Capital Accounting by Sub-Funds

Accounting for capital projects begins with fund number 171. The Accounting for Capital Projects diagram shows an example of accounting for capital projects by sub-funds within Fund 177.  For each fund number, there is a balance sheet, statement of revenues, and statement of expenditures. Within this fund there can be sub-funds noted by three letters or numbers. Each sub-fund will also have a balance sheet, statement of revenues, and statement of expenditures. This allows for appropriate organization and documentation when maintaining the capital projects budget.  Sub-fund accounting allows the managers of each project to have a separate accounting for their project and allows a separate reporting of the project to department heads, county commission, school boards, and the public.  Sub-funds are often used to help insure the cost credibility of each project by not commingling funds from different projects. It is recommended that counties consider using sub-fund accounting for large individual projects and smaller projects by yearly sub-funds. Various examples are as follows:

1. A county has fire marshal deficiencies in various schools that total $2 million dollars— the county may consider establishing a FIR sub-fund for all fire marshal improvements in their schools.
2. A county is building a new high school estimated at $50 million dollars and a new middle school estimated at $25 million dollars—the county may establish a HS sub-fund with $50 million and MS sub-fund with $25 million.
3. A county has a group of 20 small projects, some of which may take two years to complete. The total estimated cost of these projects is $500,000 dollars. The county may establish a sub-fund 009 for these 20 projects noting that they are 2009 projects. Then the next year have a group of 2010 projects sub-fund 010. During this next year the county could still have 009 open and 010 open.  A further recommendation would be that a small sub-fund be closed after the second year and any remaining funds be used for the new sub-fund year, such as 2011 or sub-fund 011.

Recommended Practice:  Establish sub-funds within a Capital Project Fund if your county has a number of separate projects.

Recommended Practice:  If your county has a number of capital improvement grants, you should consider establishing a Capital Project Fund and related sub-funds for the grants.