# Presentation: 170584

## CWIP Theory & Accounting

- Presented by
- NOAA Financial Statements Branch
- June 23, 2006

## CWIP Theory & Accounting

- CWIP is a financial holding account:
- Of resources applied to a construction project.
- Allows them to be recognized as an asset without triggering depreciation.
- A generally accepted accounting principle  required of all Federal Agencies
- Reflects the fair market value at point “X” in the CWIP gestation timeline.
- Reported on NOAA’s and DOC’s Quarterly and Year End Financial Statements.

## CWIP Theory & Accounting

- Costs:
- The classification assigned to the resources that will be included in the final value of the depreciable item constructed.
- Represents the resources that meet the criteria of an asset (to be reported on the Balance Sheet.)
- Are identified only with goods received or delivered, and or services performed.
- If you haven’t got it... it’s not a cost.
- Received or Delivered Trumps:
- Ordered
- Payable
- Committed
- In transit/enroute/partial performance, and
- Paid

## CWIP Theory & Accounting

- Expenses:
- All other CWIP Resources used that won’t be part of the final depreciable value.
- Reported on NOAA’s Income Statement

## CWIP Theory & Accounting

- Whether you know it or not:
- every classification of each cwip resource,  as either an asset or an expense, helps build NOAA’s Balance Sheet & Income Statement.
- Which goes where?
- depends on the project codes you assign to that resource.

## CWIP Theory & Accounting

- CWIP tracking:
-  Is NOT a Budget Execution Exercise.
- Delegates CWIP activity managers to sort the resources to be recorded as:
-  Assets (on the balance sheet)
- Expenses (on the income statement)
- Accomplished through dedicated project codes, namely:
- Income Statement project codes
- Balance Sheet project codes

## CWIP Theory & Accounting

- Conclusion:
- CWIP activity manager financial reporting
- Is NOT a recap of Budget Execution            responsibilities.

## CWIP Theory & Accounting

- KPMG, NOAA’s Contract Independent Auditors, Audit CWIP:
- Not from a Budget Execution Standpoint
- Instead, from a Financial Statement creation perspective.
- Their prime objective:
- Are you assigning the right CWIP project codes.
- To all CWIP resources going into your construction activity?
-  Asset project codes for items to be depreciated.
-  Expense project codes for every thing else.
-  Exclusion of Undelivered Orders

## CWIP Theory & Accounting

- What’s Driving This Preoccupation
- Materiality Concerns
- CWIP is:
-  50% of NOAA’s Total PP&E
- The lynch pin in assessing the complete & reliability of NOAA’s Balance Sheet
- NOAA’s Financial Statements fail annual audit:
- If CWIP Balances are not fairly stated as assets that reflect goods and services received or delivered
- DOC’s Financial Statements fail their audit:
- NOAA comprises over 50% of DOC’s assets.
- As of 2006 NOAA has $3 billion in CWIP assets.

## CWIP Theory & Accounting

- Questions
- or
- Clarifications

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