When should governments maintain a capital projects fund?

Governments should maintain a capital projects fund when there are both legal restrictions and contractual requirements associated with the funding of specific capital projects. A capital projects fund is utilized to account for financial resources that are designated for acquiring, constructing, or improving major capital assets.

Having legal restrictions implies that certain laws or regulations mandate the usage of these funds for a specified purpose, ensuring that government resources are used in compliance with required standards. When there are also contractual requirements, it indicates that there are specific agreements in place that dictate how the funds should be managed and utilized. This combination ensures accountability and transparency in the management of public funds devoted to capital projects, thereby fostering public trust and ensuring that the government's objectives for infrastructure development are achieved within the legal and contractual frameworks.