# Presentation: 903481

## NOAA’sConstruction Work-In-Progress (CWIP)

- Presented by
- NOAA’s Finance Office
*April 2008*

## Purpose of Presentation

- To provide an overview of NOAA’s CWIP process and some current areas of concern in the CWIP process
- To familiarize NOAA personnel who deal with financial management on the:
- Concepts of CWIP so they can recognize likely CWIP projects
- Major steps and regular actions needed
- Reporting requirements for CWIP projects
- 	*NOTE:*
*	**This does *_***not***_* fulfill requirement for annual CWIP training*

## Presentation Overview

- Underlying Concepts
- CWIP – What is it?
- Why care about CWIP?
- Issues & Obstacles
- Non-Compliance

- FY2007 Audit Findings
- Program Review
- CWIP Policy & Procedures
- Next Steps

## Underlying Concepts

- Obligations (delivered obligations, not undelivered) incurred by a program each FY are either *capitalized* or *expensed*
- Amounts *capitalized* relate to the acquisition of a capital asset
- Value of capital asset is consumed over a period of 2 or more years & remains a NOAA asset for useful life of the asset
- Amounts *expensed* are deemed to be consumed within a period of one year or whose value is below the capitalization threshold

## Underlying Concepts

- Assets purchased “off the shelf” are capitalized upon delivery (if meet capitalization threshold)
- Some assets require time to deliver/complete or include costs associated with design, site preparation, planning, installation, etc.
- The “constructed” asset costs are **not completed & depreciated until the project is completed**; instead costs are tracked and recorded in asset holding accounting, such as the CWIP account

## CWIP – What is it?Definitions & Criteria

- Temporary asset holding account used to track cost during the design & construction of PP&E:
**Capital asset** in NOAA’s financial statements
- Eventually **depreciated** over asset’s useful life in NOAA’s financial statements upon completion of the project
- Criteria for CWIP (must meet _all_ 4 conditions):
- Aggregate acquisition **cost of $200K or more**, and
- Estimated **service life of 2 years or more**, and
**Long-term economic benefit** to the organization which maintains or obtains control, and
**Not intended for sale** in the ordinary course of operations

## CWIP – What is it?Definitions & Criteria

- Determinations must be made for capital improvement projects to property – projects that **extend the useful life or enlarges/improves the capacity** of the asset will be capitalized
- MUST be treated as a CWIP project
- References to “bulk purchase” has been removed from CWIP documentation
- Not special to CWIP unless part of CWIP
- follows personal property requirements
- CWIP process _must_ be followed even if a project, which will result in the capitalization of the asset, is expected to begin & finish in the same FY

## CWIP – What is it?Categories/Groups

- 3 major groups of assets generally capitalized & may require the use of the CWIP process:
- Real Property
- Construction or significant improvement of a facility
- Personal Property
- Acquisition, development, construction or installation of equipment or asset which is not real property, or
- Significant improvement or modification to the original
- Internal Use Software – in Development
- Development or modification to software used internally

## CWIP – What is it?Categories/Groups

- Internal Use Software – in Development (IUSD)
****MUST Follow CWIP Policy & Procedures****
*along with Internal Use Software Guidance found in the NOAA Finance Handbook*
*	**Software developed for internal use falls within the parameters of CWIP (even though CBS project “type” is IUSD/IUSDC)*
***IUSD is a “subset” of CWIP***

## CWIP – What is it?Accounts

- CBS & Treasury’s USSGL reflects:
- CWIP activity in Account 1720
- IUSD activity in Account 1832
- The costs remain in the CWIP/IUSD accounts until the PP&E has been delivered & accepted by NOAA (placed in service, commissioned, etc.)

## CWIP – What is it?Still not sure it’s CWIP?

- If there is even the slightest possibility that any activity may require CWIP handling, please contact the OCAO PPMD &/or PPMB for guidance to verify _*before*_ any obligations are incurred to avoid considerable difficulties in getting the data corrected in the accounting system

## Why care about CWIP?

- CFO Act of 1990
**Improve the government's financial management**, outlining standards of financial performance & disclosure
- Ensure **more effective** general & financial management **practices** to the Federal government through statutory provisions
- FASAB’s Federal Financial Accounting Standards #6 – Accounting for PP&E
- Support capitalized PP&E and depreciation components of NOAA’s financial statements

## Why care about CWIP?

- CWIP is “material” to NOAA & DoC Financial Statements
- As of 9/30/2007, NOAA CWIP totaled $3.2 billion
- CWIP (including IUSD) comprised of:
- PP&E – 67% of NOAA ($4.8 billion) / 56% of DoC ($5.7 billion)
- Assets – 35% of NOAA ($9.2 billion) / 23% of DoC ($14.2 billion)

## Why care about CWIP?How Big is NOAA?Based on September 30, 2007 Data

## Why care about CWIP?How Big is NOAA?Based on September 30, 2007 Data

## Why care about CWIP?How Big is NOAA?Based on September 30, 2007 Data

## Why care about CWIP?How Big is NOAA?Based on September 30, 2007 Data

## Why care about CWIP?

- DoC will ***FAIL***
- annual financial audit
- if NOAA’s CWIP balances
- are not fairly stated

