CAS 414: Cost of Money for Facilities Capital

Cost Accounting Standard 414 establishes how government contractors measure and recover the Facilities Capital Cost of Money, an imputed cost that compensates you for the capital tied up in the buildings, equipment, and other assets used to perform contract work. The standard lives at 48 CFR 9904.414, and FAR 31.205-10 makes the resulting cost allowable, but only if you specifically identify the estimated amount in your cost proposal. The Treasury rate for January 1 through June 30, 2026 is 4⅛ percent per annum.¹ Miss the proposal step and the money is gone for that contract.

What CAS 414 Actually Measures

CAS 414 treats the capital you have invested in productive assets as a real cost of performing work, even though no cash leaves the business the way it does with rent or payroll. The standard labels this an “imputed cost” because it represents the time value of money locked in facilities and equipment rather than an expense recorded in the books.² It applies whether you financed those assets with debt or equity.

FAR 31.205-10 makes FCCOM allowable when the contractor follows the CAS 414 measurement and allocation rules and identifies the estimated amount in the proposal.³ Your actual interest expense on borrowings is not a substitute. The government reimburses a standardized imputed cost, not whatever a contractor pays its lenders.

Whether CAS 414 Applies to You

CAS 414 only applies to CAS-covered contracts, and coverage depends on contract size and your overall government business.

Exemptions

Contracts and subcontracts under $7.5 million are generally exempt from CAS, provided the business unit is not already performing a CAS-covered contract of $7.5 million or more. Sealed-bid contracts, contracts with small businesses, contracts for commercial items, and firm-fixed-price contracts awarded on adequate price competition are exempt regardless of dollar value.⁴

Modified Versus Full Coverage

Contractors above the $7.5 million threshold but below the full-coverage line get modified coverage, which requires compliance with only CAS 401, 402, 405, and 406.⁵ CAS 414 is not on that list. You have no obligation to compute FCCOM under CAS 414, though you can still propose cost of money under FAR 31.205-10 if you want to recover it.

Full coverage applies when a business unit receives a single CAS-covered award of $50 million or more, or received $50 million or more in net CAS-covered awards during its preceding cost accounting period.⁵ Full coverage brings every applicable standard with it, CAS 414 included.

Building the Facilities Capital Base

The facilities capital base is the dollar figure you multiply by the Treasury rate. It equals the net book value of your tangible capital assets plus any amortizable intangible capital assets.⁶ The net book values must come from the same accounting data used for contract cost purposes.⁷

What Qualifies

Tangible capital assets are land, buildings, machinery, equipment, and similar items with physical substance, more than minimal value, and a useful life beyond the current accounting period.⁶ Intangible capital assets qualify if they are subject to amortization; capitalized software development costs are the common example. Right-of-use assets from finance leases count. Right-of-use assets from operating leases do not.⁸

What Gets Excluded

The calculation captures your own capital investment, so assets financed directly by the government come out of the base. Progress payments and advance payments mean the government already bears the carrying cost. The net book values on Form CASB-CMF should reflect only the contractor-funded portion, and DCAA auditors verify that exclusion as a standard step.⁹

The Treasury Rate

You do not use your own borrowing costs. The rate comes from the Secretary of the Treasury and is published semi-annually.⁷ The rate for the first half of 2026 is 4⅛ percent per annum. DCAA maintains a table of historical and current rates on its website.¹⁰

Which rate you apply depends on the context. For a prospective cost proposal, use the most recently published Treasury rate. For final incurred costs at year-end, use the arithmetic mean of all Treasury rates in effect during the cost accounting period.⁷ If the rate changed mid-year, the final rate is the average of the two semi-annual figures.

Completing Form CASB-CMF

Every FCCOM calculation runs through Form CASB-CMF, and one form covers all indirect cost pools in a business unit.⁷ The form has seven columns:

Column 1 – Cost of Money Rate: the applicable Treasury rate.
Column 2 – Net Book Values: the average net book value of facilities capital outstanding during the period, broken into “distributed” items tied to a specific indirect cost pool and “undistributed” items that are not. Includes recorded assets owned by the business unit, capitalized finance leases, and any allocable share of corporate or group facilities.
Column 3 – Allocation of Undistributed: spread the undistributed assets across overhead and G&A pools on a reasonable basis that approximates how the related depreciation or amortization is absorbed.
Column 4 – Total Net Book Value: Columns 2 and 3 combined for each pool.
Column 5 – Cost of Money: Column 4 multiplied by the Column 1 rate.
Column 6 – Allocation Base: the total base for each pool (direct labor dollars, machine hours, total cost input, etc.). Must match the base the business unit uses to apply overhead to government contracts, and must cover all work in the organizational unit, not just government work.
Column 7 – FCCOM Factor: Column 5 divided by Column 6, carried to five decimal places.

