The DCAA Incurred Cost Submission is your Government Contractor equivalent to federal tax form 1040. Like the well-known IRS Form that summarizes your personal and/or joint earnings to calculate your taxable Income and tax liability (or refund) associated with annual income, the DCAA Incurred Cost submission is used to calculate your final fiscal year cumulative claimed direct costs billed and indirect expense rates. The overarching goal is to compare your negotiated billing rates with what was actually invoiced for potential overbillings.
If you have government contracts that contain references to FAR 52.216-7 known as the “Allowable Costs and Payment” clause, you are required to submit an incurred cost proposal within six months of the end of your fiscal year. Contractors must prepare this Incurred Cost Electronically (ICE) submission to document their actual indirect expense rates including Fringe, Overhead, and G&A indirect rates for a fiscal year. DCAA will audit the Incurred Cost Submission and issue a report including recommended final indirect expense rates.
As with a complex IRS 1040, the DCAA ICE submission requires a substantial amount of financial disclosure. Not submitting your submission in a timely manner could result in negative outcomes. For example, if the submission is six months overdue, DCAA may issue a recommendation on final indirect rates and total contract costs. If that’s the case, then your contracting officer will have to base final indirect rates on the provisions included in FAR 52.705-1. In this scenario, it is highly unlikely that the rates set by DCAA would favor a contractor. Furthermore, DCAA can state that your job cost system is inadequate!
To avoid this situation, contractors can plan ahead and use the specifications set forth by DCAA. In fact, DCAA has developed an ICE model that includes the required schedules that must be completed before the incurred cost proposal is considered adequate. Here is an outline of the key schedules that are included in the model:
What’s included in the Model?
- Schedule A– Summary of all Claimed Indirect Rates
- Schedule B – General and Administrative (G&A) Expenses (Final Indirect Cost Pool)
- Schedule C – Overhead Expenses (Final Indirect Cost Pool)
- Schedule D –Intermediate Indirect Cost Pool
- Schedule E – Claimed Allocation Bases by element of cost used to distribute indirect costs
- Schedule F – Facilities Capital Cost of Money Factors Computation
- Schedule F-1 – Calculation of Average Net Book Values
- Schedule G – Reconciliation of Books of Account and Claimed Direct Costs
- Schedule G-1 – Reconciliation of Claimed Direct Costs to Job Cost Ledger
- Summary Schedule H - Summary Schedule H of Direct Contract/Subcontract/IR&D/B&P Costs
- Schedule H – Schedule of Direct Costs by Contract/Subcontract and Indirect Expense Applied at Claimed Rates
- Schedule H-1 – Subsidiary Schedule of Government Participation Percentages
- Schedule I – Schedule of Cumulative Direct and Indirect Costs Claimed and Billed by Contract and Subcontract
- Schedule J – Subcontract information
- Schedule K – Summary of Hours and Amounts on T&M/Labor Hour Contracts
- Schedule L – Reconciliation of Total Payroll per IRS form 941 to Total Labor Costs Distribution
- Schedule M – Listing of Decisions/Agreements/Approvals and Description of Accounting/Organizational Changes
- Schedule N – Certificate of Final Indirect Costs
- Schedule O – Schedule Contract Closing Information for those Contracts which Work Effort was Completed (in this Fiscal Year)
The starting point for completing the submission is to have your annual audit or review completed by your outside CPA firm with all material adjustments recorded in the accounting books of records. Like tax preparation software by using the SYMPAQ DCAA Incurred Cost template, you can organize and automatically prepare the above schedules that are based on your trial balance. The most onerous schedule to prepare is Schedule H, but with SYMPAQ and Infor’s F9 add-in, we can make your life easier!