Cost Accounting Standard 414: Its Relationship to DoD Profit Policy
Abstract
In the committee report on the 1984 legislative Appropriation Bill and a subsequent letter from Chairman Addabbo, Subcommittee on Defense, House Committee on Appropriations, you asked us to study Cost Accounting Standard (CAS) 414 and the Department of Defense's (DOD'S) profit policy. Your request arose from a concern regarding DODS introduction of cost of money as an allowable contract cost as a part of its profit policy revisions in October 1976. Your request raised three issues: 1. whether CAS 414 (which establishes a method for measuring the cost of money for a contract) has continued relevance in light of current profit policy; 2. whether DODS profit policy, that permits the facilities investment value to be used twice in the computation of profit objectives, results in double-dipping; and 3. whether CAS 414, in the context of DODS profit policy, induces investment in cost reducing facilities. This report addresses the first two of these three issues. More specifically, it describes the interrelationship between CAS 414 and DODs profit policy. An important element of DODs 1976 revision to its policy is the steps it took to preclude overall increases in profit recovery. In light of the concerns about over recovery, this report examines these steps and their impact on profits.
Document Details
- Document Type
- Technical Report
- Publication Date
- Mar 01, 1986
- Accession Number
- AD1177855
Entities
People
- Frank C. Conahan
Organizations
- United States Government Accountability Office