Certain costs present the most challenging aspects of FAR compliance for A/E contractors. In a highly focused webinar on November 15, R. Scott Butler, CPA, Beason & Nalley, defines the concepts of reasonableness, allowability, and allocability of costs in addition to FAR 31.202 and 31.203 concepts of direct and indirect costs, and the avoidance of double counting costs. Butler emphasizes the importance of consistency and of adopting accounting policies on direct and indirect costs that mitigate the risk of overcharging projects.
Participants in Meeting the Challenges of FAR Part 31 Cost Principles will also include discussion on other key sections of FAR:
Public Relations and Advertising (FAR 31.205-1): By definition, these types of costs are unallowable. Discussion of components that may be allowable and how to ensure you are not including those costs in these accounts which are better included in others.
Compensation (FAR 31.205-6): The importance of having internal controls and systems in place that demonstrate reasonableness at all levels of compensation including bonus and incentive compensation, and discussion of salary surveys, policies, importance of internal documentation.
Economic Planning Costs (FAR 31.205-12): Costs that are frequently disallowed and why, such as spouse costs, entertainment costs, and certain travel costs that are frequently embedded within long-range planning meetings.
Employee Welfare (FAR 31.205-13): A look what may be allowable in an area where majority of costs are unallowable, and the issue of coffee, refreshments, and other areas such as the annual Holiday Party or Employee Recognition Awards banquets.
Entertainment (FAR 31.205-14): Emphasis on segregation of these costs at the source and ensuring entertainment is not included or embedded within other accounts such as Travel, Economic Planning, or Recruiting.
Organization Costs (FAR 31.205-17): Importance of segregating unallowable legal fees including directly associated costs of reorganizing or mergers and acquisitions.
Professional and Consultant Costs (FAR 31.205.33): This high-risk account often times lacks appropriate documentation to demonstrate allowabilitythe importance of demonstrating reasonableness of consulting and professional fees and examples.
Travel Costs (FAR 31.205.46): Due to recent changes in FAR, the lowest-available airfare issues and other documentation challenges require a well-defined policy and trained accounting staff. Some of the most challenging areas will be discussed with input on best-practices.
Idle Facilities, Idle Capacity and Related Party Facility Costs (FAR 31.205-17): A look into the requirements for overcoming potentially disallowed costs with regard to these issues.