Introduction to Cost Accounting Standards
This Web site contains information about the University of Kentucky's response to Cost Accounting Standards (CAS).
The University of Kentucky was required to comply with new cost accounting standards in 1997. These regulations are as complex as those that govern the care and use of animals or the use of human subjects, so it is important for faculty and staff to become familiar with their provisions.
There are two documents, called Disclosure Statements or DS-2's. One DS-2 applies to the Lexington Campus and Research and Graduate Studies; the second applies to the Medical Center. The Disclosure Statement provides an authoritative description of an educational institution's cost-accounting practices. These statements should help to minimize disputes between contracting parties and will also be used to determine if an institution in compliance with CAS.
In addition to these Disclosure Statements, there are additional documents that relate to the Disclosure Statements: Departmental Costing Manual, Listing of Direct and Indirect Cost Subcodes, Cost Transfer Policy, Cost Sharing Policy, and the Service Center/Recharge Operations Manual. These documents will be discussed in detail below.
The Disclosure Statements themselves are not particularly "user friendly" unless you have either been heavily involved in these CAS discussions or have an accounting background. The other documents are, however, designed for use by the faculty and staff. It is hoped that the organization of this material, particularly, sections 1-4 of this presentation, will provide the reader with a synopsis of the key issues in each draft policy statement, answer commonly asked questions, and point the way to the key provisions that faculty and staff should review in sections 5-10.
Questions and Answers
Q. Why are there two Disclosure Statements (DS-2's)?
A. The two DS-2's will allow us to develop two indirect cost rates, one for the Medical Center and one for Lexington Campus and Research and Graduate Studies. Although these two calculations often become a single rate for the entire University during negotiations with DHHS, we want to retain the flexibility to seek two rates, if appropriate, at some point in the future. We also wanted to set up the DS-2's to exclude the UK Hospital from these standards. The Hospital already must comply with many federal pricing regulations, and it was unnecessary to add these standards to this burden.
Q. Does this mean that the Medical Center has different standards that the rest of campus?
A. No, in all important provisions, the two statements are very much the same. They differ principally in the section describing the organizational structure.
Q. Why are there two DS-2's for each of these two broad areas of the University? Are there really four DS-2's?
A. Yes, in one sense there are four DS-2's, but really there are two "pairs" rather than four separate DS-2's. Because of the way in which the University is organized and because of our desire to exclude the UK Hospital from the DS-2, we needed to file a total of four DS-2's. In fact, one pair of these DS-2's applies to the Lexington Campus and Research and Graduate Studies. A second pair applies to the Medical Center. Understanding this requirement is probably not necessary for faculty and staff, but we must complete a portion of a DS-2 describing each of these broad areas of campus. We must also file a detailed DS-2 that describes the policies that apply to the specific colleges and units in each of these broad areas. For the Lexington Campus and Research and Graduate Studies, the pair is called "The University of Kentucky" (Parts 1 and 7 of the DS-2) and "Main Campus" (Parts 1 through 6 of the DS-2). For the Medical Center, the two segments are called: "Medical Center" (Parts 1 and 7 of the DS-2) and "Medical Center Colleges and Support Units" (Parts 1 through 6 of the DS-2).