Construction Work in Progress

(CWIP)

Lawrence Berkeley
National Laboratory Financial Policies and Procedures Part I

Originally issued: August 15, 2005

Effective date: December 31, 2009
Revision number: 1
Scheduled review date: December 31, 2011 (every two years)
Primary contact: Manager, General Accounting
______________________________________________________________________________

Summary

The purpose of this policy is to define the guidelines for appropriately managing
Construction Work in Progress (CWIP) projects at Lawrence Berkeley National
Laboratory (LBNL).

Policy

Overview

CWIP is a balance sheet account that the Laboratory maintains and manages (through an
accounting process) to reflect costs incurred for plant and capital equipment (PACE). The
Laboratory will ensure that costs incurred for plant and capital equipment purchases are
properly accounted for (i.e., timely closing, asset identification, tagging, capitalization, and
depreciation) in accordance with DOE requirements.

Maintaining a CWIP account complies with accounting standards and capitalization criteria
in the Statements of Federal Financial Accounting Standards (SFFAS) No. 6, Chapter 2.34
and the Department of Energy (DOE) Accounting Handbook, Chapter 10,1.h. The
Laboratory CWIP account reflects costs associated with PACE work in progress
accumulated during the acquisition, fabrication and/or construction period. When the
project is completed and/or the asset has been identified (tagged) and placed in service, it
is capitalized and transferred to an asset account for depreciation.

Procedures

See following table for criteria, guidelines and procedures for processing PACE projects
for CWIP.
 Financial Policies and Procedures Manual

Roles and Responsibilities

Divisions

 Ensure appropriate funding is available at the project ID level.

 Ensure equipment, fabrication, construction, LDRD and CSR purchases

(requisitions) meet the criteria of capital equipment as appropriate and are charged
to the correct fund type and Management Analysis and Reporting System (MARS)
program code (see PACE criteria, guidelines and procedures table above).

 Ensure WFO equipment purchases meet terms and conditions of WFO contract.

 Track all associated costs within that project ID; ensuring the total cost is greater
than $50K to meet the established criteria, as appropriate. Stay within approved
budget and date projected for project to be completed.

 Complete PACE Life Cycle Form to open and/or close projects as applicable, and
submit electronically to Property Accounting.

 When appropriate, close the project ID in FMS.

Property Accounting

 Verifying PACE form data and submit to Budget Office to open project.

 Ensure overall management and oversight of CWIP process. Work with stakeholders
to ensure CWIP processes are performed in a timely and accurate manner.

 Ensure appropriate funding source is used.

 Verify costs of closed CWIP projects.

 Submit electronic notification to Property Management verifying costs for asset

tagging, if appropriate.

 Capitalize asset when appropriate and transfer costs to asset account, completing
the CWIP process.

 Reconcile CWIP project accounts to the Laboratory Asset Management System

(AMS) for Property Management.

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Budget Office

 Verify appropriate funds are available at the B&R level when project ID is in “request”
status in FMS.

 If appropriate, open project ID in FMS (change status to “open”).

Property Management

 Identify and tag asset when notified via email from Property Accounting.

 Enter asset into LBNL asset inventory database.

 Notify Property Accounting electronically verifying property is identified and asset is

tagged.

Adjustments for Non Capital Projects

In cases where the project did not meet the capitalization criteria (non capital funds), the
following process applies:

 If the equipment costs of a non capital project are charged to a CWIP project, and
require an adjustment to transfer the costs into the appropriate operating expense, the
Division prepares a resource adjustment to reflect the appropriate changes.

 If the equipment costs have been removed from CWIP and placed into a capital asset
account and General Accounting has begun depreciating the asset:

o The Division prepares a resource adjustment to move the costs into the
appropriate operating expense.

o If the cost was incurred in a prior year, and the B&R is closed, consult the Budget
Office’s Direct Budget Group for the appropriate B&R to use. If the B&R that
should have been used is closed, also contact the Direct Budget Group for the
new B&R to use.

o Notify General Accounting of the change via email, so that depreciation of the
asset can be reversed, and the asset can be removed from the Property
Accounting System.

The following diagram illustrates the CWIP process flow:

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CONSTRUCTION WORK-IN-PROGRESS PROJECT ACCOUNTING PROCEDURES

Division Property Accounting Budget Office Property Management

Start (Project Identified)

Gold – Opening
No
Project meets Blue – Execution
capital criteria
Green – Closure

Yes

Obtain appropriate project

funds
No No

Funding is
Funding source B&R Funding
No appropriate and Yes
appropriate? adequate?
adequate?

