Accounting Manual for Public School Districts

CHAPTER 10 – Capital Projects Fund and

Transportation Vehicle Fund Accounting

Table of Contents Page

INTRODUCTION ................................................................................................................. 1
CAPITAL PROJECTS FUND ................................................................................................ 1
Capital Projects Fund Allowable Expenditures by Revenue Source ............................ 3
CAPITAL PROJECTS FUND EXPENDITURES .................................................................... 6
Expenditure Type Codes ................................................................................................... 6
10 Sites ....................................................................................................................................................... 6
20 Buildings .............................................................................................................................................. 6
30 Equipment........................................................................................................................................... 7
40 Energy................................................................................................................................................... 7
50 Sale and Lease Expenditures ........................................................................................................ 7
60 Bond or Levy Issuance .................................................................................................................... 7
90 Debt....................................................................................................................................................... 7
DESCRIPTIONS OF TYPE CODES ....................................................................................... 7
10 Sites................................................................................................................................ 7
11 Purchases ............................................................................................................................................ 7
12 Improvements ................................................................................................................................... 7
20 Buildings........................................................................................................................ 8
21 New ....................................................................................................................................................... 8
22 Remodeling ........................................................................................................................................ 8
30 Equipment ..................................................................................................................... 8
31 Initial ..................................................................................................................................................... 9
32 Additional............................................................................................................................................ 9
35 Instructional Technology ............................................................................................................... 9
40 Energy ............................................................................................................................ 9
41 Audits.................................................................................................................................................... 9
42 Capital Improvements .................................................................................................................. 10
50 Sale, Lease, and Rental Expenditures ....................................................................... 10
51 Sale of Real Estate .......................................................................................................................... 10
52 Lease and Rental of Surplus Real Property ........................................................................... 10
60 Bond or Levy Issuance ............................................................................................... 10
61 Bond or Levy Issuance or Election ........................................................................................... 10

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90 Debt ............................................................................................................................. 10
91 Principal ............................................................................................................................................. 11
92 Interest ............................................................................................................................................... 11
93 Arbitrage Rebate ............................................................................................................................ 11
Object Expenditure Codes—Optional ........................................................................... 11
Capital Projects Fund—Source–Use Codes ................................................................... 11
Expanded Source–Use Coding ........................................................................................................ 12
Example of Source–Use Coding ...................................................................................................... 13
State Reporting of Capital Projects Fund Revenues and Other Financing Sources ..... 13
Restriction of Fund Balance Using Source–Use Code ............................................................. 13
Capital Outlay Expenditures ........................................................................................... 15
Salaries .............................................................................................................................. 15
Repairs .............................................................................................................................. 16
Renovations ...................................................................................................................... 16
Initial Equipment ............................................................................................................. 17
Replacement ..................................................................................................................... 17
Acquisition or Relocation of Modular (Portable) Buildings ....................................... 17
Energy Capital Improvements ........................................................................................ 17
Ineligible Expenditures in the Capital Projects Fund................................................... 18
Supplies, Instructional Resources, and Noncapitalized Items .............................................. 18
Bonded Indebtedness ......................................................................................................................... 18
Bond Election ......................................................................................................................................... 18
Vehicles .................................................................................................................................................... 18
Inventory and the Capital Projects Fund ...................................................................... 19
Ongoing Technology and Maintenance Expenditures and Transfers ....................... 19
Ongoing Technology .......................................................................................................................... 19
Maintenance and Repair .................................................................................................................... 19
Transfers and Source of Funding.................................................................................................... 19
CAPITAL PROJECTS FUND ENTRIES............................................................................... 20
Capital Projects Fund State Matching Journal Entries ................................................ 20
CPF: State Matching Paid Directly to the Contractor .............................................................. 20
CPF: State Matching Paid to the District ...................................................................................... 20
CPF: State Matching Paid to the District on a Front Funded Project ................................ 21
Local Option Capital Asset Lending (LOCAL) Program Journal Entries .................... 21
TRANSPORTATION VEHICLE FUND ............................................................................... 24
TRANSPORTATION VEHICLE FUND EXPENDITURES ................................................... 25

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Expenditure Type Codes ................................................................................................. 25

30 Equipment......................................................................................................................................... 25
60 Bond or Levy Issuance .................................................................................................................. 25
90 Debt..................................................................................................................................................... 25
DESCRIPTIONS OF TYPE CODES ..................................................................................... 26
30 Equipment ................................................................................................................... 26
33 Transportation Equipment Purchase ....................................................................................... 26
34 Transportation Equipment Major Repair ............................................................................... 26
60 Bond or Levy Issuance ............................................................................................... 26
61 Bond or Levy Issuance or Election ........................................................................................... 26
90 Debt ............................................................................................................................. 26
91 Principal ............................................................................................................................................. 26
92 Interest ............................................................................................................................................... 27
93 Arbitrage Rebate ............................................................................................................................ 27
Object Expenditure Codes—Optional ........................................................................... 27

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INTRODUCTION
This chapter provides information that is unique to the Capital Projects and
Transportation Vehicle funds. Some information presented here may also be included in
other parts of this manual, but it is included here so that those new to governmental
accounting can obtain an overview of the funds.

