Inquiry: Dear Paul: I attended your conference of months ago sponsored by SBA Office. It was an excellent presentation. I want your opinion on the following because talking to many accountants , I get different answers: 1. If our company benefits, which we offer employees total above the $3.24 do we have to pay the $3.24 in addition to the minimum wage in the WD? Example: Free online training classes, Direct Deposit, Life insurance, Credit Union, FICA, WIC and a certain percentage of their Health Insurance company paid under United health insurance plans. 2. Can we separate out the portion of the $3.24 that is health insurance and only be responsible for paying that portion back into the employees salary? For example if the company contributes $1.00 per hour to health insurance per individual, can we pay that only in addition to the employee that does not want to participate in the company health insurance plans? 3. If we offer and pay a portion of their health insurance, can we require them to sign a waiver or acknowledging their benefits are above the $3.24 health and welfare requirement and that they understand.

Issued by: DEPARTMENT OF DEFENSE Subject: Questioned Hours on Time-and-Materials (T&M)/Labor-Hour (LH) Contracts are targeted for Disallowance. A memorandum was issued to clarify guidance on reporting questioned labor costs relating to exceptions taken to labor hours billed/claimed on T&M and LH contracts when labor hours incurred are not in compliance with contract terms. Specifically, if an auditor’s examination of incurred labor hours discloses that an employee does not meet the labor qualifications/requirements prescribed in the contract for the labor category billed,

Let's talk about how advance agreements can protect you.  Due to the many different types of accounting systems and varying contract situations that arise, determining the reasonableness, allocability, and the allowability of certain costs may be difficult to determine.  So to avoid possible subsequent disallowance or dispute based on unreasonableness, unallocability or unallowability, contracting officers and contractors (you and I) should seek advance agreement on the treatment of special or unusual costs, especially if you are in construction or A&E.  It's just good business sense!  Let's talk about this a little more........... 

There are many differences of opinion and disputes about whether certain costs should be classified as direct or indirect. In addition, the use of ambiguous terms that are used interchangeably doesn't help the situation. For instance, overhead is used interchangeable in industry with burden, loading, add-on, management cost, general and administrative, factory expense, etc.  That is why I am always bugging you to document your companies definition of the terms it uses.  It helps you, your staff and anyone else who has to deal with the many ways people use these terms.  So let's get into the Direct Cost Definition in a bit more detail...