DCAA Accounting And The Problems Of Unallowable Expenses

1. DCAA Accounting And The Problems Of Unallowable Expenses When you take care of your DCAA Accounting chores, you should keep your eyes open for money spent on things you did because you wanted to have some “fun.” In the industry of government contracting, there’s a saying –“if you enjoy spending on something, it’s possibly an unallowable expenditure.” Unallowable expenses are a crucial topic when it comes to contemplating the plan and structure of indirect rates. You’ll find an explanation of the term in part 31.205 in the FAR or Federal Acquisition Regulation. While you can’t make the mistake of confusing unallowable expenses with nondeductible expenses for tax returns, there are a few commonalities. It’s of the utmost importance to determine allowable versus unallowable costs in government contracting. You have to do it, especially if you handle cost-reimbursable contracts. To keep your contracting process as smooth as possible, you have to set up unallowable accounts from the beginning. If the DCAA runs into issues in the incurred cost submission, and if it considers running an audit, the process will run longer. You’ll also have to pay more and waste a lot of time than you expect. Consider depending on someone who understands the regulations and rules of government contracts.

2. More about it In-depth Unallowable Cost Accounting can be beneficial in several ways. For starters, you can keep track of and record all unallowable expenses properly. If you have a dedicated accounting team in place, make sure the members understand how to handle unallowable accounts. They should also contemplate the way unallowable expense accounting impacts your business entity. Now, the presence of unallowable costs in your cost groupings will increase your rates more than you allocate. This situation will result in several issues from the perspectives of billing and auditing. If the DCAA chooses to conduct an audit and finds unallowable costs in your incurred cost submission, the auditors will think that you overbilled the government. As a result, you’ll be in debt. It also comes with extra administrative work, which, in turn, will become a burden on your company. If you’re wondering whether entertainment measures or meals are allowable or not, you should hire an expert in government contracting for support. In specific circumstances and with enough documentation, these things may become allowable or unallowable. Everything depends on the nature of the expenses.