CWIP Theory & Accounting

Presented by NOAA Financial Statements Branch

June 23, 2006

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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.

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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

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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

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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.

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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

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CWIP Theory & Accounting

• Conclusion:

– CWIP activity manager financial reporting

• Is NOT a recap of Budget Execution responsibilities.

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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

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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

Questionsor

Clarifications

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Accounting Operations DivisionFinancial Systems Division Field Financial and Client Services Division (former Finance ASC’s) Financial Reporting DivisionFinancial Policy and Compliance DivisionAdministrative Support Group Site MapQuick Links Audit

CBS (FSD) CWIP Fed Ex Finance Handbook Internal Controls Motorpool

Object Class

PolicyPurchase

CardsReportsTravelYear-End

Employees OnlyNFC Employee Personal Page

Finance Office

The Finance Office

provides NOAA's financial management policies, systems and procedures. It advises line/staff offices on financial management policies and procedures and provides special-purpose financial information and analyses on matters of immediate concern to line/staff offices, the CFO, and the Office of the Under Secretary. Jon AlexanderDirector, Finance Office/ComptrollerPhone: (301) 444-2102Staff Directory

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Accounting Operations DivisionFinancial Systems DivisionField Financial and Client Services Division (former Finance ASC’s) Financial Reporting DivisionFinancial Policy & Compliance DivisionAdministrative Support GroupSite MapQuick Links

AuditCBS

(FSD) CWIP

FedEx Forms Internal Controls Motorpool

Object Class

PolicyPurchase

CardsReportsTravelYear-End

Employees OnlyNFC Employee Personal Page

CWIP Instructions for completing CWIP Reconciliation Spreadsheet NEW

CWIP Policies (Use computer login and passcode) Activity Manager's Reconciliation CHECKLIST NEW

Line Office/M&B Chief Reconciliation CHECKLIST NEW

CWIP Reconciliation Review Checklist MUST USE

INTERNET EXPLORER

<ACWIP Reconciliation Template •Excel Version •Lotus Version

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