## Why care about CWIP?

| NOAA's CWIP by LO @ 9/30/2007 (in millions) *** |  |  |
| --- | --- | --- |
| NOS | 0.41% |  $           13.3  |
| NMFS | 0.16% |  $             5.3  |
| OAR | 0.03% |  $             1.1  |
| NWS | 0.23% |  $             7.3  |
| NESDIS | 94.21% |  $      3,040.5  |
| PROGRAM SUPPORT | 0.09% |  $             2.8  |
| FACILITIES (*Includes PRC) | 0.88% |  $           28.5  |
| NMAO | 3.98% |  $         128.4  |
| TOTAL | 100.00% |  $      3,227.2  |
|  *** Amounts based on Program 1 Codes; includes IUSD balances |   |   |

## Issues & Obstacles

- #1 Issue is **Non-Compliance** with CWIP Policy and Procedures
- Lack of ownership for CWIP responsibilities throughout NOAA community
- Lack of understanding roles & responsibilities
- Incomplete mandatory annual CWIP training
- New & Repeat audit findings for CWIP
- CWIP Project & Activity Managers are **not familiar with** &/or **knowledgeable of** CWIP policies & procedures

## Non-Compliance

- Incomplete CWIP **training** – it’s **mandatory**
- Lack of **supporting documentation** or adequate records kept by CWIP Activity Managers in CWIP documentation files
- Support of costs capitalized on NF 37-6 “Report of Property Constructed” & monthly CWIP reconciliations
- Incorrect **capitalization** of costs
- CWIP Activity Managers should know how to differentiate between CWIP and non-CWIP costs & ensure all project costs are charged to appropriate project codes – capital vs. expense

## Non-Compliance

- CWIP CBS Project Codes
- Incorrect project code **structure** for CWIP projects
- Incorrect **project type assignment** for CWIP projects
- Incorrect **accounting information** assigned at onset of projects classified as CWIP activities
- Incorrect **establishment/use** of non-CWIP projects (expensed costs) for valid CWIP activity
- Incomplete & inaccurate of monthly CWIP **reconciliations** (adherence to instructions)

## FY2007 Audit Findings

- FY 2007 Other consists of  3 Leases, 2 Real Property, 1 Cost Allocation, 1 Payroll, 1 Accounts Payable,  1 CBS queries and 1 Journal Entries.

## FY2007 Audit Findings

**19 Property NFRs, 10 CWIP**
- We did not “concur” with all NFRs

## FY2007 Audit Findings

- CWIP-specific NFRs, include:
- Improper accounting of prepayments/advances for CWIP/Property
- Must ensure to identify amounts prepaid/advanced vs. work completed & report to FO quarterly
- Timeliness of asset transfer from CWIP to asset account from date placed into service
- Must ensure NF37-6 is completed & submitted _**within same calendar quarter**_ the activity reaches BOD or substantial completion

## FY2007 Audit Findings

- CWIP-specific NFRs, include, continued:
- Monthly CWIP reconciliations
- Unexplained differences identified & resolved
- Must ensure differences are corrected within 4 weeks
- CWIP Activity Managers should be able to provide documented evidence for amounts reported in CWIP Activity Manager’s Uncapitalized Cost column
- Must ensure CWIP documentation file contains documentation required to support costs
- Incorrect amounts classified as CWIP, should be expensed
- Must allocate costs correctly between CWIP (capital) & non-CWIP (expense) codes

## Program Review

- Why is a program review being conducted?
- Significant increase in the number of audit findings during FY 2007 Financial Statement audit.
- Objective of Review
- To determine whether there is adequate supporting documentation for CWIP projects costs.

## Program Review

- Process
- Document processing & reviewing of CWIP project costs
- Interview program & finance staff to determine:
- How CWIP costs are actually being processed & reviewed
- Roles & responsibilities for individuals involved with processing CWIP project costs
- Conduct direct testing of CWIP reconciliations & records from sample of CWIP projects
- Issue report with recommendations
- Responsible LO/SOs will be required to develop CAPs

## CWIP Policy & Procedures

**Updates**
**Roles & Responsibilities**
**Mandatory Annual CWIP Training**
**CBS Project Code Assignments**
**CWIP Costs**
**CWIP Activities Funded by Reimbursables**
**Documentation Requirements**
**Transferring Assets from CWIP to PP&E**

**Incomplete/Impaired CWIP**
**Advances/Prepayments for CWIP**
**Internal Use Software – In Development**
**Appendices**
**Figures**
**NOAA CWIP Contacts**
**“****Phase 2”**

## CWIP Policy & ProceduresUpdates

- CWIP Policy and Procedures – Updated April 08
- 		***** Effective May 1, 2008 *****
- Updates included:
- Revisions (including editorial)
- Clarifications
- Expansion of available information
- Additions (including new requirements)

## CWIP Policy & ProceduresUpdates

- Clarification/Expansion of:
- Roles & responsibilities for the CWIP process, including responsibilities for:
- OCAO & OCFO
- CWIP Project & Activity Managers
- CFOs and NOAA CAO (Deputy CAO)
- Mandatory CWIP Training:
- Mandatory annual CWIP training (from FY2007)
- Expansion on training responsibilities

## CWIP Policy & ProceduresUpdates

- New Requirements:
- Formal analysis required to determine asset impairment, if any
- Must be completed **annually**
- CFO/CAO (Deputy CAO) certifications for all NF 37-6s
- Prior to submission to FO-FSB
- Advance/prepaid amounts for CWIP activities
- Quarterly data call submission required

## CWIP Policy & ProceduresUpdates

- Specific asset guidance added for assets involved with CWIP activities
- Spare parts, outfitting costs, PP&E integral & non-integral to CWIP asset, etc.
- Revised NF 37-6
- Consolidated Real & Personal Property
- Prior versions will not be accepted

