Cost Accounting Standards Decoded: CAS 401 Consistency in Estimating, Accumulating and Reporting Costs

At a glance:

• The main takeaway: Understanding CAS (and CAS 401 in particular) is critical for any government contractor and their ability to estimate costs for proposals and reporting costs during contract performance.
• The impact on your business: Government contractors seeking success in the space need to understand the ins and outs of CAS 401 and other relevant provisions to achieve CAS compliance, maintain acceptable accounting standards and win more bids for projects.
• Next steps: Learn the basics of CAS 401 compliance, then use the insights within as stepping stones toward a more successful future in government contracting. 

Connect with our dedicated Government Contract Compliance team today for help with your CAS compliance needs.

The full story:

What is CAS 401?

Cost Account Standard (CAS) 401 is designed to achieve consistency in the cost accounting practices used by a contractor in estimating costs for proposals with those practices used in accumulating and reporting costs during contract performance. It is also designed to provide a basis for comparing such costs.

The consistent application of cost accounting practices will facilitate the preparation of reliable cost estimates used in pricing a proposal and then, once performance under the contract begins, provide a means to compare those cost estimates with the actual cost of contract performance.

Noncompliance with this standard can occur because contractors have failed to estimate their cost in accordance with their established or disclosed accounting practices. It can also occur when the reverse is true and a contractor estimates in accordance with their disclosed or established practices but accumulates on a different basis.

CAS 401 applies to both full and modified CAS-covered contracts. For contractors that are not CAS covered, Federal Acquisition Regulation (FAR) 31.201-1(a) and the Defense Federal Acquisition Regulation Supplement (DFARS) 252.242-7006(c)(17) alludes to these same principles.

Why should government contractors follow CAS 401?

CAS mandates that contractors follow specific accounting practices and procedures in various areas including cost accumulation and estimating. Consistent practices in cost accounting are important because they enhance the reliability of cost information.

Government agencies benefit from consistent application of cost because it aids in evaluating contract performance, making informed decisions, awarding and negotiating new and follow-on contracts. It ensures that government contracts are awarded and executed fairly and priced consistent with your accounting practices. Contractors don’t want to lose a bid-protest against them if it is discovered that your proposal is not consistent with your practices.

A final word

Consistency in estimating, accumulating and reporting costs is a fundamental principle that contributes to the accuracy, reliability and comparability of financial information of a government contracting organization.

Aprio’s dedicated Government Contract Compliance team is here to help with your CAS compliance needs. Connect with us today to discuss your particular situation.

Related Resources:

The Four Horsemen of the Incurred Cost Audit

From Thorns to Roses: Taming Unqualified GSA Labor

Preparing for Your Financial Statement Audit With This Checklist for Government Contractors

48 CFR Part 9904 – Cost Accounting Standards

FAR Part 30 – Cost Accounting Standards Administration

FAR Part 31 – Contract Cost Principles and Procedures

DFARS Part 252.242-7006 – Accounting System Administration