Which of the following activities would normally not be accounted for in a capital projects fund?

• A. Acquisition of police cars using operating funds.
• B. Construction of airport runways financed by revenue bonds to be repaid from airport revenues (enterprise fund).
• C. Renovation of city hall using general fund resources.
• D. Purchase of land with debt issued to be repaid from taxes.

Answer: (B)

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 sources other than the operating revenues of an enterprise fund (for example, bond proceeds, grants, or interfund transfers). When a project is financed by revenue bonds payable from the revenues of an enterprise activity, the project belongs in the enterprise fund rather than the capital projects fund because it is part of the enterprise’s operations and debt service.

In this scenario, constructing airport runways with revenue bonds that are to be repaid from airport revenues is inherently an enterprise fund activity. The airport, as an enterprise, would handle the project and debt issuance and repayment from its own revenues, not through the capital projects fund. The other options describe purchases or renovations that are typical capital outlays financed through capital projects funding or transfers, so they would normally be tracked in a capital projects fund.