P. 6-1

The financial statements of an actual capital projects fund leave it to the report reader to draw inferences on key transactions.

The accompanying statements of the parks, recreations, and municipal capital improvement bond fund (a capital projects fund) were drawn from an annual report of Parkville. According to a note in the report (the only one pertaining to the fund), 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 substantial. What is the most likely explanation?
2. A schedule of longterm debt payable (in the statistical section of the report) indicates that only $7 million, of 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 and 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?

Parks, Recreation, and Municipal Capital Improvement Bond Fund Balance Sheet December 31, 2021 (in thousands)
Assets
Receivables	$2
Investments	5,874
Total assets	$5,876
Liabilities and Fund Balance
Liabilities
Accrued wages and salaries	$ 4
Construction contracts payable	202
Due to other funds	220
Total liabilities	$426
Fund Balance
Restricted for bond projects	$5,019
Committed	431
Total fund balance	$5,450
Total liabilities and fund balance	$5,876

Parks, Recreation, and Municipal Capital Improvement Bond Fund Statement of Revenues, Expenditures, and Changes in Fund BalanceBudget and Actual Year Ended December 31, 2021 (in thousands)

Budget	Actual
Revenues
Interest earnings	$ 75	$ 131
Expenditures
Capital outlay
General governmentfacility	1,552	425
Culture and recreationfacility	5,500	1,177
Total expenditures	$7,052	$ 1,602
Deficiency of revenues over expenditures	$ (6,977)	$ (1,471)
Other financing sources (uses)
Proceeds from bonds payable	$ 7,052	$ 7,052
Nonreciprocal transfers out	(75)	(131)
Total other financing sources (uses)	$ 6,977	$ 6,921
Excess of revenues and other sources over expenditures and other uses	$0	5,450
Fund balance, beginning of year		0
Fund balance, end of year		$5,450