Q. We are being audited by a state agency and they are telling us we should be deleting a portion of our industry association fees related to lobbying costs. I never heard of this and DCAA has never questioned it. What do you think?
A. On some association fee invoices, lobbying costs are identified for tax purposes since lobbying costs are not deductible. Though we initially thought the state auditors were in error (after all, it is not a contractor’s responsibility to identify “unallowable” costs incurred by organizations they purchase goods and services from) we took a look at the DCAA Contract Audit Manual and found in the section for auditing Dues and Membership Fees in Chapter 7-1102(b) it states lobbying portions of association dues should be identified and deleted from charges on government contracts. The fact DCAA did not review these costs (as former DCAA auditors we never did) was, most likely, because such costs are usually immaterial.
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