demystifying dcaa incurred cost submissions › wp-content › uploads › 2018 › 02 › ...•...

Demystifying DCAA Incurred Cost Submissions

Donna Dominguez & Aisha Mian | May 10, 2017

http://blogs.aronsonllc.com/fedpoint/

2 © 2017 | www.aronsonllc.com | www.aronsonllc.com/blogs |

https://www.facebook.com/MeetAronson/

https://twitter.com/Aronsonllc

https://www.linkedin.com/company/21619?trk=tyah

http://www.aronsonllc.com/

http://www.aronsonllc.com/blogs


About Aronson LLC

Aronson LLC provides a comprehensive platform of assurance, tax, and consulting solutions to today’s most active industry sectors and successful individuals. For more than 50 years, we have purposefully expanded our service offerings and deepened our industry specialties to better serve the needs of our clients, people, and community. From startup to exit, we help our clients maximize opportunity, minimize risk, and unlock their full potential.







About Aronson LLC

• Thinking ahead for clients for more than 50 years • 225+ professionals located in Rockville, MD • 80+ professionals dedicated to supporting government contractors • Aronson helps clients rethink the way they approach their business

through innovative, industry-specific services and advice: – Audit, Assurance and Tax – Deltek Systems and Outsourcing – Financial and Contract Compliance – GSA Schedules

• www.aronsonllc.com/blogs/fedpoint/ – News and trends and insight for today’s savvy government contractor






http://www.aronsonllc.com/blogs/fedpoint/


Awards / Accolades / Affiliations

The Gazette of Politics & Business Exceptional 53 Business Award In 2012, Aronson received the PB53 award for the third year in a row. The program acknowledges the top businesses and organizations in Maryland based on criteria that includes the company’s annual revenue, employee growth, noteworthy product or service innovations, community service efforts and more.

Accounting Today Top Firm In 2013, Aronson was once again named to Accounting Today’s list of the top 100 firms in the country. Accounting Today is a leading provider of online business news for the tax and accounting community.

Washington Business Journal Top 25 Aronson is ranked #12 on the Washington Business Journal’s Top 25 Accounting Firms in the DC Metropolitan area.

INSIDE Public Accounting Top 100 Once again, Aronson has earned a spot in the top 100 of this prestigious list, released by INSIDE Public Accounting. This is the longest running, most comprehensive and accurate independent analysis focusing on management and operations of America’s large local, regional and national firms.

Washington Business Journal Best Places to Work Aronson has been recognized five times as one of the Metro area’s “Best Places to Work.” The award recognizes a company’s achievements in creating a positive work environment that attracts and retains employees through a combination of employee satisfaction, working conditions and company culture.

Montgomery County Chamber Corporate Social Responsibility Award In 2010, Aronson was honored to receive the MCCC’s Corporate Social Responsibility Award based on the depth and breadth of the company’s energetic commitment to support young people, in the areas of education, housing and health.







Agenda

• Filing Requirements for an Incurred Cost Submission

• Required Information needed to commence preparation

• Preparation of the Incurred Cost Submission • Ramifications of Non-Compliance • Statute of Limitations • Incurred Cost Audit Tips







Filing Requirements for an Incurred Cost Submission







The Four W’s for an ICS

• WHAT: When a contract contains the following FAR Clause 52.216-7, Allowable Cost and Payment, normally found in solicitations/contracts that are cost-reimbursement (flexibly priced) or a time-and-materials contract (other than a contract for commercial items).






https://www.acquisition.gov/far/html/52_216.html



• WHEN: Per FAR 52.216-7(d)(1)(2)(i) The Contractor shall submit an adequate final indirect cost rate proposal to the Contracting Officer (or cognizant Federal agency official) and auditor within the 6-month period following the expiration of each of its fiscal years. – Reasonable extensions, for exceptional circumstances only, may

be requested in writing by the Contractor and granted in writing by the Administrative Contracting Officer








• WHERE: To your cognizant DCMA and DCAA Representative

• WHY: Balancing your Checkbook – To settle up on the amount the Government owes you or the amount you owe the Government







Quick Summary Reference on Incurred Cost Submission

• It begins with a contract FAR Clause 52.216-7, Allowable Cost & Payment – Can be found in Prime and Subcontracts – Applicable to Cost Type (flexibly priced) and T&Ms

• A submission to “True-up” Provisional Rates to Actual Rates

• Prepared Annually – Due 6 months after company year-end







Background on Incurred Cost Submission

Commonly asked questions • What if I have a T&M contract (prime or subcontract) with

no “M”s? • What if I have a T&M prime or subcontract and did not

apply G&A on the pass through?

