July 19, 2005
The Board discussed the following issues:
The Board was briefed on the current status of the following initiatives:
- Alternative Disclosure Statement for UK Contractors (public comments
due by July 22, 2005)
- Employee Stock Ownership Plans (at Federal Register for publication)
- CAS 404.60(a) – Capitalization Illustration (published in Federal
- CAS 403 Operating Revenue Threshold (in coordination with OMB Legal
Counsel and OIRA)
- Contract Clause for Foreign Concerns (in coordination with OIRA)
- T&M/Labor-Hour Contracts for Commercial Items (at Federal Register
- Adjustment of Thresholds for Inflation (in coordination with OMB
Legal Counsel and OIRA)
- Letter from U.S. Agency for International Development (in coordination with State Department)
CAS Board Working Group Projects
In accordance with instructions from the May 13, 2005 meeting, the staff presented a list of potential issues that could merit establishment of working groups. After assessing the complexity and resources required to address each of the issues, along with the current projects/workload of the staff, the Board instructed the staff to establish working groups that will be tasked to address the following:
Working Group 1: Disclosure Statement Requirements Review
Tasking: Review the current submission requirements for segments and home offices. Determine if there are commensurate benefits associated with the costs of the contractor completing and maintaining the Disclosure Statement for segments with modified coverage and/or for home offices that allocate minor/insignificant costs to segments with CAS covered contracts.
Working Group 2: CAS 404 and 409, Tangible Capital Assets
Tasking: Review the current minimum capitalization threshold to determine if it should be amended. Also review the cost and benefits of the record-keeping requirements at CAS 409-50(e) and explore potential alternatives to these requirements.
Working Group 3: CAS 410, Appendix A, Transition from a cost of sales or sales base to a cost input base
Tasking: Identify those contractors that are currently subject to the provisions at Appendix A and review the circumstances of those particular contractors. Based on both the provisions in Appendix A and the circumstances that have caused contractors to remain under the transition method indefinitely, determine if Appendix A should be revised or eliminated. In addition, determine if any action could be taken to complete the transition to a cost input base for those contractors still subject to the provisions in Appendix A. (e.g., contract modifications, a one-time settlement, etc.).
Catastrophic LossesIn accordance with instructions from the May 13, 2005 meeting, the staff provided the Board with a draft Staff Discussion Paper (SDP) regarding the CAS 416 provision for catastrophic losses. The paper included the historical background of the CAS provision and a request for public input on a series of questions concerning the issue of catastrophic losses. The Board approved the SDP for publication in the Federal Register.
CAS Exemption for Contracts Executed and Performed Outside the United StatesIn accordance with instructions from the May 13, 2005 meeting, the staff provided the Board with a SDP regarding the exemption for contracts executed and performed outside the United States. The paper included the historical background of the CAS exemption and a request for input on a series of questions concerning this exemption. After incorporation of changes made by the Board, the SDP was approved for publication in the Federal Register.
Cost Impacts - Changes in Cost Accounting PracticeThe staff presented a paper to the Board that described the different interpretations among both Government and contractor representatives regarding the term “increased costs in the aggregate” as used in P.L 100-679 (amended 41 U.S.C. 422(h)(3)). The staff noted that, on March 9, 2005, the FAR Council issued a final rule revising FAR Part 30, “CAS Administration.” However, the final rule did not specify how to calculate increased costs in the aggregate, since only the CAS Board has the authority to define “increased costs in the aggregate” under P.L. 100-679. The Board instructed the staff to establish a working group to evaluate whether any revisions or interpretations to the Board’s rules and regulations are needed regarding the term “increased costs in the aggregate.” In conjunction with this effort, the Board further instructed the working group to specifically consider how increased costs in the aggregate are computed when a contractor makes multiple accounting changes that take effect on the same date.
CMS Brief on FEHBP Contract AccountingCASB staff member Mr. Eric Shipley provided the Board an advanced paper expressing CMS concerns regarding FEHBP contractor’s exemption from CAS for home office expenses that are allocable to contracts under the FEHB and Medicare programs. However, due to unforeseen circumstances, Mr. Shipley was unable to attend this meeting. Since he has the detailed knowledge of this issue, the Board agreed to table discussion of the subject issue until the next meeting.
Potential Pension Legislative ReformsThe Board discussed the need to stay abreast of current Congressional initiatives that may significantly overhaul the existing pension funding rules. Certain proposals could eliminate many of the core ERISA funding concepts in place now and introduce new funding concepts, measurements and methods. If a significant change is made to pension funding rules, it may be necessary for the CASB to consider a comparable change in the CAS 412 regulations to coordinate the cash contribution requirements to the pension plan and the government reimbursable expense for companies contracting with the government. The Board instructed the staff to coordinate with Mssrs. Patrick Ring of DCMA and Elliot Friedman of Lockheed Martin to monitor and update the Board on the progress of the pension funding legislation to reform pension funding requirements and the impact the legislation could have on the current CAS 412 provisions.
AdjournmentThe meeting was adjourned at 3:30 P.M.
Minutes submitted by David J. Capitano, August 1, 2005.