Understanding unallowable costs is a key factor in profitably managing government contracts. Government agencies will only reimburse contractors for costs that are considered reasonable, allocable and allowable under the contract terms, Cost Accounting Standards or Generally Accepted Accounting Principles. Identifying these costs is important to avoid billing issues, incurred cost audit findings, and to pass pre-award accounting system surveys.
On Thursday, January 26, I will present a webinar for the National Contract Management Association on “Hot Topics in Unallowable Costs.” From noon to 1:30 p.m. ET, we will discuss often-overlooked information in FAR Parts 31.000–31.204, how this information sets the stage for the selected costs in FAR 31.205, and hot topics for auditors.
Attendees will leave with a greater understanding of how unallowable costs impact their government contracts. Key takeaways include:
• A deeper understanding of FAR Part 31, “Contract Cost Principles and Procedures”
• Knowledge of other sources of cost interpretations
• Critical thinking on unallowable costs
We’ll cover a lot of ground in the webinar, including:
• Defining unallowable costs
• Unallowable costs vs IRS deductible costs
• Unallowable vs non-billable costs
• Cost Accounting Standards – CAS 405
• Common issues, such as auditor hot buttons, bad debts, entertainment, etc.
• Travel expenses
• Legal expenses
Once we’ve covered the basics, we’ll go on to discuss current Hot Topics, including:
• The annual hat trick: what it is, and what to watch for
• Unallowable vs expressly unallowable costs
• Directly associated unallowable costs
• New FAR 31.205 Selected Cost Principles Guidebook
• Related party rent vs cost of ownership
As we’ll discuss, non-compliance can be costly! The government charges penalties for expressly unallowable costs. Moreover, The Defense Contract Audit Agency is, on average, 5 to 6 years behind in auditing incurred cost proposals. That means a disallowed amount could incur 5 to 6 years of interest.
The webinar will wrap up with a discussion of best practices for handling unallowable costs, including how to be audit ready and audit proof. We’ll go over:
• DCAA tools to use
• Policies & procedures
• Structures & reporting
• A prudent approach to documenting costs
If you’d like to attend the webinar, tickets are available on the NCMA website. If you’re unable to attend or want to pick my brain about unallowable costs, give me a call at (614) 556-4415 or email Robert@leftbrainpro.com.