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Financial and Strategic Management for Nonprofit Organizations, Fourth Edition by Herrington J. Bryce

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Appendix H Risks of Cost Denial

A major risk that any organization that contracts to do work for the federal government faces is that certain costs will not be honored. OMB Circular A-122, “Cost Principles for Nonprofit Organizations,” explains how certain costs will be treated. I summarize these below beginning with a statement of the general principles that determine all cost recognition by the federal government.

The cost must be reasonable relative to the job, it must conform to government regulations on costs, must be applied consistently and uniformly across government and others, be documented, not be included in meeting cost-sharing requirements of any other government contract, and it must conform to generally accepted accounting principles. ...

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