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Audit Alert: T&M/LH Contract Hours Targeted For Disallowance

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Issued by: DEPARTMENT OF DEFENSE Subject: Questioned Hours on Time-and-Materials (T&M)/Labor-Hour (LH) Contracts are targeted for Disallowance. A memorandum was issued to clarify guidance on reporting questioned labor costs relating to exceptions taken to labor hours billed/claimed on T&M and LH contracts when labor hours incurred are not in compliance with contract terms. Specifically, if an auditor’s examination of incurred labor hours discloses that an employee does not meet the labor qualifications/requirements prescribed in the contract for the labor category billed,

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