As required by accounting standards, governmental accounting systems should be

organized and operated on a fund basis. A fund is defined as a fiscal and accounting
entity with a self-balancing set of accounts, which are segregated for the purpose of
carrying on specific activities or attaining certain objectives in accordance with special
regulations, restrictions, or limitations. (See Chapter 1 Fund Accounting Systems, for
additional information regarding fund accounting systems.)

The standards categorize funds into one of eleven fund types. These fund types are
grouped into three general classifications:

• Governmental funds are used to account for tax-supported activities. GAAP

establishes five governmental fund types; General Fund, Special Revenue Funds,
Capital Projects Funds, Debt Service, and Permanent Funds. RCW 28A.320.330
requires school districts in Washington state to establish a General Fund, Capital
Projects Fund, Debt Service Fund, and Associated Student Body Fund (Special
Revenue Fund). RCW 28A.160.130 creates a Transportation Vehicle Fund (Capital
Projects Fund).
• Proprietary funds are used to account for business-type activities of a
government and are supported, at least in part, by fees or charges. Proprietary
funds are not permitted for school districts in Washington State.
• Fiduciary Funds are used to account for resources in situations where the
government is acting as a trustee or agent for parties outside the
government. Fiduciary Funds cannot be used to support the government’s
own programs. Fiduciary Activities are described in Chapter 13.

CAPITAL PROJECTS FUND

Capital Projects Funds—to account for financial resources to be used for the
acquisition or construction of major capital facilities (other than those financed
by proprietary funds and trust funds) (GASB Cod. Sec. 1100.103a[3]. See also Sec.
1300, “Fund Accounting”).

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Within the state of Washington, two funds are used for the acquisition or construction
of major capital facilities or assets: the Capital Projects Fund and the Transportation
Vehicle Fund. (See the Transportation Vehicle Fund section starting on page 24 of this
chapter.) The Capital Projects Fund is created by RCW 28A.320.330.

The Capital Projects Fund can be used for the acquisition of land or existing facilities,
construction of buildings, purchase of equipment, conducting energy audits, making
capital improvements, which are cost effective as determined by energy audits, and
implementing technology systems. In addition, improvements to buildings or grounds,
remodeling of buildings, and the replacement of roofs, carpets, and service systems are
included in the Capital Projects Fund.

The Capital Projects Fund is generally financed from the proceeds of the sale of bonds,
state matching revenues, and special levies. In all instances where moneys are raised by
voter-approved bond issues, the proposition must include a description of the projects
for which the money is being raised. RCW 28A.530.010 authorizes school districts to
issue bonds for certain capital projects. The acquisition of school buses is not a capital
project. Therefore, the proceeds of bonds issued per RCW 28A.530.010 cannot be used
to acquire school buses.

The Capital Projects Fund is also used to record the proceeds from the sale of, and the
net proceeds from, the lease of surplus real property and to record investment earnings
of the Capital Projects Fund.

The modified accrual basis of accounting is to be utilized in measuring financial position

and operating results unless the district has less than 1,000 full-time equivalent students
the previous fiscal year and has elected to utilize the cash basis for all funds except debt
service. (See Chapter 1, Accrual Basis in Governmental Accounting, for additional
information on the modified accrual basis of accounting.)

The focus of Capital Projects Fund accounting is on the sources and uses of available
resources, and the accounting and reporting is on an annual period-oriented basis. The
accounting records must contain sufficient information to permit special purpose
reporting on a project-length basis.

Revenue recognition for the Capital Projects Fund is the same as for other governmental
funds. Amounts are recorded as revenues or other financing sources when they are both
measurable and available.

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This section does not include information pertaining to the general ledger accounts
(Chapter 4), revenue accounts (Chapter 5), or most journal entries (Chapter 7). See the
chapters indicated for detailed information in these areas.

Capital Projects Fund Allowable Expenditures by Revenue Source

Revenues Expenditures
Sale of Bonds Bond revenue is restricted to sites and buildings as authorized
by law or necessary or proper to carry out the functions of a
school district, improvement of energy efficiency and
installation of energy systems and components, and structural
changes and additions to buildings and sites. The purchase of
initial equipment as defined in this section is also allowable.
The resolution approving the election shall include the specific
buildings to be constructed or remodeled and any additional
specific purposes as authorized under RCW 28A.530.010.
Expenditures are restricted to those authorized in the bond
resolution. Any alteration of the expenditure plan requires a
public hearing (RCW 28A.530.020).

Special Levies Special levies are restricted to the following: the same
purposes that bond proceeds may be used for, as well as major
renovations of buildings including the replacement of facilities
and systems where periodic repairs are no longer economical
or extend the useful life of the facility or system beyond its
original planned useful life. Also, the renovation and
rehabilitation of playfields and athletic fields can be
accomplished with Capital Projects Fund special levies. The
purchase of initial equipment, additional major items of
equipment and furniture, and the costs associated with
implementing technology systems as defined in this section
are allowable. The resolution approved by the voters
authorizing the special levy must include the purpose for
raising the moneys.

State Funding State Funding Assistance revenue may be spent on new

Assistance construction for unhoused students or modernization or
replacement of existing areas. Local funds must be provided,
typically through bonds, and expended first. Any state match
not used for the funded project may be expended on any legal
expenditure in the Capital Projects Fund. However, any
alteration to the use of state assistance requires a public
hearing (RCW 28A.530.020).

