Changes Coming to Government’s Use of Cost Accounting Standards

Section 820 of the National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-238, 130 Stat. 2000 (NDAA), makes three significant changes to the federal government’s future use of cost accounting standards (CAS).  First, it empowers contractors to avoid Defense Contract Audit Agency (DCAA) audits by employing private auditors to audit their rates.  Next, it creates a new and independent Defense Cost Accounting Standards (DCAS) Board to oversee cost accounting standards across the Department of Defense (DoD).  Finally, it provides direction to the federal government’s existing CAS Board.

(1) Section 820(b)(1) of the NDAA authorizes defense contractors to present commercial auditors’ findings to the DCAA, which must accept them without performing additional audits so long as indirect costs were audited and the commercial auditor used a relevant accounting standard, e.g. Generally Accepted Accounting Principles (GAAP).  This development could be of great significance, and may enable contractors to accelerate the audit process and reduce the risk of protracted and inaccurate audits performed by the DCAA. READ MORE….