October 17, 2016
Efficient and effective execution of duties is dependent on a well-trained staff. However, there are some training and training-related costs that are not allowable. Know these rules to maximize recovery, avoid penalties and preclude findings of accounting system inadequacy.
The Federal Acquisition Regulation (FAR) 31.205-44 addresses
After Hours or During Working
Overtime compensation (the overtime premium) paid to employees for attending training is not allowed.
The cost of salaries paid to employees for attending undergraduate level classes or part-time graduate level classes during working hours is also unallowable unless unusual circumstances do not permit the employees to attend classes outside of regular working hours.
What Else is Not Allowed?
Grants to educational or training institutions, scholarships and fellowships are considered contributions and are unallowable. This includes the donation of facilities or other properties to these institutions.
Training or educational costs for other than bona fide employees are generally not allowed, unless the employee is working in a foreign country and suitable public education is not available. In these cases, the costs of primary and secondary level studies for the employee’s dependents are allowable and can be included in the employee’s overseas differential pay.
Contributions to college savings plans for employee dependents aren’t allowed.
You can send an employee to pursue full-time graduate level education and incur allowable costs for tuition, fees, training materials, textbooks, subsistence and salary. However, any portion of the program that exceeds two school years or the length of the degree program, whichever is less, is not allowed.
What Happens in an Audit?
Auditors will scrutinize your incurred training costs for appropriate documentation, evaluate whether the costs are allowed and verify that you have excluded any unallowable amounts. Failure to segregate the unallowable costs could result in application of penalties for their inclusion in your incurred cost indirect rate submissions and disapproval of your accounting system.
For more information, consult with your government contracting advisor.