SEC. 820. DEFENSE COST ACCOUNTING
STANDARDS.
(a) Amendments To The Cost Accounting Standards Board.—
(1) IN GENERAL.—Section 1501 of title
41, United States Code, is amended—
(A) in subsection (b)(1)(B)(ii), by
inserting “and, if possible, is a representative of a public
accounting firm” after “systems”;
(B) by redesignating subsections (c) through (f) as
subsections (f) through (i), respectively;
(C) by inserting after subsection (b) the following new
subsections:
“(c) Duties.—The Board shall—
“(1) ensure that the cost accounting
standards used by Federal contractors rely, to the maximum
extent practicable, on commercial standards and accounting
practices and systems;
“(2) within one year after the date of enactment of this
subsection, and on an ongoing basis thereafter, review any
cost accounting standards established under section 1502 of
this title and conform such standards, where practicable, to
Generally Accepted Accounting Principles; and
“(3) annually review disputes involving such standards
brought to the boards established in section 7105 of this
title or Federal courts, and consider whether greater
clarity in such standards could avoid such disputes.
“(d) Meetings.—The Board shall meet
not less than once each quarter and shall publish in the
Federal Register notice of each meeting and its agenda before
such meeting is held.
“(e) Report.—The Board shall annually submit a report to the
congressional defense committees, the Committee on Oversight
and Government Reform of the House of Representatives, and the
Committee on Homeland Security and Governmental Affairs of the
Senate describing the actions taken during the prior year—
“(1) to conform the cost accounting
standards established under section 1502 of this title with
Generally Accepted Accounting Principles; and
“(2) to minimize the burden on contractors while protecting
the interests of the Federal Government.”; and
(D) by amending subsection (f) (as
so redesignated) to read as follows:
“(f) Senior Staff.—The Administrator,
after consultation with the Board—
“(1) without regard to the
provisions of title 5 governing appointments in the
competitive service—
“(A) shall appoint an executive
secretary; and
“(B) may appoint, or detail pursuant to section 3341 of
title 5, two additional staff members; and
“(2) may pay those employees without
regard to the provisions of chapter 51 and subchapter III of
chapter 53 of title 5 relating to classification and General
Schedule pay rates, except that those employees may not
receive pay in excess of the maximum rate of basic pay
payable for level IV of the Executive Schedule.”.
(2) VALUE OF CONTRACTS ELIGIBLE FOR WAIVER.—Section
1502(b)(3)(A) of title 41, United States Code, is amended by
striking “$15,000,000” and inserting “$100,000,000”.
(3) CONFORMING AMENDMENTS.—Section 1501(i) of title 41,
United States Code (as redesignated by paragraph (1)), is
amended—
(A) in paragraph (1), by striking
“subsection (e)(1)” and inserting “subsection (h)(1)”; and
(B) in paragraph (3), by striking “subsection (e)(2)” and
inserting “subsection (h)(2)”.
(b) Defense Cost Accounting Standards
Board.—
(1) IN GENERAL.—Chapter 7 of title 10,
United States Code, is amended by adding at the end the
following new section:
Ҥ 190. Defense Cost Accounting
Standards Board
“(a) Organization.—The Defense Cost Accounting Standards Board
is an independent board in the Office of the Secretary of
Defense.
“(b) Membership.— (1) The Board consists of seven members. One
member is the Chief Financial Officer of the Department of
Defense or a designee of the Chief Financial Officer, who serves
as Chairman. The other six members, all of whom shall have
experience in contract pricing, finance, or cost accounting, are
as follows:
“(A) Three representatives of the
Department of Defense appointed by the Secretary of Defense;
and
“(B) Three individuals from the private sector, each of whom
is appointed by the Secretary of Defense, and—
“(i) one of whom is a representative
of a nontraditional defense contractor (as defined in
section 2302(9) of this title); and
“(ii) one of whom is a representative from a public
accounting firm.
“(2) A member appointed under
paragraph (1)(A) may not continue to serve after ceasing to be
an officer or employee of the Department of Defense.
“(c) Duties Of The Chairman.—The Chief
Financial Officer of the Department of Defense, after
consultation with the Defense Cost Accounting Standards Board,
shall prescribe rules and procedures governing actions of the
Board under this section.
