NOAAs Construction WorkInProgress CWIP

1
NOAAsConstruction Work-In-Progress (CWIP)

• Presented by
• NOAAs Finance Office
• April 2008

2
Purpose of Presentation

• To provide an overview of NOAAs 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

3
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

4
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

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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

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CWIP What is it?Definitions Criteria

• Temporary asset holding account used to track
  cost during the design construction of PPE
• Capital asset in NOAAs financial statements
• Eventually depreciated over assets useful life
  in NOAAs 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

7
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

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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

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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

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CWIP What is it?Accounts

• CBS Treasurys USSGL reflects
• CWIP activity in Account 1720
• IUSD activity in Account 1832
• The costs remain in the CWIP/IUSD accounts until
  the PPE has been delivered accepted by NOAA
  (placed in service, commissioned, etc.)

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CWIP What is it?Still not sure its 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

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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
• FASABs Federal Financial Accounting Standards 6
  Accounting for PPE
• Support capitalized PPE and depreciation
  components of NOAAs financial statements

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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
• PPE 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)

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

• DoC will FAIL
• annual financial audit
• if NOAAs CWIP balances
• are not fairly stated

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Why care about CWIP?
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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

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Non-Compliance

• Incomplete CWIP training its 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

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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)

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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.
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FY2007 Audit Findings

• 19 Property NFRs, 10 CWIP
• We did not concur with all NFRs

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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

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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 Managers 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

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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.

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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

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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 PPE

• Incomplete/Impaired CWIP
• Advances/Prepayments for CWIP
• Internal Use Software In Development
• Appendices
• Figures
• NOAA CWIP Contacts
• Phase 2

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CWIP Policy ProceduresUpdates

• 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)

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CWIP Policy ProceduresUpdates

• 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

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CWIP Policy ProceduresUpdates

• 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

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CWIP Policy ProceduresUpdates

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

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CWIP Policy ProceduresUpdates

• 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)

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CWIP Policy ProceduresUpdates

• 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

36
CWIP Policy ProceduresUpdates

• 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

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CWIP Policy ProceduresRoles Responsibilities
Overall

• OCAOs Project Planning Management Division
  (PPMD) Personal Property Management Branch
  (PPMB)
• Overall responsibility for oversight of NOAAs
  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

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CWIP Policy ProceduresRoles Responsibilities
Overall

• OCFOs 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
• OCFOs Budget Execution Division (BEX)
• Responsible for maintaining CWIP Activity Listing
  database
• OCFOs BEXs role in the CWIP process is
  currently under review TBD

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CWIP Policy ProceduresRoles Responsibilities
Overall

• OCAOs PPMB/OCIO/FO
• Responsible for the policies procedures for
  capitalization of Internal Use Software

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CWIP Policy ProceduresRoles 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

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CWIP Policy ProceduresRoles 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 MB Chiefs)

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CWIP Policy ProceduresRoles 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 MB 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)

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CWIP Policy ProceduresRoles 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

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CWIP Policy ProceduresRoles 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

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CWIP Policy ProceduresRoles 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

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CWIP Policy ProceduresRoles 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

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CWIP Policy ProceduresRoles 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

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CWIP Policy ProceduresRoles 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/MB Chiefs/CAO (Deputy CAO) review
  certify accuracy completion of monthly CWIP
  reconciliations
• Ensuring timely submission of monthly CWIP
  reconciliations, approved by CFO/MB Chiefs/CAO
  (Deputy CAO)

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CWIP Policy ProceduresRoles 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)

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CWIP Policy ProceduresRoles 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

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CWIP Policy ProceduresRoles 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

52
CWIP Policy ProceduresMandatory Annual CWIP
Training

• ALL
• CWIP Project Managers
• CWIP Activity Managers
• must complete mandatory
• CWIP training,
• on an annual basis!

53
CWIP Policy ProceduresMandatory Annual CWIP
Training

• Newly appointed CWIP Project/Activity Managers
  have one month of appointment to complete the
  mandatory CWIP training
• OCAOs 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

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CWIP Policy ProceduresCBS 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

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CWIP Policy ProceduresCBS 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

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CWIP Policy ProceduresCBS 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 CWIPC (or IUSDC)
• Required for CBS CWIP Report (CA500D) PURGE
  (Appendix N)

57
CWIP Policy ProceduresCBS Project Code
Assignments

• ORF Direct Funded CBS CWIP Project Code Structure
  (13_1450 Treasury symbols)
• 2nd position of CBS project code should be a 4
  (i.e., x4xxxxx)
• PAC Direct Funded CBS CWIP Project Code Structure
  (13_1460 Treasury symbols)
• 2nd position of CBS project code should be a 2
  AND 4th position should be F (i.e., x2xFxxx)
• Both conditions must exist in PAC project codes

58
CWIP Policy ProceduresCWIP 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 Managers responsibility
  to ensure that all costs, both capital expense,
  are captured allocated correctly

