I just got off the phone with my internal project management guy a few minutes ago (he does our billing), and had a very similar conversation:
In my case, I'm doing plenty of work, but the way that work is funded, we have a hard time recovering from it. On the other hand, other projects for the same funding sources are funded differently, with a lot of padding built into them, so the convention has been to use up that padding. It all comes from the same source eventually, but it isn't technically correct; and it makes a mess of things.
So recently we've been told only to charge for exactly what we're working on. Unfortunately, exactly what I'm working on only covers 1/4 of my time, and the other 3/4 have no mechanism for me to recover.
This is a problem.