Yes Yes
Enter new project info into
FMS in REQUEST status Open project in FMS
and obtain PACE Form change to OPEN status
and “Open” information

Prepare PACE Form and

send to Property
Accounting

Verify OPEN status in

FMS. Execute project until
completion or
abandonment

Asset placed in Receive PACE with

service? “closed’ Information
and Construction
Capitalization Recap if
Yes applicable
Complete PACE form
with “closed” information,
or partial project closure Receive via e-mail asset
No and Construction Verifies amount to tag and tagging information from
Capitalization Recap if notify Property Property Accounting
applicable and send to Management to tag asset
Property Accounting

Execute resource File Division Director

adjustments and prepare memo for approving
Division Director memo to abandoned costs
CFO Identify and tag asset in
Property Management DB

Execute resource
Close Project ID adjustment for write off to
YN03

Capitalize asset in Asset

Notifies Property
Management System
End Capital Project Accounting via e-mail that
(Transfer cost into asset
asset is “tagged”
account)

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Authority

 DOE Accounting Handbook, Chapter 10, Plant and Capital Equipment

Contacts

 Manager, General Accounting

 Property Accounting

 Manager, Procurement and Property

 Financial Policy Office

Glossary

 Abandoned projects: The cancellation of all or part of a contract or purchase order

to procure, manufacture, or assemble an item of Property and Capital Equipment
(P&CE). These costs, less any salvage credits, shall be distributed over the
remaining units of property within the project for project accounting purposes, except
where such distribution significantly distorts the cost of the remaining property units.
Where such distortion occurs, the costs of the abandoned project or project segment
may be closed from Construction Work in Progress to Abandoned Projects (Budget
and Reporting Classification Code YN, Other Costs and Credits). All charges to
abandoned projects shall be approved by DOE.

 Beneficial occupancy: The point at which the facility is turned over to the user or
occupants.

 Capital equipment: A movable, tangible item, with a value of > $50K, including
labor, burdens, transportation, modifications, etc., and a useful life of > two years.

 Capitalization: The act of closing (or reclassifying) acquisition costs of an asset,

which allows it to be allocated or depreciated (expensed) over the life of the asset.

 Construction: The installation, assembly or creation of a new facility, the addition,

expansion, improvement, or replacement of an existing facility, or the relocation of a
facility. Construction includes equipment installed in and made part of the facility and
related site preparation (excavation, filling and landscaping, or other land
improvements), and the facility design.

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 Construction Work in Progress (CWIP): A holding account that captures costs

incurred for property, plant and equipment that complies with accounting standards
and capitalization criteria in the Statements of Federal Financial Accounting
Standards (SFFAS) No. 6, Chapter 2.34 and the DOE Accounting Handbook,
Chapter 10, 1.h.

 Contracting Supporting Research (CSR): The CSR funds are provided to the
Laboratory by the University of California. For research at the Laboratory, selection
of the projects funded with CSR funds are made at the discretion of the Laboratory
Director or designee.

 Depreciation: The allocation of the cost of an asset over a period of time for
accounting purposes. A decline in the value of a property due to general wear and
tear or obsolescence.

 Fabrication: A tangible, self-constructed asset, valued at > $50K, including LBNL

labor, and applicable burdens, transportation, modifications, etc., with a useful life of
> two years. It must be a unique or custom built device not available in the open
market. To qualify as a fabrication, any modification or improvement of off-the-shelf
equipment must be a betterment that significantly increases its value, functionality, or
life.

 Personal Property: Property that can be moved and that is not permanently affixed
to and part of real estate.

 Plant: Land, building, and improvements, associated infrastructure (i.e., electrical

substations, piping systems, roads, etc.) and construction in process. Does not
include movable equipment.

 Plant and Capital Equipment (PACE): Land, land rights, depletable resources,
improvements to land, buildings and structures, utilities, and equipment. For the
purposes of this policy, PACE is synonymous with property, plant and equipment
(PP&E).

 Property, Plant and Equipment (PP&E): Synonymous with plant and capital
equipment (PACE).

Related Documents

 LBNL Capital Equipment Fabrication policy, Part I – Chapter 2.02

 PACE Life Cycle Form

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