Incurred Cost Submission FAQ for the DIY Padawans
Once upon a webinar, in a galaxy as far away as a click of your mouse, three mighty Jedis took the challenge on May 4th to further explain and help young padawans discover the true force of an incurred cost submission (ICS). Our Brave Jedis/Panelists included moderation by Meg Kerns, and a discussion from Boost’s Director of Accounting & CFO Service Susana I. Vellelonga and BOOST’s Senior Accounting Consultant Khaldun Taib. After doing a brief review on what an incurred cost submission (ICS) is and the power it holds for your company, the discussion swiftly moved to a question and response dialogue. Questions include what you will need if you want to DIY your incurred cost submission (ICS), if you do everything correctly could you avoid a DCAA audit, what is an Ice Model and how can it help you, and many more. Think of this as your FAQ insider look on the topic from perspectives that have experience on both sides of the force.
What is an Incurred Cost Submission (ICS)?
ICS stands for Incurred Cost Submission (Which was previously referred to as an Indirect Cost rate proposal, ICRP, ICP, ICS; Commonly interchanged).
- It determines the over-under for the billing cycle as it pertains to schedule I
- Establishes those final rates for annual indirect cost.
- Used in a calculation for fuller pricing rates, provisional billing rates, and other pieces that businesses need to move forward.
When are Incurred Cost Submissions due?
An incurred cost submission (ICS) is due 6 months after the end of a company’s fiscal year. Since most governments see the end of their fiscal year around December 31st, their deadline would be June 30th.
Can you Prepare an Incurred Cost Submission Yourself?
You can if you have the proper knowledge and proper supporting documentation. This challenge is not something that can be completed in a day; it is something that should be manually put together on the back end over time.
The real question here is should you prepare it yourself? To understand your own answer to this question ask yourself this…
- Do you have the proper people and knowledge to submit?
- Do you have the resources?
- Do you have the outreach?
- Do your resources have experience submitting an incurred cost submission?
Although the bigger question is…
- Do I want to do it myself?
- Do I know the risks if it is not submitted adequately and gets pushed back?
- Do you want this risk on your shoulders or do you want it done right?
There are a lot of documentations to tie out and some of that information comes from your accounting system, but most are done through heavy lifting on your part. Contracts are involved and you need to make sure you have a good person who is watching out for your contracts ahead of time.
Is this Better Done with a Team or as a Solo Endeavor?
A team is highly recommended. Through this team you can assign, what Susana I. Vellelonga referred to as, a “Champion.” This leader will help keep the team in line and help set deadlines for your incurred cost submission.
If I Do Everything Correctly, Could I Avoid a DCAA Audit?
Since 2012, there has been added a risk factor. This means that when you submit your incurred cost submission, the adequacy of your form determines your overall risk from low to high. Some examples of things that can get you flagged are…
- Having issues with your CO when submitting invoices.
- Deemed to have an inadequate accounting system.
- Not submitting an adequate incurred cost submission will also put you in a grey area.
This does not mean if you do everything perfectly you still may not get an audit. The best advice is to prepare like you are going to be audited. This way whether or not you get audited does not matter because you will be ready!
What Constitutes an adequate ICS form and when will the DCAA determine that and perform the audit if any?
The DCAA provides a seven-page adequate checklist on their website. Adequacy is determined by how you submitted the proposal and if you have all your schedules in place. You will receive your adequacy report 60 days after your ICS Submission. Adequacy is important because the grade you get can affect your business in the way of penalties.
What are the penalties? It depends on the level of issues you come across. An example is If you have a cost included with your pools, which should have been allowable, what penalties would you incur? This is entirely dependent on the threshold.
- If you are talking more than $10,000, then there is a certain amount of percentage for penalties.
- If you are a first-time offender, they will usually take leniency and ask why it was not put in as allowable.
- If it is a recurring theme and you do not correct it, penalties will become larger at that point. Including but not limited to losing contracts, losing the ability to win, and the DCAA will start to send other audits to make sure you are following the rules.
When submitting your incurred cost submission, the DCAA has 6 years after submission to audit you before they are stopped by the statute of limitations. Most audits will appear within a year of submission but legally they have 6 years.
What is the ICE Model?
A helpful resource from the DCAA to help you get your incurred cost submission (ICS) in order. This is something we highly suggest, especially for new DIYers, unless you already have something historically you have been submitting and already have prepared. Why should you use it though?
- User Friendly
- Schedules are already in the ICE Model.
- DCAA updates it whenever there are any updates on their website.
Although it is a very helpful resource it does not solve all your problems or do the work for you but gives you a good start.
Are there any good resources or more information if you are doing your incurred cost submission yourself?
- DCAA tools mentioned before.
- Utilizing your network/team.
- Webinars, classes, or blogs like this.
These are all a good start for resources and information. If you are looking for free resources, the DCAA website is your best bet.
Top 5 Takeaways!
- You must file 6 months after the end of the Fiscal year.
- COVID may delay auditor response time, this does not mean you can be late.
- You do NOT have to use the ICE Model.
- You will have to review and adjust your base reports.
- When in doubt, seek resources to help. (i.e., Outsourcing)
When you are done…CHECK IT AGAIN…Then CHECK IT ONE MORE TIME…Then maybe have someone else CHECK IT AGAIN for you!
To hear all the info shared through this webinar listen to the audio recording on BOOST’s very own podcast GovCon Untethered or watch the video on our YouTube channel.
BOOST can help prepare your Incurred Cost Submissions with a keen eye for detail and reporting. If you’d like to learn more about our Accounting Services for Government Contractors or back office services for GovCons, schedule a chat here.
About BOOST’s CEO, Stephanie Alexander
Stephanie Alexander has spent more decades than she wants to admit supporting high growth government contractors with an eye towards their bottom line. She is the CEO and founder of BOOST LLC which supports back-office functions for government contractors. She is a co-founder and Partner at govmates, a free teaming platform and technology scouting tool to connect business across the federal landscape.