## CWIP Policy & ProceduresUpdates

- New NF 37-6 checklists for review & certification
- CWIP Activity Managers
- CFO/CAO (Deputy CAO)
- CWIP Policy & Procedures Contact Information within different NOAA Offices (OCAO, OCFO)

## CWIP Policy & ProceduresUpdates

- Revised/New appendices, *explaining in detail*, specific aspects of CWIP:
- Preparing & reviewing the NF 37-6
- OMAO Ship Construction/Purchases, Upgrades & Modifications (not yet finalized) **** New ****
- CWIP Documentation File (What should be included)
- Includes standard DW Discoverer Query to standardize the CBS CWIP accounting charges that need to be certified by the CWIP Activity Manager (not yet finalized)
- Must request access to Data Warehouse – FMC Business Area

## CWIP Policy & ProceduresUpdates

- Revised/New appendices, *explaining in detail*, specific aspects of CWIP, continued:
- Impairment analysis information **** New ****
- Memo from NOAA CFO (February 2008) for CWIP Activity Manager Responsibilities
- Understanding the CBS CWIP Report (CA500D) **** New ****
- Advanced/Prepaid Amounts for CWIP Activities Template **** New ****
- Frequently Asked Questions **** New ****
- CWIP Process Flowchart **** New ****

## CWIP Policy & ProceduresRoles & Responsibilities – Overall

- OCAO’s Project Planning & Management Division (PPMD) & Personal Property Management Branch (PPMB)
- Overall responsibility for oversight of NOAA’s CWIP activities, policies and procedures
- Responsible for:
- Providing guidance on NOAA CWIP Policy & Procedures
- Reviewing & providing guidance to the LO/SO in determination as to whether an activity will result in a CWIP activity and of the policies for capitalization of personal and real property
- Reviewing NF 37-6s & CWIP documentation files to ensure the accuracy of costs included in the CWIP asset
- Annual CWIP training program

## CWIP Policy & ProceduresRoles & Responsibilities – Overall

- OCFO’s Finance Office (FO)
- Responsible for:
- Providing guidance to ensure policies & procedures are consistent with external accounting requirements (FASAB)
- Issuing, interpreting, monitoring & maintaining CWIP (& IUSD) guidance
- OCFO’s Budget Execution Division (BEX)
- Responsible for maintaining CWIP Activity Listing database
*	*
*	**OCFO’s BEX’s role in the CWIP process is currently under review – TBD*

## CWIP Policy & ProceduresRoles & Responsibilities – Overall

- OCAO’s PPMB/OCIO/FO
- Responsible for the policies & procedures for capitalization of Internal Use Software

## CWIP Policy & ProceduresRoles & Responsibilities – Overall

- Line/Staff Offices – Management & Staff
- Responsible for:
- Designating a CWIP Project Manager & CWIP Activity Manager for each activity
- Ensuring CWIP requirements are established before expending the funds
- Ensuring compliance with policies & procedures
- CWIP Project/Activity Managers
- Responsible for adhering to all CWIP policies & procedures & ensuring compliance

## CWIP Policy & ProceduresRoles & Responsibilities – LO CFOs & NOAA CAO

- LO CFOs & NOAA CAO (Deputy CAO) – responsible for:
- Adhering to all CWIP policies & procedures
- Ensuring all staff interacting with CWIP activities adhere to all CWIP policies & procedures
- Ensuring Managers (Project & Activity) are designated for each CWIP activity
- Ensuring CWIP reconciliations are completed & submitted monthly by established due dates
- Review & certify the CWIP reconciliations (_can_ be delegated to M&B Chiefs)

## CWIP Policy & ProceduresRoles & Responsibilities – LO CFOs & NOAA CAO

- LO CFOs & NOAA CAO (Deputy CAO) – responsible for:
- Ensuring mandatory CWIP training is completed annually, or within established window of newly designated CWIP Project/Activity Managers
- Reviewing & certifying the NF 37-6 (_cannot_ be delegated to M&B Chiefs; _can_ be delegated to Deputy CAO)
***** NEW *** Effective 5/1/2008**
- Ensuring NF 37-6s are completed & reported _**in the calendar quarter**_ the CWIP activity are placed into service (accepted, delivered, occupied, commissioned)

## CWIP Policy & ProceduresRoles & Responsibilities – LO Headquarters Offices

- LO Headquarters Office – responsible for:
- Adhering to all CWIP policies & procedures
- Providing construction needs & funding
- Establishing CBS Project Code for CWIP activities, including:
- CWIP project codes
- Non-CWIP project codes
- Depreciation project codes
- Incidental & administrative cost project codes
- Ensuring all CWIP project codes are set up properly by utilizing the unique CBS CWIP project code structure
- Take corrective action ***immediately*** when project codes set up incorrectly have been identified

## CWIP Policy & ProceduresRoles & Responsibilities – CWIP Project Managers

- CWIP _**Project**_ Managers – responsible for:
- Adhering to all CWIP policies & procedures
- Providing construction management support
- Providing CWIP documentation to CWIP Activity Manager
- CWIP Determination Letter; estimated schedules, including dates and costs; award & obligating documents (prior to obtaining authorizations) & related invoices
- Completing mandatory CWIP training annually (or within 30 days of CWIP Project Manager designation)
- Ensuring correct accounting codes are used on transactions