“(d) Duties.—The Defense Cost Accounting Standards Board—
“(1) shall review cost accounting
standards established under section 1502 of title 41 and
recommend changes to such cost accounting standards to the
Cost Accounting Standards Board established under section 1501
of such title;
“(2) has exclusive authority, with respect to the Department
of Defense, to implement such cost accounting standards to
achieve uniformity and consistency in the standards governing
measurement, assignment, and allocation of costs to contracts
with the Department of Defense; and
“(3) shall develop standards to ensure that commercial
operations performed by Government employees at the Department
of Defense adhere to cost accounting standards (based on cost
accounting standards established under section 1502 of title
41 or Generally Accepted Accounting Principles) that inform
managerial decisionmaking.
“(e) Compensation.— (1) Members of the
Defense Cost Accounting Standards Board who are officers or
employees of the Department of Defense shall not receive
additional compensation for services but shall continue to be
compensated by the Department of Defense.
“(2) Each member of the Board appointed from the private sector
shall receive compensation at a rate not to exceed the daily
equivalent of the rate for level IV of the Executive Schedule
for each day (including travel time) in which the member is
engaged in the actual performance of duties vested in the Board.
“(3) While serving away from home or regular place of business,
Board members and other individuals serving on an intermittent
basis shall be allowed travel expenses in accordance with
section 5703 of title 5.
“(f) Auditing Requirements.— (1) Notwithstanding any other
provision of law, contractors with the Department of Defense may
present, and the Defense Contract Audit Agency shall accept
without performing additional audits, a summary of audit
findings prepared by a commercial auditor if—
“(A) the auditor previously performed
an audit of the allowability, measurement, assignment to
accounting periods, and allocation of indirect costs of the
contractor; and
“(B) such audit was performed using relevant commercial
accounting standards (such as Generally Accepted Accounting
Principles) and relevant commercial auditing standards
established by the commercial auditing industry for the
relevant accounting period.
“(2) The Defense Contract Audit Agency
may audit direct costs of Department of Defense cost contracts
and shall rely on commercial audits of indirect costs without
performing additional audits, except that in the case of
companies or business units that have a predominance of
cost-type contracts as a percentage of sales, the Defense
Contract Audit Agency may audit both direct and indirect
costs.”.
(2) CLERICAL AMENDMENT.—The table of sections at the beginning
of chapter 7 of such title is amended by adding after the item
relating to section 189 the following new item:
“190. Defense Cost Accounting Standards
Board.”.
(c) Report.—Not later than December 31, 2019, the Comptroller
General of the United States shall submit to the congressional
defense committees a report on the adequacy of the method used
by the Cost Accounting Standards Board established under section
1501 of title 41, United States Code, to apply cost accounting
standards to indirect and fixed price incentive contracts.
(d) Effective Date.—The amendments
made by this section shall take effect on October 1, 2018.
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Defense cost accounting standards (sec. 820)
The Senate bill contained a provision (sec. 811) that
would amend chapter 7 of title 10, United States Code, and
establish an independent board chaired by the Chief Financial
Officer of the Department of Defense to prescribe, amend, and
rescind cost accounting standards as they affect operations at
the Department of Defense. The provision also requires that cost
accounting standards developed shall to the maximum extent
practicable align with Generally Accepted Accounting Principles
(GAAP), thereby minimizing the requirement for government-unique
cost accounting systems. The provision would also ensure that
managerial cost accounting and activity-based accounting
structures derived from cost accounting standards are applied to
the financial operations of the Department of Defense.
The House amendment contained no similar provision.
The House recedes with an amendment that would modify
sections 1501 and 1502 of title 41, United States Code, to
improve the government-wide Cost Accounting Standards Board
(CASB) and require that Federal Cost Accounting Standards (CAS)
be reconciled, to the extent possible, with U.S. Generally
Accepted Accounting Principles. The amendment also would require
the CASB to hire an executive director and meet at least
quarterly to reduce inconsistencies between CAS and GAAP, as
well as address problems identified by cases presented to the
Armed Services Board of Contract Appeals and Civilian Board of
Contract Appeals. Additionally, the amendment would allow the
head of a Federal agency to waive the application of the CAS for
contracts valued at less than $100.0 million. The amendment also
would retain the Senate proposal to create a Defense Cost
Accounting Standards Board, but would authorize the new board to
advise the CASB, oversee implementation of CAS within the
Department of Defense, and ensure that managerial cost
accounting is appropriately implemented for commercial functions
performed by employees of the Department. The conferees also
encourage the Director, Defense Contract Audit Agency (DCAA) to
examine the potential for electronic quality management systems
to improve the ability of DCAA to conduct thorough and timely
audits. |
