# 42.709-5 Computing interest.

For 42.709-2(a)(1)(ii), compute interest on any paid portion of the disallowed cost as follows:

1. (a) Consider the overpayment to have occurred, and interest to have begun accumulating, from the midpoint of the contractor’s fiscal year. Use an alternate equitable method if the cost was not paid evenly over the fiscal year.

2. (b) Use the interest rate specified by the Secretary of the Treasury pursuant to Pub.L.92-41 (85 Stat. 97).

3. (c) Compute interest from the date of overpayment to the date of the demand letter for payment of the penalty.

4. (d) Determine the paid portion of the disallowed costs in consultation with the contract auditor.