Cost Accounting Standards (CAS) 403 governs how home office expenses are allocated to business segments performing government contracts. The purpose of CAS 403 is to establish criteria for allocating home office expenses to the segments of an organization based on a beneficial or causal relationship. The standard requires contractors to allocate home office costs in […]
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Managing Cost Accounting Standards
Once a single award is CAS-covered, a contractor’s compliance requirements can change significantly. Contractors should evaluate their readiness before accepting a CAS-covered award and understand the requirements that come with it.
Contractors that are already CAS-covered must also monitor ongoing CAS compliance to help ensure they bid, book, and bill costs in accordance with their disclosed cost accounting practices.
Changes in cost accounting practices within a CAS-covered environment may also require a cost impact analysis.
CAS coverage can have implications beyond ongoing compliance. For example, an organization’s CAS history can affect whether it qualifies as a Nontraditional Defense Contractor (NDC). Learn how NDC status may affect supplier assertions, procurement procedures, and compliance.
RKI can assist in navigating CAS, including:
- Evaluation of readiness for a CAS-covered award
- CAS applicability evaluation
- Administration of cost accounting practice changes, including cost impact analyses
- Evaluation of CAS compliance with specific Cost Accounting Standards
- Preparation and revision of CASB Disclosure Statements
CAS Compliance Services
Our Cost Accounting Standards Compliance Services help your business navigate the strict regulations required for government contracts. We provide expert guidance in implementing and maintaining CAS-compliant accounting systems. Our team is skilled and experienced in navigating CAS compliance and CASB Disclosures.
Implementation
Becoming a Contractor with CAS-Covered contracts is no small feat, nor is it simple to implement the 19 standards. We will help analyze your organization for risk exposure to CAS noncompliance, and devise and execute a plan to fill those gaps with consideration for your oragnization's unique structure.
Cost Impact Analysis
It is important to stay ahead of your cost accounting practice changes, especially as a Contractor with CAS-Covered contracts. We can help analyze the impact of desired, needed, or previously made cost accounting practice changes on affected proposals, and contract claims, and billings. We can also assist on how to best handle cost impact statements and general dollar magnitude (GDM) estimates.
CAS Readiness Reviews
RKI routinely performs CAS readiness reviews of contractors, including an evaluation of current state practices to determine if they are ready to comply with the Cost Accounting Standards (CAS) so that contractor’s can have confidence they are ready to comply with CAS prior to having it apply to their awards.
How CAS Compliance Supports Financial Performance
Reliable CAS compliance reduces audit findings, protects revenue, and supports stronger financial stability for government contractors. By following consistent cost accounting practices, companies reduce the risk of questioned costs during audits and maintain accurate cost allocation across contracts.
Strong CAS compliance also improves financial visibility. Contractors gain clearer insight into labor, overhead, and indirect expenses, allowing for better budgeting, pricing, and long-term planning. In addition, demonstrating compliance builds credibility with government agencies, helping position contractors as reliable and lower-risk partners for future work.
Navigate Cost Accounting Standards (CAS) Compliance with Confidence
Cost Accounting Standards are a critical part of working with federal contracts, especially for businesses handling larger or more complex projects. Understanding how CAS applies—and improving your accounting practices are aligned—can help reduce risk and improve your positioning for government work.
At RKI, we support contractors in interpreting CAS requirements and implementing processes designed to align with applicable standards. Whether you're preparing cost proposals, updating your accounting system, or responding to audit inquiries, we can assist with tailored guidance based on your specific situation.
CAS Compliance
Frequently Asked Questions
Our team is skilled and experienced in navigating CAS awards and the potential pitfalls that come with them.
We specialize in providing exceptional CAS-compliant services to businesses engaged in government contracting. Navigating the intricate requirements of Cost Accounting Standards (CAS) can be daunting, but our expertise ensures your financial practices meet all necessary regulations.