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Revenues Expenditures
Impact and Mitigation Developer Impact and Mitigation fees are restricted to growth
Fees projects specified in the Capital Facilities Plan. Impact fees,
under the Growth Management Act, are also restricted to
specific schools impacted by the development. Fees collected
from voluntary impact fees are limited to the growth projects
defined in the agreement.

Investment Earnings Investment earnings from the proceeds of bonds, state match
funds, special levies, and mitigation and impact fees are
restricted to the same purposes as proceeds from their source.
Interest earnings from all other sources may be used for any legal
purpose of the Capital Projects Fund. Further, investment
earnings from unrestricted revenue sources can be credited by
the County Treasurer to the General Fund, with Board approval,
for expenditures for instructional supplies, equipment, and
capital outlay purposes.

Insurance Proceeds Insurance proceeds that represent reimbursement for loss of a

building and contents shall be deposited to the credit of the
Capital Projects Fund. Insurance proceeds for business
interruption insurance shall be credited to the General Fund.
Expenditures for the replacement of the building and contents
shall be expended from the Capital Projects Fund. Insurance
proceeds may be used for any legal purpose in the Capital
Projects Fund.

State Apportionment State apportionment may be used for the same purposes as
special levies and bond proceeds. The purchase of initial and
additional equipment as defined in this section is also
allowable.

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Revenues Expenditures
Sale of Real Property Proceeds from the sale of real property may be used for any
legal purpose of the Capital Projects Fund. The purchase of
initial and additional equipment as defined in this section is
also allowable.

According to RCW 28A.335.130 the proceeds from any sale of

school district real property by a board of directors shall be
deposited to the Debt Service Fund or the Capital Projects
Fund, except for amounts required to be expended for the
costs associated with the sale of such property, which moneys
may be deposited into the fund from which the expenditure
was incurred.

Lease or Rental of Revenues from the lease or rental of surplus property shall be
Surplus Property deposited in the Capital Projects Fund and used for any legal
purpose of the Capital Projects Fund. A portion of these
revenues may be deposited into the General Fund to cover the
costs of maintaining the surplus property.

According to RCW 28A.335.060, at the option of the board of

directors, after evaluating the sufficiency of the school district’s
Capital Projects Fund for purposes of meeting demands for
new construction and improvements, moneys derived for the
lease or rental of real property may be deposited into the
district’s General Fund to be used exclusively for nonrecurring
costs related to operating school facilities including, but not
limited to, expenses for maintenance.

Categorical Funding Categorical funding may be used for any legal purpose of the
Capital Projects Fund and for the purposes allowed by the
funding agency or grantor. The purchase of initial and
additional equipment as defined in this section is also
allowable.

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CAPITAL PROJECTS FUND EXPENDITURES

The use of individual project numbers is optional, but districts may find that the use of
a project coding system will facilitate reporting and consolidation of expenditures for
capitalization and project tracking.

This code is intended to provide the accumulation of historical expenditures by

specific projects. A suggested possibility would be the assignment of the first digit to
a building number. The second digit would be an ascending project serial number
applicable to the building. This would distinguish the specific project within a building
location. A second possibility would be to use an ascending two-digit code, e.g., 01
through 99.

Care should be taken to develop projects that apply only to one building and one
expenditure type. This permits expenditures for completed projects to be used as
inputs to the school district’s property control record system. If at budget time this
cannot be done, a temporary number can be assigned. Assigning the permanent
number that identifies the expenditure to specific building locations can be done at
the time of accounting. However, for some expenditure items, such as salaries that
apply to more than one project, it may be desirable to use an undistributed (00)
classification for project identification for accounting purposes. When an
undistributed classification is used, the expenditures accumulated under this
classification must be assigned to projects at year-end.

Expenditure Type Codes

Expenditure types are classified as follows:

10 Sites

11 Purchases
12 Improvements

20 Buildings

21 New
22 Remodeling

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30 Equipment

31 Initial
32 Additional
35 Instructional Technology

40 Energy

41 Audits
42 Capital Improvements

50 Sale and Lease Expenditures

51 Sale of Real Estate

52 Lease and Rental of Surplus Property

60 Bond or Levy Issuance

61 Bond or Levy Issuance or Election

90 Debt

91 Principal
92 Interest
93 Arbitrage Rebate

DESCRIPTIONS OF TYPE CODES

10 Sites

11 Purchases

Record expenditures for the purchase of land or options to purchase land.

12 Improvements

Record expenditures which have the effect of adding to an existing facility’s worth,
but do not normally increase the square footage of the land. Included under
improvements are such items as assessments and the expenditures for clearing,

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drainage, grading, landscaping, demolition of existing structures, paving, tunnels,

overpasses, and fencing.

20 Buildings

21 New

Record the construction expenditures for a building addition or the expenditure

for a new or existing structure that will be used to house a related operation such
as a warehouse, business office, or school. Include expenditures for facilities to
house students during the construction of a school building.

22 Remodeling

Record expenditures for major permanent structural alterations. Included are items
which are integral parts of the building or building service such as the initial or
additional installation of heating and ventilating systems, electrical systems,
plumbing systems, fire protection systems, and other service systems in existing
buildings. Remodeling or improvement of buildings usually takes place within the
existing floor area, whereas a building addition extends the floor area.
Replacements of roofs, carpets, and service systems are recorded here. Repairs to
buildings are recorded under the General Fund Activity 64 Maintenance. Include
expenditures for facilities to house students during the remodeling of a school
building.

