Cost of money is not interest paid to a lender. It is a calculated charge representing the cost of capital tied up in net book value of facilities — equipment, buildings, land, and intangible capital assets.
The base is the average net book value (NBV) of capital assets used in performing contracts. The more capital you've invested in productive facilities, the larger the cost of money you may claim.
The rate is the Treasury Prompt Payment Act rate, published semi-annually by the Secretary of the Treasury and applied under CAS 9904.414-50(b). Contractors do not negotiate it — it is set by the government.
Without cost of money, two contractors performing the same work at the same direct cost would recover the same amount — even though one financed expensive production equipment from retained earnings while the other rented everything. CAS 414 levels the field by recognizing the capital invested in productive assets as a real cost of doing business, even though no cash changes hands.
You will not find cost of money on the income statement, the trial balance, or in the general ledger. It is computed separately each year and added to the indirect cost pools only for the purpose of claiming it on government contracts.
The amount is recognized only on Schedule F of the ICP, on cost-reimbursement billings, and in pricing proposals. There is no journal entry, no cash impact, and no effect on book income or financial statements.
Cost of money is not an expense in the general ledger. CAS 414 computes it separately and applies it as a distinct factor on Schedule H — it is not included in the G&A base and is not subject to profit/fee limitations under FAR 15.404-4.
FAR 31.205-10 makes cost of money allowable, but a contractor must claim it. If you do not include FCCM in your forward-pricing proposal or your incurred cost submission, you forfeit it — the government will not add it for you.
An incurred cost is something you actually paid for — salaries, rent, materials — and it leaves a paper trail in your books. An imputed cost is something the regulations let you claim because it represents real economic value, even though no cash transaction took place. Cost of money is the textbook example of an imputed cost in government contracting.
Compute the average net book value of all tangible and intangible facilities capital assets used during the fiscal year — equipment, buildings, leasehold improvements, capitalized software, less accumulated depreciation.
Apply the COM rate prescribed by CAS 9904.414-50(b) — the arithmetic mean of the two semi-annual Treasury rates in effect during the fiscal year. The rate is fixed by Treasury and is not negotiable.
Allocate the FCCM dollars to each indirect cost pool (G&A, Overhead, Intermediate) based on the assets supporting that pool — distributing undistributed capital proportionally — then divide by the pool's allocation base to derive the cost-of-money factor.
The COM rate is the Treasury Prompt Payment Act rate, published by the Secretary of the Treasury semi-annually. Per CAS 9904.414-50(b), the applicable COM rate for a fiscal year is the arithmetic mean of the two semi-annual rates in effect during that year — not a months-in-service weighted average.
Schedule F summarizes the cost of money allocable to each pool. It shows the average NBV from Schedule F-1, the weighted Treasury rate for the fiscal year, the allocation to each pool, and the resulting cost-of-money rate that is applied alongside the indirect rate.
Schedule F-1 supports Schedule F by listing each capital asset category and its average net book value over the fiscal year. NBV is computed as (Beginning NBV + Ending NBV) ÷ 2, by category, and assets must be those used in contract performance.
The same NBV-times-Treasury-rate computation that produces Schedule F also drives DD Form 1861 — Contract Facilities Capital Cost of Money, which is required on most cost-reimbursement and price-redeterminable proposals. If your forward-pricing rate agreement (FPRA) includes COM rates, those rates must reconcile to the Schedule F rates you ultimately claim. See DCAA Guidebook Chapter 18 — Cost of Money for the auditor's procedures.
Applies to capital assets currently used in contract performance. The cost-of-money charge is computed annually and treated as an allowable cost on the contracts the facilities serve.
Applies to capital assets that are being constructed, fabricated, or developed for the contractor's own use. The cost of money accrued during the construction period is capitalized into the asset.
For most small and mid-size government contractors, only CAS 414 applies — you simply compute COM on the assets sitting in your fixed-asset register. CAS 417 only comes into play if you are building a capital asset for your own use (a manufacturing facility, custom test equipment, capitalized internal software). Both standards point to the same Treasury rate; what differs is whether the COM is expensed (414) or capitalized (417).
Enter beginning + ending NBV by asset category
Tag each asset group to G&A, OH, or Intermediate
Enter rate(s) for the fiscal year — weighted if a change occurs
Generate F & F-1 with COM rates by pool
Enter average net book value for each capital asset group. The dashboard computes (Beginning + Ending) ÷ 2 for each row and totals by category. This becomes the input to Schedule F-1.
Tag each asset group to the indirect pool that benefits from it. Manufacturing equipment typically allocates to Overhead. Corporate buildings, executive vehicles, and shared IT assets typically allocate to G&A. Intermediate pools (e.g., Occupancy) get the assets they consume.
Enter both semi-annual Treasury rates in effect during the fiscal year. Per CAS 9904.414-50(b), the applicable COM rate is the arithmetic mean of the two — the dashboard computes it automatically and applies it to each pool's average NBV.
The most common error: omitting Schedule F entirely. Cost of money is allowable but not automatic — if you do not claim it, the government will not pay it. Money on the table.
Treasury rates change every six months. CAS 414-50(b) requires the arithmetic mean of the two semi-annual rates — using only one half-year's rate produces an incorrect FCCM and is an easy DCAA finding.
Vehicles for personal use, vacation property, or facilities not used in contract performance must be excluded from NBV. Including them inflates COM and creates questioned costs.
The standard requires average NBV — (Beginning + Ending) ÷ 2 by category. Snapshotting one point in time inflates or deflates the base improperly.
Tagging factory equipment to G&A (or vice versa) distorts each pool's COM rate. Allocate based on which pool's activities the asset actually supports — consistent with the indirect pool structure.
Interest expense is unallowable under FAR 31.205-20. Cost of money is the only permitted form of cost-of-capital recovery. Some contractors mistakenly attempt to claim both — a guaranteed disallowance.
Schedule F's NBV totals must tie exactly to Schedule F-1 detail by asset category. Footing errors or transposed figures here trigger an immediate adequacy comment.
If you have a forward-pricing rate agreement that includes COM, the Schedule F result must reconcile to the FPRA basis. Unexplained variances invite DCAA to renegotiate forward rates downward.
IR&D and B&P rows receive fringe and overhead only — never G&A or COM. Forgetting to deduct COM on the IR&D/B&P portion of the G&A base causes double-counting and is one of the most frequent DCAA questioned costs on Schedule F.
COM factors must be carried to five decimal places (not four, like indirect rates). Rounding early distorts contract-level COM recovery and produces reconciliation breaks between Schedule F and Schedule H.
Cost of money is one of the few allowable costs in the FAR/CAS framework that returns dollars to the contractor with zero cash outlay. The math is simple, the documentation is bounded by the fixed-asset register, and the rate is published by the government — yet contractors leave it on the table every year by skipping Schedule F or computing it wrong. Done correctly under CAS 414, FCCM is one of the highest-margin compliance activities a government contractor can perform.
The ICP Dashboard automates the full cost-of-money computation — NBV averaging, CAS 414-50(b) rate mean, undistributed-capital allocation, IR&D/B&P deduction, and Schedule F / F-1 generation — from your fixed-asset register straight into your incurred cost submission.
IncurredCostProposal.com