Skilled contract personnel are hard to find!







Who Does NOT Need to File an ICS

• Fixed Price Contracts • Labor Hour Contracts • Commercial Contracts

– GSA Contract & Task Orders • Contracts closed out under the quick close out procedure.

When conditions under FAR 42.708(a) are satisfied Contracting Officer can settle indirect costs in advance of final indirect cost rate.







Required Information needed to commence preparation







Where to Begin - Data Checklist

• Trial Balance (in excel format) • Payroll Reconciliation

– Year-end payroll summary report – W-2 Summary – 941 Quarterly Tax Returns

• Statement of Indirect Expenses OR Final FY Indirect Rate Calculation

• Job/Project Summary Reports (at billing level) – Flexibly priced government contracts – Government T&M (normally GSA N/A)

• General Ledger Detail • A/R History








• Year-end or last invoices (if contract ended prior to fiscal year) with cumulative for all flexibly priced and T&M government contracts with the applicable FAR 52.216-7 clause.

• Contract Briefs or Contract Information – List of contract limitations for all contracts subject to ICS. – Contract Briefs all for all contracts subject to ICS (Suppl O)

• List of total hours booked by labor category for each applicable Federal Government T&M contract (usually GSA task orders N/A).








• Note if each project listed on the ICS is DoD or Non-DoD and if Prime or Subcontract.

• Note if each project listed on the ICS has physically ended as of the year. (Yes/No)

• Note if subject to the penalty clause FAR 52.242-3. • Subcontractor & Consultant information (for those that

worked on any contracts subject to ICS) • Review General Ledger to ensure all unallowable costs

have not been claimed.







Supplemental Information (only required at time of audit)

• Comparative analysis of indirect expense detailed by account (Supplemental As)

• General Organization and Executive Compensation information (Supplemental B)

• Identification of Prime contracts which Contractor perform as a Subcontractor (Supplemental C)

• Contract Briefs (Supplemental O)








• Certified Financial Statements • Management Letter from CPA concerning any internal control

weaknesses • Actions that have been and/or will be implemented to

correct the weakness described in management letter • List of all Internal Audit Reports Issues since the last

disclosure of the Internal Audit Reports • Annual Internal Audit plan of scheduled audit to be performed

in the fiscal year when final indirect cost rate submission is made








• Federal and State Tax Returns • Securities & Exchange Commission 10K report • Minutes from Board of Directors meetings • Listing of delay claims and termination claims • Description of accounting system • Procedures for identifying and handling unallowable costs • List of work sites and the number of employees assigned

to each site








Written Policies • Segregation of Unallowables • Bonus Policy • Labor & Timekeeping • Subcontractor/Vendor procurement and payments • Travel Policy • Billing Policy

– Handling of withholds – Contract Limitations – Labor Category & Qualifications







Preparation of the ICS







Develop Custom ICS Model

• Recommend developing your own model &

customize to your company’s indirect rate structure

• Can use DCAA’s ICE model under checklist & tools (http://www.dcaa.mil/ice_model.html)

• Drop in Trial Balance and link to Schedules A-E to calculate the actual rates






http://www.dcaa.mil/ice_model.html




Sort The Trial Balance







Schedule B – G&A Pool (Final Claimed Rate)

