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Unallowable Costs

Unallowable Costs in Government Contracts

The federal government will not reimburse contractors for certain expenses, known as unallowable costs.

Common unallowable expenses include marketing, entertainment, alcohol, company parties, and certain travel expenses. These are defined in FAR 31. Your contract also may exclude certain other expenses.

In many cases, these represent legitimate business expenses. You may deduct them for tax purposes, but you cannot bill them to the government.

How we can help

If you struggle with identifying unallowable costs, you’re not alone. Even the most experienced contractors find it challenging to identify which costs can be allocated to government contracts.

Our experienced GovCon accountants have over 15 years of experience in navigating the complexities of allowable and unallowable costs. We can:

  • Answer your questions about allowable and unallowable costs and your federal contracts.
  • Help you develop and implement policies that specify what types of costs are allowable or unallowable.
  • Assist in setting up an adequate accounting system with the capacity to track allowable and unallowable costs and allocate them among your contracts.
  • Train your accounting team in how to record and report allowable and unallowable costs.
  • Prepare for and defend against DCAA and DCMA audits of your contracts.

Additional Resources:

Ready to get more information?

Contact us now or schedule one-on-one time to learn about unallowable in government contracts – and how we can help you manage cost reporting for maximum profitability.