DCAA (Defense Contract Audit Agency) has published a "CAS Cost Impact Adequacy Tool" to help auditors determine whether contractor submitted GDMs (Gross Dollar Magnitude) and detailed cost impact proposals are adequate for audit.
The CAS Cost Impact Adequacy Tool can be downloaded here.
When a contractor with CAS covered contracts makes a change to its cost accounting practices, there is a strong presumption that costs will somehow shift between final cost objectives. Costs could shift from government contracts to commercial contracts and vice versa. Costs could shift from fixed-price contracts to cost-type contracts, and vice versa.
Examples of cost accounting changes from CAS regulations include:
- Contractor changes its actuarial cost method for computing pension costs
- Contractor uses standard costs to account for its direct labor. Labor cost at standard was computed by multiplying labor time standard by actual labor rates. The contractor changes the computation by multiplying labor time standard by labor-rate standard.
- Contractor changes its established criteria for capitalizing certain classes of tangible capital assets.
- Contractor changes its methods for computing depreciation for a class of assets.
- Contractor changes its general method for determining asset lives.
- Contractor changes its method of allocating G&A expenses.
- Contractor changes the accounting for hardware common to all projects
- Contractor merges operating segment A and B which use different cost accounting practices.
We always advise contractors to utilize any available DCAA checklist. That is a good way to self-assess the adequacy and sufficiency of internal processes and reduce the chances of "surprises" during the audit.
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