Government Contracting: Contractor Promotional Advertising Costs Are Unallowable

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Report Type	Reports and Testimonies
Report Date	April 10, 1990
Report No.	NSIAD-90-52
Subject	Accounting procedures Allowable costs Contract costs Department of Defense contractors Fighter aircraft Public relations B-2 Aircraft F-14D Aircraft F-15E Aircraft V-22 Aircraft Weapons systems Advertising costs

Summary:

Pursuant to a congressional request, GAO reviewed: (1) Department of Defense (DOD) contractors' costs for advertising four weapon systems to increase public support; and (2) whether DOD contractors charged those advertising costs to their contracts.

GAO found that DOD contractors: (1) did not charge promotional advertising costs to government contracts; (2) properly charged advertising costs to corporate accounts and excluded those costs from any billing claim or proposal applicable to a government contract; (3) planned to spend approximately $2 million during 1989 advertising the four weapon systems; (4) planned to claim at least $1.4 million as deductible business expenses, in accordance with federal income tax regulations; and (5) had accounting systems in place that properly identified those expenses as unallowable.

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Government Contracting: Contractor Promotional Advertising Costs Are Unallowable