CAS Disclosure Statements

Disclosure Statement Preparation

CGS has prepared numerous Disclosure Statements for clients that have been successfully approved by the Defense Contract Audit Agency (DCAA).  In some cases, these were a “first-ever” Disclosure Statement for new contractors. 

The Disclosure Statement has two basic parts.  The first is a standard check-the-box form to document the accounting for direct costs such as direct labor, subcontracts, materials, etc.  The first part also is used to document the contractor’s accounting for indirect costs such as overhead and G&A costs.  The second part of the Disclosure Statement involves “Continuation Sheets” which the company can use to more fully describe its cost accounting practices and policies.

When a Federal contractor becomes subject to full CAS coverage – usually with the award of a $50M CAS-covered contract, the contractor is required to prepare and submit a CAS Disclosure Statement that describes the contractor’s cost accounting practices and its ability to comply will all 19 CAS standards.  The Disclosure Statement provides:

  • A basis for judging compliance with each of the respective 19 CAS Standards.
  • A basis for evaluating whether a contractor is consistently following its disclosed practices in accounting for actual costs under government contracts.

In order for the Disclosure Statement to be approved by the DCAA and Defense Contract Management Agency (DCMA) it must be:

  1. Adequate
  2. Current – Does the DS describe the practices actually in use or planned to be used?
  3. Accurate – Are disclosed practices clearly described and consistent with actual practices?
  4. Complete – Have all significant practices been disclosed in an understandable way?
  5. Compliant
  6. Do the described practices comply with FAR and CAS?

What services and solutions can CGS provide?

CGS can alleviate what can be a tedious and daunting task and prepare the Disclosure Statement for your company. We work with our clients to help them understand what is required in each section as well as to document their practices in a manner that still allows some flexibility. For this reason, drafting the Disclosure Statement is as much art as it is science – the key is to enable the company to maintain some flexibility in its cost accounting so that the accounting can be adapted to changing circumstances to help optimize cost recovery.

One of the downsides to having a Disclosure Statement is that it locks-in the company’s cost accounting policies and practices. The company can still make changes to its cost accounting, but the changes generally need to be approved by the Administrative Contractor Officer (ACO). As with all government business, there’s a process that the company needs to go through to get the changes approved.

Depending on the nature of the change in cost accounting practice(s), an update to the company’s Disclosure Statement will likely be required along with a Cost Impact Proposal. The Cost Impact Proposal basically quantifies the cost effects of the cost accounting changes on all CAS-covered contracts.

CGS can help your company evaluate the potential changes in cost accounting practices to quantify if those changes are beneficial to the company – and ultimately to the government. If it is determined that the change in practice is necessary and/or beneficial, CGS can develop a detail cost impact analysis with the pricing effects on existing CAS-covered contracts. CGS will work your company to ensure that this change is properly updated in the Disclosure Statement and communicated to the ACO.

 

Please contact us today to learn how we can help you to develop and successfully implement CAS Disclosure Statement.