Cost Accounting Standards Board (CASB): Definition, Functionality, and Impact

What Is the Cost Accounting Standards Board (CASB)?

The Cost Accounting Standards Board (CASB) is a pivotal U.S. federal agency established to ensure uniformity and consistency in cost accounting practices related to government contracts and grants. Originally created by Congress in 1970, the CASB was temporarily disbanded in 1980 but reinstated permanently in 1988. Operating under the Office of Federal Procurement Policy (OFPP), the CASB's regulations are codified in 48 CFR, Chapter 99.

Key Highlights:

• CASB promotes standardized cost accounting methods for government contracts and grants.
• Initially founded in 1970, the board was dissolved in 1980 and re-established in 1988.
• The Cost Accounting Standards (CAS) encompass 19 specific standards guiding cost determination in negotiated procurements.

Understanding the Role and Authority of CASB

The Cost Accounting Standards (CAS) consist of 19 comprehensive rules developed by the U.S. government to standardize cost measurement and allocation during negotiated federal procurements. Unlike the Federal Acquisition Regulation (FAR), which mainly governs executive agencies, CAS applies broadly to contractors and subcontractors engaged with the government.

CASB functions within the White House's Office of Federal Procurement Policy (OFPP), a division of the Office of Management and Budget (OMB). The OFPP oversees procurement policies across federal agencies, emphasizing efficiency, economy, and effectiveness in government purchasing.

According to the OFPP, "the Cost Accounting Standards Board holds exclusive authority to establish, amend, and interpret standards that ensure uniformity and consistency in cost accounting practices for contracts with the U.S. Government."

The board comprises five members: a chairperson and four experts with extensive experience in government contract cost accounting. This includes two government representatives, one industry expert, and one accounting professional.

The Evolution: Establishment of the Defense Cost Accounting Standards Board

In 2017, the National Defense Authorization Act introduced Section 820, creating the Defense Cost Accounting Standards Board (D-CASB) to specifically oversee the application of CAS in defense contracts. These provisions became effective on October 1, 2018.

Alongside this development, the original CASB gained new responsibilities, including ensuring CAS standards align with commercial accounting practices, conducting regular reviews to harmonize CAS with Generally Accepted Accounting Principles (GAAP), and annually examining CAS-related disputes to enhance clarity and reduce conflicts.

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