30 Equipment

Maintenance vehicles and machinery are allowed to be charged to the Capital Projects
Fund with money legally deposited, except bonds, as described in RCW 28A.320.330(2).
ESHB 2140 amends the law to include RCW 28A.320.330(2)(h) which states: During the
2019–2021 fiscal biennium, the purchase of maintenance vehicles and machinery are
allowed.

For the two-year fiscal biennium, RCW 28A.320.330(2)(h) supersedes RCW

28A.320.330(2)(e) which states: Vehicles shall not be purchased with capital projects
fund money.

Other motor vehicles licensed to be operated on the road are not charged to the Capital
Projects Fund. Pupil transportation vehicles are charged to the Transportation Vehicle
Fund. All other vehicles are charged to the General Fund.

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31 Initial

Record expenditures for the purchase of initial (not replacement) equipment for
new or remodeled buildings.

Additionally, for new buildings only, expenditures for the initial non-consumable
library, text, and reference books would be classified in this category. Expenditures
for these three types of instructional materials in a digital format (e.g., CD-ROM)
are also allowable. Items of a consumable nature (e.g., workbooks) are not
allowable expenditures of the Capital Projects Fund because they are not capital in
nature.

32 Additional

Record expenditures for the purchase or installation of additional major items for
equipment, furniture, and technology levy expenditures not connected with a
construction project.

35 Instructional Technology

Record expenditures for the purchase or installation of instructional technology in

classrooms. Expenditures to be recorded in this Type Code are computers and
other classroom-based technology such as printers, projectors, document cameras,
smart boards, and other peripheral equipment. Software costs that are required for
the purchase and installation of new instructional technology may also be charged
to this Type Code. Once instructional technology has been purchased and placed
into service within the district, all future related expenditures shall be charged to
the General Fund using the appropriate expenditure codes in that fund.

40 Energy

41 Audits

Record expenditures associated with surveys of a building or complex which

identify the type, size, energy use level, and major energy using systems which
determine appropriate energy conservation maintenance or operating procedures
and assess any need for the acquisition and installation of energy conservation
measures, including solar energy and renewable resource measures (RCW
28A.320.330(2)(c)(ii)).

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42 Capital Improvements

Record expenditures for installation, or modification of the installation, of energy

conservation measures in a building or complex which are primarily intended to
reduce energy consumption or allow the use of an alternative energy source.
Energy conservation measures must have been identified as cost-effective by an
energy audit (RCW 28A.320.330(2)(c)(iii)).

50 Sale, Lease, and Rental Expenditures

51 Sale of Real Estate

Record expenditures associated with the sale of real estate such as attorney’s fees,
sales commissions, and appraisal fees (RCW 28A.335.130).

52 Lease and Rental of Surplus Real Property

Record expenditures associated with the lease and rental transactions of surplus
real property. Expenditures for the sale, rental or lease of personal property should
be reported in the General Fund (RCW 28A.335.060).

60 Bond or Levy Issuance

61 Bond or Levy Issuance or Election

Record expenditures incurred in issuing bonds such as attorney’s fees,

underwriting fees, rating agencies and related costs. Successful capital levy and
bond election costs may be recorded here. If the related election fails, these
expenditures shall be recorded in the General Fund. Expenditures such as transfer
fees incurred after bonds are issued should be recorded in the Debt Service Fund.

90 Debt

Type Codes 91 and 92 are used only for debt payments that are made directly from the
Capital Projects Fund. Transfers to the Debt Service Fund are only recorded in GL 536
Other Financing Uses–Transfers Out.

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91 Principal

Record the principal portion of payments made directly from the Capital Projects
Fund for debt including, but not limited to, conditional sales contracts, purchasing
agreements, and other long-term notes.

92 Interest

Record the interest portion of payments made directly from the Capital Projects
Fund for debt including, but not limited to, interest bearing warrants, conditional
sales contracts, purchase agreements, and interfund loans.

93 Arbitrage Rebate

Record the expenditure for arbitrage rebate at the time the liability is no longer
contingent.

Object Expenditure Codes—Optional

Use of object expenditure codes is an optional expansive feature that provides a

method of identifying expenditures as to objects.

Capital Projects Fund—Source–Use Codes

School districts receive and use resources that have restrictions or conditions
attached. These conditions can be imposed by bond or levy propositions or by
conditions and terms associated with grantor funding on categorical projects or can
be restraints existent in state laws (RCW) or agency rules (WAC). The district can also
commit or assign funds for specific purposes.

When revenues are received, the school district must be prepared to account for
amounts received and expended for that purpose. The source–use code provides a
common coding classification for both restricted-use revenues and expenditures.

A one-digit source–use code should be assigned as follows:

One Digit Source–Use Codes and Assignments

0 Amounts that are unrestricted and undesignated.
1 Amounts derived from the sale of bonds and investment proceeds and
used for the purposes expressed in the bond proposition.

