Mark Gentile, CPA

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Cost Accounting Standards

• Mark Gentile, CPA
• Supervisory Auditor
• DCAA Rainier Branch Office

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• CAS Coverage.
• Full vs. modified coverage.
• CAS exemptions.
• CAS vs. FAR
• Disclosure Statements

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CAS Coverage

• Exempt No CAS requirements in contract clauses.
• Modified CAS Coverage
• FAR 52.230-3.
• Full CAS Coverage
• FAR 52.230-2 (CAS Clause).

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Modified vs. Full CAS Coverage

• Modified Coverage Contract subject only to CAS
  401, 402, 405, 406.
• Full Coverage Contract subject to ALL 19 CAS
  standards.

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Modified Coverage

• CAS 401
• Consistency in estimating/accumulating.
• CAS 402
• Costs incurred in like circumstances.
• CAS 405
• Unallowable Costs.
• CAS 406
• Accounting Period.

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Modified CAS FAR 31

• So why Modified CAS?

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CAS EXEMPTIONS

• Negotiated contracts lt 650K.
• Sealed bid contracts.
• FFP contract based on competition without
  submission of cost or pricing data.
• Contracts where prices are set by law/regs.
• Contracts with a small business.
• Existence of 7.5M trigger contract?

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Modified CAS Coverage Thresholds

• 1st Hurdle Existence of Trigger Contract? --
  Required for Modified Coverage.
• Current award gt 7.5M?
• Currently performing a CAS K gt7.5M?

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Full CAS Coverage Thresholds

• 2nd Hurdle 1 Required for Full CAS Coverage
• Current award gt 50M?
• Preceding cost accounting period
• gt50M in CAS covered contracts?
• Current cost accounting period
• gt50M single CAS covered contract?

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CAS Coverage Example 1

• K5 Full CAS Coverage
• K5 Trigger for CAS 50M in preceding pd.

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CAS Coverage Example 2

• K5 Full CAS Coverage
• K4 Trigger for CAS 50M in preceding pd.

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CAS Coverage Quiz

• Is K5 Exempt, Modified, or Full?

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CAS Coverage Answer

• K5 Exempt from CAS.
• No 7.5M trigger.

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CAS Coverage

• CAS coverage rules applies to subcontractors as
  well.

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Disclosure Statements (DS)

• Full CAS Coverage
• Automatic Submission of DS for the business unit.
• Corporate also required (Part VIII).
• Modified Coverage
• Filing depends on

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Disclosure Statements (DS)

• Modified Coverage
• Did the company segments receive 50M in CAS Ks
  in preceding acct period?
• If No Exempt from DS.
• If Yes
• Are the segment CAS-covered awards during the
  prior cost accounting period lt 10M and less than
  30 of total segment sales?
• If No DS required.

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Disclosure Statements-Adequacy and Compliance
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Disclosure Statements-Objectives

• (1) establishing a clear understanding of the
  cost accounting practices the contractor intends
  to follow,
• (2) defining costs charged directly to contracts
  and disclosing the methods used to make such
  charges, and
• (3) The contractor's methods of distinguishing
  direct costs from indirect costs and the basis
  for allocating indirect costs to contracts.

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Disclosure Statements-Adequacy

• Is the DS Current, Accurate, and Complete?
• The Goal
• An adequate DS should minimize future
  controversies between contracting parties
  regarding whether the contractor has consistently
  followed the disclosed practices.

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Disclosure Statements-Adequacy

• CFAO Determination of Adequacy
• Does not necessarily indicate that the CFAO is
  certifying that all cost accounting practices
  have been disclosed.
• It does indicate that those practices disclosed
  have been adequately described, and
• CFAO currently is not aware of any additional
  practices that should have been disclosed.

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Disclosure Statements-Adequacy

• Subsequent discovery of undisclosed practice
• DS requires revision.
• CFAO may withdraw previous adequacy determination.

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Disclosure Statements-Adequacy

• Prime Contractors
• DS adequacy determination before a covered
  contract can be awarded to a prime contractor
  (FAR 30.202-6(b)).
• Subcontractors
• Postaward adequacy determinations of
  subcontractor DS permitted (48 CFR
  9903.202-8(c)(1)).

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Disclosure Statements-Subcontractors

• Prime Contractors Responsibility
• Ensure CAS flow down clauses are included in
  subcontract terms.
• Ensure subcontractor completes certification at
  FAR 52.230-1 (CAS coverage status, DS).
• Ensure subcontractor submits DS to cognizant
  CFAO.

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Cost Accounting Standards

• QUESTIONS?
• Mark Gentile, DCAA
• 509-373-3200, x115
• Mark.gentile_at_dcaa.mil