Cwip Theory Accounting

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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 triggeringdepreciation.

– A generally accepted accounting principle required of allFederal Agencies

– Reflects the fair market value at point “X” in the CWIPgestation timeline.

– Reported on NOAA’s and DOC’s Quarterly and Year End

Financial Statements.



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• Costs:

– The classification assigned to the resources that will be included inthe final value of the depreciable item constructed.

– Represents the resources that meet the criteria of an asset (to bereported 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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• Expenses:

– All other CWIP Resources used that won’tbe part of the final depreciable value.

– Reported on NOAA’s Income Statement



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• Whether you know it or not:

– every classification of each cwip resource,

as either an asset or an expense, helpsbuild NOAA’s Balance Sheet & Income

Statement.

• Which goes where?

– depends on the project codes you assign

to that resource.



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• CWIP tracking:

– Is NOT a Budget Execution Exercise.

– Delegates CWIP activity managers to sort theresources 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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• Conclusion:

– CWIP activity manager financial reporting• Is NOT a recap of Budget Execution

responsibilities.



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• 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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• What’s Driving This Preoccupation

– Materiality Concerns• CWIP is:

– 50% of NOAA’s Total PP&E – The lynch pin in assessing the complete & reliability of NOAA’s

Balance Sheet

• NOAA’s Financial Statements fail annual audit: » If CWIP Balances are not fairly stated as assets that reflect

goods and services received or delivered

• DOC’s Financial Statements fail their audit: – NOAA comprises over 50% of DOC’s assets.

• As of 2006 NOAA has $3 billion in CWIP assets.



CWIP Theory &

Accounting

Questions

or

Clarifications



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ASC’s) offices on financial management policies andproced res and pro ides special p rpose financial



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)

FinancialReporting DivisionFinancial Policyand Compliance

DivisionAdministrativeSupport GroupSite MapQuick Links

AuditCBS(FSD)

CWIPFed ExFinance

HandbookInternal

ControlsMotorpool

Object

Class PolicyPurchas

e Cards

procedures and provides special-purpose financialinformation and analyses on matters of immediateconcern to line/staff offices, the CFO, and theOffice of the Under Secretary.

Jon Alexander Director, Finance Office/Comptroller Phone: (301) 444-2102 Staff Directory

Services DivisionINTERNET EXPLORER

<ACWIP Reconciliation Template



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(former FinanceASC’s)

FinancialReporting Division

Financial Policy &ComplianceDivisionAdministrativeSupport Group

Site MapQuick Links

AuditCBS

(FSD)

CWIPFedEx

FormsInternal

Controls

MotorpoolObjectClass

Policy

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

<ACWIP Reconciliation Template•Excel Version•Lotus Version



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