## CWIP Policy & ProceduresRoles & Responsibilities – CWIP Activity Managers

- CWIP _**Activity**_ Managers
- Defined as “the individual who maintains obligating documents for a CWIP activity ... collect, record & verify all costs, including direct & incidental labor associated with the CWIP activity”
_**Overall responsibility**_ for the financial & budgetary activities & accuracy of the valuation of the CWIP asset

## CWIP Policy & ProceduresRoles & Responsibilities – CWIP Activity Managers

- CWIP _**Activity**_ Managers – responsible for:
- Adhering to all CWIP policies & procedures
- It is imperative that all designated CWIP Activity Managers have a thorough understanding of the CWIP policies & procedures
- Maintaining quantitative & financial control over each CWIP activity
- Completing mandatory CWIP training annually (or within 30 days of CWIP Activity Manager designation)
- Ensuring all CWIP projects are set up correctly at the onset of the project
- Take corrective action ***immediately*** when project codes set up incorrectly have been identified

## CWIP Policy & ProceduresRoles & Responsibilities – CWIP Activity Managers

- CWIP _**Activity**_ Managers – responsible for, continued:
- Preparing & forwarding necessary information to appropriate personnel (cost estimates, schedules of completion, etc.)
- Ensuring all CWIP project codes are set up properly by utilizing the unique CBS CWIP project code structure
- Take corrective action ***immediately*** when project codes set up incorrectly have been identified
- Ensuring correct accounting codes are used on transactions
- Reviewing all obligating documents for CWIP compliance
- Take corrective action ***immediately*** when project codes set up incorrectly have been identified
- Capturing & allocating all costs correctly, both capital & expense

## CWIP Policy & ProceduresRoles & Responsibilities – CWIP Activity Managers

- CWIP _**Activity**_ Managers – responsible for, continued:
- Monthly CWIP Reconciliations
- Performing **monthly reviews** of the accuracy of CBS balances for all costs in CWIP accounts
- Preparing **monthly reconciliations** (CWIP Reconciliation Template) for all costs in CWIP documentation file & CBS balances
- Must ensure completeness & accuracy for all CWIP costs
- Identifying properly all **differences & adjustments** necessary
- Must provide explanations with **adequate detail**
- Must resolve all differences within **4 weeks** of noted difference
- Ensuring CFO/M&B Chiefs/CAO (Deputy CAO) **review & certify** accuracy & completion of monthly CWIP reconciliations
- Ensuring **timely submission** of monthly CWIP reconciliations, approved by CFO/M&B Chiefs/CAO (Deputy CAO)

## CWIP Policy & ProceduresRoles & Responsibilities – CWIP Activity Managers

- CWIP _**Activity**_ Managers – responsible for, continued:
- NF 37-6 “Report of Property Constructed”
- Ensuring CFO/CAO (Deputy CAO) **review & certify** the accuracy & completion of all NF 37-6s for completed CWIP activities
- Ensuring **timely submission** of CFO/CAO approved NF 37-6s to transfer costs of CWIP activities immediately once a constructed property item is placed into service or accepted
- Submitting **amended** NF 37-6 for review & certification, if necessary
- If total capitalized amount differs from amount recorded earlier
- Ensuring CWIP **project “type” changed** from CWIP/IUSD to CWIPC/IUSDC for completed CWIP activities to allow “purge” from CBS CWIP Report (CA500D)

## CWIP Policy & ProceduresRoles & Responsibilities – CWIP Activity Managers

- CWIP _**Activity**_ Managers – responsible for:
- Maintaining a CWIP documentation file, including copies of invoices & CBS reports
- Ensuring files are complete & accurate; support full CWIP costs of the activity; support CWIP amounts on CBS CWIP Report (CA500D); support costs on NF 37-6
- Ensuring formal impairment analysis is performed annually, at a minimum, on all open CWIP projects (both real & personal property) & provided to FO
- By Q3 Financial Statement Data Call
- Identifying amounts prepaid/advanced for CWIP activities vs. work actually completed

## CWIP Policy & ProceduresRoles & Responsibilities – Designated Financial Representatives

- Designated Financial Representatives
- Identified as **other individuals** who can also be listed on the CWIP Activity Listing as the person designated to assist the CWIP Activity Manager for:
- Preparation & accuracy of the reconciliations
- Maintenance of documentation for program costs
- 	******* CWIP _**Activity**_ Managers *still* have the **ultimate responsibility** for the _**overall**_ CWIP activity & must ensure CWIP policies & procedures are properly carried out *******

## CWIP Policy & ProceduresMandatory Annual CWIP Training

**ALL**
**CWIP Project Managers &**
**CWIP Activity Managers**
_**must**_** complete mandatory**
**CWIP training,**
**on an **_**annual**_** basis!**

## CWIP Policy & ProceduresMandatory Annual CWIP Training

- Newly appointed CWIP Project/Activity Managers have **one month** of appointment to complete the mandatory CWIP training
- OCAO’s PPMD & PPMB are responsible for the annual CWIP training program (coordinating, publishing, tracking, etc.)
- CWIP Project Managers & CWIP Activity Managers, who do not complete the mandatory CWIP training within established time frames, will be reported to appropriate senior management of LO/SO

