Overhead Costs:

Unallowable and Questionable Costs Charged by McDonnell Douglas Corporation

T-NSIAD-94-60: Published: Oct 13, 1993. Publicly Released: Oct 13, 1993.

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GAO discussed a Department of Defense contractor's inclusion of unallowable and questionable costs in its overhead cost submissions. GAO noted that: (1) of the $2.3 million in overhead costs the contractor submitted for payment, $1.6 million were unallowable or questionable; (2) unallowable or questionable costs included costs for alcoholic beverages, entertainment, meals, employee relations, professional public relations services, and other unallowable charges; (3) the costractor's cost for distributing a corporate videotape was unreasonably high; (4) the actual amount of unallowable or questionable costs depends on the amount of defense versus commercial business performed and type of government contract; and (5) the contractor's inclusion of unallowable or questionable costs in its overhead costs submissions was primarily due to weak internal controls and its interpretation of federal procurement regulations.

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