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Unallowable Costs: Improved Cost Principles Should Reduce Inconsistent Treatment of These Costs

NSIAD-87-11 Published: Oct 10, 1986. Publicly Released: Oct 10, 1986.
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Highlights

Pursuant to a legislative requirement, GAO evaluated the Department of Defense's (DOD) efforts regarding unallowable contract costs.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense The Secretary of Defense should remove the reference to other cost principles from the entertainment principle and insert a statement that costs made specifically allowable under FAR subsection 31.205-14 are not allowable under other subsections of FAR subpart 31.2.
Closed – Not Implemented
Action on this recommendation would lead to the disallowance of many long-accepted employee morale and relations costs that are normal in American business. Many of these allowable costs could be construed as falling within the broad definition of unallowable entertainment. If DOD was prohibited from taking into account the language of other cost principles, such costs could not be reimbursed.
Department of Defense To achieve consistency in the treatment of lobbying costs, the Secretary of Defense should structure the executive lobbying principle in a manner similar to the legislative lobbying principle.
Closed – Not Implemented
Although DOD shares the GAO desire for consistency, it should be tempered by consideration of fairness and practicality. The DOD original intent in developing this cost principle was to parallel the Legislative Lobbying principle. DOD reviewed the legislative history and met with congressional staff in an effort to discern the intent of Congress.

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Topics

National Defense
Accounting proceduresDefense cost controlExpense allowancesStatutory lawLobbyingAllowable costsPublic relationsCompensationAdvertisingContracting officers