Overhead Costs: Unallowable and Questionable Costs Charged by McDonnell
Douglas Corporation (Testimony, 10/13/93, GAO/T-NSIAD-94-60).

GAO testified that $1.6 million of the $2.3 million in overhead costs
that McDonnell Douglas Corporation tried to bill the government for was
either unallowable or questionable.  This amount includes charges for
liquor, golf outings, symphony tickets, and public relations and
lobbying activities.  GAO also questions a $1.3 million charge for the
quarterly distribution of more than 100,000 copies of a corporate
videotape.  In particular, McDonnell Douglas tried to write off the
costs of the notorious 1991 Tailhook convention. McDonnell Douglas
executives on travel have been getting around the government's cap on
meal reimbursements by charging the meals as a business conference
expense.  One breakfast at a Washington D.C. hotel, for example, was
described as a "Glass Ceiling Task Force Meeting." GAO also questions
more than $100,000 billed for employee recreation clubs, such as the
Beer Can Collectors Club.  Although McDonnell Douglas' controls for
spotting unallowable costs clearly need to be beefed up, the larger
issue remains the reasonableness of the costs that taxpayers should have
to bear.  For example, when contractor employees are on travel, why
should they not have to abide by the maximum allowance spelled out by
the General Services Administration?

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-NSIAD-94-60
     TITLE:  Overhead Costs: Unallowable and Questionable Costs Charged 
             by McDonnell Douglas Corporation
      DATE:  10/13/93
   SUBJECT:  Overhead costs
             Internal controls
             Accounting procedures
             Contract administration
             Department of Defense contractors
             Billing procedures
             Questionable payments
             Accountability
             Administrative costs
             Financial management

             
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