Cost Accounting Standards

Relevent Documents

• Implementing Cost Accounting Standards at Stony Brook
• Policy on Financial Management of Service Centers
• Some other Institution's CAS Web Sites
• DHHS Audit Guide for Audits of Disclosure Statements (DS-2) at    Colleges and Universities at COGR
• New changes proposed by The Governmental Accounting Standards    Board (GASB) (Exposure Draft Statement 34)

Cost Accounting Standards, a new issue for universities, is an outgrowth of what has been applied to private corporations contracting with the Defense Department since the 1970s. Their implementation is in some way connected to the political furor that developed around the Stanford incident. Stony Brook, as one of the top 100 research institutions in the country, will be required to file a detailed disclosure statement with the federal government by July 1, 1998. The Cost Accounting Standards and Disclosure Statement are the Government's approach to insure that we, as a supported institution, are in full compliance with the Office of Management and Budgets Circular A-21, Cost Principles for Educational Institutions.

The disclosure statement known as a DS-2 is a formal description, prepared and certified by the institution, of a contractor/grantees cost accounting practices. The DS-2 is intended to establish a clear understanding of the practices under generally accepted accounting principles that the educational institution proposes to follow. More importantly, the DS-2 explains the methodology for distinguishing direct from facilities and administrative costs (previously known as indirect costs) and identifies the method and basis for allocating the facilities and administrative costs. In accordance with Public Law 100-679 we will be required to comply with CAS and disclose in writing, and follow consistently our cost accounting practices. These changes have also been incorporated in the May 8,1996 revisions to OMB Circular A-21 and require educational institutions to submit a DS-2 and adhere to the following four standards:

Consistency in Estimating, Accumulating and Reporting Costs: this standard ensures that each educational institutions practices used to estimate costs for a proposal are consistent with the cost accounting practices used by the educational institution in accumulating and reporting costs.

Consistency in Allocating Costs Incurred for the Same Purpose: this standard requires that each type of cost is allocated only once and on only one basis to any contract or other cost objective.

Accounting for Unallowable Costs: the purpose of this standard is to facilitate the negotiation, audit, administration and settlement of contracts by establishing guidelines covering:

(a) Identification of costs specifically described as unallowable, at the time such costs first become defined or authoritatively designated as unallowable.

(b) The cost accounting treatment to be accorded such identified unallowable costs in order to promote the consistent application of sound cost accounting principles covering all incurred costs.

Consistency in Using the Same Cost Accounting Period:  this standard provides criteria for the selection of the time periods to be used as cost accounting periods for contract cost estimating accumulating and reporting.