[Anonymous]

I’m in Chapter 9 in Government accounting, and I noticed the definitions for Operating Grants & Contributions and Capital Grants & Contributions are the same. Why is Timmy giving us the mnemonic “SOC” to remember Program Revenue categories when 2 of them appear to be the same. I’m confused.

[Roxwella]

So my understanding of what needs to be remembered about both of these types of grants/contributions/bonds can by found directly in the first words, and will really only effect government fund accounting (rather than government wide accounting). If it (grant/contribution/bond) is a general/operating/expense type, it will probably be accounted for in the general fund (where all accounting for normal government activities takes place..and effectively a catchall for anything that doesn't fit another fund type). The capital grants/contributions/bonds are going to be used for capital projects, so they should be accounted for in a capital fund. There are a number of other funds you should probably be aware of.

Somebody please correct me if Im wrong. Hope this makes sense for you

[jelly]

Hope this helps, from the real-world:

Operating grant – $ used for expenses that occur regularly in the background (salaries, utility bill, health/general liability, simple office supplies, etc)

Capital grant – $ used for very infrequent projects that will likely exist for the long-term, i.e. a computer server network, a transportation link, a hydroelectric dam, a sports stadium, a factory, etc.

Couldn't pass again!

[Anonymous]

Thanks, guys. Does Becker have proof-readers? I don't understand how they would put the same definition, verbatim, for both.

[Anonymous]

Perhaps I can help– I am working on my FAR exam as well…

becker is correct– they are basically the same it is just the purpose of the funds that depend on the type of fund structure to be utilized.

like mentioned before capital funds are for long term projects or the purchase of assets that will be capitalized– as determined by the governmental agencies policies and procedures.

program revenues for governmental accounting can be similar to operational(general) fund. capital projects can be funded by user contributions(tax revenues), user fees, grants, and leverage of bonds and levies. The general fund can also be funded by these types of revenues depending on the specifics of the revenue– taxes can be tricky depending on how they were enacted into law or ordinance by the local government.

however, for capital projects, normal capitalization rules applied.. for instance.. the government may leverage bond to finance the construction of a new sewer line,,,the sewer line materials and all employee related costs that can be directly charged to the project should be found in the capital fund… and it all should be capitalized when the project is completed and transferred to long term assets within the government wide financial statements.

I know I provided more information that you asked, but the short answer is because both funds can receive identical funding sources– however, typically (depending on the state) some general funds cannot use bond proceeds for operational expenditures– some states allow it and some do not– if a state does allow bond proceeds to be used for operational expenditures typically the bond agreement is tied to a specific revenue source– such as future tax revenues or the sale of property.

please let me know if I can be of further assistance

BreAnna, CGFM

[Author]

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