CMS Pub. 100-06, ch. 2, § 200.1

A1-1521, B1-4521

The objective of this standard is to maintain a consistency in the cost accounting practices

employed by a contractor in its methods used for estimating costs and in its practices

used in accumulating and reporting cost during the course of the contract of fiscal period.

Consistency in cost accounting practices provides reasonable assurance that comparable

transactions are treated alike. This assurance is critical to our program since it provides a

reliable basis for valid comparisons between estimated, incurred, and reported costs.

This consistency requirement addresses the accounting structure of the contractor's

proposed budget - that is the cost accounting practices used in preparing the budget - not

to the amounts estimated or the estimating techniques used. The standard also requires

that a contractor's cost accounting practices used in accumulating and reporting actual

costs for the Medicare contract shall be consistent with its practices used for estimating

costs for the related budget for the same fiscal year. The contractor must comply with this

requirement through the term of the contract.

This standard extends to all levels of the contractor's cost accounting system. Therefore,

it is necessary that the contractors periodically review their methodologies for preparing

their budgets in order to obtain the consistency required with the accounting records.

The standard essentially requires that significant items of costs be accorded the same

accounting treatment in the estimate and the cost records.

There is no presumption that either of the requirements described above is violated when

a contractor groups homogeneous costs in his estimate, but accumulates and reports such

costs in greater detail during contract performance. If it is not practicable to estimate by

individual cost element or function, the contractor may use groupings of homogeneous

costs in his estimate provided:

Such grouping does not impair ability to compare any significant cost in an estimate with

the actual cost accumulated and reported, and

Estimating practices and accounting practices are consistent with respect to:

The classification of costs as direct or indirect,

The indirect cost pool assignments to which each element or function of cost is

charged or proposed to be charged, and

The methods of allocating indirect costs to the contract.