Common Unallowables

Why do Auditors and Reviewers pick apart G&A (or ICR) expenses? What are they looking for? What supporting documents will approve the submission?

First, each account in the G&A pool must be reasonable to avoid (complete or partial) disallowance. One subscription, providing information on specific types of solicitations, that takes up half the Bid and Proposal (B&P) budget is unreasonable. Most of B&P typically pays for the G&A Labor to evaluate leads and to construct and negotiate Bids and Proposals. Auditors and Reviewers look for specific transactions that – on their face – are unreasonable.

Sometimes, an apparently-unreasonable expense can be classified as allowable. For example, high rent for a small business suggests other than an “arm’s length” transaction. The Reviewer’s concern is that rent is paid to an owner, or to a relative of an owner. The lease or a monthly invoice with a header showing (source) contact information for a commercial landlord or rental agency suggests that rent is at a (competitive) market price.

G&A Unallowable Document in Business

Next, some accounts in the G&A pool are specifically unallowable per regulation. These can be literal; payment for an ad that touts the company as awesome is clearly “advertising.” Advertising is unallowable (FAR 31.205-1). These can be implied; payment for the domain or registration of a company website is usually considered “advertising,” because the purpose of the website is to tout the company as awesome.

One exception involves a website with the purpose of housing information that does not advertise the company – such as an employee-only website storing the Employee Manual, Company Policies & Procedures, and internal forms. Evidence, such as a picture of the website Menu, shows the absence of advertising.

Often, business meals are erroneously included in G&A. The Government will not prohibit the company from paying for meals – but will not reimburse the company (even indirectly through G&A) for meals with inadequate support. To be allowable, the meal must i) exclude other unallowable expenses – such as alcohol and entertainment, and ii) have a (specific) business-meeting purpose. Document discussion of next year’s Budget; new General Ledger software; and a candidate’s recruitment interview. The meal is an accompaniment to the meeting and, generally, allowable.

Note that payment for a meal during work – for the purpose of keeping the employee working – is not allowable. Most of us find this disallowance counter-intuitive. When a tight deadline is looming, companies often order-in to entice employees to work through lunch. Such a meal is unallowable.

Documented mileage at the current GSA rate is allowable. That mileage rate encompasses oil, gas, vehicle maintenance, cost/depreciation of the vehicle, etc. A separate transaction to pay for oil or gas or other component (of the mileage rate) would be a double-counting and is unallowable. Actual payments – instead of the mileage rate – requires detailed documentation of every (business and personal) mile driven. A log shows dates, departure odometer, arrival odometer, and purpose of each trip. The percentage of business miles is the percentage of applicable actual payments. The detailed log is cumbersome; a documented claim for business mileage at the GSA rate is recommended.

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