What is a key distinction between capital budgets and operating budgets?

The correct choice highlights a fundamental aspect of budgeting practices in governmental and organizational finance. Operating budget appropriations indeed lapse at the end of the fiscal year, meaning that any unspent funds budgeted for operations cannot be carried over into the next year. This temporal limitation encourages departments and agencies to utilize their operating budgets within the designated fiscal period, promoting accountability and efficient use of resources.

In contrast, capital budgets typically involve the allocation of funds for long-term investments and infrastructure projects that extend beyond a single fiscal year. These budgets often include expenditures on buildings, equipment, and other fixed assets, which can span multiple years. As such, unspent capital budget funds do not lapse at year-end, allowing for the continuation of projects and securing of funding over time.

By emphasizing the nature of appropriations and their implications for fiscal management, this distinction clarifies the operational differences between these two types of budgets, which play crucial roles in financial planning and resource allocation within organizations.