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One Digit Source–Use Codes and Assignments

2 Amounts received from capital projects levies and used for levy
propositions.
3 Amounts received from state agencies and used for funded projects.
4 Amounts received from federal agencies and used for federal portions of
individual grants.
5 Other sources and uses not described above.
6 Amounts received from Impact Fees in accordance with the Growth
Management Act.
7 Amounts received from Mitigation Fees in accordance with the State
Environmental Protection Act.
9 Amounts to be distributed. This is an intermediate code for use during the
fiscal year and does not have a balance at budget preparation time or when
year-end reports are issued. For example, the district may have two or more
projects in the same year. The source–use code 9 can be a temporary place
for the direct construction management support expenditures during a fiscal
year. At the end of the fiscal year, all of these expenditures in source–use
code 9 would be reversed and allocated on a reasonable basis to each project
for that fiscal year. Allocation methods could be based on, but not limited to,
the total direct expenditures of each project or the total square feet under
construction of each project for that fiscal year.

Revenues and Other Financing Sources that are not restricted in their use should be
coded with source–use code “0.” For example, state apportionment revenues
(Revenue Account 3100) that have been redirected from the General Fund to the
Capital Projects Fund are not restricted and should be accounted for by using the “0”
source–use code.

Expanded Source–Use Coding

Districts may wish to further expand the minimal one-digit coding to be able to
account for individual issues and sales of bonds, levy years, and individual
categorical grants. For example, the use of a two-digit code would afford up to 50
individual source–use pools if the five minimum codes are used.

Districts may also elect to expand on the source–use code structure by giving
source–use code “8” its own assignment, or by adding a third or fourth digit to the
coding. Districts electing to expand on this code structure must include some
provision for reducing their expanded code to the fund balance and investment in
capital assets accounts provided for in the general ledger.

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Example of Source–Use Coding

The Capital Projects Fund receives the proceeds of a bond issue, the terms of
which require their expenditure on a specific building project. The district has
another building project under construction, financed through the proceeds of a
different bond issue.

Correct coding: 9112

The first two digits “91” identify this as the proceeds from the sale of bonds. The
third digit, the minimal source–use digit “1” represents restricted amounts from
the sale of bonds. The last digit is entirely a district-assigned number and could be
any number 1 through 9. In this case “2” identifies this as the second project.

The Other Financing Source account code for the F-195 and F-196 would be 9100.

The applicable general ledger account is 861 Restricted from Bond Proceeds.
Notice that the third digit is the source–use code.

State Reporting of Capital Projects Fund Revenues and Other Financing Sources

Only the summary level revenue code will be reported to the state. In many cases
this will only be the first two digits, signifying only the source of the revenue. The
last two digits will be only the “00” default code. For example, local levies would
still be 1100 for reporting purposes. The actual revenue on the district’s books
would be 112, with the fourth digit assigned by the district.

Restriction of Fund Balance Using Source–Use Code

Establishing restrictions of fund balance is done by closing Account 960 Revenues

and Account 965 Other Financing Sources to the fund balance restriction accounts
listed below through the use of the source–use code. To set up restrictions of fund
balance, the third digit in the revenue or other financing source account number
must match the third digit in the restricted account section of the balance sheet.

Closing expenditures that were expended on the restricted use reduces the
restriction on Capital Projects Fund resources. So the Account 530 Expenditures
that were restricted are closed to the general ledger restriction accounts
representing that restriction.

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The applicable general ledger restriction accounts are:

General Ledger: Restricted Fund Balance:

Equity Accounts for the Capital Projects Funds
861 Restricted From Bond Proceeds

862 Committed From Levy Proceeds

863 Restricted From State Proceeds

864 Restricted From Federal Proceeds

865 Restricted From Other Proceeds

866 Restricted From Impact Fee Proceeds

867 Restricted From Mitigation Fee Proceeds

869 Restricted From Undistributed Proceeds

Balances in the above accounts represent amounts that have not been expended
for the specific projects to which they have been legally restricted; most of the
revenues and other financing sources received by the Capital Projects Fund have
legal restrictions on their expenditures.

Districts are reminded that their accounting systems must be able to identify these
restrictions on future expenditures. Use of restriction accounts is an accounting
procedure that makes it possible to account for restricted amounts in the general
ledger.

Under this method, restricted revenues and expenditures are closed at year-end to
the restriction accounts listed above.

The portion of General Ledger 960 Revenues and General Ledger 965 Other
Financing Sources representing unrestricted resources should use source–use code
“0” and must be closed to 889 Assigned to Fund Purposes. Examples include
redirected state apportionment and revenue from the lease of real property.

The following are general guidelines in determining which restriction account to

use:

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• Investment earnings have the same expenditure restrictions as do the

underlying resources generating the revenue.
• Assume that the most restrictive resources were expended first.
• Restricted net position is intended to portray, at the date of the balance sheet
or statement of net position, the extent to which the government has assets
that can only be used for a specific purpose. If the related liabilities exceed the
assets on hand, then the "shortfall," by default, is covered by unrestricted net
position. Extending that logic to the unrestricted fund balance classifications,
shortfalls in any of the classifications would be covered by the next
classification for that specific purpose in the government’s spending
prioritization policy (stopping at zero in each classification). Thus, if fund
balance (exclusive of nonspendable amounts) in total is negative, then the
negative amount can only be attributed to the unassigned fund balance
classification.

