Question

Why would a state or local government establish a capital project fund? What type of project might be considered a capital project? Could operating functions ever be funded with capital projects funds? How could these administrative controls assuring that funds not be shifted between funds be circumvented? Should the managers ever compromise their Integrity by transferring money between funds however well intended that transfer might be?

Answer 1

Governments often establish capital projects funds to account for the major acquisition and construction of capital assets.

A capital project is one in which the cost of the product is capitalized or depreciated. The most common examples of capital projects are infrastructure projects such as railways, roads, and dams. In addition, these projects includes assets such as subways, pipelines, refineries, power plants, land, and buildings. They have life more than 1 year.

Yes when funds in the operating function are too less for the operations funding and there is a fund requirement. However the same can be done in exceptional cases with proper authorization

Managers should never compromise their Integrity by transferring money between funds however well intended that transfer might be