Schedule B

Account Description Expenses per G/L Adjustments Expenses

Claimed Notes Reference

7000-000-00 GENERAL & ADMIN SALARIES 2,500,000.00$ 2,500,000.00$ 70B0-000-00 BUS DEV LABOR 847,433.52 847,433.52

_ - - TOTAL G&A LABOR 3,347,433.52$ -$ 3,347,433.52$

7001-000-00 GENERAL & ADMIN BONUS 210,000.00 210,000.00 70B0-010-00 BUS DEV CONSULTANTS 45,038.68 45,038.68 70B0-014-00 BUS DEV CONFERENCE EXPENS 267.00 267.00 70B0-030-00 BUS DEV LOCAL TRAVEL 249.27 249.27 70B0-031-00 BUS DEV OUT OF TOWN TRAVEL 80,281.38 80,281.38 7010-000-00 CONSULTANTS 185,395.71 185,395.71 7011-000-00 ACCOUNTING AND TAX 183,006.53 183,006.53 7012-000-00 LEGAL 143,286.06 143,286.06 7014-000-00 CONFERENCE EXPENSE 4,395.00 4,395.00 7015-000-00 EMPLOYEE TRAINING 795.00 795.00 7030-000-00 LOCAL TRAVEL 3,744.59 3,744.59 7031-000-00 OUT OF TOWN TRAVEL 41,485.20 41,485.20 7050-000-00 DUES & SUBSCRIPTIONS 83,814.42 83,814.42 7070-000-00 LICENSE & TAXES 517,142.94 517,142.94 7071-000-00 BUSINESS INSURANCE 12,410.00 12,410.00 7080-000-00 RECRUITMENT 67,794.12 67,794.12

_ - - _ - -

TOTAL BEFORE ALLOCATIONS & B&P 4,926,539.42$ -$ 4,926,539.42$

ARONSON LLC - EXAMPLESchedule B - General and Administrative (G&A) Expenses (Final Indirect Cost Pool)

For The Year Ended 12/31/16










Fringe Allocation 1,276,527.04 1,276,527.04 SCHED C-1Facility SVC 843,946.83 843,946.83 SCHED D

TOTAL BEFORE B&P 4,926,539.42$ 2,120,473.87$ 7,047,013.29$

B&P ACCT 39 B&P LABOR 1,100,000.00 1,100,000.00 B&P ACCT 43 B&P TRAVEL 148,000.00 148,000.00 B&P ACCT 46 B&P MATERIALS 1,200.00 1,200.00 B&P ACCT 56 B&P ODCS 4,500.00 4,500.00

Fringe Allocation 419,479.50 419,479.50 SCHED C-1Overhead Allocation 118,696.70 118,696.70 SCHED E

TOTAL B&P 1,253,700.00$ 538,176.20$ 1,791,876.20$

R&D ACCT 39 IR&D LABOR 500,000.00 500,000.00 R&D ACCT 56 IR&D ODCS 5,000.00 5,000.00

Fringe Allocation 190,672.50 190,672.50 SCHED C-1Overhead Allocation 53,953.04 53,953.04 SCHED E

TOTAL IR&D 505,000.00$ 244,625.54$ 749,625.54$

TOTAL G&A 6,685,239.42$ 2,903,275.61$ 9,588,515.03$










Unallowable Costs9100-000-00 CONTRIBUTIONS 1,000.00 (1,000.00) - (1)9110-000-00 GSA FEE (Should be Contra Revenue) 1,000.00 (1,000.00) - (1)9120-000-00 PROMOTION & ADVERTISING 1,000.00 (1,000.00) - (1)9130-000-00 UNALLOW-DEFERRED RENT 1,000.00 (1,000.00) - (1)9140-000-00 UNALLOW-BANK FEES/FIN CHR 1,000.00 (1,000.00) - (1)9150-000-00 UNALLOW-PENALTY & INT 1,000.00 (1,000.00) - (1)9150-000-00 UNALLOW-PENALTY & INT 1,000.00 (1,000.00) - (1)9195-000-00 UNALLOWABLE LEGAL 1,000.00 (1,000.00) - (1)9197-000-00 UNALLOWABLE INCOME TAX 1,000.00 (1,000.00) - (1)

_ - - - (1)TOTAL UNALLOWABLE 9,000.00$ (9,000.00)$ -$

Unallowable Costs subject to G&A9170-000-00 UNALLOWABLE ENTERTAINMENT 1,000.00 (1,000.00) - (2) SCHED E9180-000-00 GIFTS 1,000.00 (1,000.00) - (2) SCHED E9190-000-00 UNALLOWABLE TRAVEL 1,000.00 (1,000.00) - (2) SCHED E

_ - - - (2) SCHED ETOTAL UNALLOWABLE 3,000.00$ (3,000.00)$ -$

Explanatory Notes:(1) Unallowable per FAR 31.2(2) Unallowable per FAR 31.2 -- Included in the base of G&A on Schedule E