Capital Outlay Expenditures

Capital outlay expenditures are those which result in the acquisition of capital assets or
additions to capital assets. They include capital expenditures for land or existing
buildings, improvements to grounds, construction of buildings, additions to buildings,
remodeling of buildings, and purchase or installment of initial or additional major items
of equipment. Include expenditures for facilities to house students during the
construction or remodeling of a school building. Legal fees for capital projects are
chargeable to the Capital Projects Fund. Election costs may be charged to the Capital
Projects Fund upon passage of the levy. Election costs for failed levies are charged to
the General Fund but may be reimbursed by the Capital Projects Fund if the levy passes
at a later time provided it is within the same fiscal period.

Salaries

The salaries and other direct expenditures of school district employees who are hired or
assigned to the planning or construction management of capital projects, which have
been approved as provided above, are recorded under the Capital Projects Fund.

Capital projects' planning includes the development of facility specifications and

construction design. It is defined as preparing specifications for building projects or
preparing architectural blueprints or other design specifications by planning directors,
architects, engineers, or draftsmen who spend significant time performing these duties.
Salaries for capital project planning are not to be charged to the Capital Projects Fund
for a specific project after the facility specifications or the construction design planning

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has been completed. Planning for the operation of existing facilities is not to be charged
to the Capital Projects Fund.

Construction management, as it pertains to capital projects, is defined as directing,

managing, or inspecting one or more capital projects. Salaries of staff project directors,
inspectors, or monitors who spend significant time performing these services are
designated as construction management salaries. Salaries for construction management
shall not be charged to the Capital Projects Fund after the building is occupied and
accepted by school district board action.

The salaries of individuals who spend time performing duties that directly support
capital project planning or construction management are to be charged directly to the
Capital Projects Fund. Salaries of individuals engaged in the operations of the school
district are not to be charged to the Capital Projects Fund. However, costs for staff paid
to move their classroom or office as a direct result of a remodel or construction may be
charged to the Capital Projects Fund. Salaries of individuals who also perform duties
chargeable to another fund should be allocated in proportion to their duties to both the
Capital Projects Fund and the other fund. Capital Projects Fund salaries may be
processed through the General Fund, which is then reimbursed by the Capital Projects
Fund.

Real estate management salaries are not to be charged to the Capital Projects Fund.

When salaries are charged to the Capital Projects Fund, school districts may wish to
maintain an object of expenditure to account for salaries and other expenditures.

Repairs

Expenditures for repairs to building structures that do not add to existing facilities are
recorded under the General Fund Activity 64 Maintenance. As a general guide
concerning repairs to building structures, if changes of partitions, roof structure, or walls
are not involved, the expenditures are recorded under the General Fund Activity 64
Maintenance; if such changes are involved, the expenditures are recorded under the
Capital Projects Fund as remodeling.

Renovations

The Capital Projects Fund records major renovations and replacement of facilities and
systems consisting of roofing, floor covering, exterior walls and windows or service
systems when periodic repairs are no longer economical. Replacement is the

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replacement of a unit of equipment or fixture with another unit or fixture that serves the
same purpose in the same way and has approximately the same expected lifetime as the
replaced unit when installed. Normal repairs should be charged to the General Fund
Activity 64 Maintenance.

Initial Equipment

Expenditures for initial equipment for a new or remodeled building or for a structure
being converted from one use to another use are recorded in the Capital Projects Fund.
Expenditures for initial equipment or the initial installation of built-in equipment in
existing buildings are recorded under the Capital Projects Fund.

Initial expenditures for a new or remodeled building or a structure being converted from
one use to another use for the purchase of library, text, and reference books or materials
in any format, including electronic, are allowable as initial equipment. Items of a
consumable nature (for example, workbooks) are not allowable expenditures of the
Capital Projects Fund because they are not capital in nature.

Expenditures for repairs and for replacements not discussed above are recorded under
the General Fund Activity 64 Maintenance as repairs to buildings, regardless of the
relative value of the replaced item of equipment and its replacement. The purchase of
additional equipment may be recorded in the General Fund.

Replacement

Expenditures for the replacement of a building or for the replacement of facilities and
systems are recorded under the Capital Projects Fund. Expenditures for the repair of
capital assets are recorded under the General Fund Activity 64 Maintenance.

Acquisition or Relocation of Modular (Portable) Buildings

Expenditures for the acquisition or relocation of modular (portable) buildings should be

charged to the Capital Projects Fund.

Energy Capital Improvements

Expenditures for the initial installation of energy capital improvements in buildings and
during the remodeling of existing buildings are recorded under the Capital Projects
Fund. Expenditures for repairs and replacements are recorded under the General Fund

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Activity 64 Maintenance as repairs to buildings. Energy-efficient systems as a part of the

initial equipment of a new building should be charged to the Capital Projects Fund.

Ineligible Expenditures in the Capital Projects Fund

Supplies, Instructional Resources, and Noncapitalized Items

Except for office supplies consumed by employees whose time is properly charged
to the fund, all other supplies are not eligible expenditures. Items of a consumable
nature (e.g., workbooks) are not allowable expenditures of the Capital Projects Fund
because they are not capital in nature.

Bonded Indebtedness

Liabilities for bonded indebtedness are not recorded in the Capital Projects Fund, but
instead are recorded on the Schedule of Long-Term Liabilities.

Bond Election

Expenditures for preliminary studies to provide information for a bond election are
considered an expenditure of the bond election and recorded under General Fund
Activity 11 Board of Directors.

