FIACCT 09-14_00 Fixed Assets – Construction in Progress

Effective: March 16, 1998
Revised: July 2, 2001

Purpose

This policy describes how to account for construction in progress and how to create an asset record in the FINET Fixed Assets when a project has been completed.

Policy

It will be the responsibility of each agency to establish fixed asset records in FINET Fixed Assets when a building project has been completed. If DFCM holds title to the project, DFCM will capitalize it. If an agency holds title to the project, the agency will capitalize it. The Division of Finance will be responsible for notifying agencies that projects have been completed and are ready to be capitalized.

Background

Costs for construction projects are accrued in the Construction in Progress expenditure Object codes 6811–6884 by the builder of the project (usually DFCM). As work is performed on a project and expenditures are paid, debits are recorded in these CIP accounts, and credits are recorded to Cash. When the project is closed and Finance and DFCM determine that the asset should be capitalized, State Finance will process the necessary entries to move the asset from CIP to fixed assets on the balance sheet.

Procedures

Responsibility

Action

DFCM

1. Record appropriate expenses in the Construction in Progress expenditure Object codes 6811–6884. Keep a project status report of each project and record a project as closed when all outstanding claims have been resolved or the building has been placed in service, whichever is earlier. Close out appropriate CIP Expenditure Object codes for closed projects by fiscal yearend. If DFCM holds title to the project, add this asset to DFCM’s fixed asset listing.

Division of Finance

2. At fiscal yearend, review the status report of each project with DFCM to determine which projects are closed (not just complete). Determine which closed projects are to be capitalized.

Notify agencies of closed projects for which they hold title to with directions to process an FA (scratch add) transaction for appropriate asset(s).

If DFCM holds title to the project, notify DFCM to scratch add this asset to DFCM’s fixed asset listing. If an agency other than DFCM holds title to the project, notify that state agency to scratch add this asset to its fixed asset listing.

Agency

3. Process an FA (scratch add) transaction to add fixed asset(s) to FINET Fixed Assets when directed to do so by Finance. See the FA – Scratch Add policy in this section of the manual.

This procedure will cause a reconciling item between capital expenditures for the fiscal year and FINET Fixed Assets because the asset was not purchased using a capital expenditure transaction in the current fiscal year. See line 11 of the FA – Monthly Reconciliation and Out of Balance Corrections policy in this section of the manual.