Cost Accounting Standards (CAS)
What are the Cost Accounting Standards (CAS)?
- The Cost Accounting Standards (CAS) applicable to educational institutions are defined in OMB Circular A-21, Cost Principles for Educational Institutions. CAS is a set of 19 standards issued by the United States Government to achieve uniformity and consistency in the cost accounting practices governing the measurement, assignment, and allocation of costs to contracts with the United States. One of the standards which applies to universities is 9905.502, consistency in allocating costs incurred for the same purpose. The purpose of this standard is to require that each type of cost is allocated only once and on only one basis (direct or F&A cost) to any sponsored agreement or other cost objective. Exceptions to 9905.502 are commonly referred to as CAS exceptions.
Why does this matter?
- It is important because it ensures that sponsors bear their fair share of the total costs and do not pay for the same expense twice – once as direct costs and once as F&A costs.
What is the difference between direct and F&A costs?
- Facilities and Administrative Costs (F&A) - sometimes referred to as indirect costs, overhead, administrative allowance, or occasionally, institutional allowance - are real costs incurred in support of sponsored programs. They represent the costs of doing business that are not readily identifiable with any single project. Examples of F&A costs include buildings, electricity, water, utilities, and administrative research services.
Direct costs can be assigned to a specific project with a high degree of accuracy. Direct costs include: salaries for faculty, technicians, and students; fringe benefits; travel; scientific supplies; equipment; tuition; human subject incentives; animal costs; consultant pay, etc.
Who decides which costs will be charged as direct and which as F&A?
- This decision is based upon the University’s approved F&A rate proposal. When applicable, this decision will also be based on the University’s Disclosure Statement (DS-2) that outlines and explains which costs will be consistently charged to direct and F&A categories. Both the F&A rate proposal (and in the future, the DS-2 statement) are reviewed and approved by the University’s cognizant agency, DHHS.
My former university allowed this cost to be charged as a direct cost, why won’t Texas State?
- Each university must abide by its own approved DS-2 and F&A rate agreements. Therefore, what may be allowable at one university is not necessarily allowable at another.
Does CAS apply to all grants and contracts?
- Yes. The cost accounting principles are applied to all sponsored, state, and local accounts.
Is it possible for a cost normally charged as F&A to be charged as a direct cost to a project?
- Yes. In certain situations expenditures normally charged as F&A may be charged to the direct costs' portion of a project. For these costs to be directly charged to a project there must be circumstances that are different than those which would normally classify them as an F&A cost. When unlike circumstances meet this criteria it is called a CAS exception.
What is an unlike circumstance?
- An unlike circumstance occurs when a cost which is typically treated as an F&A cost is significantly greater or different in purpose than what is routinely provided by an academic unit.
Can you give me examples of activities that might have unlike circumstances?
Activities which are likely to have unlike circumstances are:
- Large, complex programs such as general clinical research centers, primate centers, program projects, environmental research centers, engineering research centers, and other grants and contracts that entail assembling and managing teams of investigators from a number of institutions
- Projects that involve extensive data accumulation, analysis and entry, surveying, tabulation, cataloging, searching literature, and reporting
- Projects which require making travel and meeting arrangements for large numbers of participants, such as conferences and seminars
- Projects whose principal focus is the preparation and production of manuals and large reports, books, and monographs (excluding routine progress and technical reports)
- Projects that are geographically inaccessible to normal departmental administrative services, such as research vessels, radio astronomy projects, and other research fields sites that are remote from campus.
- Individual projects requiring project-specific database management; individualized graphics or manuscript preparation; human or animal protocols; and multiple project-related investigator coordination and communications.
- Projects which are funded from non-federal funds and that generate less than the University’s full federally negotiated F&A rate.
Which F&A costs can be considered for a CAS exception?
- The most common CAS exceptions are: administrative and clerical salaries; general supplies, such as paper and toner cartridges; general use equipment, such as computers and printers; postage; local calls; cell phones; membership dues; and subscriptions to journals.
What if I think I have a project cost which might qualify for an exception?
- Pre and Post Award Support Services Staff can provide guidance on how to prepare an adequate justification for F&A costs to be incurred as direct costs to the grant.
CAS Guidance says I may have an exception. Now what?
- Ensure the unique/unlike circumstances of the project are clearly supported by the proposal.
- Include the cost(s) in the proposal budget.
- Fully justify the cost(s) in the budget narrative.
How do I know if my justification is strong enough to support a CAS exception?
- If you have any doubts, you can send an action item to the proposal coordinator assigned to your proposal requesting their review and comment.
What is a CAS exception item in my proposal budget is not eligible for an exception?
If the CAS Exception does not meet eligibility requirements, Pre and Post Award Support Services will request that the expense be removed from the budget prior to proposal submission.
- If the CAS Exception does meet eligibility requirements and the item is disapproved due to insufficient justification, there are 2 options:
- Option 1: If there is sufficient time, revise the justification to meet the required level of detail.
- Option 2: Delete the expense and seek out internal resources if the cost is absolutely necessary to the success of the project.
Can you give me some examples of acceptable/unacceptable CAS exceptions?
- CAS EXCEPTION-APPROPRIATE: A proposal to develop and deliver 100 copies of a training manual needs $800 in paper, $400 in toner cartridges and $800 for a printer in order to produce the manual. The development of a training manual is not a standard activity and presents significant and unusual costs not normally incurred by the department.
- CAS EXCEPTION-APPROPRIATE: A proposal to study microbial contamination of fresh produce in which data will be collected and entered into a database using a dedicated laptop in a remote agricultural site during harvest of produce might be justifiable. This kind of project involves the accumulation of data in a field site which is remote to campus and therefore geographically inaccessible to normal departmental services.
- CAS EXCEPTION-NOT APPROPRIATE: A proposal to develop computer code to decode strands of DNA requests $800 for a printer and $800 for paper and toner cartridges to prepare technical and final reports for the sponsor. Preparation of reports is a standard activity for projects not one which is unique or substantially different or greater in expense than what would be normal.
The sponsor says they’ll pay the expense as a direct charge. Why isn’t that enough?
- Determination of allowability hinges on a number of factors. Aside from sponsor approval, the University must be in compliance with A-21; the DS-2 disclosure statement; and also be able to support the exception upon request of sponsors and auditors.
What if a cost comes up after an award is made?
- The Principal Investigator (PI) will need to evaluate each cost on a transaction by transaction basis to determine whether it is an allowable CAS exception item. If it qualifies, the PI responsible for maintaining all required documentation.
Why must the PI maintain documentation?
Increased scrutiny by funding agency officials and federal auditors make it imperative that units adequately justify and maintain documentation to support charges identified as CAS exception items. A higher standard for documentation is necessary for these potentially unallowable charges for multiple reasons:
- Lack of proper justification may result in disallowance of the charge by the funding agency;
- A properly justified charge will allow the University to negotiate with the agency should a program officer arbitrarily decide not to fund the cost; and
- In the absence of proper justification, auditors may disallow charges after the fact even if they have been approved by the funding agency.