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What are the cost accounting standards?

The cost accounting standards applicable to educational institutions are defined in 2 CFR Part 200 (Uniform Guidance). CAS is a set of 19 standards issued by the U.S. 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 Facilities and Administrative cost] to any sponsored agreement or other cost objective. Exceptions to 9905.502 are commonly referred to as CAS exceptions.

Is ASU subject to full cost accounting standards coverage?

Arizona State University is not subject to full CAS coverage, but rather to 48 CFR 9905.501, 502, 505 and 506, as prescribed by Uniform Guidance (200.419). Any CAS-covered contracts awarded to ASU would be subject to the CAS requirements at 48 CFR 9900 through 9999, and FAR part 30.

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 and A costs.

What is the difference between direct and F&A costs?

Facilities and administrative costs

Facilities and administrative costs are 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

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 (ERE); 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 ASU’s approved F&A rate proposal as well as the ASU Cost Accounting Standards Board Disclosure Statement Form 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 the DS-2 statement are reviewed and approved by ASU’s cognizant agency, DHHS, who then issues the DS-2 approval letter. 

My former university allowed this cost to be charged as a direct cost, why won’t ASU?

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. CAS applies to all accounts setup to support sponsored projects. 

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.

What are some examples of activities that might have unlike circumstances?

See the CAS Guidance.

Which F&A costs most often entail a CAS exception?

For awards made prior to December 26, 2014, the most common CAS exceptions are: administrative and clerical salaries; general supplies, such as paper and toner cartridges; postage; local calls; cell phones; membership dues; and subscriptions to journals. Computing devices are also subject to CAS requirements.

For awards made on or after December 26, 2014, computing devices used to acquire, store, analyze, process, and publish data and other information electronically, including accessories (or “peripherals”) for printing, transmitting and receiving, or storing electronic information are no longer a CAS exception. They are an allowable direct charge provided the item(s) are essential and allocable.  The item(s) do not need to be solely dedicated, to the performance of a federal award.

What if  a project cost seems, on the face of it, like it might qualify for an exception?

Review CAS Guidance tab.  It provides guidance on how to prepare an adequate justification for F&A costs to be incurred as direct costs to the grant.

CAS guidance indicates an exception may be possible. 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.  At a minimum include answers to the questions in the CAS Guidance.

Who can assist with determining if a justification is strong enough to support a CAS exception?

If there are questions at the proposal stage, contact the Proposal and Negotiation Team Grant and Contract Officer assigned to the proposal requesting review and comment. If the exception arises during the postaward management phase, a unit may reach out to Award Monitoring AMT GCO.

What if a CAS exception item in my proposal budget is not eligible for an exception? 

If the CAS Exception does not meet eligibility requirements, PNT 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.

Are there examples of acceptable/unacceptable CAS exceptions?

  1. 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. 
  2. 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 $1500 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.
  3. 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 will pay the expense as a direct charge. Is that ok?

Determination of allowability hinges on a number of factors.  Aside from sponsor approval, ASU must be in compliance with 2 CFR Part 200 (Uniform Guidance); 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 unit will need to evaluate each cost on a transaction by transaction basis to determine whether it is an allowable CAS exception item. If unsure that the expenditure is allowable, the unit may submit their justification for CAS exception for review and approval by emailing their AMT Award Monitoring GCO. The unit is responsible for maintaining all required documentation related to costs meeting the CAS exception criteria.

Why must the unit 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.

How should CAS exceptions be processed and what documentation should be maintained in the unit file?

See WI-EP-60 for step by step instructions on how to process CAS exceptions and for required file documentation.