The proposal of using a permanent fund for the principal investment and special revenue fund to account for the earnings of the investment is the best alternative from a personal perspective. However, other alternatives apply to the case of building the new town hall. When permanent funds are analyzed, the funds are maintained by the state government for various purposes. Accounting principles accept the establishment of permanent funds as an assisting mechanism for the management of funds. The permanent funds are also diverse as it also serves to distribute fiscal resources and generate income from interest (Becker, 2014). Nevertheless, permanent funds are already used by the government to cover for accounting services towards donations of government-operated facilities.
When addressing special funds, they are established by the government to collect and account for fiscal resources collected for a particular project. They provide additional accountability and transparency for the taxpayers towards the intended project (Becker, 2014). Additionally, according to the Government Accounting Standards Board (GASB), a special fund is founded to finance and manage small-scale projects (Bruno & Lapsley, 2018). The definition offered by GASB aligns itself with the objectives of the small town hence its support. The alternative strategy would be the use of capital project funds, and they are limited in their usefulness lifespan as they only exist for the project (Bruno & Lapsley, 2018). After the closure of the project, the surplus funds are transferred either to a debit service or general fund. It is important to note that capital project fund has rules and regulations that govern the use of the funds; however, it is dependent on the source of the funds (Bruno & Lapsley, 2018). Overall, capital project fund helps the government as well as other non-government organizations to observe legal requirements and liability.
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References
Becker, C. (2014). Governmental and Nonprofit Accounting: Theory and Practice, 10th ed. Journal Of Public Affairs Education , 20 (3). doi: 10.1080/15236803.2014.12001798
Bruno, A., & Lapsley, I. (2018). The emergence of an accounting practice. Accounting, Auditing & Accountability Journal , 31 (4). doi: 10.1108/aaaj-01-2016-2400
