B-205208, NOV 28, 1984, OFFICE OF GENERAL COUNSEL

B-205208, NOV 28, 1984, OFFICE OF GENERAL COUNSEL

CONTRACTS - COST ACCOUNTING - COST ACCOUNTING STANDARDS DIGEST: GAO COMMENTS ON A PROPOSED DEFENSE ACQUISITION REGULATORY COUNCIL PLAN FOR THE MAINTENANCE AND PROMULGATION OF COST ACCOUNTING STANDARDS (CAS) BY NOTING THAT THE PROPOSED PLAN DOES NOT ALLEVIATE GAO'S CONCERNS THAT PROMULGATION AND MAINTENANCE OF THE CAS BE INDEPENDENT OF THE PROCUREMENT PROCESS AND BE ACCOMPLISHED BY THOSE WITH SUFFICIENT ACCOUNTING EXPERTISE AND EXPERIENCE TO MAINTAIN THE INTEGRITY OF THE CAS.

MR. JAMES T. BRANNAN DIRECTOR DEFENSE ACQUISITION REGULATORY COUNCIL THE PENTAGON WASHINGTON D. C. 20301

DEAR MR. BRANNAN:

THIS RESPONDS TO YOUR LETTER DATED AUGUST 31, 1984, REQUESTING OUR COMMENTS ON A PROPOSED DEFENSE ACQUISITION REGULATORY (DAR) COUNCIL PLAN FOR THE MAINTENANCE AND PROMULGATION OF COST ACCOUNTING STANDARDS (CAS). ALTHOUGH WE RECOGNIZE THE NEED TO ESTABLISH A MECHANISM FOR HANDLING THESE CSA MATTERS, WE CANNOT SUPPORT THE COUNCIL'S PROPOSED PLAN.

EVER SINCE THE COST ACCOUNTING STANDARDS BOARD CEASED OPERATIONS FOR LACK OF A FISCAL YEAR 1981 APPROPRIATION, THIS OFFICE HAS SUPPORTED EFFORTS TO REINSTITUTE THE CAS BOARD'S FUNCTION. OUR SUPPORT ALWAYS HAS BEEN SUBJECT, HOWEVER, TO OUR CONCERNS THAT (1) THE CAS BOARD FUNCTION BE INSULATED FROM THE INFLUENCES ASSOCIATED WITH THE PROCUREMENT PROCESS, (2) THE CAS BE APPLIED UNIFORMLY AND CONSISTENTLY THROUGHOUT THE GOVERNMENT, AND (3) THE CAS BOARD FUNCTION BE EXERCISED ONLY BY THOSE HAVING SUFFICIENT ACCOUNTING EXPERTISE AND EXPERIENCE. WE HAVE EXPRESSED THESE CONCERNS MOST RECENTLY IN STATEMENTS BY THE COMPTROLLER GENERAL AND THE SPECIAL ASSISTANT TO THE COMPTROLLER GENERAL BEFORE THE SUBCOMMITTEE ON ECONOMIC STABILIZATION, HOUSE COMMITTEE ON BANKING, FINANCE, AND URBAN AFFAIRS, AND IN A LETTER DATED MARCH 20, 1984, TO THE SECRETARY OF DEFENSE. COPIES OF OUR STATEMENTS AND LETTER ARE ENCLOSED; THEY SHOULD BE READ AS CONTINUING TO EXPRESS OUR POSITION REGARDING ANY REINSTITUTION OF A CAS BOARD FUNCTION.

THE DAR COUNCIL'S PROPOSED PLAN PROVIDES THAT A VARIETY OF CAS MATTERS-- PROMULGATION OF NEW STANDARDS, AS WELL AS CAS REVISIONS, WAIVERS, AND EXEMPTIONS-- WOULD ORIGINATE WITH A CAS POLICY GROUP, A NEW COMMITTEE REPORTING DIRECTLY TO THE COUNCIL. THE VOTING MEMBERS OF THIS GROUP WOULD BE DRAWN FROM AGENCIES WITHIN THE DEPARTMENT OF DEFENSE AND FROM THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION; OTHER DEFENSE AND CIVILIAN AGENCY REPRESENTATIVES WOULD PARTICIPATE AS CONSULTANTS; PUBLIC ADVISERS FROM THE ACCOUNTING PROFESSION AND ACADEMIC COMMUNITIES WOULD PARTICIPATE ON AN "AS-NEEDED" BASIS. THE PROPOSED PLAN CONTEMPLATES INCORPORATING THE CAS INTO THE FEDERAL ACQUISITION REGULATION (FAR) SYSTEM.

SINCE THE FAR APPLIES BOTH TO DEFENSE AND CIVILIAN AGENCIES, THE PROPOSED PLAN APPEARS TO ADDRESS OUR CONCERN THAT THE CAS REMAIN UNIFORM AND CONSISTENT GOVERNMENT-WIDE. HOWEVER, THE PLAN WOULD NOT ADDRESS OUR CONCERN THAT THE CAS BOARD FUNCTION BE INDEPENDENT OF THE PROCUREMENT PROCESS SINCE BOTH THE CAS POLICY GROUP AND THE CIVILIAN AGENCY ACQUISITION COUNCIL WOULD BE COMPOSED OF REPRESENTATIVES FROM THE VARIOUS PROCURING AGENCIES. FURTHER, THE PROPOSED PLAN DOES NOT REQUIRED THAT THE VOTING MEMBERS OF THE CAS POLICY GROUP HAVE AN ACCOUNTING BACKGROUND. CONSIDER IT IMPERATIVE THAT THOSE DIRECTLY RESPONSIBLE FOR CONTINUING THE CAS BOARD FUNCTION THEMSELVES SHOULD HAVE SUFFICIENT ACCOUNTING EXPERTISE AND EXPERIENCE TO MAINTAIN THE INTEGRITY OF THE CAS.

IN SHORT, SINCE THE PROPOSED PLAN DOES NOT ALLEVIATE OUR CONCERNS ABOUT INDEPENDENCE AND ACCOUNTING EXPERTISE-- FEATURES THAT WE BELIEVE ARE ESSENTIAL TO A SUCCESSFUL ASSUMPTION OF THE CAS BOARD FUNCTION-- WE CANNOT SUPPORT IT. IF YOU WISH, WE WOULD BE PLEASED TO DISCUSS OUR COMMENTS WITH YOU OR MEMBERS OF YOUR STAFF.