POGO Supplementing Letter to Eric Shipley, Cost Accounting Standards Board Advance Notice of Proposed Rulemaking (ANPRM) on "Accounting for the Costs of Post-Retirement Benefit Plans (PRBs) Sponsored by Government Contractors."

Mr. Eric Shipley

Project Director

Cost Accounting Standards Board

Office of Federal Procurement Policy

725 17th Street, NW, Room 9013

Washington, DC 20503

ATTN: CASB Docket 96-02A

Via Facsimile: (202) 395-5105

Dear Mr. Shipley:

This letter supplements the Project on Government Oversight's (POGO's) comment letter to the Cost Accounting Standards (CAS) Board of December 18, 2000 concerning the CAS Board's Advance Notice of Proposed Rulemaking (ANPRM) on "Accounting for the Costs of Post-Retirement Benefit Plans (PRBs) Sponsored by Government Contractors."

Enclosed are two articles from the December 22, 2000 and December 27, 2000 editions of the Wall Street Journal. The first article deals directly with the industry response to the CAS Board's ANPRM. The second article deals with the larger issue of PRB (primarily retiree medical) cut backs by established business firms, including at least one large CAS-covered contractor.

The primary issue that POGO is highlighting for the CAS Board's attention is that the defense industry is openly acknowledging its intention to possibly cut back on retiree PRB benefits, even if the cost of such benefits have been previously accrued, billed to, and paid for by the U.S. Government.

As a spokesperson for the Aerospace Industries Association (AIA), a leading antagonist to the very existence of CAS since the earliest days of the original Board, told the Wall Street Journal, "We don't want to be tied into a guaranty that employees are going to get post-retirement benefits other than pensions," said Dick Powers, a spokesman for the AIA.

This time POGO does not need to argue with one of the defense industry's leading trade associations, when in a rare display of candor, the industry association is making our case. As POGO has previously urged the Board, any adoption of a Standard for the recognition of contractor PRB liabilities must be accompanied by positive funding criteria, as well as the strongest possible crediting provisions, in order to protect the interests of American taxpayers and the earned benefits of contractor employees.

Sincerely,

Danielle Brian

Executive Director

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