59
CWIP Policy ProceduresCWIP 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

60
CWIP Policy ProceduresCWIP 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

61
CWIP Policy ProceduresCWIP Costs Capital
Costs

• FASABs SFFAS 6 (Accounting for PPE) states
  that costs captured shall include all costs
  incurred to bring the PPE 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

62
CWIP Policy ProceduresCWIP 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

63
CWIP Policy ProceduresCWIP 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 PPE
• PPE integral to the CWIP asset

64
CWIP Policy ProceduresCWIP Costs Capital
Costs

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

65
CWIP Policy ProceduresCWIP 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

66
CWIP Policy ProceduresCWIP 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.)
• PPE constructed for Research Development
  intended as experimental, changing product rather
  than as a finished product
• Personal property equipment used for
  administrative support
• Non-integral PPE not meeting capitalization
  threshold

67
CWIP Policy ProceduresCWIP 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 OMS 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

68
CWIP Policy ProceduresCWIP 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 PPE meeting capitalization threshold

69
CWIP Policy ProceduresCWIP 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

70
CWIP Policy ProceduresCWIP 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

71
CWIP Policy ProceduresCWIP 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

72
CWIP Policy ProceduresDocumentation
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

73
CWIP Policy ProceduresDocumentation
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

74
CWIP Policy ProceduresDocumentation
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

75
CWIP Policy ProceduresDocumentation
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

76
CWIP Policy ProceduresDocumentation
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

77
CWIP Policy ProceduresTransferring Assets from
CWIP to PPE

• FASABs SFFAS 6 (Accounting for PPE) states
  that
• PPE should be recognized when title passes to
  the acquiring entity or when the PPE 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

78
CWIP Policy ProceduresTransferring Assets from
CWIP to PPE

• PPE 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 PPE
• 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)

79
CWIP Policy ProceduresTransferring Assets from
CWIP to PPE

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

80
CWIP Policy ProceduresTransferring Assets from
CWIP to PPE

• CWIP Activity Managers must initiate the NF 37-6
  process to transfer assets from CWIP to PPE,
  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
  PPE do not exceed current CBS CWIP Report
  (CA500D) for Uncapitalized Costs

81
CWIP Policy ProceduresTransferring Assets from
CWIP to PPE

• 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

82
CWIP Policy ProceduresTransferring Assets from
CWIP to PPE

• CWIP Activity Managers must initiate the NF 37-6
  process to transfer assets from CWIP to PPE,
  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

83
CWIP Policy ProceduresTransferring Assets from
CWIP to PPE

• CWIP Activity Managers must initiate the NF 37-6
  process to transfer assets from CWIP to PPE,
  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
  PPE, along with associated depreciation amounts
• NOTE no adjustments will be made for NF 37-6s
  that do not have all the required certifications

84
CWIP Policy ProceduresTransferring Assets from
CWIP to PPE

• 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

85
CWIP Policy ProceduresIncomplete/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

86
CWIP Policy ProceduresIncomplete/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

87
CWIP Policy ProceduresAdvances/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

88
CWIP Policy ProceduresAdvances/Prepayments for
CWIP
89
CWIP Policy ProceduresInternal 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.

90
CWIP Policy ProceduresAppendices

• 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

91
CWIP Policy ProceduresAppendices

• 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)

92
CWIP Policy ProceduresAppendices

• 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

93
CWIP Policy ProceduresAppendices

• Appendix O CWIP Reconciliation Template
  Instructions
• CWIP Reconciliation Template
• Review Checklists
• CWIP Activity Manager
• CFO/MB Chief/CAO (Deputy CAO)
• Appendix P Advanced/Prepaid Amounts for CWIP
  Activities
• Appendix Q Frequently Asked Questions

94
CWIP Policy ProceduresFigures

• Figure 1 CWIP Process Flowchart
• Budget Approvals
• Project
• Planning
• Determination
• Documentation
• Reconciliation
• Capitalization

95
CWIP Policy ProceduresNOAA CWIP Contacts

• OCAOs Real Property Management Division (RPMD)
• Andy Duran, Chief
• Mary Ann Whitmeyer
• OCAOs Project Planning Management Division
  (PPMD)
• Chien Le, Chief
• Bev Mooneyham
• OCAOs Personal Property Management Branch (PPMB)
• Ezekiel Dennison, Chief
• Jon Pinner
• Steven Creeger

• OCFOs Budget Execution Division (BEX)
• Jim LeDuc, Chief
• Lisa Conley
• OCFOs FO Financial Reporting Division (FRD),
  Financial Statements Branch (FSB)
• Mark P. Miller, Chief
• Jones Harbor
• Melvin Spencer

96
CWIP Policy ProceduresPhase 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

97
CWIP Policy ProceduresPhase 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

98
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

99
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

100
CWIP Website

• On OCFO-Finance Office website
• Under CWIP (left side of page)
• http//www.corporateservices.noaa.gov/finance/CWI
  P.html
• Policy Documentation
• Related Accounting Standards
• Forms Checklists
• Contact Information

101
Questions?