We have been getting a lot of questions recently about system development fees (SDFs) (formerly knowns as impact fees) and the need to account for them in capital reserve funds as of July 1, 2018.
Kara Millonzi at the SOG has some excellent blog posts on SDFs. We highly recommend you review them thoroughly if your unit charges SDFs.
System Development Fees are the New Impact Fees
CRFs for SDFs (aka Capital Reserve Funds for System Development Fees)
You also can read the General Statutes that govern SDFs here.
Capital reserve funds (CRFs) can be governmental or proprietary in nature, and may be treated as annual or multi-year funds. Remember that you fund and appropriate CRFs with transfers only. So if you have a SDF for water and sewer services, the revenue will be recorded in the Water and Sewer Fund, with a transfer of an equal amount being made to out of the Water and Sewer Fund to the CRF. Likewise, when it is time to spend the SDFs, you will budget and transact another transfer from the CRF to the fund from which the fee revenue will ultimately be spent.
When establishing your CRFs be sure to specifically identify the project(s) on which you intend to spend your SDFs. See Kara's blog post for more details.