FAR Part 31.205 defines which costs are allowable, unallowable, or conditionally allowable on government contracts. With 91 expressly unallowable cost principles across 21 subsections, contractors must carefully identify and adjust out unallowable costs before submitting their incurred cost proposal. This guide maps every FAR 31.205 category and shows how the ICP Dashboard automates unallowable cost detection.
91 Expressly Unallowable Cost Principles
FAR 31.205 contains 46 cost principle subsections, of which 21 categories contain costs that are expressly unallowable on government contracts. These include entertainment (31.205-14), lobbying (31.205-22), interest and financing (31.205-20), alcoholic beverages (31.205-51), and goods or services for personal use (31.205-6(m)). Each unallowable cost must be identified and removed from indirect rate pools before submission.
DCAA Audit Focus Areas
DCAA auditors concentrate on nine high-risk FAR 31.205 categories during incurred cost audits: compensation (31.205-6), travel (31.205-46), professional services (31.205-33), insurance (31.205-19), depreciation (31.205-11), rental costs (31.205-36), IR&D/B&P (31.205-18), material costs (31.205-26), and selling costs (31.205-38). These categories account for the majority of questioned costs in DCAA audit findings.
How Adjustments Work in the ICP
Unallowable costs flow through the general ledger into indirect rate pools (Schedules B and C). The contractor must create negative adjustments to remove unallowable amounts, bringing the claimed amount to zero for fully unallowable costs or reducing it for partially unallowable accounts. The ICP Dashboard's validation engine scans G/L data against all 21 FAR 31.205 categories and flags missing or incorrect adjustments automatically.
Common Adjustment Mistakes
DCAA frequently identifies these errors: missing adjustments where unallowable costs remain in pools, partial adjustments that fail to remove the full unallowable amount, wrong-direction adjustments that increase rather than decrease pools, and adjustments placed on the wrong schedule. The ICP Dashboard's cross-schedule reconciliation catches these errors before submission.
Explore the interactive FAR 31.205 guide below to see every unallowable cost category, DCAA audit focus areas, and how the ICP Dashboard automates compliance checking for your incurred cost proposal.