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CAPITAL PROJECTS FUNDS

CAPITAL EXPANSION FUND (F41)

LONG-TERM CAPITAL IMPROVEMENT TRUST

FUND (F46) Presented by:Carey Bradley, ConsultantSchool Financial Services TeamDepartment of Public InstructionJanuary 21, 2016

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Capital Projects Funds 4x These funds account for financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets.

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Capital Projects Funds 4xCapital Expansion Fund (F41) Wisconsin Statute 120.10(10m) Long-term Capital Improvement Trust Fund (F46) Wisconsin Statute 120.137 Other Capital Projects Fund (F49) DPI Financial Requirements

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SOURCE OF REVENUECAPITAL PROJECTS FUNDS

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Capital Projects Funds 4xCapital Expansion Fund (F41)Projects financed by a special tax levy.Long-term Capital Improvement Trust Fund (F46)Projects financed with funds transferred from the General Fund.Other Capital Projects Fund (F49) Projects financed (mostly) with borrowed funds (G.O. proceeds).

Controlled Revenues Only

Controlled Revenue or Referendum Debt

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ELIGIBLE AND ALLOWED EXPENDITURES

CAPITAL PROJECTS FUNDS

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Capital Projects Funds 4xCapital Expansion Fund (F41)Capital expenditures related to buildings and sites only. (Specific project/purpose as approved with the tax levy at the Annual Meeting)Long-term Capital Improvement Trust Fund (F46)Projects in the approved long-term capital improvement plan. (After initial five year waiting period)

Other Capital Projects Fund (F49) Projects (mostly) per the referendum or resolution.

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REQUIREMENTS FOR ESTABLISHING AND

MAINTAINING A FUND

CAPITAL PROJECTS FUNDS

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Capital Expansion Fund (F41)Common School District -Power of the Annual Meeting1.Resolution to establish

the levy for a certain purpose (project).

2.Annual Tax Levy approved at the annual meeting.

● Districts must levy directly into Fund 41, as reflected on the district’s Tax Levy Certification (PI-401) Report.

● Tax levy and investment interest must be in a segregated account.

● Transfers into Fund 41 from any other fund, including Fund 10, are not permitted.

● Limitted to sites and buildings, not other capital equipment.

Capital Expansion Fund (F41) REQUIREMENTS and

RESTRICTIONS

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Capital Expansion Fund (F41) REQUIREMENTS and

RESTRICTIONS● Monies may be used for no other

purposes unless a succeeding annual meeting or unified school district board of education votes to change the purpose. (annual action provides opportunity to change once per year in the specified timeline)

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Long-term Capital Improvement Trust Fund(F46)

Board of Education1. Board approval of a 10 year

capital improvement plan.2. Board resolution to establish a

trust.3. Creation of a segregated bank

account.

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Long-term Capital Improvement Trust Fund(F46) REQUIREMENTS and RESTRICTIONS

May only use funds for capital projects (per the ten year plan).

May not use funds for an initial five year period. (Five years from the date of the first deposit)

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SHARED COST FOR STATE AID PURPOSES

Capital Projects Funds 4x

Cost Sharing and State Equalization AidThe fundamental purpose of the Equalization

Aid formula is to “level the playing field” by providing assistance (distributing aid) to poorer districts (those with lower property value) to make up for what they can’t get from their property tax base.

Shared Cost = District costs “shared” between Equalization Aid (the state) and property taxes (local tax payers).

Aid is inversely related to district property value per member.

Spending is aided at three levels.15

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Capital Expansion Fund (F41)● Shared costs increase when the funds

are expended from Fund 41, but the costs are amortized over the number of years a tax was levied for the project.

● Example:o FY Expense of $5,000 and five years of levy will increase

shared costs $1,000 each of the next five years.

● Amortization (spreading out ) of expenditures levels out shared cost increases.

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Long-term Capital Improvement Trust Fund(F46)Shared costs increase when the funds are

physically transferred from the General Fund and deposited into the fund’s account.

● Example:o FY Fund10 Expense (transfer) of $1,000 for each of five years will

increase shared costs $1,000 each year.o The fund 46 expediture of $5,000 has not impact on shared cost.

● Smaller Fund 10 transfers (expenditure) level out shared cost increases for a larger capital outlay.

● Opportunity to maintain spending and shared costs in a given year.

