Cost accounting standards: the board has taken the first steps to meet recent legislative requirements


What GAO found

The Cost Accounting Standards Board (the Board) generally follows recent legislative requirements and has taken initial steps to assess the extent to which government cost accounting standards (CAS) can comply with a set of 12 reporting principles. financial business known as generally accepted accounting. Principles (GAAP).

Composed of five members representing government and industry, the Council issued 19 standards between 1972 and 1980. After that date, the Council met intermittently until 2016. At that time, Congress included a provision in the National Defense Authorization Act for Fiscal Year 2017 to require the Council to meet quarterly, review CAS-related disputes, conform the CAS to GAAP to the extent possible, and report annually to Congress on his efforts, among others.

Since the legislation came into force, the Council has met regularly, has been briefed on CAS-related disputes and is preparing its initial report to Congress. The Board has also taken initial steps to assess the extent to which the CAS can comply with GAAP. The Board summarized its approach in a March 2019 staff discussion paper, which it released for public comment. In it, the Council:

outlined a set of five guiding principles for assessing whether the proposed changes to the CAS are necessary and whether these changes would reduce the burden on contractors while protecting government interests,

identified a roadmap prioritizing the review of standards proposed by the Council, and

included a preliminary comparison of two of the seven standards identified as having the greatest overlap with GAAP (see figure).

Cost Accounting Standards Board’s initial assessment of the potential overlap between the 19 Cost Accounting Standards (CAS) and Generally Accepted Accounting Principles (GAAP)

Some comments submitted in response to the discussion paper by industry groups stated that each of the 19 CASs should be eliminated unless absolutely necessary. Board members told GAO they were considering all options to fine-tune the CAS, but noted that GAAP and CAS focus on two separate goals: GAO on top-tier financial performance of companies. , the CAS on the allocation of costs to individual government contracts. The board of directors and other government officials said removing the CAS requirements to rely solely on GAAP would limit the government’s ability to protect its interests.

Why GAO did this study

Each year, the federal government spends billions of dollars on contracts whose final costs depend, in part, on the amount of overhead and other costs charged to the contract.

Congress created the Council in 1970. The standards it created ensure that contractors correctly charge costs to government contracts. In contrast, GAAP is a set of financial reporting principles that business enterprises can use to prepare financial statements and which include the basis for recognizing and measuring costs in those statements. . Industry representatives and others have raised concerns that complying with the CAS could be a burden and questioned whether the government can trust GAAP.

In 2016, Congress included a provision in law that the Board of Directors, among others, comply with CAS GAAP, to the extent possible. Congress also included a provision for GAO to assess the Council’s efforts. This report assesses the extent to which the Board is taking action to meet legislative requirements and describes the Board’s efforts to comply with the CAS with GAAP.

The GAO has reviewed applicable laws, regulations and directives, Federal Register notices, and other documents relating to the activities of the Council. GAO also reviewed the Board’s methodology for comparing CASs to GAAP and its preliminary analysis of two of the cost accounting standards. Finally, GAO interviewed board members and federal purchasing officials.

For more information, contact Timothy J. DiNapoli at (202) 512-4841 or [email protected]


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