31.205-14
Entertainment costs
Entertainment and related social activity costs are strictly unallowable and cannot be charged to government contracts under any circumstances.
Overview
FAR 31.205-14 establishes that entertainment costs—including amusement, diversions, social activities, and directly associated expenses—are unallowable for reimbursement under government contracts. This includes costs such as tickets to events, meals, lodging, rentals, transportation, and gratuities related to entertainment. Additionally, costs for memberships in social, dining, or country clubs, or similar organizations, are also unallowable, regardless of whether these costs are reported as taxable income to employees. The regulation makes clear that these costs cannot be claimed under any other cost principle, ensuring there are no exceptions or alternative justifications for their inclusion in contract cost submissions.
Key Rules
- Entertainment Costs Are Unallowable
- All costs related to amusement, diversions, and social activities, including associated expenses, cannot be charged to government contracts.
- No Allowance Under Other Cost Principles
- Costs specifically made unallowable here cannot be claimed under any other cost principle.
- Club Memberships Unallowable
- Membership fees for social, dining, or country clubs (or similar organizations) are unallowable, even if reported as employee income.
Responsibilities
- Contracting Officers: Must ensure that entertainment and related costs are excluded from allowable costs during contract negotiation, administration, and audit.
- Contractors: Must identify, segregate, and exclude all entertainment and club membership costs from any cost submissions or billings to the government.
- Agencies: Should provide oversight and review to ensure compliance with this cost principle.
Practical Implications
- This rule prevents contractors from passing entertainment and social expenses to the government, ensuring taxpayer funds are used appropriately.
- Contractors must have robust accounting systems to identify and exclude these costs.
- Common pitfalls include misclassifying entertainment costs or attempting to justify them under other cost principles, both of which are prohibited.