chickenWhich came first: the contract or the excluded expense? In the government contracting coop, it may not matter.

Government contractors must segregate and allocate allowable direct and indirect costs charged to government contracts. However, certain expenses are excluded under Federal Acquisition Regulation (FAR 31). Contractors who do business with the U.S. government should be familiar with all of the excluded costs listed in FAR 31. The following is a list of some costs that need careful review and are usually not allowed to be charged or allocated to a government contract:

  • advertising,
  • entertainment,
  • fines and penalties,
  • interest,
  • taxes, and
  • costs of alcoholic beverages.

If a contractor charges any excluded costs to the federal government, then s/he must not only reimburse those costs, but also pay any penalties or interest. Contractors can avoid this situation by maintaining an adequate accounting system that meets FAR requirements and includes proper cost segregation. It is also important to educate staff on FAR requirements and implement internal controls that ensure compliance.

Hatch a FAR Cost Principles Compliance Plan with CRI

CRI’s team of government contracting professionals understands the intricacies of FAR cost principles. We can help you hatch a plan that keeps your organization compliant.