Cost Accounting Standards Board (CASB): Definition, Functionality, and Application in Government Contracts

The cost accounting standards board (CASB) is a vital entity within the United States federal government, playing a crucial role in promoting consistency and uniformity in cost accounting practices related to government grants and contracts. Initially established by Congress in 1970, the CASB underwent dissolution in 1980 but was subsequently re-established in 1988, highlighting its enduring importance in the realm of federal procurement and finance.

The cost accounting standards (CAS) represent a comprehensive framework consisting of 19 standards and rules mandated by the U.S. government. These standards serve as guiding principles in determining costs associated with negotiated procurements, thereby ensuring transparency, accuracy, and fairness in financial transactions between the government and contractors. It’s worth noting that CAS differs from the Federal Acquisition Regulation (FAR) in its broader applicability, encompassing not only executive agencies but also contractors and subcontractors engaged in government contracts.

Operating as a function under the Office of Federal Procurement Policy (OFPP), the CASB holds a significant position in the federal procurement landscape. OFPP, as a component of the U.S. Office of Management and Budget (OMB), exercises overarching control over government-wide procurement procedures, aiming to optimize efficiency, effectiveness, and fiscal responsibility. The CASB, under OFPP’s purview, exercises exclusive authority in establishing, promulgating, and amending standards and interpretations aimed at achieving uniformity and consistency in cost accounting practices governing contracts with the U.S. government.

Comprising five members, the CASB boasts a diverse and experienced team dedicated to upholding the integrity of cost accounting practices in government contracts. The board consists of a chair and four members, each bringing unique perspectives and expertise to the table. Notably, the composition includes representation from both governmental and private sectors, ensuring a balanced and comprehensive approach to decision-making.

In 2017, the landscape of cost accounting standards witnessed a significant development with the establishment of the defense cost accounting standards board (D-CASB). Enacted through Section 820 of the National Defense Authorization Act for Fiscal Year 2017, the D-CASB serves as a specialized entity tasked with overseeing the application of cost accounting standards specifically in the defense sector. These amendments, which came into effect on October 1, 2018, underscore the government’s commitment to ensuring robust financial oversight and accountability in defense-related expenditures.

Furthermore, the introduction of the D-CASB ushered in a new set of responsibilities for the existing CASB. Notably, the CASB is mandated to align CAS with commercial standards and accounting practices, conduct regular reviews to ensure conformity with Generally Accepted Accounting Principles (GAAP), and address CAS disputes proactively to mitigate potential conflicts and discrepancies.

The primary goal of the CASB is to ensure consistency and uniformity in cost accounting practices concerning government grants and contracts.

The CASB comprises five members, including a chair and four individuals with expertise in government contract cost accounting.

The D-CASB oversees the application of cost accounting standards specifically to defense contracts, ensuring compliance and uniformity in cost accounting practices within this sector.