FAR Part 31 Specialists — DC, Maryland & Northern Virginia

    FAR Part 31 Allowable Cost Audit for Government Contractors — DC, Maryland & Virginia

    Quick Answer: What costs are allowable under FAR Part 31?

    FAR Part 31 defines allowable costs for federal government contracts as costs that are reasonable, allocable, and not specifically unallowable under FAR 31.205. Common unallowable costs include entertainment, lobbying, fines and penalties, executive compensation above the benchmark, and certain advertising expenses. CPA auditors test whether claimed costs meet these standards during DCAA and incurred cost audits.

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    FAR Part 31 Risks Facing Government Contractors

    Unallowable costs billed to government = False Claims Act exposure (treble damages + $25,000 per claim)

    Contractors often don't know which entertainment or travel costs are specifically unallowable under FAR 31.205

    Executive compensation cap ($653K benchmark for CY2024) surprises many contractors during DCAA incurred cost audits

    B&P (bid and proposal) costs are allowable but must be tracked separately — commingled B&P creates audit findings

    IR&D costs are allowable up to specific ceilings per FAR 31.205-18 — many contractors exceed limits without realizing it

    FAR Part 31 Compliance Audit Services

    From allowable cost classification to ICP preparation and False Claims Act risk mitigation, we provide the FAR Part 31 expertise Northern Virginia and DC-area contractors need.

    FAR Part 31 Allowable/Unallowable Cost Classification

    Transaction-level review of your general ledger and expense accounts against FAR 31.205 to identify misclassified unallowable costs. We produce a cost classification matrix and recommended GL coding changes before DCAA arrives.

    Incurred Cost Proposal (ICP) Preparation Support

    Preparation of the annual Incurred Cost Submission (ICS/ICP) required for all cost-type contracts — including Schedule H (direct costs), Schedule I (indirect costs), Schedule J (labor categories), and all supporting schedules in DCAA-required format.

    Unallowable Cost Account Setup

    Design and implementation of a FAR-compliant unallowable cost accounting system — including GL account structure, AP coding procedures, employee expense report policies, and year-end reconciliation workflow to protect you in DCAA audits.

    Executive Compensation Benchmark Analysis

    Annual analysis of your senior executive compensation against the FAR 31.205-6(p) benchmark cap. Identification of compensation amounts that exceed allowable limits and calculation of the required unallowable cost carve-out for the ICP.

    B&P and IR&D Cost Pool Review

    Review and documentation of bid and proposal (B&P) and independent research and development (IR&D) cost pools for FAR 31.205-18 compliance — including ceiling calculations, cost segregation, and proper allocation methodology.

    False Claims Act Risk Assessment

    Structured risk assessment identifying billing practices, cost pool allocations, and indirect rate submissions that carry False Claims Act exposure. We prioritize findings by risk level and provide corrective action recommendations before a whistleblower or audit surfaces them.

    FAR Part 31.205 — Allowable vs. Unallowable Cost Examples

    Cost ItemFAR CiteGenerally Allowable?Notes
    Salaries and wages31.205-6YesUp to executive comp cap
    Entertainment31.205-14NoAlways unallowable
    Advertising (recruiting)31.205-1YesMust be for recruiting purposes
    Lobbying costs31.205-22NoAlways unallowable
    Travel (domestic)31.205-46YesMust meet JTR/FTR reasonableness test
    IR&D and B&P31.205-18YesSubject to ceiling per FAR
    Interest/financing31.205-20NoGenerally unallowable

    Our FAR Part 31 Compliance Audit Process

    A 4-step process from cost pool analysis to unallowable cost account implementation.

    1

    Cost Pool & Chart of Accounts Review

    Map your current general ledger structure to FAR Part 31 cost categories. Identify where unallowable costs are currently coded and whether they are properly segregated from allowable cost pools used for government billing.

    2

    Transaction-Level Cost Testing

    Sample and test transactions across major expense categories — travel, entertainment, compensation, subcontracting, and indirect costs — against FAR 31.205 allowability standards. Quantify disallowable amounts and calculate impact on indirect rates.

    3

    ICP / Indirect Rate Analysis

    Review your Incurred Cost Proposal or prepare one if not yet filed. Verify indirect rate pools are properly structured and unallowable costs are excluded from all rate calculations before DCAA review.

    4

    Controls Implementation & Training

    Design and implement unallowable cost accounts, AP coding procedures, and expense report policies. Train finance staff on FAR Part 31 requirements to prevent recurrence of the most common compliance failures.

    FAR Part 31 Compliance FAQs

    Common questions from DC, Maryland & Northern Virginia government contractors about FAR Part 31 allowable cost compliance.

    Find Unallowable Costs Before DCAA Does.

    With False Claims Act exposure and DCAA penalties on the line, proactive FAR Part 31 compliance review is essential for every DC-area government contractor holding cost-type awards.

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    Serving government contractors in Washington DC, Maryland, Northern Virginia, and the greater DMV area.