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CAS Standards
The Federal Acquisition Regulation (FAR) Part 30, based on 41 U.S.C. chapter 15, sets the Cost Accounting Standards (CAS) for some contractors and subcontractors. These contracts must follow the Cost Accounting Standards and report their cost accounting methods in writing.
The CAS has nineteen standards from 401 to 420 (except for 419 which is reserved for future use). These rules deal with different costs, such as indirect costs, personal compensation, depreciation, pension plans, etc. The CAS Standards help ensure that the costs are measured, assigned and allocated consistently and fairly.
The costs are measured by how much they are, assigned by when they happen and allocated by which contract they belong to.
Federal Acquisition Regulation & Cost Accounting Standards
Still unraveling the mystery of Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS) compliance? The exemptions, standards and disclosures can often feel like a puzzle never to be solved – until now.
COST ACCOUNTING STANDARDS 101: 19 STANDARDS AND DEFINITIONS
The 19 CAS standards are designed to provide a uniform framework for measuring, assigning and allocating costs in contracts with the federal government. The CAS framework helps prevent cost manipulation, cost overruns and cost misallocation, ensuring that taxpayers' money is spent efficiently and fairly.
The nineteen CAS standards are:
| CAS 401 – Consistency in Estimating, Accumulating and Reporting Costs | This standard requires contractors to use the same cost accounting practices for estimating, accumulating and reporting costs for each contract unless otherwise specified by the contract terms. |
| CAS 402 – Consistency in Allocating Costs Incurred for the Same Purpose | This standard requires contractors to allocate costs incurred for the same purpose in the same way to all contracts unless there is a substantial difference in the circumstances or the contract terms. |
| CAS 403 – Allocation of Home Office Expenses to Segments | This standard guides allocating home office expenses (such as executive salaries, legal fees, etc.) to the contractor's segments (such as divisions, branches, etc.) that benefit from those expenses. |
| CAS 404 – Capitalization of Tangible Assets | This standard defines the criteria for capitalizing tangible assets (such as land, buildings, equipment, etc.) and the methods for allocating the costs of those assets to contracts over their useful lives. |
| CAS 405 – Accounting for Unallowable Costs | This standard requires contractors to identify and exclude unallowable costs (such as fines, penalties, lobbying, etc.) from any billing, claim, or proposal to the government and to maintain separate records of those costs. |
| CAS 406 – Cost Accounting Period | This standard requires contractors to use a cost accounting period (such as a fiscal year, calendar year, etc.) suitable for contract costing and consistently applied across all contracts. |
| CAS 407 – Use of Standard Costs for Direct Material and Direct Labor | This standard allows contractors to use standard costs (such as budgeted or estimated costs) for direct material and direct labor as long as they are based on historical or projected data, are regularly updated and are adjusted for any significant variances. |
| CAS 408 – Accounting for Compensated Personal Absence | This standard requires contractors to account for the costs of compensated personal absence (such as vacation, sick leave, holidays, etc.) when the entitlement to the benefit is earned by the employee rather than when the benefit is paid or used. |
| CAS 409 – Depreciation of Tangible Capital Assets | This standard requires contractors to use a depreciation method (such as straight-line, declining balance, etc.) that reflects the consumption pattern of tangible capital assets (such as buildings, equipment, etc.) and apply that method consistently across all contracts. |
| CAS 410 – Allocation of Business Unit General and Administrative Expenses to Final Cost Objectives | This standard requires contractors to allocate the general and administrative (G&A) expenses (such as rent, utilities, management salaries, etc.) of a business unit (such as a division, branch, etc.) to the final cost objectives (such as contracts, projects, etc.) of that unit based on a reasonable measure of the benefits received by those objectives. |
| CAS 411 – Accounting for Acquisition Costs of Material | This standard requires contractors to consistently account for the acquisition costs of material (such as raw materials, parts, supplies, etc.) and to assign those costs to the cost objectives (such as contracts, projects, etc.) that use or consume the material. |
| CAS 412 – Composition and Measurement of Pension Cost | This standard defines the components of pension cost (such as normal cost, actuarial gains and losses, etc.) and the methods for measuring and assigning those costs to the cost accounting periods and the contractor's cost objectives (such as contracts, projects, etc.). |
| CAS 413 – Adjustment and Allocation of Pension Cost | This standard requires contractors to adjust and allocate the pension cost (such as normal cost, actuarial gains and losses, etc.) to the cost accounting periods and the cost objectives (such as contracts, projects, etc.) of the contractor based on the funded status of the pension plan and the changes in the actuarial assumptions and methods. |
