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CASB 46th Meeting
July 19, 2005

The 46th meeting of the Cost Accounting Standards Board (CASB) took place in the Old Executive Office Building, Washington, DC, on July 19, 2005. The meeting was convened at 2:00 P.M. The Board, consisting of the Chair, Mr. David Safavian, Administrator for Federal Procurement Policy (OFPP), and Messrs. DiPasquale, Reed, and Waszily were in attendance. Also in attendance for the entire meeting were Messrs. Abel and Capitano (Board staff), and Mr. Burton, Deputy, OFPP.

The Board discussed the following issues:

Status Reports

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 Register)

  • 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 for publication)

  • 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 Losses

In 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 States

In 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 Practice

The 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 Accounting

CASB 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 Reforms

The 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.


The meeting was adjourned at 3:30 P.M.

Minutes submitted by David J. Capitano, August 1, 2005.