Cost Accounting Standards (CAS) Compliance

When applicable, compliance with Cost Accounting Standards (CAS) is one of the single hardest challenges contractors face in their accounting and compliance programs. Once a single award is CAS covered, a contractor’s universe changes. Contractors need to measure their readiness for the award of a CAS-covered contract. Additionally, those contractors who are already CAS-covered have requirements for monitoring compliance ensuring that they bid, book, and bill costs consistent with their disclosed cost accounting practices. Changes in cost accounting practices in a CAS covered environment bring with it the requirement for cost impact analyses. 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 compliance with specific Cost Accounting Standards
  • Preparation/Revision of CASB Disclosure Statements


A: 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.

A: 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.

A: There are two types of CAS applicability coverage: Modified- and Full-CAS. Click  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.

A: 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.

A: After completing the CASB DS-1, our system will prompt you to download and save your file to your company records. For submission, file a copy with the relevant Administrative Contracting Officer (ACO) or federal agency official acting in that capacity, and one copy with your auditor.

Note: Any amendments and revisions shall be submitted in the same manner.

A: 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:

  1. Disclosed practices not compliant with CAS.
  2. Disclosed practices not compliant with FAR.
  3. Actual practices of estimating costs not complaint with CAS.
  4. Actual practices of estimating costs not compliant with FAR.
  5. Actual practices for estimating costs not compliant with the practices disclosed in the Disclosure Statement.
  6. Actual practices for accumulating or reporting costs not compliant with CAS rules and regulations.
  7. Actual practices for accumulating or reporting costs not compliant with FAR.
  8. Actual practices for accumulating or reporting costs not compliant with the practices disclosed in the Disclosure Statement.

While DS Done is a solution for 100% adequacy on the formatting of your Disclosure Statement, CAS compliance requires technical interpretation of the regulations surrounding CAS. For this reason, we offer a complimentary initial consultation upon successful registration and payment on your account and standby should you need extended consulting support throughout your CAS covered journey.

A: 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.

A: Failure to disclose accounting practices when required under Full-CAS is considered a noncompliance and is subject to preclusion from award or penalties as described below under: “What is the penalty for noncompliant cost accounting practices disclosed in a CASB DS-1?”

A: Inadequate formatting of CASB DS-1 greatly hampers the progress of a contractor’s Government Contracts program from an operational, accounting, and billing standpoint. To ensure all contract estimates, procurements, and billings are conducted properly under CAS rules, regulations, and standards and FAR part 31, the accounting practices of Full-CAS covered contracts or companies/business segments are audited via initial Disclosure Statement audit. As previously stated, such audits will only be initiated once the CFAO has deemed the CASB DS-1 to be adequate. Delays in Disclosure Statement adequacy translate to delays in Disclosure Statement audits, and delays in Disclosure Statement audits degrade both contractor and Government confidence in the contractor’s cost accounting reliance.

A: Depending on the situation, there can be a whole host of penalties for noncompliance.

In its simplest sense, the U.S. Government will receive repayment of any material non-compliance if it resulted in increased cost to the Government.  If the CFAO determines that the noncompliance is material, the contractor is required to submit a description of any accounting practice change needed to bring the practices into compliance, which the auditor will review for adequacy and compliance. If the proposed change is both adequate and compliant, the contractor must submit a cost impact detailing the effect the non-compliance had on all, effected CAS covered awards.  The CFAO will evaluate the cost impact and if the result was increased cost to the Government, the CFAO will administer contract and/or billing adjustments, plus applicable fines and interest to repay the amounts due as a result of the noncompliance.  Noncompliant cost impacts take time to develop, negotiate, and are a significant burden and expense to both the contractor and the Government to administer.  It can require going back years into your historical contract and accounting records to obtain the necessary information to perform a cost impact analysis.  “CAS noncompliance” is among the short list of bad words you never want associated with your organization; right along with false claims and defective pricing – words that often get attached to CAS noncompliance if the Government feels the noncompliance was purposeful.

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)
Scroll to Top
Skip to content