Is Applying a G&A Rate Mandatory
Q. In auditing our 2011 incurred cost proposal (ICP) DCAA noted we do not apply G&A to travel and other direct costs and said we should change our G&A total cost input (TCI) base to a value added base that excludes travel and ODCs. We are confused and don’t know what to do for our 2012 ICP.
A. First, it is your call, not the government’s on what costs to include in your indirect cost bases. As for what you bill the government, you are entitled to apply G&A to all costs that are included in the base. It appears as if your G&A base is TCI but for some reason you have not been applying G&A to travel and ODCs. There is nothing necessarily wrong with that except you are not recovering all the costs you are entitled to. The auditor has apparently seen that and is saying you should change it. There is one problem with that.
If you proposed (either on fixed price or cost type work) a G&A rate where the computation included a TCI base then changing it to a value added base for ICP purposes, which would presumably increase the rate, is inconsistent with the way you proposed it. Such a change constitutes an accounting change where even if you are not CAS covered it does require notifying the government, justifying the change and probably identifying any cost impacts due to the change. The auditor is giving you advice that may come back to haunt you.
