Cost Accounting Standards - Definitions
Institutions and researchers must comply with externally imposed requirements related to the management of research funds. The objectives of good fiscal management are twofold:
- To make the best use of available funds to achieve research outcomes
- To avoid problems of fraud, waste, and abuse of sponsor support
Formal cost accounting standards as set forth by the federal government and institutional fiscal policy help set the appropriate fiscal protocols for researchers and the University.
Proper Classification of Costs
This is a key component of compliance with federal regulations. Non-compliance may result in financial penalties for NCSU and could affect our ability to qualify for federal funds.
OMB Circular A-21
Anyone authorizing the expenditure of federal funds must have a working understanding of the underlying cost principles as set forth in OMB Circular A-21 (A-21). These principles govern costs that may be charged either directly or indirectly to the government by educational institutions.
Cost Accounting Standards Board (CASB)
The CASB, an independent legislatively-established board within the executive branch of the federal government, provides guidelines on cost accounting practices, referred to as Cost Accounting Standards (CAS). In 1994, CAS imposed four standards on universities receiving significant awards from federal agencies. In 1996, A-21 was revised to include the four CAS standards and made these standards applicable to all types of federal awards. CASB
imposed these standards to:
- Prevent the charging of unallowable costs to federal awards
- Standardize university costing practices
- Standardize requirements for recipients of federal funds
NCSU must comply with the CAS requirements to ensure the recovery of direct and indirect (F&A) costs. As a required element of CAS, the University must disclose its cost accounting practices in writing to the federal government. NCSU satisfied this requirement with the disclosure statement (DS-2) submitted to the federal government in 1997.
The DS-2 describes the cost accounting practices that NCSU follows. This document lays the groundwork for fiscal policy created to support daily financial operations.
The four cost accounting standards that pertain to NCSU:
1. 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.
2. 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.
3. 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.
4. 506 – Consistency in Using the Same Accounting Period for Purposes of Estimating, Accumulating and Reporting Costs
Fundamental Requirement – Educational institutions shall use their fiscal year as their cost accounting period.
See Appendix A to Federal Circular A-21 for further clarification of the requirements of these standards.
See the Direct vs. F&A Costs section of this web site for more information on this area.
Questions related to the Cost Accounting Standards should be addressed with your College Business Office.