Rutgers Municipal Capital and Trust Fund Accounting Practice Test

Authorizations for improvements funded from the Capital Improvement Fund, reserves, or the Capital Fund Balance must be approved by formal action of the governing body (such as an appropriation through an ordinance or resolution). This formal action provides the legal authority to spend, identifies the project and funding source, and creates an auditable record. Capital funds are restricted, so expenditures must go through the official budgetary/approval process rather than informal staff authorization. Hence, the statement is correct: formal governing-body action is required.