In this article, we offer tips on identifying unallowable costs on government contracts including understanding and identifying unallowable costs, reviewing expenses, training and education, and working with an expert. Read up on these tips below.
Government contracts can provide a lucrative and steady revenue stream for contractors. However, strict rules and regulations must be followed to ensure compliance with federal laws. One critical aspect of government contracting is identifying and avoiding unallowable costs in your accounting. As a firm specializing in government contract accounting, we are here to help you navigate this complex landscape. Here, we offer tips on identifying unallowable costs on government contracts.
Understanding Unallowable Costs
Unallowable costs refer to expenses that cannot be reimbursed or included in the billing of a government contract. These costs are generally not directly related to the work performed or services provided under the contract and are not considered reasonable or necessary expenses to charge the government.
Examples of unallowable costs include lobbying expenses, fines and penalties, entertainment costs, alcohol, and personal expenses. Government contractors must be clear on what constitutes unallowable costs to avoid compliance issues.
Identifying Unallowable Costs
To identify unallowable costs, contractors must understand the Federal Acquisition Regulation (FAR) guidelines, which govern the acquisition process for federal agencies. FAR outlines procedures and requirements that contractors must follow when providing goods and services to the government.
FAR provides a list of unallowable costs, but it is not exhaustive. Some costs may be allowable under certain conditions or if they meet specific criteria. Contractors must be aware of these exceptions and comply with FAR guidelines.
Reviewing Expenses
Regularly review expenses associated with the government contract to ensure compliance with FAR requirements. Establish an effective accounting system that tracks all expenses, identifies unallowable costs, and flags them for review. Remove any identified unallowable costs from billing or reimbursement requests.
Training and Education
Provide training to employees and personnel on FAR regulations and requirements, including unallowable costs. Familiarity with these requirements can help avoid future compliance issues.
Working with an Expert
Identifying and avoiding unallowable costs can be challenging, with many gray areas and varying contract specifications. Working with a professional, like those at Peter Witts, CPA, can help you review expenses, establish and maintain a DCAA-compliant accounting system, and ensure compliance on all your government contracts.
Are you in need of assistance with Government Contract Accounting? Look no further! Our team at Peter Witts CPA PC has over 20 years of experience and is ready to provide you with expert guidance and support.
I’m Kristin, the PWCPA PC Customer Success Specialist. For more information about this topic, or any other, you can always reach me through our customer ticketing system.