How to Classify Travel Costs on a Government Contract

Travel is the cost small contractors misclassify most often, because a single trip can land in three different cost pools depending on its purpose. Get it wrong and you either overcharge a contract or bury a direct cost in your indirect rates. This guide shows how to decide, using the same logic from our four-question classification method.

The Same Trip, Three Different Pools

Consider one travel expense in three situations:

An engineer travels to a customer site to work on one contract. That is direct travel, because it clearly benefits one contract.
A project manager travels to visit several active contracts and supervise the teams on them. That is overhead travel, because it supports contract performance across multiple contracts.
A CFO travels to a management meeting, or to meet the company's CPA or banker. That is G&A travel, because it supports the business as a whole.

As Sarah Sun, CPA (Wendroff & Associates, CPA), puts it: "Nothing changed about the expense itself. It's still an air ticket, a hotel, a regular travel expense. The only thing that changed was the purpose of the trip."

That gives you a rule you can fall back on whenever a trip is ambiguous: "Don't ask yourself, what did we buy? Instead, ask, why did we incur the cost? The answer usually tells you which cost pool it belongs to."

If it helps to see the three cases side by side, Sarah works through the same trip in each of them here:

What's Never Billable, Even When Travel Is

Even when a trip is properly charged, some pieces inside it can never be billed. Entertainment and alcohol are unallowable, so a client dinner's food may be billable while the wine is not. Fines, and costs above what the contract allows, are also excluded. Travel costs for government contracts are governed by FAR Part 31, and specifically the travel cost principle at FAR 31.205-46, which limits reimbursement to reasonable amounts and ties lodging and per diem to federal travel rates.

Keep the unallowable pieces separate at the moment you record the expense, not at year end.

The Travel Sub-Accounts

In the CPA-reviewed template, direct travel is split into nine sub-accounts (50501 to 50509): lodging and hotel, air, rail, and bus, mileage, per diem, business meals, rental car and gas, taxis and tolls, parking, and other. Overhead and G&A travel mirror the same breakdown in the 70000s and 80000s. The detail is deliberate: it lets you bill exactly what a contract allows, reconcile against expense reports, and strip out unallowable pieces cleanly. For the full direct pool, see how to classify direct costs; for the indirect side, see how to classify indirect costs.

How WiseCost Keeps Travel Straight

Because travel depends on purpose, the classification has to happen when the expense is recorded, by the person who knows why the trip happened. WiseCost keeps each travel charge tied to the right contract or indirect pool, with an immutable audit trail showing the purpose behind it, so the split you decide once holds up when an auditor asks.

Get the free 147-account chart of accounts template. It is CPA-reviewed and built for GovCon books, with direct, overhead, and G&A travel already broken into sub-accounts, ready to import into QuickBooks Online.

You can also run our free DCAA Readiness Self-Assessment to check your cost pools against an SF-1408 review, or book a demo to see how WiseCost keeps travel audit-ready.