County of Riverside OFFICE OF THE AUDITOR-CONTROLLER STANDARD PRACTICE MANUAL

Transcription

1 Cunty f Riverside OFFICE OF THE AUDITOR-CONTROLLER STANDARD PRACTICE MANUAL SECTION: 5 POLICY NUMBER: 510 SUBJECT: CATEGORY: CONSTRUCTION-IN-PROGRESS CAPITAL ASSET POLICIES REVISED DATE: 07/01/17 APPROVED BY: PURPOSE: T establish standard guidelines fr Cunty departments, agencies, and special districts fr prperly accunting fr cnstructin-in-prgress. SCOPE: Applies t Cunty departments, agencies, special districts and authrities that are gverned by Riverside Cunty Bard f Supervisrs. POLICY: Cnstructin-in-Prgress must be recrded in cmpliance with GAAP and Gvernmental Accunting Standards Bard (GASB) Statements. PROCEDURE: This Standard Practice Manual cntains infrmatin n the criteria t be used fr cnstructin-in-prgress (CIP) as well as the dcumentatin and the prcess t recrd the transactin(s) in PepleSft Asset Management mdule (AM mdule). Page 1 f 5

2 GENERAL INFORMATION Cnstructin-in-prgress: Capitalized csts related t a tangible capital asset that is nt yet substantially ready t be placed in service. Develpment-in-prgress: Capitalized csts related t an internally generated intangible capital asset that is nt yet substantially ready t be placed in service. Cnstructin-in-Prgress is used t recrd the csts f direct labr, direct material, and verhead amunts that are expended in ne fiscal year n new cnstructin, land r building imprvements, r ther tangible capital cnstructin prjects that will be finished in a future year. CIP prjects related t Buildings and Infrastructure with an estimated prject cst greater than $5,000 must be capitalized. Because depreciatin cannt begin until capital assets are substantially ready t be placed int service, CIP is nt depreciable. Upn cmpletin f the prjects, the related csts that have accumulated in the CIP accunt as a transfer in (increase) t the apprpriate asset categry, e.g. Buildings, and a transfer ut (decrease) frm CIP then depreciatin will cmmence. CONSTRUCTION OVERHEAD Cnstructin verhead includes any cst f CIP that benefits mre than a single cnstructin prject. Overhead may include csts fr supervisin and ther indirect labr, supplies and materials, transprtatin, and depreciatin f ther assets used in cnstructin f the asset in prgress. Cnstructin verhead must be cllected in cst pls and allcated t specific cnstructin prjects in prprtin t the benefits received. Often, a cmmn single element such as square feet, direct labr hurs, r direct labr dllars is used t allcate verhead csts. Other methds, such as ttal cst, may als be used. The bjective is t select an verhead allcatin base that best represents the beneficial r causal relatinship between the expenses incurred and all benefiting r causing segments. CAPITALIZABLE COSTS ASSOCIATED WITH CONSTRUCTION-IN-PROGRESS Capitalizable csts assciated with a building prject that shuld be included in the riginal capitalizable cst f the CIP prject include (nt inclusive): Original cntract price f cnstructin Architect and engineering services Equipment rentals (equipment purchases will be recrded directly in AM) Expenses incurred in remdeling, recnditining, r altering a purchased building t make it available fr its intended purpse. Design and supervisin csts Building permits Legal and architectural fees Insurance csts during cnstructin phase Interest csts during cnstructin f prprietary fund buildings Excavatin, grading r filling land ABANDONMENT OF PROJECT When it is n lnger prbable that a prject will be cmpleted and placed int service, n further csts shuld be capitalized, and guidance n impairment (See SPM 514) shuld be applied t existing balances. Page 2 f 5

3 WHEN TO CAPITALIZE INTEREST Interest csts assciated with gvernmental fund capital assets will nt be capitalized. Prprietary funds shuld fllw the guidance f Gvernmental Accunting Standards Bard (GASB) Statement N. 34 r GASB Statement N. 62 in determining whether r nt t capitalize such csts. In prprietary funds and thse trust funds whse measurement fcus is n incme determinatin r capital maintenance, the preferred accunting practice is t capitalize interest csts. Gvernmental Funds: Interest csts assciated with gvernmental fund capital assets will nt be capitalized. Prprietary funds shuld fllw the guidance f Gvernmental Accunting Standards Bard (GASB) Statement N. 34 r GASB Statement N. 62 in determining whether r nt t capitalize such csts. In prprietary funds and thse trust funds whse measurement fcus is n incme determinatin r capital maintenance, the preferred accunting practice is t capitalize interest csts. Interest Capitalizatin Decisin Mdel fr Prprietary Funds Only Are the prceeds f the debt externally restricted t finance this particular asset? If NO, then: Interest capitalizatin perid begins when: Expenditures fr the asset are made, and Interest cst is being incurred, and Activities necessary t get the asset ready fr its intended use are in prgress The capitalizatin perid ends when the asset is ready fr its intended use. The amunt f interest capitalized will equal the average expenditures accumulated fr the asset during the reprting perid times the interest rate used in the brrwing. Are the prceeds f the debt externally restricted t finance this particular asset? If YES, then: Interest determined under GASB 62 is reduced by any interest revenue earned n the investment f the prceeds frm the date f the brrwing until the asset is ready fr its intended use. Enterprise Funds: When debt is used t finance the cnstructin f a capital asset, the interest expense incurred during cnstructin shuld be capitalized. The perid during which interest is t be capitalized starts when the fllwing cnditins are met: Expenditures have been made Activities are in prgress t prepare the asset fr its intended use Interest is being incurred The interest capitalizatin perid ends when the asset is substantially cmpleted and ready fr its intended use. Enterprise funds shuld capitalize interest nly n debt actually reprted in the fund itself. Page 3 f 5

