The Office of Management and Budget’s Cost Accounting Standards (CAS) Board has released two proposed rules aimed at eliminating more than 60 accounting requirements for federal contractors. These changes target regulations that have required contractors to maintain two sets of overlapping records, a practice in place for over five decades.
According to the CAS Board, these proposals are intended to reduce regulatory burdens and simplify the rules affecting nearly $750 billion in annual government contract spending. The changes would affect how costs related to compensated personal leave, capitalization and depreciation of capital assets, and acquisition costs of material are measured and assigned. Under the new approach, the government would depend on Generally Accepted Accounting Principles (GAAP) instead of separate federal standards in these areas.
Dr. Kevin Rhodes, senior advisor to OMB Director Russell Vought, stated: “Holding contractors responsible for properly and transparently accounting for their costs is good stewardship, but forcing contractors to maintain overlapping books and records is wasteful and creates barriers that discourage talented companies from working with the Government to meet the needs of our taxpayers.”
The proposed deregulatory actions are expected to lead to fewer unique records for contractors, reduced government oversight tied specifically to CAS requirements, and greater reliance on financial audits conducted by commercial firms under GAAP compliance.
Finalization of these rule changes is anticipated by early next year. The CAS Board also plans to accelerate efforts aligning its standards with GAAP. In parallel, the Office of Federal Procurement Policy (OFPP) is working on streamlining the 2,000-page Federal Acquisition Regulation (FAR), focusing it on statutory essentials and procurement rules where CAS does not apply—such as fixed-price contracts awarded through competition for commercial solutions.
The CAS Board operates under OFPP within OMB and sets standards ensuring accurate cost accounting on government contracts. CAS applies when contract pricing or payment depends directly on a contractor’s reported costs. Over time, as shareholder demands have made GAAP more rigorous in private sector business practices, significant overlap has developed between GAAP and CAS.
For further details about the Board’s proposed rules or information about broader procurement reforms like the Revolutionary FAR Overhaul, interested parties can access updates online.
