13.0 - Certificate of Substantial Completion

SUBJECT:	Certificate of Substantial Completion
SOURCE:	Capital Asset Management
ORIGINAL DATE OF ISSUE:	November 2006
DATE OF LAST REVISION:	November 2006
CSOP NO:	13.0
RATIONALE:	To provide guidelines for the process of initiating depreciation on construction-in-progress assets via the Certificate of Substantial Completion form.
CSOP:	Creation of a substantial completion form Routing of a substantial completion form Review of construction in progress Project cost review and depreciation Non-moveable projects not constructed through the University Architects' Office (UAO) Substantial completion of university fabricated equipment Creation of a substantial completion form Capital construction projects at Indiana University are held in construction-in-progress and do not begin depreciation until they are placed into service. The Capital Asset Management Office of Financial Management Services (FMS) receives notification that an asset has been placed in service or is available to be placed in service via the Certificate of Substantial Completion. Indiana University defines substantial completion as the point in time when an asset is complete or is nearly complete and is available to be placed in service. The Certificate of Substantial Completion indicates contractor information, project information, date of substantial completion, date placed in service, and the project account number. The Certificate of Substantial Completion serves the following university purposes: Transfers ownership of the asset from the contractor (in cases where outside contractors are involved) to the university Initiates the contractor's warranty period where applicable. Initiates the internal university processes to begin depreciating the construction-in-progress asset based on the date at which an asset is placed in service or is available to be placed in service Routing of a substantial completion form The University Architects' Office (UAO) team leader is responsible for insuring that all substantial completion documentation is initiated in a timely manner for his/her project. Once created, a copy of the Certificate of Substantial Completion is forwarded to the Vice President for Administration (VPAD) finance personnel for processing. The UAO team leader will obtain signatures on the original version of the substantial completion documentation from the following parties: Outside Architect (where involved) Contractor University Architect Because the work of one contractor on a large project may be completed several months in advance of the time at which the asset is placed in service, the VPAD finance group will monitor project progress and communicate substantial completion as well as the placed-in-service date to the Capital Asset Management Office in FMS so that asset depreciation is not delayed. As soon as a construction asset is placed in service, VPAD finance personnel will send the University Capital Asset Management Office in FMS all Certificates of Substantial Completion that have been initiated at that time along with an indication of the appropriate placed in service date to be used. Once all signatures have been obtained, the final version of the Certificate of Substantial Completion will be routed to the VPAD finance group for processing, who will in turn forward the final documentation to the Capital Asset Management Office in FMS. Review of construction in progress As a second measure of review for construction-in progress assets, the Capital Asset Management Office will work with VPAD's finance personnel during, preceding, and immediately following the fiscal year end, on the construction in progress summary report. This report summarizes the accounts in Capital Asset Management that are listed as construction-in-progress. VPAD finance will examine each project account to determine if the project is complete to the point of substantial completion and/or placed in service, as defined above. VPAD finance will indicate by each account number a Yes (Y) or No (N) status to indicate whether the project has been or is available to be placed in service. This report will be sent via e-mail to Capital Asset Management at which time those project accounts with a Yes (Y) status will be changed to depreciable assets. In July the Review Construction in Progress Capital Asset Summary report will be run by VPAD immediately after first closing. The report will be returned to Capital Asset Management from VPAD prior to June's depreciation run, so that all completed assets can be transferred out of construction-in-progress into the appropriate asset categories to begin depreciation prior to the university's fiscal year end. June's depreciation run occurs prior to second closing, approximately one week following first closing. Project cost review and depreciation Upon the receipt of the initial Certificate of Substantial Completion by FMS, an analysis of total asset cost will be performed by the Plant Fund Accountant in the Capital Asset Management Office to determine that the appropriate capitalization threshold limits have been met and that the appropriate capital asset categories have been assigned for depreciation. The total cost of the asset will then be capitalized to the appropriate capital asset categories and subsequently depreciated according to the University's depreciation methodology. Non-moveable projects not constructed through the University Architect's Office (UAO) Non-moveable projects not constructed through the University Architect's Office are identified by Capital Asset Management as those project accounts not using a construction account (account numbers with the 90 prefix). During December of the current fiscal year, Capital Asset Management will contact the Vice President of Administration (VPAD) to determine if the non-90 account project is or is not being managed through the University Architect's Office (UAO). If the project is being managed through UAO the process explained above will apply. If VPAD indicates the construction project is not being managed through UAO, Capital Asset Management will contact the Fiscal Officer of the account to determine if the project account will reach capitalization threshold amounts. At this time the Fiscal Officer will be notified of the construction-in-progress status, the need for the Certificate of Substantial Completion form and the determinants for a substantially complete or placed-in-service asset. Those projects meeting the $75,000 capitalization threshold will require a signed Certificate of Substantial Completion form upon the sooner of project completion or placed-in-service date. As a second measure of review for these construction-in progress assets, the Capital Asset Management Office of FMS will request in May of each fiscal year, that organizations review the status of these projects and complete a Certificate of Substantial Completion for any projects that are substantially complete or placed in service. This review is to ensure that projects placed in service during the current fiscal year begin depreciation in that same fiscal year. Substantial Completion forms should be routed to the Capital Asset Management Office by departments no later than May 31st for assets placed in service during the current fiscal year. If the project is not substantially complete the organization will be required to indicate a review date as a means for follow up by the Capital Asset Management Office. Substantial completion of university fabricated equipment Organizations may choose to fabricate an asset. A fabrication is a moveable asset created (built) by a university organization. Annually, in May of each fiscal year, the Capital Asset Management Office in FMS will request that organizations review the status of active fabrications for substantial completion. This review is to ensure that any fully constructed fabricated equipment that has been completed and is available for use has been identified as placed-in-service so that depreciation may begin on the asset. Substantial Completion forms for completed fabricated equipment should be routed to Capital Asset Management no later than May 31st for assets placed in service during the current fiscal year. If the fabricated equipment is not complete the organization will be required to indicate a review date as a means for follow up by the Capital Asset Management Office. See CSOP 12.0 Fabricated Equipment.
DEFINITIONS:	Substantial completion - The point in time when the asset is complete or nearly complete and available to be placed in service.
CROSS REFERENCES:	CSOP 12.0 Capitalization Fabricated Equipment
RESPONSIBLE ORGANIZATION:	Organizations that purchase capital assets.