Q.  Since the September 11 tragedy, we have received numerous question about how to treat certain costs like:  Can labor costs be charged direct when normally direct labor employees were sent home?  Should cancelled travel costs not returned be charged direct or indirect? Etc.

A.  We expect the government will issue guidelines on these type of questions but none have been issued as of this printing.  The unusual nature of the event puts the proper treatment of these costs in the “gray area.”  First, I would look for written policies or practices that exist for analogous circumstances (e.g. paid absences for unusual circumstances, cancelled trips, etc.) and follow those practices. Secondly, since there are, in most cases, plausible justification for both direct and indirect charging, I would trust your judgement by choosing one method and be prepared to defend it.  For example, direct charging of individuals can be defended because of the extraordinary nature of the events, the government required work to cease and you want to book these normally direct charged employees in a manner consistent with the way they normally are charged; indirect charging is viable because most paid absences are allowable indirect costs.  If challenged, there will be no penalties.  Finally, if more confirmation is desired, I would consult with your cognizant CO and ask either their opinion or tell them why your choice is used.

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