## CWIP Policy & ProceduresCBS Project Code Assignments

- A CWIP activity must have, at a minimum, two unique CBS project codes assigned:
- CWIP project code – to capture all costs associated with that activity to be capitalized (will have a CBS project ‘type’ of CWIP or IUSD) *****
- Non-CWIP project code – to capture costs associated with the CWIP activity not to be capitalized as part of the CWIP project, but instead, expensed (will have a CBS project ‘type’ of something other than CWIP or IUSD)
- Separate & distinct set of CBS project codes must also be established for annual cost adjustments of incidental & administrative costs from a funded non-CWIP related project code to a CWIP project code
- * See slide on Project “TYPES”

## CWIP Policy & ProceduresCBS Project Code Assignments

- It is imperative the appropriate **unique CWIP project code structure** is followed when assigning project codes to CWIP activities (CWIP Report, UPR, Policy, Auditors)
- The CWIP Activity Manager will be required to make corrections when non-compliant project codes are identified
- Reimbursable project codes for CWIP activities funded by an outside source, through reimbursable funding, will not follow the same CWIP project code structure, nor will they be reported in the same CBS Fund Code as other CWIP project codes

## CWIP Policy & ProceduresCBS Project Code Assignments

- CBS Project Code “**TYPES**” – each CBS project code is assigned a project “TYPE”.
- For capital (not expensed) CWIP project codes, project “TYPE” must be **CWIP** (or **IUSD**) during the construction or development of the activity
- For **completed** activities, the CWIP Activity Manager should notify FO-FSB to change project type in CBS to **CWIP**_**C**_ (or **IUSD**_**C**_)
- Required for CBS CWIP Report (CA500D) “PURGE” (Appendix N)

## CWIP Policy & ProceduresCBS Project Code Assignments

- ORF Direct Funded CBS CWIP Project Code Structure (13_14**5**0 Treasury symbols)
**2****nd**** position** of CBS project code should be a “4” (i.e., x_4_xxxxx)
- PAC Direct Funded CBS CWIP Project Code Structure (13_14**6**0 Treasury symbols)
**2****nd**** position** of CBS project code should be a “2” _**AND**_ **4****th**** position** should be “F” (i.e., x_2_x_F_xxx)
- Both conditions must exist in PAC project codes

## CWIP Policy & ProceduresCWIP Costs

- CWIP **Activity** Managers are responsible for reviewing all obligating documents & determining that each cost charged to the CWIP activity is correctly
- Capitalized as CWIP & assigned to the CBS CWIP project code
**	**_**OR**_
- Expensed as non-CWIP & assigned to the CBS non-CWIP project code
- It is the CWIP **Activity** Manager’s responsibility to ensure that all costs, both capital & expense, are captured & allocated correctly

## CWIP Policy & ProceduresCWIP Costs – Capital Costs

- Specific examples of costs the CWIP Activity Manager should **include** in CWIP for capitalization are (not limited to):
- Labor cost for design & engineering
- Actual contract costs with modifications for architectural & engineering contract design
- Storage costs of Government Funded Equipment (GFE) delivered prior to installation date
- Construction contract & all modifications
- Materials & all actual labor associated with construction

## CWIP Policy & ProceduresCWIP Costs – Capital Costs

- CWIP Activity Manager should **include** in CWIP for capitalization (not limited to), continued:
- Incidental & administrative costs representing labor for procurement, finance, supervisory, clerical and all other non-labor administrative costs (Rates used are 3% & 5%)
- Direct labor, leave, benefits & indirect costs
- Construction & installation costs and generally all ancillary costs associated with design, delivery, project management, and testing & implementing the equipment or facility

## CWIP Policy & ProceduresCWIP Costs – Capital Costs

- FASAB’s SFFAS #6 (Accounting for PP&E) states that costs captured shall include all costs incurred to bring the PP&E to a **form & location suitable for its intended use** & would include (not limited to):
- Amounts paid to vendors
- Transportation charges to the point of initial use
- Labor & other direct or incidental production costs (for assets produced or constructed)
- Engineering, architectural & other outside services for designs, plans, specifications & surveys
- Acquisition & preparation costs of buildings & other facilities

## CWIP Policy & ProceduresCWIP Costs – Capital Costs

- CWIP costs should **include** (not limited to), continued:
- An appropriate share of the cost of the equipment & facilities used in construction work
- Fixed equipment & related installation costs required for activities, a building or facility
- Direct costs of inspection, supervision & administration of construction contracts & construction work
- Legal & recording fees & damage claims
- Handling & storage costs
- Demolition of an existing building/structure to prepare a site for construction of a new building, structure or addition

## CWIP Policy & ProceduresCWIP Costs – Capital Costs

- CWIP costs should **include** (not limited to), continued:
- Fair value of facilities & equipment “donated” to the government by non-Federal agency
- Fair value of facilities & equipment “transferred” to NOAA by another Federal agency (includes amounts funded through reimbursable funding, if ownership transfers from sponsor to NOAA at project completion)
- Material amounts of interest costs paid
- Interest costs refers to any interest paid by the reporting entity directly to providers of goods or services related to the acquisition or construction of PP&E
- PP&E integral to the CWIP asset

## CWIP Policy & ProceduresCWIP Costs – Capital Costs

- PP&E **integral** to the CWIP asset should be included in the cost of the CWIP asset when it meets _**both**_ of the following **2 conditions**:
- PP&E is **built into the CWIP asset such that its removal would damage the asset** or the PP&E or **impair the intended use** of the asset or the PP&E
**	**_**and**_
- PP&E is **immaterial** relative to the related CWIP asset.  In determining materiality, both cost & useful life should be considered

