Introduction to Cost Accounting Standards (CAS)

The Office of Management and Budget, OMB Circular A-21, Cost Principles for Educational Institutions requires educational institutions to follow four Cost Accounting Standards (CAS) for all sponsored agreements:

501 - Consistency in Estimating, Accumulating and Reporting Costs by Educational Institutions

Fundamental Requirement - An educational institution's practices used in estimating costs in pricing a proposal shall be consistent with the educational institution's cost accounting practices used in accumulating and reporting costs.

502 - Consistency in Allocating Costs Incurred for the Same Purpose by Educational Institutions

Fundamental Requirement - All costs incurred for the same purpose, in like circumstances, are either direct costs only or F&A costs only with respect to final cost objectives.

505 - Accounting for Unallowable Costs

Fundamental Requirement - Costs expressly unallowable or mutually agreed to be unallowable shall be identified and excluded from any billing, claim, application, or proposal applicable to a Sponsored Agreement.

506 - Consistency in Using the Same Accounting Period for Purposes of Estimating, Accumulating and Reporting Costs

Responsibility for Compliance

Responsibility for compliance with the Cost Accounting Standards lies primarily with PIs of sponsored projects, department heads, and college/department fiscal officers. University administration is responsible for guidance and training, and for ensuring compliance through periodic internal and external audits.

USF CAS Policies and Procedures:

http://www.research.usf.edu/sr/CAS_Policies_and_Procedures_3.htm

USF Office of Research Policy:

http://www.research.usf.edu/vpfr/policy/charcost.pdf

Criteria for Determining Allocability of Costs

A cost is allocable to a sponsored agreement if:

• It is incurred solely to advance the work under the sponsored agreement.
• It benefits both the sponsored agreement and other work of the institution in proportions that can be approximated through use of reasonable methods.
• It is necessary to the overall operation of the institution and is deemed to be assignable in part to sponsored projects.

Research CLARIFICATION OR CHANGE IN PROCEDURE (CCHIP) 002: Determining Allowability, Reasonableness and Allocability of Costs for Sponsored Projects

Costs may not be allocated:

• To meet deficiencies caused by overruns or other fund considerations.
• To avoid restrictions imposed by law or by terms of the sponsored agreement.
• For other reasons of convenience.

Criteria for Determining Allowable Costs

In order to be allowable as a project cost, costs must be:

• Reasonable and necessary.
• Allocable.
• Adequately and explicitly documented.
• Consistent with University and sponsor guidelines.
• Consistent with award terms and conditions.
• Appropriate under Cost Accounting Standards if federal funds are included.

Refer to Section J of OMB Circular A-21: http://www.whitehouse.gov/omb/circulars/a021/a21_2004.html#j

Unallowable Costs:

Costs considered "unallowable" in accordance with federal and state regulations and sponsor-specific terms and conditions must be identified and accounted for separately.

Unallowable costs must be identified and charged to an unrestricted source of funds in the college or department.

The following links contain sponsor specific definitions of Unallowable Costs:

• NSF
• NIH

Research CLARIFICATION OR CHANGE IN PROCEDURE (CCHIP) 005: Removal of Unallowable Charges on Sponsored Projects

Project Costs:

The cost of a sponsored agreement comprises the allowable direct costs incidental to its performance, plus the allocable portion of the allowable F&A costs of the University.

Direct Costs vs. Indirect Costs [Facilities & Administrative (F&A) Costs]

Direct Costs

"... those costs that can be identified specifically with and relate directly to a particular sponsored project..."

Facilities & Administrative (F&A) Costs

"...those that are incurred for common or joint objectives [of the University] and, therefore, cannot be identified specifically with a particular sponsored project..."

CAS Exceptions

Circumstances do exist where costs normally not allowed are permissible. These are frequently referred to as CAS exceptions (Cost Accounting Standards) or A-21 exceptions.

A-21 does not prohibit costs identified by the University as indirect from being charged directly to a sponsored agreement. However, strict criteria must be met.

Costs normally treated by the University as indirect may be charged to a sponsored project when ALL of the following conditions apply:

• The cost can be readily identified as specific to the project with a high degree of accuracy.
• The cost is incurred for a different purpose or unlike circumstance.
• The cost is explicitly budgeted, with justification and awarded.
• The cost is significantly greater than the routine amount provided by an academic unit.

If the project is federally funded, the PI must prepare and submit a CAS Exemption Form at the time of the award to DSR for review and approval.

USF Office of Research Policy: Charging Costs Directly or Indirectly to Federally Sponsored Projects

Research CLARIFICATION OR CHANGE IN PROCEDURE (CCHIP) 003: Charging of Administrative and Clerical Salaries and Certain Other Expenses to Federal Funds.

USF Disclosure Statement (DS-2)

OMB Circular A-21, requires educational institutions to disclose their cost accounting practices by filing a Disclosure Statement (DS-2). The DS-2 shall be submitted to the cognizant Federal audit agency with a copy to the educational institution's audit cognizant office.

USF's Cognizant Agency:

United States Department of Health and Human Services (DHHS).

DHHS' Cognizant Agency Responsibilities (per OMB Circular A-21):

• Determine cost adjustments for all sponsored agreements in the aggregate on behalf of the Federal Government. Actions of the cognizant agency official in making cost adjustment determinations shall be coordinated with all affected Federal agencies to the extent necessary.
• Prescribe guidelines and establish internal procedures to promptly determine on behalf of the Federal Government that a DS-2 adequately discloses the educational institution's cost accounting practices and that the disclosed practices are compliant with applicable CAS and the requirements of this Circular.
• Distribute to all affected agencies any DS-2 determination of adequacy and/or noncompliance.

USF DS-2:

http://www.research.usf.edu/sr/DS-2_Final_Revised_Submitted_03-09-2007.pdf