Which activity would normally not be accounted for in a capital projects fund?

• A. Building a new city hall with general revenues
• B. Construction of airport runways financed by revenue bonds to be repaid from the revenues of the city airport, an enterprise fund
• C. Purchasing park department vehicles financed by fines
• D. Acquiring park land financed by a capital grant

Answer: (D)

Capital Projects Funds are used to account for financial resources that will be used for the acquisition or construction of major capital facilities, typically funded by proceeds from bonds, grants restricted for capital projects, or transfers specifically earmarked for capital improvements.

Acquiring park land with a capital grant is usually not a capital projects fund activity because the grant is dedicated to a land asset rather than to a defined construction project. In practice, the land acquisition would be reflected as a capital asset in the government-wide financial statements, with the grant’s resources supporting that asset outside the capital projects fund’s normal construction-outlay accounting. The capital projects fund would mainly track the inflow of restricted grant funds and the outlay for the project, but land acquisition funded by a capital grant is typically not treated as a capital project in that fund.

By contrast, building a new city hall with general revenues and constructing airport runways financed by bonds intended to be repaid from the airport’s revenues clearly fit the capital projects fund model, as they involve major capital outlays and dedicated financing for those projects. Park department vehicles purchased with fines are generally operating or equipment purchases and not major capital projects, so they wouldn’t typically be handled in a capital projects fund.