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FAR 31.205-20 makes interest unallowable, however, cost of money is not interest based on the CAS Board and is allowable (see our article Interest is Unallowable – How is That Possible). Cost of money is an imputed cost that is provided to contractors to recover the time value of money invested in facilities and equipment that benefit government contracts. Contractors that do not have contracts subject to full CAS, follow FAR 31.205-10 Cost of money which incorporates CAS 414 (Cost of Money as an Element of the Cost of Facilities Capital) and CAS 417 (Cost of Money as an Element of the Cost of Capital Assets Under Construction) and allows cost of money as a cost as long as it is measured, assigned and allocated in accordance with the standard. Cost of money must be specifically identified and proposed in cost proposals to be claimed or billed. Let’s discuss the requirements of CAS 414 and 417.
What is the Purpose of CAS 414 and CAS 417?
- CAS 414 provides the criteria for the measurement and allocation of this imputed cost as an element of contract cost.
- CAS 417 is the criteria for measurement of cost of money as an element of cost for capital assets under construction, fabrication, or development.
What are the Requirements of CAS 414?
CAS 414 requires the facilities cost of money factor to be determined using the CASB CMF Facilities Capital Cost of Money Factors Computation Form and its instructions. Cost of money rates can be calculated for any indirect cost pool that has deprecation or amortization. The cost of money amount is computed by multiplying the net book value of the assets assigned to each indirect pool by the Treasury rate. The cost of money factors are calculated by dividing the cost of money amount for each indirect pool by the corresponding allocation base of the indirect pool. These imputed amounts are not recorded in your accounting system so, you need to maintain the supporting CASB CMF forms. You want to make sure you clearly present the cost of money in each price proposal to the Government.
The CASB CMF form can be difficult to complete as the computations are slightly different for forward pricing and incurred cost and it gets more complicated when there is NBV for undistributed, corporate, and leased costs are involved.
What is CAS 417 All About?
CAS 417 allows you to impute and recover the cost of money related to your self-constructed assets during construction.
Takeaways
When the Treasury rates are low it may not be administratively beneficial to complete the CASB CMF Form and compute cost of money factors. However, since treasury rates are increasing, contractors should take advantage of computing and recouping cost of money on your capital investments that benefit Government contracts as well as including it as part of the capitalized cost of constructed assets. Once cost of money factors are computed, make sure to include them in price proposals so you can bill and claim the costs after award. Don’t leave money on the table.
Redstone GCI offers comprehensive support to your company, including assistance with completing the CASB Cost Accounting Standards Board Disclosure Statement (CMF Form) for both forward pricing and incurred cost claims. Our team is also available to draft written policies and procedures tailored to your specific needs. In addition, we provide expert training on Cost Accounting Standards, ensuring your team is fully equipped with the knowledge to navigate these complex requirements.
Lynne is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Item Determinations and support, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Professional Experience Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. Lynne was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Education Lynne earned a Bachelor of Science Degree in Accounting from the University of Central Florida. Certifications State of Florida Certified Public Accountant State of Alabama Certified Public Accountant Defense Acquisition Workforce Improvement Act (DAWIA) Level III- Auditing DAWIA Level III – Contracting