Vehicles

Maintenance vehicles and machinery are allowed to be charged to the Capital

Projects Fund with money legally deposited, except bonds, as described in RCW
28A.320.330(2). ESHB 2140 amends the law to include RCW 28A.320.330(2)(h) which
states: During the 2019–2021 fiscal biennium, the purchase of maintenance vehicles
and machinery are allowed.

For the two-year fiscal biennium, RCW 28A.320.330(2)(h) supersedes RCW

28A.320.330(2)(e) which states: Vehicles shall not be purchased with capital projects
fund money.

Other vehicles are not to be purchased with capital projects fund money (RCW
28A.320.330(2)(e)). Pupil transportation vehicles are charged to the Transportation
Vehicle Fund. All other vehicles are charged to the General Fund.

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Inventory and the Capital Projects Fund

The use of inventory accounts within the Capital Projects Fund is optional. Inventory
within the Capital Projects Fund consists of items of equipment that have been
purchased for a large-scale project, such as the implementation of a new technology
system, but that have not yet been distributed to the schools within a district. Items
purchased as equipment for a single-school project, such as a new or remodeled school
building, should be recognized as expenditures when incurred and not treated as
inventory, even if the district chooses to utilize a central warehouse system.

Ongoing Technology and Maintenance Expenditures and Transfers

Certain moneys in the Capital Projects Fund may be transferred to the district’s General
Fund and used for certain, non-capital technology or maintenance and repair costs
(RCW 28A.320.330(2)(f)(ii) and (g)). Capital Projects Fund moneys that are used in this
manner shall be transferred to the General Fund, where the expenditures are recorded.
These non-capital expenditures include:

Ongoing Technology

Costs associated with the application and modernization of technology systems for
operations and instruction including, but not limited to, the ongoing fees for online
applications, subscriptions, or software licenses, including upgrades and incidental
services, and ongoing training related to the installation and integration of these
products and services.

Maintenance and Repair

Major equipment repair, painting of facilities, and other major preventative

maintenance purposes. Based on the district’s most recent two-year history of
General Fund maintenance expenditures, financial resources used for this purpose
may not replace routine annual preventive maintenance expenditures made from the
district’s General Fund.

Transfers and Source of Funding

Resources received in the Capital Projects Fund including, but not limited to, interest
earnings on unrestricted Capital Projects Funds, can be used for the purposes of
RCW 28A.320.330(2)(f)(ii) and (g), with the exception of funds derived from the
following sources: A) bond proceeds and interest on bond proceeds; B) school

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impact and mitigation fees and interest on impact and mitigation fees; C) proceeds
from the Washington LOCAL Program; or D) other sources subject to legal or
contractual restrictions as to use (for example grant proceeds).

For further information on the transfer process, refer to Chapter 3, Interfund Transfers.

CAPITAL PROJECTS FUND ENTRIES

Capital Projects Fund State Matching Journal Entries
Subsidiary Ledger Account Format for the following JEs:
Expenditures XX-X Type-Source

CPF: State Matching Paid Directly to the Contractor

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
530 21-3 New Construction, State Source X
State Funding Assistance Paid Direct to
960 4230 X
Contractor
To record the receipt of state funding assistance moneys paid directly to the
contractor. Source code 3 in both the expenditures and revenue will close into GL 863,
Restricted from State Proceeds, with a net effect of zero.

CPF: State Matching Paid to the District

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
240 Cash on Deposit X
530 21-3 New Construction, State X
530 21-1 New Construction, Bonds X
960 4130 State Funding Assistance Paid to District X
To record the receipt of state funding assistance moneys paid to the district and used
on the funded project. This entry will increase GL 861, Restricted from Bond Proceeds
and have a net effect of zero on GL 863, Restricted from State Proceeds.

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CPF: State Matching Paid to the District on a Front Funded Project

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
240 Cash on Deposit X
960 4100 State Funding Assistance Paid to District X
To record the receipt of state funding assistance moneys paid to the district on a front-
funded project. Revenue Account 4100 will close into GL 889, Assigned to Fund
Purposes.

Local Option Capital Asset Lending (LOCAL) Program Journal Entries

A Certificate of Participation (COP) is a third-party borrowing option for financing capital

acquisitions. School districts usually take advantage of COPs through the LOCAL
program administered through the Office of the State Treasurer (OST). The following
examples show the journal entries when School District A signs a financing contract with
OST to acquire buses. In the first example, the district has chosen to receive the
proceeds directly from OST. In the second example, the district has chosen to keep the
proceeds with OST, who will handle the payment of the invoices.

SCENARIO #1: District receives proceeds from OST.

In the Transportation Vehicle Fund:

LOCAL Entry #1

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
240 Cash on Deposit With County Treasurer X
965 Yes Other Financing Sources X
To record COP LOCAL proceeds when OST sends the proceeds to the school district.

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LOCAL Entry #2

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
530 Yes Expenditures X
240 Cash on Deposit With County Treasurer X
To record payments to the vendor for a bus purchase when the COP LOCAL proceeds
were paid to the school district directly.

LOCAL Entry #3

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
Other Financing Uses—Transfers Out
536 X
(Budget and Actual)
240 Cash on Deposit With County Treasurer X
To record the transfer of funds from TVF to DSF to make the COP LOCAL payment.

In the Debt Service Fund:

LOCAL Entry #4

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
240 Cash on Deposit With County Treasurer X
965 Yes Other Financing Sources X
To record the transfer of funds from TVF to DSF to make the COP LOCAL payment.

