Tuesday, December 27, 2016

Defense Cost Accounting Standards - Part 2

We are continuing to unpack the Defense Const Accounting Standards provision (Sec. 820) included in the 2017 NDAA (National Defense Authorization Act). Yesterday we discussed Sec 820's provisions designed to reinvigorate the CAS (Cost Accounting Standards) Board (See Part 1). Today we discuss the section dealing with the creation of a Defense Cost Accounting Standards Board (DCASB), its purpose and composition.

The DCASB is to be established as an independent board in the Office of the Secretary of Defense. There will be seven members, chaired by DoD's Chief Financial Officer. The remaining six members, all of whom must have experience in contract pricing, finance, or costs accounting include three representatives from the Department of Defense and three from the private sector. The private sector representatives must include one member who is a representative of a nontraditional defense contractor and one of whom is a representative from a public accounting firm.

Don's confuse DCASB with CASB. DCASB is the newly constituted Defense Cost Accounting Standards Board. CASB is the regular Cost Accounting Standards Board which has been around since the early-1970s.

Duties of the DCASB. The DCASB -

  1. shall review cost accounting standards established by the CASB and recommend changes to such cost accounting standards to the CASB.
  2. has exclusive authority with respect to the Department of Defense to implement such cost accounting standards to achieve uniformity and consistency in the standards governing measurement, assignment, and allocation of costs to contracts with the DoD, and
  3. shall develop standards to ensure that commercial operations performed by Government employees at the Department of Defense adhere to cost accounting standards (based on cost accounting standards established by the CASB) or GAAP (Generally Accepted Accounting Principles) that inform managerial decision-making.

We have no idea of the intent of item 3 above but we'll figure it out and let you know once we do.

Sec 820 does not set term limits for DCASB board members except for the provision that Government members can no longer serve after leaving Government service. Private sector members will be compensated at around $80 per hour for the time spent engaged in the actual performance of duties vested in the Board. Government members receive no extra pay.

Tomorrow we will look as specific provisions within Sec 820 affecting DCAA (Defense Contract Audit Agency) and the opportunities for contractors to reduce DCAA oversight.

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