Capital project fund explained

In government accounting, capital project fund refers to development funds used to account for capital expenditure of the government. Federal, state, and local governments set up a fund accounting system to track their projects. In this article we explain this term.

1. What's capital project fund

Another name for it is capital development fund. This is a fund accounting system used by the government to track spendings on capital projects as well as to set aside funds for it. With this the responsible government can show accountability for the use of project fundings. 

The sources of funds for capital projects are usually value added tax, grants, transfer from consolidated relief fund, and money borrowed internally or externally via IMF and other international development funds. Recently, the International Monetary Fund promised to fund the installation of data centers in Nigeria. Such finance can be tracked using the capital development fund accounting system.

Through this fund accounting, it is easy for the government to track how the funds are used and make informed decisions. For example, if the federal government intends to construct federal roads in Nigeria, after an estimated budgeted cost for the project is determined, it will be entered in a fund account. 

Read: Fiduciary fund in Government Accounting

The importance of a capital project fund accounting is to track projects and their progress, monitor their funding, and ensure accountability. With a good system, fraud can be detected/avoided. Also, the government can account for how the financing is spent and make necessary decisions.

2. Examples of items in the capital project fund

Examples of capital expenditure that can be classified as CPF are acquisition of capital items required to meet the need of governance. Also the building of hospitals, schools, road, bridges, and so on can be accounted for under this system.

In conclusion, fund accounting system for capital projects are accounted for separately in the capital project fund. This aid the accountability of these funds as well as helps in decision making by the government.