Page 49 - VYSNOVA PROGRAM MANAGEMENT GUIDE V1.1

Accounting

• Asset revaluations resulting from business combinations
• Bad debts
• Contributions and donations
• Entertainment
• Executive compensation more than established ceilings
• Federal income taxes
• Fines and penalties
• Goodwill
• Certain costs related to legal and other proceedings
• Lobbying costs
• Losses on other contracts
• Memberships in social organizations
• Organizational costs
• Patent costs not required by contract
• Certain professional services
• Non-Performing bonus
Identifying and Segregating Unallowable Costs

The various PMs identify costs that are unallowable and submit such costs as separate
line items on time and expense reports submitted to corporate headquarters. The PMs
attend training sessions in FAR compliance on unallowable costs to learn/update their
knowledge on allowable vs. unallowable costs annually. Any large or unusual costs
submitted are reviewed by corporate accounting for allowability. If a cost submitted as
allowable and its allowability is questionable based on the review the Accounts Payable
(AP) Specialist contacts the associated PMs to discuss the allowability of the cost. If the
cost is determined to be unallowable an entry is created to reclassify the cost as
unallowable, if the cost is determined to be allowable the original entry stands.

To facilitate the tracking and segregating of unallowable costs in the general ledger, these
costs are recorded in separate general ledger accounts in Deltek CostPoint identified as
expense accounts beginning with numeric digits “9”. All costs not specifically classified
as allowable are recorded as unallowable costs and are recorded in the separate general
ledger accounts. These unallowable costs are then excluded in the Company’s final
indirect cost rate proposal to the Government.

Penalties
Each year, the Company must submit its costs on government contracts to the Defense Contract
Audit Agency (DCAA) and these costs are subject to an incurred cost audit. During these audits,
the DCAA will determine the allowability of incurred costs submitted for reimbursement. Because
government contracts will generally include a clause for penalties for unallowable costs, if the final
indirect cost rate proposal includes expressly unallowable costs, the Government may access a
penalty equal to the amount of the disallowed indirect cost plus simple interest, or a penalty for
twice the amount of the allocated unallowable indirect cost (if the indirect cost was previously
determined as unallowable).

Copyright 2020 Vysnova Partners Inc. All rights reserved.

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