Cost Accounting Standards Board

The importance of cost accounting plays a major role in our society, setting retail prices for merchandise and goods used by the consumer. Billions of dollars are spent each year on goods and services that the average consumer may rely heavily upon, so it is only in good moral standing to regulate and restrict the amount paid for such materials. In many countries including the United States the levels of income very from person to person. Regardless of the amount of money earned per individual, the costs for available products should be fair and not subject to dramatic exponential increases or decreases. Thus, the creation of a committee that determines a set price on all consumer goods, and devises a set of concrete standards that are to be lawfully followed by large corporations and businesses to the single individual. Realizing the usefulness of regulating cost accounting, a board to do just that, was formed, the Cost Accounting Standards Board (CASB) was founded.

The CASB consists of five members, which are the following; a Representative from the Department of Defense (DOD), an Officer from the General Service Administration (GSA), two individuals from the private sector, one from the industry, and the other an expert in the field, and the “Chairman”, the Administrator of the Office of Federal Procurement Policy (OFPP). “The OFPP Administrator serves as Chair of the Cost Accounting Standards Board (CASB), an independent board which has exclusive authority to establish standards for use by contractors and subcontractors to achieve uniformity and consistency in the measurement, assignment and allocation of costs to government contracts. The CASB’s cost accounting standards are promulgated as regulations. OFPP provides staff support to the CASB.”

All members of the CASB except for the Chairman have four year terms. The Representative from the DOD and the Officer from the GSA can be appointed for additional terms. Both of whom, are subjected to dismissal if they are no longer employed within their distinguished agencies. Vacancies are inevitable, the DOD and GSA seats are filled no different than the appointees before them. “A vacancy on the Board shall be filled in the same manner in which the original appointment was made. A member may be reappointed for a subsequent term(s). Any member appointed to fill an interim vacancy on the Board shall serve for the remainder of the term for which his or her predecessor was appointed. In the event of the absence or incapacity of the Administrator or during a vacancy in the office, the official of the Office of Federal Procurement Policy, acting as Administrator, shall serve as the Chairman of the Board.” Each member selected is highly qualified in his or her position regarding their functions in order to properly implement the guidelines of cost accounting.

The need for such a committee has emulated from congressional concerns regarding pricing and inconsistencies in cost accounting practices. Congress proposed a plan to the General Accounting Office (GAO) to estimate the probability of implementing Cost Accounting Standards (CAS) in regards to unifying and benefiting all firms and executive agencies. The GAO found it practical to regulate CAS. In turn Congress established the CASB in 1968. “Cost Accounting Standards promulgated by the Board shall be mandatory for use by all executive agencies and by contractors and subcontractors in estimating, accumulating, and reporting costs in connection with pricing and administration of, and settlement of disputes concerning, all negotiated prime contract and subcontract procurements with the United States Government in excess of $500,000, other than contracts or subcontracts that have been exempted by the Board’s regulations.”

Formed in 1968, the CASB operated as a committee until 1980, when Congress deemed the committee irrelevant based on its succession to regulate the CAS. However, in 1988, the CASB was re-activated and given a permanent seat as a government organization. The CASB office is located in Washington, DC and operates yearly and are only dismissed from their duties on observed Federal holidays. The “Chairman” of the CASB holds supreme power and arranges the discussions of various issues in regards to controlling and regulating the CAS at his or her discretion. A quorum of three board members with one member from the private sector must be met before new CAS can be executed. “CAS were designed to achieve uniformity and consistency in the measurement, assignment, and allocation of costs to Government contracts. The standards were based on examinations of common cost accounting practices throughout the industry. Advice and comments were sought from Government agencies, industry, and professional accounting associations. Numerous publications on the subject were also reviewed. CAS is not, therefore, an onerous set