LOCAL Entry #5

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
530 Yes Expenditures X
240 Cash on Deposit With County Treasurer X
To record payment made to the county treasurer, according to the COP LOCAL
payment schedule, including principal and interest.

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SCENARIO #2: District elects to keep proceeds with OST and submits invoices to them.

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
250 Cash With Fiscal Agent X
965 Yes Other Financing Sources X
To record the deposit of LOCAL program proceeds with OST that the district will access
to pay for future invoices.

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
530 Yes Expenditures X
250 Cash With Fiscal Agent X
To record payment on invoices that have been paid by OST for allowable uses under
the LOCAL program.

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
Other Financing Uses—Transfers Out
536 X
(Budget and Actual)
250 Cash With Fiscal Agent X
To record the transfer of any remaining unused LOCAL proceeds out of the TVF.

General Subsidiary
Ledger Ledger
Account Required Account Title Debit Credit
250 Cash With Fiscal Agent X
965 Yes Other Financing Sources X
To record the transfer of funds from the TVF to the DSF for future debt payments.

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TRANSPORTATION VEHICLE FUND

The Transportation Vehicle Fund is created per RCW 28A.160.130. The
Transportation Vehicle Fund is to be used to account for the expenditures for the
purchase and related debt service incurred for pupil transportation equipment (school
buses). In addition, major repair and rebuilding of pupil transportation equipment
(school buses) as defined in WAC 392-142-260 is permitted. To charge major repairs to
the Transportation Vehicle Fund, a district must receive prior approval from OSPI (Form
1023).

There are three primary sources of revenue for the Transportation Vehicle Fund.

The first source are payments from the state for school bus depreciation, per RCW
28A.150.280.

The second source of revenue for the Transportation Vehicle Fund comes in the form of
special Transportation Vehicle Fund levies, per RCW 84.52.053.

The third source of revenue for the Transportation Vehicle Fund comes in the form of
bonds. RCW 28A.530.080 authorizes school districts, under certain circumstances, to
issue bonds without a vote of the people. These non-voted bonds may be deposited
into the Transportation Vehicle Fund, where the proceeds may be used for the purchase
of school buses.

In addition, the district may transfer money from the General Fund into the
Transportation Vehicle Fund. Such transfers are recorded in General Ledger Account 965
Other Financing Sources.

The modified accrual basis of accounting is to be utilized in measuring financial position

and operating results unless the district has less than 1,000 full-time equivalent students
the previous fiscal year and has elected to utilize the cash basis for all funds except debt
service. (See Chapter 1, Accrual Basis in Governmental Accounting, for additional
information on the modified accrual basis of accounting.)

This section does not include information pertaining to the general ledger accounts
(Chapter 4), revenue accounts (Chapter 5), or journal entries (Chapter 7). See the
chapters indicated for detailed information in these areas.

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TRANSPORTATION VEHICLE FUND EXPENDITURES

The Transportation Vehicle Fund is provided to account for the expenditures for the
purchase, major repair, rebuilding, and related debt service incurred for pupil
transportation equipment.

As prescribed in WAC 392-142-260, the allowable uses of Transportation Vehicle Fund

moneys by school districts are (1) the purchase of school buses, and (2) performing
major repairs of a school bus receiving prior approval by the superintendent of public
instruction.

Expenditure Type Codes

Expenditure types are classified as follows:

30 Equipment

33 Transportation Equipment Purchase

34 Transportation Equipment Major Repair

60 Bond or Levy Issuance

61 Bond or Levy Issuance or Election

90 Debt

91 Principal
92 Interest
93 Arbitrage Rebate

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DESCRIPTIONS OF TYPE CODES

30 Equipment

33 Transportation Equipment Purchase

Record expenditures for the purchase of school buses for student transportation.
Other vehicles should not be recorded here, but recorded in the General Fund
instead.

34 Transportation Equipment Major Repair

Record expenditures for major repairs to school buses in accordance with WAC 392-
142-260. Major repairs require prior approval from the superintendent of public
instruction.

60 Bond or Levy Issuance

61 Bond or Levy Issuance or Election

Record expenditures incurred for issuing bonds such as attorney’s fees, underwriting
fees, rating agencies and related costs. Successful Transportation levy and bond
election costs may be recorded here. If the related election fails, these expenditures
shall be recorded in the General Fund. Expenditures such as transfer fees incurred
after bonds are issued may be recorded in the Debt Service Fund.

90 Debt

Type Codes 91 and 92 are used only for debt payments made directly from the
Transportation Vehicle Fund. Transfers to the Debt Service Fund are only recorded in GL
536 Other Financing Uses—Transfers Out.

91 Principal

Record the principal portion of payments made directly from the Transportation
Vehicle Fund for debt including, but not limited to, conditional sales contracts,
purchasing agreements, and other long-term notes.

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92 Interest

Record the interest portion of payments made directly from the Transportation
Vehicle Fund for debt including, but not limited to, conditional sales contracts and
purchase agreements.

93 Arbitrage Rebate

Record the expenditure for arbitrage rebate at the time the liability is no longer
contingent.

Object Expenditure Codes—Optional

Use of object expenditure codes is an optional expansive feature that provides a

method of identifying expenditures as to objects.

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