## CWIP Policy & ProceduresCWIP Costs – Capital Costs

- Costs of additions, alterations, betterments, rehabilitations, replacements or upgrades that meet the criteria for capitalization, and **extend the useful life of the asset, or enlarges/improves its service capacity**, shall be treated as a CWIP activity

## CWIP Policy & ProceduresCWIP Costs – Expensed Costs

- Specific examples of costs the CWIP Activity Manager should _**not**_** include** in CWIP for capitalization, but instead should **expense**, are (not limited to):
- Planning activities not resulting in final design
- Ordinary administrative supplies (i.e., copy paper, office equipment, etc.)
- PP&E constructed for Research & Development intended as experimental, changing product rather than as a finished product
- Personal property equipment used for administrative support
- Non-integral PP&E not meeting capitalization threshold

## CWIP Policy & ProceduresCWIP Costs – Expensed Costs

- CWIP costs should _**not**_** include** (not limited to), continued:
- Spare parts
- Depending on overall value of spare parts, consideration should be given to capitalizing the parts as OM&S & expensing them as they are used (By quarterly Financial Statement Data Call)
- Outfitting costs not meeting capitalization threshold
- Outfitting costs meeting capitalization threshold, with a useful life of 2 years or more, should be capitalized _**separately**_ from the CWIP asset & depreciated over the appropriate useful life

## CWIP Policy & ProceduresCWIP Costs – Other Related Capital Costs

- Other related capital costs, which should be capitalized _**separately**_ from the CWIP asset & depreciated over the appropriate useful life include (not limited to):
- Outfitting costs not meeting capitalization threshold with a useful life of 2 years or more
- Material components of a CWIP asset that meet capitalization threshold, but expected to have a useful life less than that of the asset
- Non-integral PP&E meeting capitalization threshold

## CWIP Policy & ProceduresCWIP Activities Funded by Reimbursables

- Project code structure will not follow the unique CWIP structure for CWIP-related activity in reimbursable funds
- Project codes should be setup & accounted for as reimbursables to accurately reflect reimbursable activity in financial reports
- Costs will be included in the total value of the CWIP activity only if the MOU transfers or identifies the asset as belonging to NOAA at the end of the construction project
- End of CWIP activity, if NOAA plans to own the constructed asset, the portion of the CWIP asset funded by the reimbursable sponsor (i.e., Airforce, Navy, NASA, etc.) should be "transferred" to NOAA

## CWIP Policy & ProceduresCWIP Activities Funded by Reimbursables

- At start of agreement, LO responsible for informing the sponsor (financial reporting area) they should be recording the funds, contributed to NOAA through reimbursable funding, as CWIP (SGL account 1720) on their CFO-Act financial statements until the asset is constructed & transferred to NOAA
- SLTs should _**not**_ be used to adjust CWIP-related activity from reimbursable funds into a NOAA-appropriated fund
- CWIP Activity Managers must track the CWIP costs funded by reimbursable money on monthly CWIP reconciliations (separate spreadsheet) to ensure full cost accounting once the activity has been completed

## CWIP Policy & ProceduresCWIP Activities Funded by Reimbursables

- NF 37-6s must include the NOAA-appropriated portion (the CWIP project codes) _**AND**_ the "transferred-in" portion from the reimbursable sponsor
- Must list funding contributed by each agency separately for appropriate intragovernmental eliminations
- FO will enter NF37-6 showing CWIP amounts transferred-in & then moving them out & capitalizing them with the remaining cost of the CWIP asset
- Property Offices must enter the total cost amount of the asset, if NOAA owns the constructed asset, which includes the NOAA-appropriated portion plus the reimbursable portion, into the property system & depreciate the total amount

## CWIP Policy & ProceduresDocumentation Requirements

- It is the responsibility of the CWIP **Activity** Manager to:
- Maintain **adequate supporting documentation** for _all costs_ included in the CWIP activities for proper cost valuation of the asset
- CWIP Activity Managers must **obtain copies of**, or **have access to the source documents**, for any costs included on the monthly CWIP reconciliations & on the NF 37-6
- Forward **copies** of supporting documentation (reports, etc.) to the appropriate property office for review, along with NF 37-6 for entry into the appropriate property system

## CWIP Policy & ProceduresDocumentation Requirements

- CWIP documentation file should include – **minimum requirements**:
- Standard DW Discoverer query (FMC Business Area) results for CWIP activities, including charges for administrative costs (travel, training, labor, security, etc.), by project code
- Obligating documents (contract, etc.), including Statement of Work – copies of:
- construction or production contract & all modifications & related invoices
- architectural & engineering contract task orders & related invoices
- contracts for construction management services & related invoices
- Memorandum of Understanding (MOUs)
- CWIP Determination Letter

## CWIP Policy & ProceduresDocumentation Requirements

- CWIP documentation file should include – minimum requirements:
- CWIP spreadsheet or planning document as a cost & documentation checklist
- CD-509 “Property Transaction Report” for personal property construction signed by the property custodian
- BOD Letter
- Hard copies of invoices to support the dollar amounts reported on the NF 37-6, including IPAC billings from other Federal agencies
- Required annual calculations & SLTs for incidental & administrative costs

## CWIP Policy & ProceduresDocumentation Requirements

- CWIP documentation file should include – minimum requirements, continued:
- CBS CWIP Report (CA500D) & other related CBS accounting reports, organized by project code & agreeing to the dollar amounts by project code reported on the NF 37-6
- Reviewed/Verified/Certified CBS labor reports documenting direct labor costs & other CBS cost reports
- Documentation related to CWIP activities transferred to NOAA through reimbursable funding or outright transfers/donations
- Details in Appendix K of CWIP Policy & Procedures