Cost Accounting Standards, commonly referred to as CAS, is a set of nineteen (19) standards promulgated by the CAS Board (CASB) designed to ensure uniformity and consistency in the measurement, assignment, and allocation of costs to contracts with the United States Government (USG). CAS covers a variety of costs such as depreciation, pension plans, personal compensation, indirect costs and other areas of cost accounting
The CASB DS-1 is a form required by the United States Government (USG) required for submission for a contract or business segment with Full-CAS applicability (explained below). The CASB DS-1 discloses:
- General business information;
- How you distinguish between direct and indirect costs and indirect allocation methodology;
- Depreciation and capitalization practices;
- Other costs and credits;
- Deferred compensation and insurance costs; and
- Home office expenses.
There are two types of CAS applicability coverage: Modified- and Full-CAS. Click here for an up-to-date guide issued by the Defense Contractor Audit Agency (DCAA) for determining whether your company/business or contract is subject to either Modified- or Full-CAS.
Note: submission of a CASB DS-1 is only required if your company/business or contract is subject to Full-CAS.
CASB DS-1 should not be submitted prior to Full-CAS coverage applicability, unless a solicitation your are pursuing specifically requires it. It is, however, prudent to have the Disclosure Statement prepared and ready (i.e., not submitted to the Government) if you anticipate future Full-CAS coverage.
Absolutely. Disclosure Statement adequacy is only one part of the equation! The Defense Contract Audit Agency (DCAA) actually maintains eight types of noncompliance based on CASB rules, regulations, and standards and FAR Part 31:
- Disclosed practices not compliant with CAS.
- Disclosed practices not compliant with FAR.
- Actual practices of estimating costs not complaint with CAS.
- Actual practices of estimating costs not compliant with FAR.
- Actual practices for estimating costs not compliant with the practices disclosed in the Disclosure Statement.
- Actual practices for accumulating or reporting costs not compliant with CAS rules and regulations.
- Actual practices for accumulating or reporting costs not compliant with FAR.
- Actual practices for accumulating or reporting costs not compliant with the practices disclosed in the Disclosure Statement.
Upon filing and submission of your CASB DS-1 with your Administrative Contracting Officer (ACO) or Cognizant Federal Agency Official (CFAO), they will review for adequacy. Once the ACO or CFAO deems your Disclosure Statement adequate, a government audit agency will be prompted to audit the disclosed accounting practices through an initial Disclosure Statement audit within sixty (60) days. Moreover, your disclosed accounting practices may also be audited indirectly during:
- Proposal evaluations
- Estimating system surveys
- Certified cost or pricing audits
- Incurred cost audits
- Other DFARS Systems audits
If you have questions or concerns related to audits, an upcoming audit, or previous audit findings, please don’t hesitate to contact us.
There are many examples of CAS noncompliance. For illustrative purposes, below are a few very basic examples:
- Contractor uses a direct labor allocation base, as opposed to Total Cost Input (TCI) for its General & Administrative (G&A) expenses when direct labor is not an accurate cost input base representing the total activity of the business (CAS 410)
- Contractor excludes a subsidiary entity that it supports from its G&A allocation base (CAS 410, 403)
- Contractor charges procurement personnel as direct labor under some contracts, while treating them as indirect under others in like circumstances (CAS 402, 418)
- Contractor has significant design engineering and manufacturing expenses with different causal/beneficial relationships to final cost objectives that included in a single overhead pool (e.g., using a single overhead rate when two is warranted) (CAS 418)
To become CAS compliant, contractors must identify the relevant CAS standards applicable to their prospective or current contracts. It's crucial to recognize that not all standards apply to every contract. Therefore, contractors should determine the standards that are relevant to their specific situation.
Cost Accounting Standards (CAS) focus on accurate cost allocation and compliance for companies working with U.S. government contracts, ensuring consistency and transparency in federal spending. Generally Accepted Accounting Principles (GAAP), on the other hand, provide a broader set of guidelines for all U.S. businesses, ensuring reliable and transparent financial reporting for investors and stakeholders. CAS is more detailed and specialized, while GAAP covers general financial accounting for various industries. Both aim to promote accuracy and consistency, but CAS is specific to government work, while GAAP serves the private sector.
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