Cost Accounting Standards

Cost Accounting Standards (CAS)

In 1994, the Cost Accounting Standard Board (CASB) established CAS. CAS was extended to grants and cooperative agreements in Circular A-21 (or 2 CFR Part 220) in 1996.
• Four standards and a disclosure statement are the components of CAS.

  • The standards apply to all grants, contracts, and cooperative agreements (collectively called sponsored agreements).
  • The disclosure statement requirement applies to all institutions receiving $25 M in federal funding (regardless of amounts of individual awards).

• The University of Washington (UW) and other universities receiving federal funds are required to comply with the Cost Accounting Standards (CAS) set forth in Appendix A, OMB Circular A-21 (Cost Principles for Educational Institutions).
• In accordance with these standards, the UW has submitted a Disclosure Statement to the federal government that describes cost accounting practices and methodologies in effect at the UW.

CAS Standards:

CAS 501: Consistency in Estimating, Accumulating and Reporting Costs by Educational Institutions
• An educational institution's practices used in estimating costs (proposal budgets) shall be consistent with the educational institution's cost accounting practices used to accumulate and report costs (award expenditures). This standard applies to costs charged to the award as well as cost sharing (costs that are contributed).
CAS 502: Consistency in Allocating Costs Incurred for the Same Purpose by Educational Institutions
• All costs incurred for the same purpose, in like circumstances, are either direct costs or facilities & administrative costs.
CAS 505: Accounting for Unallowable Costs
• Unallowable costs shall be identified and excluded from any billing, claim, application, or proposal applicable to a Sponsored Agreement.
CAS 506: Consistency in Using the Same Accounting Period for Purposes of Estimating, Accumulating and Reporting Costs.
• Educational institutions shall use their fiscal year as their cost accounting period.

Disclosure Statement is a comprehensive description of an organization’s cost accounting practices and includes direct costs and facilities & administrative (indirect) costs. Direct costs are those costs that can be identified specifically with a particular sponsored project, instructional activity, or any other institutional activity relatively easily, with a high degree of accuracy, and are allowed by all terms and conditions governing a particular award.

Facilities & Administrative costs (indirect costs) are general institutional expenditures that are incurred for common or joint objectives benefiting instruction, research, or public service and therefore cannot be readily identified with a particular sponsored project.

Unlike Circumstances, by definition, exist when costs are:
• above the normal level of services or items required for a project or
• for technical expertise or items not otherwise needed by department are required.

Applies to:
CAS Covered Sponsored Projects: (budget type 05)
1. All federal awards
2. All awards that contain any federal flow-through money
3. All awards where the terms and conditions of the proposal or award documents reference OMB Circular A-21, 2 CFR Part 220, or Cost Accounting Standards
4. Any sponsored project whose funds are being used as cost sharing on a CAS covered project. Only the individual cost(s) being used as cost sharing will be subject to the definitions of direct charges and “unlike circumstances”
5. Awards not covered under CAS are still subject to the requirements listed in the award as well as University and State guidelines.


Agency Approval:
Sponsor approval of a budget does not in and of itself constitute approval of specific proposed budget items. The sponsor assumes compliance with A-21, the University’s Disclosure Statement, the University’s F&A cost proposal, and any other regulations cited.
UW Costing Policy:

The UW costing policy is contained in GIM 23.

Non-CAS Covered Projects:
Cost accounting policies for sponsored awards not subjected to CAS will be dependent upon the individual terms and conditions of the award. Expenditures that are not allowed as direct charges on sponsored awards subject to CAS may be considered allowable as direct charges on those awards not subject to CAS. All charges to any contract or grant should be necessary, reasonable, allocable, and allowable under the terms and conditions of the agreement.
Cost share policy
The UW cost share policy is contained in GIM 21.

Department’s responsibilities:
• To document the unlike circumstances in a proposal when budgeting to directly charge costs that are normally indirect.
• To ensure that costs normally considered facilities and administrative (or indirect costs) are charged directly only when unlike circumstances exist and those costs and circumstances are justified in the proposal and maintained in the award file.
• When rebudgeting (if allowable) to incur these types of costs the justification for charging these costs is, documented and filed in departmental file.
• To develop and follow Delegation of Signature Authority policy. Ensure authorized signatures are on all required documents according to GIM 14.
• To document mandatory and committed cost sharing in the official records of the institution and maintain supporting documentation in the departmental file.

GCA responsibilities:
• Selective review for compliance with costing policies.

Helpful hints:

Ask five questions to determine allowability to directly charge normally indirect costs:
1. Are there unlike circumstances?
2. Are the unlike circumstances documented in proposal?
3. Are the proposed expenses on the F&A cost list? (GIM 23)
4. May the UW rebudget without sponsor approval?
5. Are the unlike circumstances documented and in file?
Refer to GIM 23 for a list of costs that may be charged directly to a project or must be charged indirectly.


• OMB Circular A-21
Principles for Determining Costs Applicable to Grants, Contracts, and other Agreements with Educational Institutions

• GIM 21 Cost Sharing on Research Supported by Federal Agencies 

• GIM 23 Costing Policy for Sponsored Research Agreements
GIM 14 Delegation of Signature Authority 

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