Incurred Cost Submissions: DIY or Do It Well?

Editor’s Note: This Article Has Been Updated June 14, 2023

While Tax Season may be the bell of the ball for the average American, in the GovCon space the real sweetheart is the Incurred Cost Submission. The question on our client’s minds is: Can you DIY the ICS with some turbo-tax-type setupor does it need to be carefully placed into the hands of a professional? Keeping that in mind, let’s discuss:  

Incurred Cost Submission Must-Knows 

Filing Deadline: Your incurred cost submission (ICS) must be filed 6 months after the close of your fiscal year. For many, that’s June 30thThough that may seem far from today, the amount of QA (which we’ll get to shortly) necessary to facilitate and close this filing leaves little wiggle room.  

Schedule H Detail: Providing minimal detail or justification for costs isn’t going to cut it here. We typically say that with the government, ignorance isn’t an excuse, and with your incurred cost submission (ICS) that holds true. You’ll need to provide adequate reasoning for the costs as they pertain to each line item on your submission.  

Running Reports Isn’t Enough: The running of the report is step one in the process. From there you’ll need to match and checkpoint contact, accounting, and contract data (to include task order changes) to ensure that everything matches and balances. This is where the bulk of your time will be spent, and it is also why we harp on having your processes, filing, and organization in place for future needs.  

The DIY Approach 

If you’re planning to DIY (Do-ICS-Yourself) you’ll need to begin gathering your data ASAP. Is it possible to DIY the ICS? Absolutely. Do you have the dedicated time and attention to get it right? That’s up to you. When it comes to the mathematically minded let’s put this to a quick equation 

Your Time Per Week  

Contract and Client Deliverable Time + ICS Prep Time + BD Time 

If we’re looking at a negative number, or one that robs you of sleep, DIY may not be your best bet. If you’re set on the DIY method here are some of the things you’ll need to remember:  

• Know the DCAA Workbook (ICE) and Requirements well (No, this isn’t an optional filing)
• Match schedules to unlinked data
• Categorize for Schedule H
• Include and complete all mandatory schedules
Include appropriate wage accounts
• All Policy Documents Readily available (Accounting Policies, Bonus Policy, Labor & Timekeeping, etc.)
• Have direct access to task orders and contracts, and correct figures for all schedules
• Run your report
• Set aside time to double and triple check the data outputs
• Check the DCAA Adequate Checklist

How To Do It Well 

If the DIY method looks too overwhelming, we have a suggestion. This should come as no surprise, but you may want to pass the ball to an outsourced option that can help you to prepare for submitting your report. An outsourced team will have fresh eyes to compile, prepare, and check your submission prior to crunch time. The goal here is to provide your incurred cost submission (ICS) in a way that the DCAA will deem it “adequate” AND low risk to avoid an audit. While most preparation services cannot guarantee these ratings and future audit avoidance, having your DCAA ducks in a row will definitely give you an educated leg up in the pool.  

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 GovCon accounting services, 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 businesses across the federal landscape.

Incurred Costs Submissions, Tis the Season

As we take more sinus meds and smell the pollen, it’s time to start talking about an annual rite of passage for most in the GovCon world. The annual incurred costs submission to DCAA.  While many might think a sinus infection sounds like more fun (and we tend to agree), now is the time to start planning on your submission.

The Incurred Costs Submission (or ICS) is due 6 calendar months after closing your fiscal year, which means many are due on June 30.  FAR 52.216-7 Allowable Costs and Payments requires submissions of annual final cost rates.  The ICS (or sometimes called ICE, which is the Incurred Costs Electronically Model, the actual excel spreadsheet that is submitted) determines the final actual indirect cost rates that a GovCon incurred for the previous year.  These rates are used to “settle up” on the contract, particularly CPFF type contracts.

First, the mechanics 
Most GovCon accounting systems actually prepare this report.  But if you think it’s as easy as running it and submitting, you would be wrong.  Now is where the rubber hits the road in terms of what your accounting and contracts departments have been filling out in the accounting system.  Suddenly you find POC info isn’t in the system or that you’ve missed a task order change or any number of things that you need to QA.  Prepare to spend a decent amount of time on reviewing the information, going back to your contracts and accounting files and making sure everything is legit.

A DCAA auditor briefed us earlier this year that the top issues with submission were:

  • Unsupported costs in the Incurred Cost Proposals
    • Fix this by maintaining records of all your costs. Make sure that they are stored on the company shared files, not on someone’s laptop somewhere.  If your controller leaves the company, you still want to have the backup required to argue for allowability.  You could leave money on the table by not having this documentation.
  • Schedule H
    • Schedule H seems to be the biggest issue on Incurred Cost Submissions – specifically not providing enough detail to justify the costs. Putting one line-item for a huge IDIQ isn’t going to cut it.

Second, the reality.
If this is the first time you realize that you owe the government money back or need to send a huge bill, you are doing it wrong.  Nothing in this report should be a surprise nor should any of these numbers be new.  As one who has lived with an $800,000 CREDIT to the government (seriously), it impacts all areas of the business – contracts, operations/program management and accounting.  It could impact BD/Capture’s ability to win more work with a customer if you become known as the contractor who couldn’t budget your indirect rates.  Every department needs to know what the bottom line is and the impact.

BOOST has the knowledge, resources and experience to mitigate your brain function when it comes to preparing your annual incurred costs submission to DCAA. June 30th is closer than you think. Contact us today and let’s get you on the right path before the mud starts flying.  Email [email protected].