RGCI - Oh My Goodness I Think We Are CAS Covered

Let’s Set the Stage

So as a contractor you have received several cost-based contracts (i.e., subject to FAR Part 31), however they have all been less than $7.5M. You are flying under the Cost Accounting Standards (CAS) radar. You get a $9M cost-based contract that does not meet any of the exceptions to CAS covered listed at 9903.201-1(b) – categories of contracts and subcontracts exempt from all CAS requirements. The dreaded “trigger contract.”

What Shall We Do?

You bring together your best and brightest, even a consultant or two. You set this team to getting your cost allocations into compliance with CAS 401, CAS 402, CAS 405, and CAS 406 (i.e., Modified CAS Coverage). No easy job, right.

Wait a Minute

Let’s take a closer look at these four CAS standards.

CAS 401

Consistency in estimating, accumulating, and reporting costs, requires that the cost accounting practices used to develop estimates (i.e., your cost proposals to the Government) be consistent with the cost accounting practice used to accumulate and report cost with your accounting system. While FAR Part 31 does not clearly spell-out a similar requirement. FAR Part 15 (i.e., Table 15-2) set a clear expectation that estimate can be tracked back to known data in your cost accounting system. The DFARS Cost Proposal Checklist requires that you explain “whether the proposal is consistent with established estimating and accounting principles and procedures and FAR Part 31, Cost Principles, and, if not,” you are required to provide an explanation. Clearly the Government expects consistency.

Learn more about CAS 401

CAS 402

Consistency in allocating costs incurred for the same purpose, requires that each type of cost be allocated only once and on only one basis to any contract or other cost objective. FAR 31.202, Direct costs, and FAR 31.203, Indirect costs, uses slightly different wording to require the exact same requirement.

Learn more about CAS 402

CAS 405

Accounting for unallowable costs, already required by FAR 31.201-6(c)(1) which states: “The practices for accounting for and presentation of unallowable costs must be those described in 48 CFR 9904.405, Accounting for Unallowable Costs.” (Emphasis Added)

Learn more about CAS 405

CAS 406

Cost Accounting Period, requires that a contractor use its fiscal year as its cost accounting period, in most cases. FAR 31.203, Indirect costs, has the same basis requirement.

So as far as your cost accounting practices go a trigger contract requiring modified CAS coverage does not significantly change the rules of the Government Contracting game you have already been playing for your cost-based contracts with the Federal Government.

So, what is the big new CAS requirement?

You must ask, “mother may I,” 60 days in advance of making any change to your cost accounting practices and you get to pay the Government back any increased cost the change may have created to Government contracts, with interest. Additionally, the Government simply takes any decrease cost – without even a thank you. Granted this process is not easy and getting Government resources to support you is not easy, it is really the only new requirement with Modified CAS coverage.

Redstone GCI is available to assist contractor’s in assessing their current cost accounting practices and being well position to handle any future or current CAS requirements. Redstone GCI assists contractors throughout the U.S. and internationally with understanding the Government’s expectations in applying FAR Part 31, Cost Principles and Cost Accounting Standards.

CAS Applicability Information and Resources DOWNLOAD NOW

Written by John C. Shire, CPA

John C. Shire, CPA John is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to the DFARS business systems, CAS Disclosure Statements, and DCAA/DCMA compliance preparation, advisory, and defense. Prior to joining Redstone Government Consulting, John served in a number of capacities with DCAA/DCMA for more than 30 years. Upon his retirement, he was based in Texas as an SES-level Corporate Audit Director for DCAA, managing a staff of 300 auditors at one of the largest DOD programs. Professional Experience John began his career in the late 80s working in the Clearwater, FL audit office and over the next three decades he progressed through a number of positions within both DCAA and DCMA with career highlights as DCAA Program Manager at Ft. Belvoir, Chief of Technical Programs Division, Deputy Assistant Director-Policy, Director of the DCMA Cost and Pricing Center, the SES-level Lockheed Martin Corporate Audit Director, and Director of Integrity and Quality Assurance. John’s three decades of experience in performing and leading DCAA auditors and DCMA reviewers provides a wealth of expertise to our clients. John’s role, not only in the performance of audits, but also in the development of audit policy affords him unique insights into the defense of audit findings and the linkage of audit program steps to the underlying regulatory framework. He is an expert in FAR, DFARS, and other agency acquisition regulation, as well as a subject matter expert in the Cost Accounting Standards having reviewed and provided audit feedback on many of the largest and most complex cost accounting practices during his tenure with the DCAA. John’s tenure with DCAA and DCMA came at a critical time during each agency’s history where a number of changes were occurring such as the response to the ICS backlog, development of audit approaches to the DFARS Business Systems and implementation of new audit initiatives as a result of Congressional oversight through the NDAA process. John’s leadership at the DCMA Cost & Pricing center saw oversight of all major DOD pricing actions, leadership of should cost review teams, the Commercial Pricing group and many other areas of strategic value to our clients. His involvement in these and other Agency initiatives is of great value to our clients due to his in depth understanding of DCAA and DCMA’s internal policy directives. Education John holds a Master of Business Administration and a B.A. in Accounting from the University of South Florida. Certifications Certified Information Systems Auditor State of Alabama Certified Public Accountant

About Redstone GCI

Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals.

Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs.

One thing our clients can be certain of is that with the Redstone GCI Team in your corner, there is no problem too big and no issue too technical for our team to tackle.

Topics: Government Regulations, Cost Accounting Standards (CAS), Federal Acquisition Regulation (FAR)