accrued interest sold is an offset to the
interest expenditures on the first interest payment date following the sale of the bonds.
Generally in practice, however accrued interest sold is recorded as revenue of the Debt
Service Fund.

4.8 BOND ANTICIPATION NOTES PAYABLE

The “bond anticipation” description of the debt signifies an obligation to retire the notes from
the proceeds of the proposed bond issue The account is increased and decreased for the same
reason and in the same manner employed for Tax anticipation Notes Payable in General
Fund.

4.9 INVESTMENTS

All the money necessary to pay for the capital project is usually raised near the inception of
the project, but contractors are paid as work progresses. Excess cash, therefore may be
temporarily invested in high quality interest bearing securities. Interest rates payable by the
governmental unit on general long term debt have been lower than interest rates the
governmental units can earn on temporary investments of high quality such as Treasury bills
and notes, Bank notes, Bank Certificates of deposit and government bonds with short
maturities. consequently, there is considerable attraction to the practice of selling bonds as
soon as possible after capital project is legally authorized, and investing the proceeds to earn a
net interest income. The interest earned on the temporary investment is available for use by
the CPF in same jurisdictions; in others, laws a local practices require the interest income to
be transferred to the DSF or to the GF. If interest income is available to the CPF, it should be
recognized on the accrual basis as a credit to revenues. If it will be collected by the CPF but
must be transferred, the credit for the income earned should be Due to other funds. If the

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interest will be collected by the DSF or other fund that will recognize it as Revenue, no entry
by the CPF is necessary.

4.10 ACCOUNTING FOR CAPITAL PROJECTS FUND

Financial activities such as revenues earned expenditures incurred for the construction or
acquisition are recorded in almost the same manner as that of the General and Special
Revenue Fund. at the end of each fiscal year prior to a completion of a capital project, the
Revenues, Other Financing sources, Expenditures, Other Financing Uses and encumbrance
ledger accounts of the capital projects fund are closed to the unreserved and undesignated
fund balance account. upon completion of the project, the entire capital project fund is closed
by a transfer of any unused cash to the Debt Service Fund or to the General fund, as
appropriate; the unreserved and undesignated fund balance ledger account of the receiving
fund would be for Residual Equity Transfer. Any cash deficiency in the capital projects
fund probably would be made up by a General fund; this operating transfer would be credited
to the other financing sources ledger account of the capital projects fund and debited to the
other financing uses account of the general fund. a capital projects fund issues the same
financial statements as General Fund-statement of revenues Expenditures and change in fund
balance and a Balance sheet. To reiterate, the assets constructed with the resources of the
capital projects fund are not included in that funds balance sheet. The constructed plant assets
are recorded in the governmental units general fixed assets account group. Furthermore the
bonds issued to finance the capital projects fund are not a liability of that fund. Prior to
maturity date or dates of the bonds, the liability is carried to the General Long Term Debt
Account Group.
The following illustration will show how the construction and related activities are accounted
for in a capital projects fund.

Illustration
The town of X wants to construct a new library on the site owned by the town. The
construction is expected to cost 50,000,000. It is expected to be completed within two years
on June 30 year 7. In a special meeting held on July 2 year 5, the members of the town
council approved a 30,000,000 issue of General Obligation Bonds maturing in 20 years. The

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proceeds of this sale will be used to help finance the construction of the new library. The
remaining 20,000,000 will be financed by an Irrevocable State Grant that has been awarded.

The following transactions occurred during the fiscal year ended June 30 year 6.

1. The General fund loaned 500,000 to the library Capital Projects Fund for defraying
Engineering and other preliminary expenses by receiving a note which is later to be
Settled from the bond issue proceeds.

Cash 500,000
Bond Anticipation Notes Payable 500,000

2. Out of the Irrevocable grant of 20,000,000, the state contributed 5,000,000 and the
remaining is deemed to be susceptible to accrual

Cash 5,000,000
Due from State Grant 15,000,000
Revenue 20,000,000

3. Preliminary engineering and planning costs of 320,000 were paid to the contractor.
There had been no encumbrances for this cost.

Construction Expenditure 320,000

Cash 320,000
4. The Bonds were sold at 101. the bond indenture agreement requires that any premium
to be set aside in the related Debt Service Fund.