## CWIP Policy & ProceduresDocumentation Requirements

- Documentation will be reviewed/requested for the following reasons (not limited to):
- Property office NF 37-6 review of source documents for proper cost valuation
- FO Program Review of CWIP activities
- Management Control Reviews
- Annual financial audit review of sampled CWIP activities by contract auditors

## CWIP Policy & ProceduresTransferring Assets from CWIP to PP&E

- FASAB’s SFFAS #6 (Accounting for PP&E) states that
- 	*“**PP&E should be recognized when title passes to the acquiring entity or when the PP&E is delivered to the entity or to an agent of the entity”*
- Completed CWIP activities must be reported on the NF 37-6 _**in the calendar quarter**_ in which the assets are delivered or placed into service (accepted, occupied, commissioned or operational)
- “Acceptance” means that NOAA has agreed that the project is **substantially completed** according to specifications

## CWIP Policy & ProceduresTransferring Assets from CWIP to PP&E

- PP&E shall be recorded as CWIP until:
- Real property – “Beneficial Occupancy” (the Beneficial Occupancy Date (BOD))
- BOD shall be used as the “acquisition date” for purposes of depreciation
- Personal property – when ready for its intended purpose & placed into service
- CWIP Activity Managers must initiate the NF 37-6 process to transfer assets from CWIP to PP&E
- Complete the NF 37-6 form
- Obtain necessary certification signatures prior to forwarding to FO for review/certification
- CWIP Activity Managers
- LO CFO or CAO (Deputy CAO)

## CWIP Policy & ProceduresTransferring Assets from CWIP to PP&E

- 	***** NEW *****
**	****Starting May 1, 2008, NF 37-6s received in FO without CFO or CAO (Deputy CAO) certifications will not be accepted**

## CWIP Policy & ProceduresTransferring Assets from CWIP to PP&E

- CWIP Activity Managers must initiate the NF 37-6 process to transfer assets from CWIP to PP&E, continued:
- FO will review the NF 37-6 to certify the:
- Depreciation project code is valid & active
- CWIP costs on NF 37-6 to transfer from CWIP to PP&E **do not exceed** current CBS CWIP Report (CA500D) for “Uncapitalized Costs”

## CWIP Policy & ProceduresTransferring Assets from CWIP to PP&E

- 	NOTE – FO is _**not**_:
- *** 1) Reviewing CWIP documentation file
- *** 2) Certifying accuracy of costs charged to & included in CWIP activity
- 	*** This is the responsibility & certification of the OCAO Real/Personal Property Offices during their review of the NF 37-6 & CWIP Documentation File prior to entering the CWIP asset into the property systems

## CWIP Policy & ProceduresTransferring Assets from CWIP to PP&E

- CWIP Activity Managers must initiate the NF 37-6 process to transfer assets from CWIP to PP&E, continued:
- Once NF 37-6 is accepted/certified by FO & signed copy is received, the CWIP **Activity** Manager must forward NF 37-6 & CWIP documentation file supporting the costs on the NF 37-6 to the appropriate Real/Personal Property Office for review/certification
- Once NF 37-6 is reviewed/accepted/certified by the Property Office, the asset is entered in the appropriate property system & depreciation begins

## CWIP Policy & ProceduresTransferring Assets from CWIP to PP&E

- CWIP Activity Managers must initiate the NF 37-6 process to transfer assets from CWIP to PP&E, continued:
- Once NF 37-6 is received back in the FO (with all required certifications), an adjusting entry is entered into CBS moving the amounts from CWIP to PP&E, along with associated depreciation amounts
- NOTE – no adjustments will be made for NF 37-6s that do not have all the required certifications

## CWIP Policy & ProceduresTransferring Assets from CWIP to PP&E

- Entire process must occur **in the calendar quarter** in which the assets are delivered or placed into service (accepted, occupied, commissioned or operational)
- Details in Appendix I of CWIP Policy & Procedures

## CWIP Policy & ProceduresIncomplete/Impaired CWIP

- FASB FAS #144 “Accounting for the Impairment or Disposal of Long-Lived Assets” defines impairment as “**the condition that exists when the carrying amount of a long-lived asset (asset group) exceeds its fair value**.”
- If an impairment loss is recognized, the adjusted net book value of the long-lived asset shall be its new cost basis.
- Require annually – formal analysis to determine permanent loss during construction or development of real & personal property CWIP assets

## CWIP Policy & ProceduresIncomplete/Impaired CWIP

- CWIP **Activity** Managers must ensure an impairment analysis is performed, _**annually**_, on all open real & personal property CWIP activities & provide the information to FO
- Must determine if an impairment situation has occurred; determine if CWIP activity is viable or likely to be completed
- Notification required as part of the quarterly Financial Statement & Stewardship Data Call
- Details in Appendix L of CWIP Policy & Procedures

## CWIP Policy & ProceduresAdvances/Prepayments for CWIP

- Includes advances & prepaid amounts to other government agencies for CWIP activities (i.e., Navy, etc.)
- CWIP Activity Manager is responsible for:
- Ensuring amounts are allocated correctly & charged using the correct CWIP or related non-CWIP project codes
- Quarterly, as part of the quarterly Financial Statement & Stewardship Data Call:
- Identifying the amount of funds advanced/prepaid vs. the amount of work completed to date
- Preparing standard spreadsheet identifying each project code with advanced/prepaid funds for CWIP activities & the amount of advanced/prepaid funds completed, identified by CWIP and related non-CWIP project codes
- Format in Appendix P of CWIP Policy & Procedures

## CWIP Policy & ProceduresAdvances/Prepayments for CWIP

## CWIP Policy & ProceduresInternal Use Software – In Development

- Internal Use Software – In Development is a “sub-set” of CWIP
- IUSD is the CBS project code
- Temporary holding account (SGL Account 1832) for collecting costs during activities related to the design & development of internal use software
**Any developed software, including enhancements, which will be capitalized & used internally**
**Must follow the CWIP policy and procedures documentation**
- In order to be considered an IUSD activity, a development project must meet all of the criteria for CWIP activities.

