CAS 405 - Accounting for Unallowable Costs

Purpose

• To facilitate the negotiation, audit, administration and settlement of contracts by establishing guidelines covering:
• Identification of costs specifically described as unallowable; and
• The cost accounting treatment to be accorded such identified unallowable costs.

Requirements

• Costs expressly unallowable, or mutually agreed to be unallowable, shall be identified and excluded from any billing, claim, or proposal to the Government.
• Costs which become designated as unallowable as a result of a CO’s written decision pursuant to disputes procedures shall be identified if included or used in the computation of any billing, claim, or proposal.
• Costs directly associated with unallowable costs that would not have been incurred if not for the incurrence of the unallowable costs are also unallowable.
• Costs of any project not contractually authorized shall be accounted for in a manner which allows ready separation from costs of authorized projects.
• Where unallowable costs are normally part of a base(s) for the allocation of indirect expenses, the unallowable costs shall remain a part of the base(s).

Applicability

• Applies under modified and full coverage. 48 CFR 9904.405