Cost Accounting Standards (CAS)

Thanks to Ginger Baker for providing this information in her SW training session on the Cost Accounting Standards!

The University of Alaska System must comply with four of the Federal Cost Accounting Standards. UA tells the federal government how we conduct business in compliance with the CAS items, plus the Cost Principles of OMB Circular A-21, in UAF's Disclosure Statement (DS-2). The four Cost Accounting Standards that UAF must abide by are:

• CAS 501 - Consistency in estimating, accumulating and reporting costs
• CAS 502 - Consistency in allocating costs incurred for the same purpose
• CAS 505 - Accounting for Unallowable Costs
• CAS 506 - Cost Accounting Period

CAS 501 - Consistency in estimating, accumulating and reporting costs

Purpose:

• Estimating practices for a proposal are consistent with cost accounting practices used in accumulating and reporting costs
• Comparable transactions are treated alike
• Cost estimates are reliable
• Improved cost control
• Enhanced accountability

Fundamental requirements:

• Estimate costs same way that expenses are accumulated and reported
• Accumulate and report costs consistent with cost estimating procedures
• Actual costs may be recorded in more detail than those provided in proposal estimates, but not vice versa

Techniques for application:

• Comparability
  • Must be able to compare costs estimated in proposal with actual costs
• Consistency
  • Direct or indirect
  • Assignment to F&A cost pools
  • Allocation methodologies

Examples of consistent practice:

• Example 1
  • Proposal estimate
    • Average direct labor rate by category
  • Actual
    • Actual labor recorded by the individual
• Example 2
  • Proposal estimate
    • Individual costs are estimated and identified to project in budget
  • Actual
    • Costs are charged directly to the project as incurred

Examples of inconsistent practice:

• Proposal estimate
  • PI effort proposed on a research project is the anticipated effort required to successfully perform the project
• Actual
  • Effort devoted to the project is charged to the restricted fund to the extent of available funding.
  • Effort devoted to the project, but paid from general funds, is charged to an instruction account

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CAS 502 - Consistency in allocating costs incurred for the same purpose

Purpose:

• Each type of cost is allocated only once and on only one basis to any contract or other cost objective
• Criteria for allocating costs to sponsored agreements is same for all similar cost objectives
• Prevent overcharging, double counting, or double dipping

Fundamental requirements:

• All costs incurred for the same purpose in like circumstances are either direct or indirect only
• If a sponsored agreement is charged directly for a cost, no other similar costs incurred for the same purpose, in like circumstances, can be in the F&A cost pools and subsequently the F&A rate (and vice versa)

Techniques for application:

• Apply to estimates used in proposals and to actual costs
• Describe in DS-2 which cost items are direct which are indirect
• Describe criteria of dissimilar circumstances and/or different purposes for hybrid costs

Examples of costs not incurred for same purpose:

• Test equipment costs
  • Special - charged directly
  • General purpose - normally indirect
  • Accounting treatment disclosed

Example of costs incurred for same purpose:

• Purchasing support
  • Indirect cost
  • Sponsored project requires disproportionate amount of subcontract administration
  • Costs cannot be charged both directly and indirectly
• Costs incurred in preparing and submitting proposal
  • Renewal proposal
    • Existing award’s specific requirement
      • Direct cost of existing contract
  • Existing award has no specific requirement
• Indirect cost of department

• New Proposals

  • Indirect cost of department

• Fire protection

  • 10 general firefighters

    • Indirect cost
  • New contract requires 3 firemen at fixed post 24 hours due to high risk materials
    • Direct cost

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CAS 505 - Accounting for Unallowable Costs

Purpose:

• Facilitate the negotiation, audit, administration and settlement of sponsored agreements by establishing the guidelines covering
  • Identification of unallowable costs
  • Consistent cost accounting treatment of all costs, including unallowable costs
• Does not address which costs are allowable (This can be found in OMB Circular A-21)

Fundamental requirements:

• Two types
  • Costs expressly unallowable by sponsor, laws, or rules
  • Costs directly associated with unallowable costs
• Identify and exclude all costs from any billing, claim, application or proposal that are
  • Expressly unallowable OR
  • Mutually agreed to be unallowable
• All unallowable costs are subject to the same cost accounting principles as allowable costs
  • Allocable

Techniques for application:

• Documentation required as support for proposals, billings, or claims must be adequate to
  • Identify unallowable costs through specific account codes and program codes
  • Identify cost accounting treatment of the unallowable costs

A-21, Section J - Examples of unallowables:

• Advertising
• Alumni activities
• Bad debt
• Dependent/spouse tuition waivers
• Alcoholic beverages
• Donations

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CAS 506 - Cost Accounting Period

Purpose:

• Provide criteria for the selection of cost accounting time periods for F&A rate development
• Enhance objectivity, consistency, and verifiability, and promote uniformity and comparability in sponsored agreement measurements

Fundamental requirement:

• Use fiscal year, except:
  • Costs of indirect function which exists for part of fiscal year may be allocated to cost objectives of same period
  • Another annual period may be used if an established practice at institution
• Recharge activities may have a different year

Techniques for Application:

• Government can agree to allow institution to use a fixed annual period other than its fiscal year

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