## CWIP Policy & ProceduresAppendices

- Appendix A – Glossary of Terms
- Appendix B – References (i.e., CFO Act of 1990)
- Appendix C – Acronyms
- Appendix D – Policy & Procedures for Reporting Construction Work-In-Progress And Capitalization of GOES & POES Satellites, Their Component Sensors, and Related Assets
- Appendix E – Policy & Procedures for Reporting Construction Work-In-Progress And Capitalization of NPOESS Satellites, Their Component Sensors and Related Assets

## CWIP Policy & ProceduresAppendices

- Appendix F – CWIP Processing Flow & Responsibilities (for Real & Personal Property)
- Flow of the CWIP process, including different phases of a CWIP activity & required actions of involved parties
- Appendix G – Example of CBS CWIP Report (CA500D)
- Appendix H – Summary Level Transfer (SLT) CBS Cost Adjustment
- Appendix I – Preparing & Reviewing the NF 37-6
- Review Checklists
- CWIP Activity Manager
- LO CFO or NOAA CAO (Deputy CAO)
- Revised NF 37-6 FORM (for Real & Personal Property)

## CWIP Policy & ProceduresAppendices

- Appendix J – OMAO Ship Construction/Purchases, Upgrades & Modifications
- Appendix K – CWIP Documentation File (What should be included)
- Includes minimum requirements & suggested file formats
- Appendix L – Impairment Analysis Information
- Appendix M – NOAA CFO February 2008 Memo on Responsibilities of all CWIP Activity Managers
- Appendix N – Understanding the CBS CWIP Report (CA500D)
- Includes report layout & columns, purge criteria, display examples for assets transferred-in to NOAA

## CWIP Policy & ProceduresAppendices

- Appendix O – CWIP Reconciliation Template Instructions
- CWIP Reconciliation Template
- Review Checklists
- CWIP Activity Manager
- CFO/M&B Chief/CAO (Deputy CAO)
- Appendix P – Advanced/Prepaid Amounts for CWIP Activities
- Appendix Q – Frequently Asked Questions

## CWIP Policy & ProceduresFigures

- Figure 1 – CWIP Process Flowchart
- Budget Approvals
- Project:
- Planning
- Determination
- Documentation
- Reconciliation
- Capitalization

## CWIP Policy & ProceduresNOAA CWIP Contacts

**OCAO’s Real Property Management Division (RPMD)**
- 	Andy Duran, Chief
- 	Mary Ann Whitmeyer
**OCAO’s Project Planning & Management Division (PPMD)**
- 	Chien Le, Chief
- 	Bev Mooneyham
**OCAO’s Personal Property Management Branch (PPMB)**
- 	Ezekiel Dennison, Chief
- 	Jon Pinner
- 	Steven Creeger

**OCFO’s Budget Execution Division (BEX)**
- 	Jim LeDuc, Chief
- 	Lisa Conley
**OCFO’s FO – Financial Reporting Division (FRD), Financial Statements Branch (FSB)**
- 	Mark P. Miller, Chief
- 	Jones Harbor
- 	Melvin Spencer

## CWIP Policy & Procedures”Phase 2”

- Finalize OMAO Ship-Specific Appendix
- Finalize standard CWIP Discoverer Query for CWIP Documentation File (DW-FMC Business Area)
- Review of Internal Use Software policy in NOAA Finance Handbook – ensure consistency & appropriate references to CWIP Policy & Procedures for developed software used internally
- CWIP Activity Listing Database – determine where database maintenance belongs

## CWIP Policy & Procedures”Phase 2”

- Revised NF 37-6 – easier to use & complete
- CBS CWIP Project Code setup – should approvals be required, along w/ determination letters
- Process for suggested revisions/changes to CWIP Policy & Procedures
- CWIP workgroup to discuss CWIP issues & potential revisions to CWIP Policy & Procedures

## Next Steps

- Phase 2 of CWIP Policy & Procedure Updates
- Continued activities & efforts implementing Corrective Action Plans (CAPs) to address audit findings
- Continued communication with NOAA senior management on progress in area of CWIP activities
- Gain understanding of CWIP policies & procedures, including roles & responsibilities

## Next Steps

- Complete annual CWIP training
- Compliance with CWIP policies & procedures
- Proactive, not reactive
- Cooperation vs. resistance – staff only trying to help prevent future audit findings

## CWIP Website

- On OCFO-Finance Office website
- Under CWIP (left side of page)
- _[http://](http://www.corporateservices.noaa.gov/~finance/CWIP.html)__[www.corporateservices.noaa.gov/~finance/CWIP.html](http://www.corporateservices.noaa.gov/~finance/CWIP.html)_
- Policy Documentation
- Related Accounting Standards
- Forms & Checklists
- Contact Information