CAS (Cost Accounting Standards)

What is CAS (Cost Accounting Standards)?

Cost Accounting Standards (CAS) are a set of government accounting principles and standards designed to achieve uniformity and consistency in cost accounting practices employed by contractors when pricing and administering negotiated U.S. government contracts and subcontracts. The goal of CAS is to ensure fair and equitable cost determination and allocation.

Definition

CAS is established and maintained by the Cost Accounting Standards Board (CASB), an independent board within the Office of Federal Procurement Policy (OFPP). These standards are codified in Title 48 of the Code of Federal Regulations (CFR), specifically Part 9903 and following. CAS applies primarily to negotiated contracts and subcontracts where cost-based pricing methods are used, and exceeding certain dollar thresholds. The threshold for modified coverage is currently contracts exceeding $2 million and exceeding $7.5 million for full CAS coverage. Contractors meeting these thresholds are required to adhere to specific accounting practices related to cost allocation, measurement, and assignment. Compliance with CAS ensures that the government pays fair and reasonable prices for goods and services, and that contractors are transparent and accountable in their cost accounting practices.

Key Points

• Applicability: CAS primarily applies to negotiated contracts exceeding specific dollar thresholds, particularly those involving cost-reimbursement or price-negotiation based on cost data.
• Disclosure Statement: Contractors subject to full CAS coverage must submit a CAS Disclosure Statement (CAS DS-1) detailing their cost accounting practices to the government for review and approval.
• Compliance: Contractors must consistently follow their disclosed and approved cost accounting practices. Any changes require prior approval from the government.
• Consistency: CAS emphasizes consistency in cost accounting practices from period to period and across different contracts, ensuring costs are treated uniformly.

Practical Examples

1. Cost Allocation: A contractor providing both commercial and government services must allocate indirect costs, such as overhead, fairly between the two sectors based on a reasonable allocation base, like direct labor hours, in accordance with CAS principles.
2. Material Costs: If a contractor purchases materials for both government and commercial projects, CAS requires that the materials are properly tracked and costs allocated to the appropriate projects based on consumption or other appropriate method.
3. Depreciation: CAS provides specific guidelines on calculating and allocating depreciation expense for assets used in performing government contracts, ensuring that depreciation is recognized appropriately over the asset's useful life.