Government Contracting:

Contractor Promotional Advertising Costs Are Unallowable

NSIAD-90-52: Published: Apr 10, 1990. Publicly Released: Apr 13, 1990.

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Pursuant to a congressional request, GAO reviewed: (1) Department of Defense (DOD) contractors' costs for advertising four weapon systems to increase public support; and (2) whether DOD contractors charged those advertising costs to their contracts.

GAO found that DOD contractors: (1) did not charge promotional advertising costs to government contracts; (2) properly charged advertising costs to corporate accounts and excluded those costs from any billing claim or proposal applicable to a government contract; (3) planned to spend approximately $2 million during 1989 advertising the four weapon systems; (4) planned to claim at least $1.4 million as deductible business expenses, in accordance with federal income tax regulations; and (5) had accounting systems in place that properly identified those expenses as unallowable.

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