4 WHEN TO USE THE CIP ACCOUNT/CATEGORY Use the CIP accunt anytime prject / capital asset that meets estimated threshlds will nt be cmpleted within the same fiscal year in rder t accumulate the cst assciated with the prject/capital asset(s). The fllwing is a flwchart f hw a prject might have several capital assets classified differently and therefre it is imprtant t prperly track the different csts fr each asset categry under CIP. 2.5 acres Parcel #1 Based n Assessr's Parcel # $2M Land TIP: Tracking CIP Prjects: Cnstructin-in-Prgress (CIP) prjects shuld be prperly tracked frm inceptin f the prject t the cnclusin f the prject in rder t accurately recrd the asset(s) in PepleSft Asset Mdule. A particular prject might be budgeted as ne prject (i.e. Prject A); hwever, the funding f the prject might have many cmpnents depending n the cmplexity f the prject as illustrated by the flwchart. Initially and thrughut the prject all csts will be captured in the CIP accunt up until the prject is cmpleted and at which time the prject alng with its cst will be re-categrized/remved frm CIP t several different asset categries which might cntain several assets within each categry depending n the assets f the prject. $10M Prject A (CIP) $6M Building $1M Land Imprvements $1.5M 10 acres Parcel #2 Based n Assessr's Parcel # $3M Structure 1 $3M Structure 2 $800K Parking Lt $200K Fence/Wall Equipment 1 $1M Equipment Equipment 2 CAPITALIZATION CRITERIA: Make sure that the csts that are recrded in the CIP accunts fr a particular prject/capital asset d meet the Cunty f Riverside capitalizatin criteria; therwise the csts shuld be expensed. REMOVAL OF CIP PROJECTS: Management frm the Department will have t present the ttal amunt f CIP t be remved t their Department Head in a mem frmat and btain her/his signature fr apprval befre any CIP prjects are remved frm the CIP accunts. Page 4 f 5

5 DEPARTMENT ROLES: 1) CIP transactins shuld be recrded in the AM mdule immediately nce all supprting dcumentatin is available and has been received by the department. a. All assets shuld be recrded immediately via an AM-5 frm r using Schedule Q 2) Cmplete AM-5 Frm and submit it t the Auditr-Cntrller with all supprting dcumentatin, within 15 days after it has been entered in the AM mdule, except at year end it shuld be submitted within 24 hurs. 3) Once a prject/capital asset has been cmpleted and there is n need t cntinue using the CIP accunt it is the respnsibility f the department t submit the AM-4 r using Schedule Q t reclassify the accumulated csts in the CIP accunt t the prper asset categries. a. Submit supprting dcumentatin including ntice f cmpletin AUDITOR-CONTROLLER S ROLES: 1) Review and verify AM-4, AM-5 and Schedule Q. 2) Prcess transactins in PepleSft Financial System. RECORDS MANAGEMENT ROLES: Department Retain all capital asset supprting dcumentatin fr at least 7 years as it relates t capital assets infrmatin reprted n schedule Q and any ther recrds that are nt submitted t the Auditr- Cntrller. Auditr-Cntrller All AM-4 (including supprting dcumentatin), AM-5 and Schedule Q are filed in accrdance with the Cunty s General Recrds Retentin plicy which states t keep the current year plus the 7 past years. SECURITY ROLES: In rder t perfrm the functins discussed abve the fllwing rles must be requested: Department: Capital Asset Prcessr this rle will allw yu t: Add capital/nncapital asset infrmatin Update sme capital asset infrmatin Auditr Cntrller: Asset Reviewer Auditr-Cntrller Only this rle will allw yu t: Adjust, re-categrize, transfer, and dispse capital assets/nncapital asset infrmatin Review and prcess capital asset transactins Run capital asset reprts Page 5 f 5