Net book values must be average balances for the period, not beginning or ending balances.⁸ Auditors look at this.

Applying the Factor to a Contract

Once you have the Column 7 factor, applying it is simple multiplication. Take the allocation base units charged to a contract during the period and multiply by the corresponding factor for each indirect cost pool. Sum the results across pools to get the contract’s total cost of money.¹¹

FCCOM is not recorded as a regular expense in the general ledger. It is a memorandum computation on the CASB-CMF form, carried into the cost proposal as a separate line item. The total flows alongside indirect cost pools like overhead or G&A rather than inside them.⁸

The Proposal Requirement

This is where contractors most often lose money. FCCOM is allowable only if the estimated amount is specifically identified and proposed in the cost proposal for the contract under which it will be claimed.³ Leave it out of the proposal and you cannot go back and claim it during performance or at final settlement. The right to recover is surrendered for that contract.¹²

Even if you choose not to claim FCCOM on a particular contract, you are still required to compute the cost of money factors. Skipping the computation is a violation of the standard, not just a missed opportunity.⁹

FCCOM and Profit

Before the contracting officer applies profit or fee factors, any FCCOM must come out of the cost base used to calculate profit.¹³ The contractor already receives compensation for its capital investment through FCCOM, so that amount does not also generate a profit margin. FCCOM increases total reimbursement, but not the profit percentage on the rest of the base.

What DCAA Auditors Look At

DCAA’s CAS 414 compliance audit follows a structured program that focuses on a small set of high-risk areas:

Consistency between actual accounting practices and Part IV of the contractor’s Disclosure Statement. Deviations trigger noncompliance findings.
The connection to CAS 404 and CAS 409. Net book values depend on proper capitalization (CAS 404) and depreciation or amortization (CAS 409). Recent clean audits on those standards can reduce transaction testing for CAS 414. Problems there mean deeper scrutiny of the capital base.
Changes in capitalization practices or depreciation methods since the last CAS 414 audit, and whether those changes were disclosed.
Corrective action on previously reported issues. Repeat findings escalate the noncompliance.
Materiality of the FCCOM claim. Low-dollar claims may receive a lighter review.

The audit scope covers only the most recently completed contractor fiscal year.⁹

Assets Under Construction Go Under CAS 417

CAS 414 covers facilities already in service. Capital assets still being constructed, fabricated, or developed fall under CAS 417 instead.¹⁴ Under CAS 417, the imputed cost of money during the construction period is capitalized into the asset’s acquisition cost rather than allocated to contracts as a current-period expense. Once the asset is placed in service, it enters the CAS 414 facilities capital base and starts generating FCCOM through the normal calculation. FAR 31.205-10 recognizes both standards as the basis for allowable cost of money.³

1
Federal Register. Prompt Payment Interest Rate; Contract Disputes Act
2
eCFR. 48 CFR 9904.414-20 – Purpose
3
Acquisition.GOV. FAR 31.205-10 Cost of Money
4
eCFR. 48 CFR 9903.201-1 – CAS Applicability
5
eCFR. 48 CFR 9903.201-2 – Types of CAS Coverage
6
eCFR. 48 CFR 9904.414-30 – Definitions
7
eCFR. 48 CFR 9904.414-50 – Techniques for Application
8
Legal Information Institute. 48 CFR Appendix A to 9904.414 – Instructions for Form CASB CMF
9
Defense Contract Audit Agency. Master Audit Program – Compliance Audit CAS 414
10
Defense Contract Audit Agency. Cost of Money Rates
11
eCFR. 48 CFR 9904.414-50 – Techniques for Application
12
Defense Contract Audit Agency. Selected Area of Cost Guidebook – Chapter 18 Cost of Money
13
Acquisition.GOV. FAR 15.404-4 Profit
14
eCFR. 48 CFR 9904.417-20 – Purpose