White House OMB Board Proposes Elimination of Dozens of Unnecessary and Redundant Accounting Requirements on Federal Contractors

Washington, D.C. - Today, the Office of Management and Budget's Cost Accounting Standards (CAS) Board, chaired by the Office of Federal Procurement, published two proposed rules to eliminate more than 60 requirements. The current rules force contractors who support the Government's most important missions - from national defense to energy dominance, human space exploration, and making America healthy again - to unnecessarily keep two sets of overlapping books. These rules have remained largely unchanged for over 50 years.

Today's actions are part of the Administration's ongoing efforts to drastically reduce regulatory burdens and will streamline the complex maze of rules that govern nearly $750 billion in annual contract spending by government agencies. They will update measuring and assigning costs for compensated personal leave, capitalization and depreciation of capital assets, and acquisition costs of material. Instead, the Government will now rely on GAAP to protect the government's interests and ensure taxpayers receive the contractor's best value in these areas.

"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," said Dr. Kevin Rhodes, senior advisor to OMB Director Russell Vought.

Deregulatory actions addressed in the Board's rulemakings should result in fewer unique records and processes that contractors must maintain, fewer Government oversight activities required by CAS requirements, and opportunities for reliance on financial audits being performed by commercial firms for GAAP compliance.

The Board expects to finalize rulemaking on the proposed elimination of standards by early next year and intends to significantly accelerate work on additional conformance of CAS to GAAP. Related efforts by OFPP to streamline the 2,000-page Federal Acquisition Regulation back to its statutory roots and rules that are essential to sound procurement will further alleviate the need for CAS, by emphasizing practices where CAS does not apply, such as where the agency is relying on fixed-price competitively awarded contracts for commercial solutions.

BACKGROUND

The CAS Board, which is chaired by OMB's Office of Federal Procurement Policy (OFPP), is responsible for issuing standards to ensure contractors properly account for costs on government contracts. CAS applies when the government must rely on a contractor's costs to establish a fair and reasonable fixed-price or where payment is based on costs incurred. Generally Accepted Accounting Practices (GAAP), which must be followed by government contractors doing business in the private sector, have become more rigorous in response to shareholder demands for corporate accountability. These advances have led to a significant overlap between GAAP and CAS.

Go here to read the Board's proposed and final rules and here for more information on the Revolutionary FAR Overhaul.