Construction Work in Progress (CWIP)

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Construction Work in Progress(CWIP)

• Update January 2005

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What is CWIP?

• CWIP is a balance sheet account used to
  temporarily track all costs associated with
  construction, fabrications, and equipment
  purchases. Costs remain in CWIP until completion
  of activities, which then initiates the
  capitalization and depreciation process.

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CWIP Balances1 by Project Type(in millions)
165.8 M
2
74.9 M

• Excludes 58M DARHT project that was transferred
  to LANL and will be completely eliminated from
  CWIP by the end of February
• Other includes WRKOR, JOBOR, etc.

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Aged CWIP1 Balance(in millions)

• Excludes 58M DARHT project that was transferred
  to LANL and will be completely eliminated from
  CWIP by the end of February

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Construction, Fabrication Capitalization Process
Construction Project, Equipment FAB Initiated
Division Opens Account(s)
Project Complete
Division Notifies Property Accounting
Property Management
Property Management Tags Equipment
Property Management Notifies Property Accounting
Capitalization Process Begins
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What is the Issue?

• The entire closeout process has not been
  completed in a timely way. 75 million of assets
  are closed awaiting capitalization.
• Roles , responsibilities, and clear ownership of
  entire process is not well defined.
• Policies and procedures not clear.

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Risk/Impact

• Depreciation is understated
• Assets are overstated
• Potential color of money issues
• Aged CWIP becomes difficult to identify

The Lab is vulnerable to criticisms that assets
are not well managed and financial statements are
not accurate.
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Progress to Date

Jan 05 Cross Functional Team Established
April 04 Jan 05 117M Capitalized from CWIP
March 04 Two Property Accountants Hired

• April 03 Oct 03 - 76M Asset Review Project

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CWIP Closeout Activity Progress(in millions)
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Next Steps

• Property Management transfers to OCFO in Spring
  2005
• Cross functional team setup to meet the following
  objectives
• Complete closeout process for identified 75M
• Recommend clear roles and responsibilities
• Recommend new guidelines to address policy,
  practices procedures
• Review open projects to determine status
• Meeting with UCOP/BSC

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CWIP Project Plan