DCAA Oct 18 issued separate guidance alerting auditors to the Defense Procurement and Acquisition Policy Oct 11 memo regarding allowability of costs of contractor employees donating vacation or unused leave time for the victims of Hurricane Katrina.  The memo states such donated leave time are allowable compensation costs under FAR 31.205-6, Compensation for personal services and not unallowable costs under FAR 31.205-8, Contributions or donations.  The memo also references Internal Revenue Service Notice 2005-68 dated Sept 8 advising that the leave donations do not constitute taxable income to the employee and that employers may treat these donations as either ordinary and necessary business expenses or charitable contributions (MRD 05-PAC-064(R).

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