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Where are you in the Formula? State Equalization Aid

District 1 District 2 District 3 District 4

Property ValueBelow

Tertiary Guarantee

Property ValueAbove Tertiary

Guarantee

Property ValueAbove

Secondary Guarantee

Property ValueAbove

Primary Guarantee

Primary LevelCost per Pupil

Positive Aid Positive Aid Positive Aid Zero Aid

Secondary Level Cost per Pupil

Positive Aid Positive Aid Negative Aid

Negative Aid

Tertiary Level Cost per Pupil

Positive Aid Negative Aid

Negative Aid

Negative Aid

Increasing property values

Increasing spending

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REPORTING TO DPICAPITAL PROJECTS FUNDS

1. Resolution to establish the fund and initial tax levy (including Annual Meeting Minutes).

2. Any resolutions that result in a change in the project/purpose.

3. The Fund 41 tax levy must be reported in Fund 41 of the current year's budget and annual reports, and the tax levy table at the end of the report.

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Capital Expansion Fund (F41) REPORTING

1. Official Board minutes approving the long-term capital improvement plan.

2. Signed resolution creating the Long-term Capital Improvement Trust Fund or official minutes documenting the creation of the fund.

3. Documentation that confirms the existence of a segregated bank/investment account and initial deposit.

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Long-term Capital Improvement Trust Fund(F46)

REPORTING

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CONSIDERATIONS

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Provides a method for districts to set aside funds for capital projects.

Requires identification of projects and purpose of tax.

May be used to reduce the single year expense for shared cost as the expense is divided by the years levied.

Amount of revenue determined when the levy is set.

Capital Expansion Fund (F41)

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Provides a method for districts to set aside funds for capital projects

Requires planning for capital facility needs and improvements including care and maintenance.

May be used to level out expenses for shared cost (rather than a large project expenditure in Fund 10)

Provides an option for fiscal year end expenditure of unused budgeted amounts.

Initial five year waiting period to access funds.

Long-term Capital Improvement Trust Fund(F46)

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IDENTIFYING CAPITAL ASSETS AND

OUTLAYS

Capital Projects Funds 4x

Federal Reporting Handbook

Capital expenditures relate to the acquisition of capital assets. Such expenditures may be recorded in the general fund, special revenue funds, or capital projects funds, depending on the source of funding. Purchases of personal property, such as furniture and equipment, are usually recorded as expenditures in the general fund if they are financed from operating budgets (or in the general fund or special revenue funds, if they are financed from grants). Major projects, such as the construction of a school building financed by the proceeds of debt, should be accounted for in a capital projects fund.

http://nces.ed.gov/pubs2015/2015347.pdf26

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Capital AssetsPer the Federal Reporting Handbook:Long-livedOf a significant value at the the time of

purchase or acquisitionReasonably identified and controlled

through a physical inventory systemLand, buildings, and improvementsVehicles, machinery, and equipmentIT network equipmenthttp://nces.ed.gov/pubs2015/2015347.pdf

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Capital Expenditures (outlay)Consider the following:Enduring and Permanent in

natureOutside the regular operational

budgetOccasional and large expenditurePurchase, Improvement or

Replacement of capitalized assetsAssets the district intends to hold

or continue to use over a long period of time

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ADDITIONAL INFORMATION

Capital Projects Funds 4x

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Long-term Capital Improvement Trust Fund Capital Improvement Plan

A school board may establish a “trust” to fund capital improvement projects per their ten year long-term capital improvement plan.Basic Components of a Capital Improvement Plan

1.Describe nature of each capital improvement project. (Capitalization per GASB 34)

2.Identify the project location 3.Provide a cost estimate4.Provide a timeline

The Board may approve changes to the Plan

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Requirements Review (Fund 41)Action required at Annual Meeting

(Common School District)Tax Levy must be used for sites and

buildings.Tax levy and investment interest must

held in a segregated bank/investment.Vote required at succeeding meeting to

change the project or purpose for use of funds. May have a residual transfer out.

Report establishment and changes in purpose to DPI.

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Requirements Review (Fund 46)Board approved long-term capital improvement

plan (minimum of 10 years) Funds may only be accessed five years after

the establishment of the “trust” fund.Funds must be physically deposited and held in

a segregated bank/investment (separate and distinct from other district accounts) until they are expended for capital improvement projects per the district’s plan.

Funds invested as per sec. 66.0603, Wis. Stats.Timing Requirements Reporting to DPI-documenting establishment

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Capital Projects Funds

Carey Bradley, Consultant ..……608-267-3752Gene Fornecker, Auditor ……….608-267-7882