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Consistency in Estimating, Accumulating, and Reporting Costs

Consistency in Estimating, Accumulating, and Reporting Costs
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  • 0:01 CAS 401
  • 1:52 Fundamental Requirements
  • 2:30 Compliant Practices Example
  • 3:00 Non-Compliant…
  • 3:29 Lesson Summary
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Lesson Transcript
Instructor: Beth Loy

Dr. Loy has a Ph.D. in Resource Economics; master's degrees in economics, human resources, and safety; and has taught masters and doctorate level courses in statistics, research methods, economics, and management.

Learn more about Cost Accounting Standard 401, which is outlined in the Federal Acquisition Regulations System within the Code of Federal Regulations. Find out what is compliant when estimating, accumulating, and reporting costs.

CAS 401

Imagine that as a nonprofit, we contract with the federal government to provide inner-city education. Let's call us MAT (Masters at Teaching). We provide training to individuals who want to pass their General Educational Development (GED) tests to get a high school equivalency certificate. Every five years, we go through what is called a re-bid process. This is where we respond to the government's request for proposal (or RFP) for our grant funds. We have to compete for this and must have the top solicitation to receive our funds and continue our work.

An important part of any solicitation is the budget. There has to be consistency in estimating, accumulating, and reporting costs. The Code of Federal Regulations (CFR) lays out the rules for government contractors that MAT must follow. An entire title of the CFR is dedicated to the Federal Acquisition Regulations System (FARS), which regulates how the government and agents of the government purchase goods and services.

Part 9904 is the section of Title 48 that details the cost accounting standards, which is what we are interested in for this lesson. If you go to Section 401 of Part 9904, it lays out what is called the Cost Accounting Standard (CAS). CAS 401 exists to ensure that we use the same cost accounting practices to accumulate and report costs as we do when estimating costs.

Why is CAS 401 so important to nonprofits like MAT? Because it enables the government to compare estimated to actual costs to make sure the contractor is spending funds wisely. CAS 401 also helps the government make comparisons among proposals to see which proposal gives the most output for the least costs.

Fundamental Requirements

As a federal contractor, CAS 401 outlines three essential obligations for MAT:

  • The accounting practices used to estimate the costs of a contract must be used to accumulate and report costs during performance of the contract.
  • The accounting practices used in accumulating and reporting actual costs for a contract must match those used to estimate costs in the contractor's proposal.
  • Giving more detail when providing accumulating and reporting costs is acceptable as compared to what was used to estimate costs in the proposal.

Let's look at examples of what is and isn't compliant under CAS 401.

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