Cost Accounting Standards For Government Contracts


CAS covers a variety of costs such as depreciation, pension plans, personal compensation, indirect costs and other areas of cost accounting. NC State must comply with the CAS requirements to ensure the recovery of direct and indirect (F&A) costs. As a required element of CAS, NC State University must disclose its cost accounting practices in writing to the federal government. NC State satisfied this requirement with the disclosure statement (DS-2) submitted to the federal government in 1997, with the most recent revision being approved in 2010. The purpose of this standard is to provide criteria for measuring deferred compensation costs and assigning those costs to cost accounting periods. It applies to all deferred compensation costs except for compensated absences and pension costs covered in CAS 408 and CAS 412.

What is the basic concept of cost sheet?

A cost sheet is a statement that shows the various components of total cost for a product and shows previous data for comparison. You can deduce the ideal selling price of a product based on the cost sheet. … A historical cost sheet is prepared based on the actual cost incurred for a product.Tangible assets shall be capitalized when both of the criteria in the contractor’s policy as required in paragraph of this subsection are met, except that assets described in subparagraph of this subsection shall be capitalized in accordance with the criteria established in accordance with that paragraph. Staff management not identifiable with any certain specific activities of segments. The expenses incurred by a home office for staff management, supervisory, or policy functions, which are not identifiable to specific activities of segments shall be allocated in accordance with paragraph of this subsection as residual expenses. When the parties agree to a change to a cost accounting practice, other than a change under subdivision of this clause, negotiate an equitable adjustment as provided in the Changes clause of this contract. If the aggregate impact on sponsored agreements is considered material, a cost adjustment will normally be made through an adjustment of future F&A rates or by other means considered appropriate by the cognizant agency. A cost impact analysis determines the costs that would have been charged to federally sponsored programs, from the point of the change to the end of the project, using the former accounting practices. These costs are then compared to the amounts that will actually be charged using the new practices.

Why Must The Unit Maintain Documentation?

Consistent application of these criteria and guidance will improve classification of costs as direct and indirect and the allocation of indirect costs. The purpose of this standard is to provide criteria for the measurement of insurance costs, the assignment of such costs to cost accounting periods, and their allocation to cost objectives. The application of these criteria should increase the probability that insurance costs are allocated to cost objectives in a uniform and consistent manner. Unless otherwise noted, paragraphs through of this subsection address pension costs and transition amounts determined for the first cost accounting period beginning on or after the date this revised Standard becomes applicable to a contractor.

  • Other terms defined elsewhere in this part 99 shall have the meanings ascribed to them in those definitions unless paragraph of this section requires otherwise.
  • A total cost input base is generally acceptable as an appropriate measure of the total activity of a business unit.
  • Accumulating costs means the collecting of cost data in an organized manner, such as through a system of accounts.
  • The cost of preparing the budgets for the other segment should be removed from B’s G&A expense pool and transferred to the other segment.
  • Final cost objective means a cost objective which has allocated to it both direct and indirect costs, and in the contractor’s accumulation system, is one of the final accumulation points.

If substantially all the activities necessary to get the asset ready for its intended use are discontinued, cost of money shall not be capitalized for the period of discontinuance. However, if such discontinuance arises out of causes beyond the control and without the fault or negligence of the contractor, cessation of cost of money capitalization is not required. Insurance administration expenses means the contractor’s costs of administering an insurance program, e.g., the costs of operating an insurance or risk-management department, processing claims, actuarial fees, and service fee paid to insurance companies, trustees, or technical consultants. These advance agreements may be modified, by mutual agreement, to incorporate the requirements effective on June 2, 2008.Direct costs are not limited to items which are incorporated in the end product as material or labor. Costs identified specifically with a contract are direct costs of that contract.