Schedule B-1 – SM&H Pool (Final Claimed Rate) If Applicable

Schedule B-1



70M0-000-00 MATERIAL HANDLNG LABOR 1.00$ 1.00$ _ - -

TOTAL SM&H LABOR 1.00$ -$ 1.00$

70M0-010-00 MATERIAL HANDLNG CONSUL 1.00 1.00 _ - -

TOTAL BEFORE ALLOCATIONS 2.00$ -$ 2.00$

Fringe Allocation 0.26 0.26 SCHED C-2Facility SVC 0.53 0.53 SCHED D

SVC 2 0.05 0.05 SCHED D-1TOTAL SM&H POOL 2.00$ 0.85$ 2.85$

- - TB SCHED H

CLIENT NAMESchedule B-1 - Subcontract/Material & Handling Costs (Final Indirect Cost Pool)








Schedule C – Overhead(s) Pool (Final Claimed Rate) may have multiple Schedules

Schedule C



6000-000-00 OVERHEAD SALARIES 2,000,000.00$ 2,000,000.00$ _ - -

TOTAL OH LABOR 2,000,000.00$ -$ 2,000,000.00$

6001-000-00 OVERHEAD BONUS 200,000.04 200,000.04 6014-000-00 CONFERENCE EXPENSE 13,962.69 13,962.69 6015-000-00 EMPLOYEE TRAINING 6,000.00 6,000.00 6025-023-00 COMMUNICATIONS 1,623.62 1,623.62 6030-000-00 LOCAL TRAVEL 21,032.02 21,032.02 6031-000-00 OUT OF TOWN TRAVEL 14,599.13 14,599.13 6035-022-00 BUSINESS MEALS 30,241.76 30,241.76 6080-000-00 RECRUITMENT 15,000.00 15,000.00

_ - - TOTAL BEFORE ALLOCATIONS 2,302,459.26$ -$ 2,302,459.26$

Fringe Allocation 762,690.00 762,690.00 SCHED C-1Facility SVC 1,969,209.28 1,969,209.28 SCHED D

TOTAL OVERHEAD 2,302,459.26$ 2,731,899.28$ 5,034,358.54$

- - TB SCHED H

ARONSON LLC - EXAMPLESchedule C - Overhead Expenses (Final Indirect Cost Pool)








Schedule C-1 – Fringe Pool (Final Claimed Rate)

Schedule C-1



5001-000-00 PAID TIME OFF (PTO) 5,000,000.00$ 5,000,000.00$ 5001-001-00 BEREAVEMENT LEAVE 76,782.88 76,782.88 5001-002-00 JURY DUTY LEAVE 32,145.18 32,145.18 5001-003-00 MILITARY PAID LEAVE 10,899.32 10,899.32 5010-000-00 HOLIDAY 2,198,321.01 2,198,321.01 5051-000-00 EMPL RELOCATION/MOV ASST 2,000.00 2,000.00 5031-000-00 ER TRANSIT/PRKG CONTRIB 163,597.10 163,597.10

_ - - TOTAL FRINGE LABOR 7,483,745.49$ -$ 7,483,745.49$

5019-000-00 BONUS 592,878.96 592,878.96 5020-000-00 FICA MATCH 4,702,247.04 4,702,247.04 5021-000-00 FUTA EXPENSE 56,844.59 56,844.59 5022-000-00 SUTA EXPENSE 403,197.87 403,197.87 5023-000-00 401K CORP MATCH 1,106,497.53 1,106,497.53 5024-000-00 WORKMAN'S COMP INSURANCE 95,071.02 95,071.02 5025-000-00 HEALTH INSURANCE 4,250,836.72 4,250,836.72 5026-000-00 LIFE INSURANCE 65,676.60 65,676.60 5027-000-00 SHORT TERM DISABILITY 175,139.77 175,139.77 5028-000-00 LONG TERM DISABILITY 73,073.31 73,073.31 5029-000-00 DENTAL INSURANCE 279,232.47 279,232.47 5030-000-00 HSA CORP MATCH 47,502.94 47,502.94 5050-000-00 EMPL TRAINING/EDUC ASST 418,243.28 418,243.28 5065-000-00 FRINGE BENEFIT ADMIN FEES 70,760.58 70,760.58 7072-000-00 SERVICE PROVIDER FEES 67,121.63 67,121.63

