Certain assets are purchased and depreciated, while others are leased and considered operating leases. Annual lease costs are included in the overhead pool.
The depreciation reflected on the Company's financial statements differs from the acceptable depreciation for federal income tax purposes. Because the financial statement amounts included in the overhead pool are lower than the amounts used for federal income tax purposes, the amounts included in the Schedule of Indirect Cost Pools are allowable under FAR Section 31.205-11(e).
The Company is a wholly-owned subsidiary of C&S Worldwide Holdings, Inc. The Company leases a commercial building located at 499 Col. Eileen Collins Boulevard, Syracuse, NY 13212 from Approach Associates, LLC ("Approach"), which is also a wholly-owned subsidiary of C&S Worldwide Holdings, Inc. This lease agreement expires in February 2022. Effective July 2017, a lease modification was executed reducing the monthly rental payments. In accordance with the lease agreement and modification, annual rent payments of $600,000 was paid to Approach and included in rent expense for the year ended December 31, 2019. The calculation to determine the allowable portion of the rent is as follows:
| Total Rent Expense | $ 600,000 |
|---|---|
| Plus: Facilities Capital Cost of Money | 161,412 |
| Less: | |
| Income Included in Rent Charges | 102,032 |
| Unallowable Interest Expense | 214,716 |
| 316,748 | |
| Allowable Portion of Related Party Rent | $ 444,664 |
Consequently, rental expense has been adjusted downward by $155,336 to reflect the provisions of FAR Section 31.205-36(b)(3).
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