Accounting For Unallowable Costs

Contractors need to have a logical practice for the establishment of standards that includes periodic review and update. Relating to the establishment of standards, accumulation of standard costs, and accumulation and disposition of variances from standard costs. This Standard shall not apply to contracts and grants with State, local, and federally recognized Indian tribal governments. When the costs of individual IR&D or B&P efforts are not material in amount, these costs may be accumulated in one or more project within each of these two types of effort. Bid and proposal (B&P) cost means the cost incurred in preparing, submitting, or supporting any bid or proposal which effort is neither sponsored by a grant, nor required in the performance of a contract. The base used to represent the activity being managed or supervised shall be determined by the application of the criteria below. Where the amount of a loss which is represented by a liability to a third party is uncertain, the estimate of the loss shall be the amount which would be includable as an accrued liability in financial statements prepared in accordance with generally accepted accounting principles.Business Unit C has accounted for and allocated IR&D and B&P costs in a cost pool separate and apart from the G&A expense pool. Unit C may continue to account for these costs in a separate cost pool under the provision of this Standard. If Unit C is to use a total cost input base, these costs when accounted for and allocated in a cost pool separate and apart from the G&A expense pool will become part of the total cost input base used by Unit C to allocate the G&A expense pool. Expenses which are not G&A expenses and are insignificant in amount may be included in the G&A expense pool for allocation to final cost objectives. G&A expenses of a segment incurred by another segment shall be removed from the incurring segment’s G&A expense pool. They shall be allocated to the segment for which the expenses were incurred on the basis of the beneficial or causal relationship between the expenses incurred and all benefiting or causing segments. If the expenses are incurred for two or more segments, they shall be allocated using an allocation base common to all such segments.Accumulating costs means the collecting of cost data in an organized manner, such as through a system of accounts. If you have questions for the Agency that issued the current document please contact the agency directly. And as to any cost adjustment demanded by the United States, such failure to agree will constitute a dispute under 41 U.S.C. chapter 71, Contract Disputes. Previously, contracts where performance would have been performed entirely outside the United States were also exempt, but this exemption was removed for new contracts effective October 11, 2011. The new CASB readopted the original 19 standards with only minor modifications, and has yet to adopt any new standards.

Is It Possible For A Cost Normally Charged As F&a To Be Charged As A Direct Cost To A Project?

Training will be provided to personnel affected by the procedure and designated individuals shall be made available to provide guidance for proper cost classifications. The treatment of costs as direct or F&A shall be consistent both within a department and among campus departments and schools in like circumstances. Although a proposal may group certain costs, the accounting system shall identify all significant amounts of costs so as to permit sufficient and meaningful comparison with the estimates. Based on the review of specific facts and circumstances, a judgment is made by the institution’s appropriate personnel as to the proper allocation (direct vs. indirect). A thorough review of all regulations, policies and procedures applicable to the project. Awards not covered under CAS administration are still subject to the requirements listed in the award as well as all University and State guidelines.It excludes incidental interest, dividends, royalty, and rental income, and proceeds from the sale of assets used in the business. Allocate means to assign an item of cost, or a group of items of cost, to one or more cost objectives. This term includes both direct assignments of cost and the reassignment of a share from an indirect cost pool.Typical residual expenses are those for the chief executive, the chief financial officer, and any staff which are not identifiable with specific activities of segments. Residual expenses shall be allocated to all segments under a home office by means of a base representative of the total activity of such segments, except where paragraph or of this subsection applies. Directly assign all such costs to final cost objectives with which they are specifically identified. Indirect cost means any cost not directly identified with a single final cost objective, but identified with two or more final cost objectives or with at least one intermediate cost objective. The following examples are illustrative of application of cost accounting practices which are deemed not to be consistent. The following examples are illustrative of applications of cost accounting practices which are deemed to be consistent.In this case the company does not have to compare the sample to subsequent years to determine if disposition has occurred. As in Example of this subsection, the sample items are traced to prior years to determine the year in which acquired. The estimated service life and method of depreciation to be used for an original complement of low-cost equipment shall be based on the expected consumption of services over the expected useful life of the complement as a whole and shall not be based on the individual items which form the complement. The estimated liability shall include all earned entitlement to compensated personal absence which exists at the time the liability is determined, in accordance with paragraph of this subsection. Material cost at standard means a pre-established measure of the material element of cost, computed by multiplying material-price standard by material-quantity standard.

