Overhead Costs:

Unallowable Costs Charged by Rockwell Corporation, Rocketdyne Division

NSIAD-95-41: Published: Dec 9, 1994. Publicly Released: Jan 9, 1995.

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Pursuant to a congressional request, GAO reviewed whether: (1) a National Aeronautics and Space Administration contractor included unallowable costs in its overhead cost submissions; and (2) the extent to which the questionable costs identified in the Defense Contract Audit Agency (DCAA) audit were sustained.

GAO found that: (1) about 2.6 percent of the costs charged to the reviewed accounts from fiscal years (FY) 1990 and 1992 were unallowable; (2) the unallowable costs included charges for legal fees, lobbying, public relations, contributions, employee education, and training for consultants; (3) the contractor included the unallowable costs primarily because its accounting personnel lacked accurate instructions on allowable membership fees and weaknesses in the contractor's procedures for handling outside legal services costs; (4) the contractor is revising its accounting procedures to ensure that unallowable costs are properly recorded in the future; (5) the contractor would have received reimbursement for its FY 1990 unallowable costs partly because DCAA did not review its legal expenses and did not follow up on membership fee information it did obtain on certain membership fees; (6) DCAA has not yet audited the contractor's FY 1992 submission; and (7) DCAA did not question any costs in the contractor's FY 1988 and FY 1989 overhead submissions.

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