How to Effectively Handle Cost Accounting Standards

View all blog posts under Articles | View all blog posts under Online Master of Accountancy

Using a calculator to interpret graphs

If you’re interested in a senior-level career in accounting, earning a Master of Accountancy  (MAcc) is a significant step in the process. While undergraduate coursework provides students with accounting fundamentals, from financial statements and bookkeeping to tax law and preparation, a MAcc program instills a deeper understanding of accounting and financial theory and principles as well as complex financial systems and regulations.

MAcc students will not only take in-depth courses, such as prescriptive and predictive financial analysis but also become well versed in specialized topics by studying financial regulations, such as the cost accounting standards: a set of financial standards and rules that apply to negotiated contracts between contractors and government agencies.

Skills Gained with a Master of Accountancy

Among the advantages, a MAcc offers in preparation for the Unified Certified Public Accountant Examination (UCPAE). In most states, a prerequisite for the test is the completion of 150 semester hours of course study, including 30 semester hours at the graduate level. Earning a MAcc satisfies the coursework requirement and prepares aspiring CPAs for the rigorous four-part test.

A MAcc-prepared accountant who has passed the UCPAE is more likely to secure a position with a say in a company’s decision-making process and, therefore, have more involvement with a company’s top executives. Examples include senior accountants, directors of finance, government cost accountants, company controllers, city comptrollers, and chief financial officers.

MAcc students receive specialized training in the latest developments in tax laws and regulations, which are becoming more complex due to factors like economic globalization. MAcc students also learn to use technological advancements, which are facilitating faster financial analysis and greater efficiency in accounting procedures.

Applying Skills Using Cost Accounting Standards

In earning a MAcc, graduates may also dive deeper into fields that require a broad understanding of financial concepts and a mastery of details, standards, and codes governing large contracts.

One such field is cost accounting: the recording and analysis of business expenses in order to improve efficiency and management. Cost accounting standards (CAS) lie at the heart of this accounting method—acting as a guide and framework for the awarding and execution of government contracts worth $50 million or more.

In 1970 Congress established the Cost Accounting Standards Board. The board was tasked with creating a set of standards, the CAS, to ensure uniformity, consistency, and fairness in the awarding of government defense contracts. The CAS would also regulate and guide the bidding process and expense estimates for contractors.

In 1988, CAS expanded beyond defense contracts to cover all larger government contracts with civilian agencies, and in 1995, CAS was extended to educational institutions. Presently, a significant amount of money is to be accounted for; in 2017, for instance, the federal government committed $507 billion in contracts for goods, services, and research and development.

Careers Opportunities with Government Agencies

The importance of a qualified, knowledgeable CPA in handling government contracts can’t be overstated. Whether working for an organization like the U.S. Department of Defense (DOD), U.S. Department of Transportation (DOT), or U.S. Department of Education (ED) in evaluating a bid and awarding a contract, the cost accountant must be well versed in all 19 standards and rules that make up CAS. This includes understanding which standards apply to a specific contract and where exemptions apply.

Government contracts are more highly regulated than private contracts, mainly because they involve public funds; therefore, accountants with a deep understanding of government regulations and business statutes involved in government contracts, such as the Federal Acquisition Regulation, are essential to the decision-making process. Because government contracts involve public funds, more than an aptitude for numbers is required; analytical skills, sound judgment, and predictive abilities are also essential in developing and executing government contracts.

The clearest path to mastering the financial and governmental codes, regulations, statutes, and standards are to attain an MAcc and certification as a CPA.

A MAcc may lead to senior roles within organizations that employ CAS, positions that go beyond the stereotypical picture of accountants as bookkeepers or bean counters; these are accountants whose analytical and financial expertise informs consequential decisions such as the awarding of large government contracts. Government accounting positions have real-world impact.

Accountants tasked with applying CAS for the government need to understand all of a contract’s aspects, from material costs to depreciation to personal compensation to pensions. CAS contracts that are efficiently administered are beneficial to the government and contractors alike, and even to society at large in the form of cleaner air, better roads, and impactful educational programs, to name just a few benefits.

Making a Difference with Cost Accounting Standards

There’s also an element of idealism in a government accounting career. For instance, as an accountant or a financial officer for the U.S. Department of Energy, it may be necessary to evaluate a large renewable energy contract that could benefit the environment and consumers; ditto infrastructure projects with the DOT or education reform projects with the ED.

Or take the real-world example of California’s high-speed rail project. The plan to build a high-speed train line connecting Los Angeles and San Francisco and potentially other parts of the state received billions of dollars in federal and state funds, and construction on the project began in 2013. However, cost overruns, upward adjustments to cost estimates, extensive delays, and lack of transparency in administration left the project in limbo. In February 2019, California’s governor shelved the project indefinitely. It’s possible that a more thorough upfront cost accounting of the project could have prevented some of the wasted time and expenditures.

Beyond a MAcc potentially resulting in a 10 to 20 percent higher starting salary, the question may arise whether a senior accounting position using CAS can really be unique and fulfilling and have a positive impact on government projects that affect society at large. The short answer is yes.

Learn More:

Find out more about how Ohio University’s online Master of Accountancy program strives to prepare students for success as financial professionals.

Sources:

Accounting.com, Government Accounting
AccountingEdu.org, Cost Accounting Jobs
Accounting Today, “Why a Master’s in Accounting Is Your Next Step Towards the C-Suite”
AICPA, CPAs in Government
Business Administration Information, “Masters in Accounting Programs Can Boost Accounting Careers”
Celestial Defense, Cost Accounting Standards
Dixon Hughes Goodman, Introduction to the Cost Accounting Standards
GovCon360, CAS Disclosure Statement Triggers
Government Contract Associates, Basics of the Cost Accounting Standards
University of California, San Francisco, Cost Accounting Standards Guidelines