Cash 30,300,000
OFS-Bond proceeds 30,000,000
Due to DSF 300,000

5. The town of X library CPF invested its 10,000,000 bond proceeds on the Federal
Government treasury bills.

Short Term Investment-Treasury Bills 10,000,000

Cash 10,000,000

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6. A construction contract for 44,270,000 is authorized and signed.

Encumbrances 46,000,000
Fund Balance Reserved for Encumbrances 46,000,000
7. Orders were placed for materials estimated to cost 550,000.

Encumbrances 550,000
Fund Balance Reserved for Encumbrances 550,000
8. The materials previously ordered (Transaction 7) were received at a cost of 510,000.

a) Fund Balance reserved for Encumbrance 550,000

Encumbrance 550,000
b) Construction exp 510,000
Constr. Payable 510.00
9. In addition to the construction contract of transaction 6; 3,900,000 was incurred for
the services of the architects and engineers; of this amount 3,100,000 was paid.

Encumbrances 3,900,000
Fund Balance Reserved for Encumbrances 3,900,000

Fund Balance Reserved for Encumbrance 3,900,000

Encumbrance 3,900,000

Construction Expenditure 3,900,000

Construction Payable 3,900,000

Construction Payable 3,100,000

Cash 3,100,000
10. Received cash of 1,000,000 from the General fund as an operating transfer.

Cash 1,000,000
OFS- Operating transfers in 1,000,000

11. A partial payment of 10,000,000 was received from the state irrevocable Grants and
the General Fund loan was repaid with interest amounting to 10,000.

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 Cash 10,000,000
Due from State Grant 10,000,000

Bond Anticipation Notes Payable 500,000

Interest Expenditure 10,000
Cash 510,000
12. When the project was approximately half finished, the contractor submitted billing for a
payment of 12,000,000.
Fund Balance Reserved for Encumbrance 12,000,000
Encumbrance 12,000,000

Construction Expenditure 12,000,000

Construction Payable 12,000,000
13. The contractors initial claim was fully verified and paid.
Construction Payable 12,000,000
Cash 12,000,000

Town of X Library Capital Projects fund

Trial Balance
June 30, Year 6

Account Title Debit Credit

Cash 20,870,000
Short term investment-Treasury Bills 10,000,000
Due from State Grant 5,000,000
Construction Payable 1,310,000
Due to DSF 300,000
Fund Balance Reserved For Encumbrance 32,270,000
Unreserved and Undesignated Fund Balance -
Revenues 20,000,000
OFS- Bond Proceeds 30,000,000
OFS- Operating transfers 1,000,000

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Construction Expenditures 16,730,000
Interset Expenditures 10,000
Encumbrances 32,270,000 .
Total 84,880,000 84,880,000

Town of X library Capital Projects Fund

Statement of Revenues, Expenditures and Changes in Fund Balance
For the year ended June 30, year 6
Revenues:
Irrevocable State Grant 20,000,000
Expenditures:
Construction Expenditures 16,730,000
Interest Expenditure 10,000 16,740,000
Excess of Revenue over Expenditure 3,260,000
Other Financing Sources(Uses)
OFS- Bond Issue Proceeds 30,000,000
OFS- Operating transfers in 1,000,000 31,000,000
Excess of Revenue and OFS over Expenditure 34,260,000
Add:
Add: Fund Balance - July 1, Year 5 -
Fund Balance - June 30, Year 6 34,260,000

Town of X Library Capital Projects Fund

Balance Sheet
June 30, year 6
Assets
Cash 20,870,000
Short Term Investment- Treasury Bills 10,000,000
Due from State Grant 5,000,000
Total Asset 35,870,000
Liabilities and Fund Balance
Construction Payable 1,310,000
Due to DSF 300,000

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Fund Balance:
Reserved for Encumbrance 32,270,000
Unreserved and Undesignated 260,000
Total Liabilities and Fund Balance 35,870,000
________________________________________________________________________
Closing Entries

Revenues 20,000,000
OFS- Bond Proceeds 30,000,000
OFS- Operating Transfer 1,000,000
Construction Expenditure 16,730,000
Interest Expenditure 10,000
Unreserved and undesignated-
Fund Balance 14,260,000

Unreserved and Undesignated-

Fund Balance 32,270,000
Encumbrances 32,270,000
________________________________________________________________________
The following transactions related to the town of X Library Capital Projects Fund occurred
during the fiscal beginning July 1 Year 6 and ending June 30, Year 7.
7.

