During the AFR reviews by the Comptroller’s Office, it has become evident that an increasing number of school districts are unfamiliar with the restrictions on the creation, funding, and use of a Capital Reserve Fund #32. Although this Capital Reserve Fund is classified as a Capital Projects fund type, section 1431 of the Municipal Code which authorizes the creation and use of this fund imposes additional restrictions which must be adhered to.
Allowable sources of funding include only:
- Interfund transfers from the General Fund only consisting of:
- excess funds at the end of the fiscal year
- excess appropriations during the fiscal year
- Interest earnings of the fund
- Refund of prior year expenditures if the original expenditure was made from and reported within Fund 32.
- Insurance recoveries only for items in which the original expenditure was made from and reported within Fund 32
Unallowable sources of funding include items such as:
- Any type of debt proceeds or debt refunding proceeds
- Grant funds
- Interfund transfers from any fund other than the General Fund
- Donations and Contributions
- Settlement proceeds
- Insurance recoveries for any items in which the original expenditure was not made from Fund 32
- Any other State or Federal funding
AFR reporting of funding sources:
- When completing the AFR revenue detail for Fund 32, the only revenue codes available are those that represent the allowable funding sources noted above.
Allowable uses include:
- Capital Improvements
- Replacement of and additions to public works, and deferred maintenance thereof
- Purchase of school buses (as defined in PA Code, Title 67, section 171.2)
- Debt service payments
Unallowable uses include items such as:
- Computers, Laptops, technology equipment and maintenance of these items
- Furniture and other removable equipment
- Vehicles other than school buses
- Payments made by a school district to a CTC for the CTC’s capital improvements.
Clarifications and common errors:
- Monies within the general fund must meet the criteria of being considered excess prior to being transferred to Fund 32. Example: Bonds are typically issued for a specific purpose and therefore the proceeds would not be considered excess in order to meet the transfer criteria.
- Unallowable funding streams should not be deposited into the general fund and transferred to Fund 32 simply to circumvent the direct deposit of unallowable funding sources into Fund 32.
- Monies held within Fund 32 may not be transferred to any other fund for any reason. The balance of this fund must be maintained until utilized for an allowable purpose.
- Money may not be transferred into Fund 32 from any fund other than the general fund.
- All expenditures utilizing Fund 32 monies must be reported within Fund 32.
- Interfund reimbursements may be utilized if an expenditure is made by another fund on behalf of Fund 32, or made by Fund 32 on behalf of another fund. At year end, payable and receivable entries must be recorded if the reimbursement has not yet occurred, and the initial expenditure must be reported in the fund ultimately responsible for the cost. Interfund reimbursements should not be confused with interfund transfers.
- Unallowable uses are frequently identified, the most common being purchases of computers, laptops, maintenance agreements, equipment, and items which are not permanent improvements to the grounds or a structure.