citizens of a defined geographical area of the City of Sale authorized a
special assessment to be levied on their property to finance the reconstruction
of the sewer system infrastructure that serves the area. The City will solicit bids, oversee
reconstruction, issue the debt in the name of the City, and service the
debt. The City is NOT obligated in any
manner for the debt but will collect the special assessments and make principal
and interest payments to the bondholders.
Discuss the appropriate accounting for the construction phase and the
debt service phase of this project.
Justify the required accounting and financial reporting for these two
phases of this project.
2. What is arbitrage? What are its potential uses and/or
abuses? How are potential abuses
should governments report their capital projects and debt service activities in
their government-wide financial statements?
often receive interest on the temporary investment of capital debt
proceeds. Some believe that governments
are inconsistent in the way they report interest and other earnings on
investments compared to interest on their debt.
Explain this comment. Do you
believe it is inconsistent?