Cost Accounting Standards: Theyre Policy For Government Contracts

It provides guidance on how to prepare an adequate justification for F&A costs to be incurred as direct costs to the grant. In certain situations expenditures normally charged as F&A may be charged to the direct costs’ portion of a project.All costs incurred for the same purpose, in like circumstances, are either direct costs only or indirect costs only with respect to final cost objectives. No final cost objective shall have allocated to it as an indirect cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included as a direct cost of that or any other final cost objective. Further, no final cost objective shall have allocated to it as a direct cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included in any indirect cost pool to be allocated to that or any other final cost objective. Agree to an adjustment of the contract price or cost allowance, as appropriate, if the Contractor or a subcontractor fails to comply with an applicable Cost Accounting Standard, or to follow any cost accounting practice consistently and such failure results in any increased costs paid by the United States. This standard provides criteria for assigning costs of tangible capital assets to cost accounting periods and should enhance objectivity and consistency in their allocation.

Cost Accounting Standards Disclosure Statement Campus Briefing

B. The Cost Accounting Standards Board provides guidelines, referred to as Cost Accounting Standards , on cost accounting practices for federal contracts. In November 1994, the CASB imposed four standards and a cost accounting practice disclosure requirement on universities receiving significant awards from federal agencies. cost accounting standards for government contracts A representative investment amount shall be determined each cost accounting period for each capital asset being constructed, fabricated, or developed giving appropriate consideration to the rate at which costs of construction are incurred. The contractor shall maintain such records as may be necessary to substantiate the amounts of premiums, refunds, dividends, losses, and self-insurance charges, paid or accrued, and the measurement and allocation of insurance costs.In addition, total cost input is used in the example as the allocation base for the G&A expense. Two variations of this example have been prepared to illustrate the impact of excluding or including cost of money from total cost input. Variation I, summarized in Table XIII, excludes cost of money from the cost input allocation base. Variation II, summarized in Tables XVII and XVIII, includes cost of money in the cost input allocation base. The investment base used in computing the cost of money for facilities capital shall be computed from accounting data used for contract cost purposes. The form and instructions stipulated in this Standard shall be used to make the computation. The ratios of market value of the assets to actuarial accrued liabilities for each of the merged or separated plans are materially different from one another after applying the benefits in effect after the pension plan merger or pension plan division.The cost of preparing the budgets for the other segment should be removed from B’s G&A expense pool and transferred to the other segment. The company should select a sampling time period which, preferably, is significantly longer than the anticipated life of the assets for which lives are to be estimated. The company would then select a random sample of items retired in each year of the sampling time period and tabulate age at requirement. A company maintains an inventory of assets in use and also has a record of retirements.

Cost Accounting Standards For Government Contractors

The CAS rules and regulations provide for additional federal government oversight of the institution’s cost accounting practices. This includes the authority and responsibility to assess our compliance with the individual standards and our adherence to our disclosed and established cost accounting practices.An internal assessment shall be made to determine whether the revision constitutes a cost accounting change as defined in the CAS administrative guidelines. Including exceptions in the Disclosure Statement shall be limited to those circumstances where a particular disclosed practice is clearly inappropriate to a certain segment or other unit within the University. In such a situation, the primary practice shall be fully disclosed followed by a description of the alternative cost treatment. The Disclosure Statement shall clearly identify the segments or other units to which the alternative practice applies. Rate limits or caps imposed by OMB Circular A-21 or by negotiation with the federal government may limit the institution’s ability to recover all costs that would otherwise be allocable and allowable.Responsible for developing proposals requesting extramural support and for assuring that all direct costs proposed and incurred comply with the requirements of this policy and meet the federal and University criteria for proposing and charging of direct costs. If a net aggregate overpayment by the federal government is determined, UCSD may be required to refund or credit costs to the affected agency.Each increase or decrease in unfunded actuarial liability resulting from the institution of new pension plans, from the adoption of improvements, or other changes to pension plans subsequent to the date this Standard first becomes applicable to a contractor shall be amortized over no more than 30 years nor less than 10 years. A contractor has established inventories for various categories of material which are used on Government contracts. During the year the contractor allocates the costs of the units of the various categories of material issued to contracts by the moving average cost method. The contractor uses the LIFO method for tax and financial reporting purposes and, at year end, applies a pooled LIFO inventory adjustment for all categories of material to Government contracts. This application of pooled costs to Government contracts would be a violation of this Standard because the lump sum adjustment to all of the various categories of material is, in effect, a noncurrent repricing of the material issues. Consequently, the contractor establishes an inventory record for these tubes and allocates their cost to the contracts on an average cost method. Because a FIFO method is used for a similar category of material within the same business unit, the use of an average cost method for “Y” would be a violation of this Standard.