| CAS 414 – Cost of Money as an Element of the Cost of Facilities Capital | This standard requires contractors to include the cost of money (such as interest, dividends, etc.) as an element of the cost of facilities capital (such as land, buildings, equipment, etc.) and to allocate that cost to the cost objectives (such as contracts, projects, etc.) that use or benefit from the facilities capital. |
| CAS 415 – Accounting for the Cost of Deferred Compensation | This standard requires contractors to account for the cost of deferred compensation (such as stock options, bonuses, etc.) when the employee earns the compensation rather than when the compensation is paid or vested. |
| CAS 416 – Accounting for Insurance Costs | This standard requires contractors to account for the insurance costs (such as premiums, losses, etc.) consistently and to allocate those costs to the cost objectives (such as contracts, projects, etc.) protected by the insurance coverage. |
| CAS 417 – Cost of Money as an Element of the Cost of Capital Assets Under Construction | This standard requires contractors to include the cost of money (such as interest, dividends, etc.) as an element of the cost of capital assets under construction (such as buildings, equipment, etc.) and to allocate that cost to the cost objectives (such as contracts, projects, etc.) that will use or benefit from the capital assets when they are completed. |
| CAS 418 – Allocation of Direct and Indirect Costs | This standard requires contractors to identify and allocate the direct and indirect costs (such as labor, material, overhead, etc.) to the cost objectives (such as contracts, projects, etc.) reasonably and consistently based on the causal or beneficial relationship between the costs and the objectives. |
| CAS 419 – [Reserved] | This standard is reserved for future use by the Cost Accounting Standards Board. |
| CAS 420 – Accounting for Independent Research and Development Costs and Bid and Proposal Costs | This standard requires contractors to account for the independent research and development (IR&D) costs and bid and proposal (B&P) costs (such as salaries, materials, travel, etc.) consistently and to allocate those costs to the final cost objectives (such as contracts, projects, etc.) of the contractor based on a reasonable measure of the benefits received by those objectives. |
KEY CAS STANDARDS FOR CONTRACTORS
As a contractor, navigating the world of government contracts and the associated regulations can be a complex endeavor. Among the numerous requirements and guidelines set forth by the government, the Cost Accounting Standards (CAS) stand out as a critical framework for maintaining transparency and consistency in allocating costs. With 19 CAS standards in place, you might wonder which ones are the most important for your operations.
Some of the CAS standards hold particular significance for contractors, as they profoundly impact cost allocation, compliance and overall contract management. These standards ensure fairness and consistency and play a pivotal role in determining contractors' financial health and competitiveness in the government contracting space.
CAS 401 and 402
CAS 401 and 402 are the most fundamental standards, as they establish the principle of consistency in estimating, accumulating and allocating costs. These standards apply to all contracts subject to CAS, regardless of the type of coverage (full or modified). Therefore, they are essential for ensuring that the costs are comparable and fair across different contracts and contractors.
CAS 405 and 406
CAS 405 and 406 are also essential standards, as they deal with the allowability and timing of costs.
- CAS 405 requires contractors to identify and exclude unallowable costs, such as fines, penalties, lobbying, etc., from any billing, claim, or proposal to the government.
- CAS 406 requires contractors to use a cost accounting period suitable for contract costing and consistently applied across all contracts. These standards help ensure that the costs are reasonable and accurate and comply with the Federal Acquisition Regulation (FAR) Part 31.
CAS 410, 412, 413 and 414
CAS 410, 412, 413 and 414 are complex and challenging standards, as they allocate significant and variable costs, such as general and administrative (G&A) expenses, pension costs and cost of money.
These standards require contractors to use reasonable and consistent methods and assumptions to measure and assign these costs to the cost objectives and to adjust and allocate them based on the changes in the circumstances and the contract terms. These standards significantly impact the contractors' profitability and competitiveness and they are often subject to disputes and audits.
HOW COSTPOINT HELPS CONTRACTORS STAY COMPLIANT
Deltek Costpoint is the industry-standard ERP solution for government contractors who must comply with Cost Accounting Standards (CAS). Deltek Costpoint supports the CAS requirements and best practices by providing industry-specific features and functions that help contractors account for and allocate their costs suitably and consistently.
Costpoint covers various aspects of cost accounting, such as capitalization, depreciation, pension, insurance, deferred compensation, etc. It also includes the cost of money as an element of the cost of facilities capital and capital assets under construction.
Deltek Costpoint also helps contractors to easily comply with other government contracting requirements, such as Federal Acquisition Regulation (FAR), Defense Contract Audit Agency (DCAA) and Defense Contract Management Agency (DCMA). Deltek Costpoint is a trusted and proven software solution for government contractors who want to achieve their project goals and satisfy their customers.
Your Guide to Government Compliance
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