P. 6-1

The accompanying statements of the parks, recreations, and minicipal capital improvement bond fund were drawn from an annual report of Parksville. According to a note in the report, the fund is maintained "to account for bond proceeds to be utilized for the construction and refurbishment of parks and recreation facilities and the refurbishment of other municipal facilities."

1. The variances in expenditures between budget and actual are substaintial. What is the most likely explanation?

2. A schedule of long-term debt payable (in the statistical section of the report) indicates that only $7 million, or parks, recreation, and municipal capital improvement bonds were authorized and issued. How do you reconcile that amount with the proceeds from bonds payable reported in the statement of revenues, expenditures, and changes in fund balance?

3. Another schedule of transfers between funds (in the same section) indicates that $131 thousand was transferred to the general fund. What conclusions can you draw about whether interest on fund investments must be used either to repay the capital improvement bonds or to construct nd refurbish city facilities?

4. How much of fund resources did the government spend during the year on capital improvements?

5. How do you explain the absence in the balance sheet of "construction in process?"

6. Why is a major portion of the fund balance "restricted?"