14. Received 10,500,000 at maturity date of the Federal Government Treasury Bills.
Cash 10,500,000
Short Term Investment-Treasury Bills 10,000,000
Revenues 500,000

15. The Library CPF transferred the premium on the Bond to the DSF
Due to DSF 300,000
Cash 300,000

16. A progress billing of 32,270,000 was received from the contractors for the final work
done on the project. as per the term of the contract, the town withhold 10% of the

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 billing.
a) If Encumbrances are Re-established at the beginning of the fiscal period (July 1,Year 6)
-Entry on July 1, year 6 would be;

Encumbrances 32,270,000
Unreserved and Undesignated-
Fund Balance 32,270,000

- Then, the entry for the current transaction would be

Construction Expenditure 32,270,000

Construction Payable 29,043,000
Construction Payable-
Retained Percentage 3,227,000

b) If there is no re-establishment of encumbrance (this is not very common in CPF)

On July 1, year 6;

Fund Balance Reserved for Encumbrance 32,270,000

Construction Payable 29,043,000
Construction Payable-
Retained Percentage 3,227,000

17. All outstanding liabilities of the town of X Library CPF are paid except remaining
balance.

Construction Payable 30,353,000

Cash 30,353,000
18. Received the remaining balance from the Irrevocable State Grant.

Cash 5,000,000
Due from State Grant 5,000,000
________________________________________________________________________

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 Town of X Library Capital Projects Fund
Statement of Revenues, Expenditures and Change in Fund Balance
For the year ended June 30, Year 7.

Revenues 500,000
Add: Unreserved and Undesignated Fund Balance July 1, Year 6 1,990,000
Fund Balance June 30, year 7 2,490,000

Town of X Library Capital Projects Fund

Balance Sheet
June 30, Year 7

Assets
Cash 5,717,000
Liabilities and Fund Balance
Construction Payable- Retained Percentage 3,227,000
Unreserved and Undesignated Fund Balance 2,490,000
Total Liabilities and Fund Balance 5,717,000
________________________________________________________________________
Closing Entry
Revenue 500,000
Unreserved and Undesignated-
Fund Balance 500,000
________________________________________________________________________
The following transactions and events take place after the construction has finished

19. The Retained percentage balance has been paid to the contractor because the work
has been performed as per the term of the contract.

Construction Payable- 3,227,000

Retained Percentage
Cash 3,227,000

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20. The town council decides to transfer the residual fund balance of the Library CPF to
the DSF.

Residual Equity transfer out 2,490,000

Cash 2,490,000
================================================================
Closing Fund Balance

Unreserved and Undesignated- 2,490,000

Fund Balance
Residual Equity transfer out 2,490,000
================================================================

Check Your Progress

1. Describe how and which kind of activities are accounted for in a Capital Projects Fund.
_________________________________________________________________________
_________________________________________________________________________
2. Explain the use of encumbrance and its re-establishment in CPF.
_________________________________________________________________________
_________________________________________________________________________
3. Discuss the concept of budgeting in CPF and its difference with that of GF and SRF.
_________________________________________________________________________
_________________________________________________________________________
4. Describe the use of investment as a source of financing in CPF.
_________________________________________________________________________
________________________________________________________________________
5. Explain the mechanism how construction process and the contractor is controlled from
doing poor quality work?
__________________________________________________________________________
__________________________________________________________________________
6. IF bonds sold to finance a project for the construction of general Fixed Assets are sold

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 at a discount, what legal questions arises? What about at a Premium? Discuss.
__________________________________________________________________________
__________________________________________________________________________
7. Explain how financial reporting are made in that of CPF in contrast that of GF.
__________________________________________________________________________
__________________________________________________________________________
8. Describe the sources of financing in a CPF by indicate the major and most common
sources.
__________________________________________________________________________
__________________________________________________________________________
9. Explain the treatments for the remaining residual balance or for a deficit after the
construction of a major capital facility by a CPF.
__________________________________________________________________________
__________________________________________________________________________
10.Describe the factors that influence the decision to use or not to use budgetary accounts
in a CPF.
__________________________________________________________________________
__________________________________________________________________________

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