Cost Accounting Standards (CAS) Compliance

The Federal Acquisition Regulation (FAR) Part 30 describes the policies and procedures for applying the Cost Accounting Standards Board (CASB) rules and regulations under 48 CFR Chapter 99 to negotiated contracts and subcontracts.  The Cost Accounting Standards (CAS) establishes the CAS compliance requirements for U.S. Government contractors to properly account for costs allocated to certain U.S. Government contracts.  The applicability CAS varies based on the contracting methods, trigger contract and dollar thresholds. 

Further, Federal Acquisition Regulation Subpart 30.6 CAS Administration provides requirements for contractors and Contracting Officers to follow if any cost accounting practice changes need to be processed or resolve any CAS non-compliances. Additionally, understanding and meeting COA requirements can be essential for ensuring compliance with cost-related contractual obligations.

Understanding 48 CFR Chapter 99 CAS Requirements for Contractors

48 CFR Chapter 99, under Public Law 100–679 (41 U.S.C. 422), requires certain contractors and subcontractors to comply with CAS, disclose its cost accounting practices in writing, and consistently follow its disclosed cost accounting practices.

The individual standards set forth how direct and indirect costs should be accounted for related to measurement, assignment, and allocation of costs. This mitigates the risk of mischarging, misallocation, and provides the U.S. Government the ability to compare cost representations more consistently for all contractors.

Capital Edge Consulting specializes in helping companies achieve and maintain CAS compliance, a mandatory requirement for government contracts over a certain dollar amount. As experts in the field of CAS government contracting regulations, Capital Edge provides comprehensive guidance on how to interpret and implement Cost Accounting Standards (CAS) to ensure full compliance. Our services are essential for companies looking to navigate the complex landscape of government contracts, ensuring that their accounting practices and cost allocation methods meet the stringent CAS requirements.

By assisting firms in the preparation of CAS-compliant disclosure statements and the implementation of appropriate accounting systems, we ensure that their clients can withstand rigorous government audits and maintain eligibility for federal contracts. Our expert consultancy effectively safeguards companies from potential penalties due to non-compliance and enhances their reputation as reliable government contractors.

The 19 Cost Accounting Standards

Knowing the cost accounting standards can help ensure compliance, enhance financial accuracy, and improve overall cost management. There are 19 standards listed below that provide requirements for contractors to promote consistency and accuracy regarding their cost accounting practices.

• CAS 401 - Consistency in Estimating, Accumulating, and Reporting Costs
• CAS 402 - Consistency in Allocating Costs Incurred for the Same Purpose
• CAS 403 - Allocation of Home Office Expenses to Segments
• CAS 404 - Capitalization of Tangible Assets
• CAS 405 - Accounting for Unallowable Costs
• CAS 406 - Cost Accounting Period
• CAS 407 - Use of Standard Costs for Direct Material and Direct Labor
• CAS 408 - Accounting for Costs of Compensated Personal Absence
• CAS 409 - Depreciation of Tangible Capital Assets
• CAS 410 - Allocation of Business Unit General and Administrative Expenses to Final Cost Objectives
• CAS 411 - Accounting for Acquisition Costs of Material
• CAS 412 - Composition and Measurement of Pension Cost
• CAS 413 - Adjustment and Allocation of Pension Cost
• CAS 414 - Cost of Money as an Element of the Cost of Facilities Capital
• CAS 415 - Accounting for the Cost of Deferred Compensation
• CAS 416 - Accounting for Insurance Costs
• CAS 417 - Cost of Money as an Element of the Cost of Capital Assets under Construction
• CAS 418 - Allocation of Direct and Indirect Costs
• CAS 419 - Reserved - Not Used
• CAS 420 - Accounting for Independent Research and Development and Bid and Proposal Cost

CAS Noncompliance

CAS noncompliance is when a contractor fails to comply with the applicable standard or fail to follow disclosed practices consistently in estimating, accumulating and reporting costs on contracts. If that is the case, FAR Clause 52.230-2 invokes price adjustments, with interest, if there is increased cost to the U.S. Government resulting from a CAS noncompliance. This clause also states that price adjustments are acceptable when a change in practice is required to comply with a standard that becomes applicable or is necessary to remain compliant.  

CAS-related Solicitation Provisions and Contract Clauses are key elements incorporated into Section I of the U.S. Government’s Request for Proposal (RFP). Below is an essential list of CAS-related Provisions and Clauses that all contractors should know to ensure compliance:

• FAR 52.230-1 – Cost Accounting Standards Notices and Certification (Solicitation Provision)
• FAR 52.230-2 – Cost Accounting Standards
• FAR 52.230-3 – Disclosure and Consistency of Cost Accounting Standards
• FAR 52.230-4 – Disclosure and Consistency of CAS for Foreign Entities
• FAR 52.230-5 – Cost Accounting Standards for Educational Institutions
• FAR 52.230-6 – Administration of Cost Accounting Standards
• FAR 52.230-7 – Proposal Disclosure – Cost Accounting Practice Changes (Solicitation Provision)

These provisions and clauses are critical for contractors navigating government contracts under CAS requirements.

Based on the level of CAS coverage and other factors, contractors may need to submit a Cost Accounting Standards Board Disclosure Statement (CASB DS-1).  Please find more information on Disclosure Statement requirements through the 10 essentials of CAS.