_ - - TOTAL FRINGE POOL 19,888,069.80$ -$ 19,888,069.80$

ARONSON LLC - EXAMPLESchedule C-1 - Fringe Benefits Expenses (Final Indirect Cost Pool)








Schedule C-1 – Fringe Pool (Final Claimed Rate)

_ - -

TOTAL FRINGE POOL 19,888,069.80$ -$ 19,888,069.80$

Allocation based is over cumulative Total Labor Dollars

Description Total Labor % of Total Allocation Notes ReferenceG&A Labor 3,347,433.52 6.42% 1,276,527.04 SCHED BB&P Labor 1,100,000.00 2.11% 419,479.50 SCHED BIR&D Labor 500,000.00 0.96% 190,672.50 SCHED B

Overhead Labor 2,000,000.00 3.83% 762,690.00 SCHED CFAC SVC Labor 150,000.00 0.29% 57,201.75 SCHED D

Direct Labor 45,000,000.00 86.29% 17,160,525.03 TBDL - Unbillable 55,000.00 0.11% 20,973.98 SCHED B

TOTALS 52,152,433.52$ 100.00% 19,888,069.80$

- 0.00 - TB ICS SCHED C-1







Schedule D – Facility/IT Service Center (Intermediate Pool)

Schedule D



70F0-000-00 FACILITIES LABOR 150,000.00$ 150,000.00$ _ - -

TOTAL FAC LABOR 150,000.00$ -$ 150,000.00$ -

70F0-010-00 FACILITIES OFFICE EXPENSE 97,007.89 97,007.89 70F0-011-00 FACILITIES TEMP SVC/STAFF 53,965.00 53,965.00 70F0-015-00 FACILITIES COMPUTER SUPPL 169,233.08 169,233.08 70F0-016-00 FACILITIES OFFICE SUPPLIE 126,639.15 126,639.15 70F0-020-00 FACILITIES RENT 1,637,580.20 1,637,580.20 70F0-025-00 FACILITIES COMMUNICATIONS 134,096.39 134,096.39 70F0-030-00 FACILITIES POSTAGE &DELIV 25,818.76 25,818.76 70F0-034-00 FACILITIES REPAIR & MAINT 8,561.12 8,561.12 70F0-035-00 FACILITIES DEPRECIATION 159,079.01 159,079.01 70F0-040-00 FACILITIES AMORT EXP 193,973.76 193,973.76

_ - - Fringe Allocation 57,201.75 57,201.75 SCHED C-1

TOTAL SERVICE CENTER 2,755,954.36$ 57,201.75$ 2,813,156.11$

Allocated based over Labor Hours for all applicable labor

Description Labor Hours % of Total Allocation Notes ReferenceG&A/B&P/IR&D Labor 30.00 30.00% 843,946.83 SCHED B

OH Labor 70.00 70.00% 1,969,209.28 SCHED CTOTALS 100.00 100.00% 2,813,156.11$

- - - TB ICS Schedule D

ARONSON LLC - EXAMPLESchedule D - Service Center for Facility Costs (Intermediate Indirect Cost Pool)








Schedule E – Basis of Allocation

Schedule E

Pool & Description Expenses per

G/L Adjustments Expenses

Claimed Ref

Fringe Benefits 19,888,069.80$ -$ 19,888,069.80$ Sch C-1 -

Fringe Benefits Base: AllocationOH Labor 2,000,000.00 2,000,000.00 Sch C 762,690.00

FAC SVC Labor 150,000.00 150,000.00 Sch D 57,201.75 G&A Labor 3,347,433.52 3,347,433.52 Sch B 1,276,527.04 B&P Labor 1,100,000.00 1,100,000.00 Sch B 419,479.50 IR&D Labor 500,000.00 500,000.00 Sch B 190,672.50

Direct Labor 45,000,000.00 45,000,000.00 TB 17,160,525.03 DL - Unbillable 55,000.00 55,000.00 TB 20,973.98

Total Fringe Base 52,152,433.52$ -$ 52,152,433.52$ 19,888,069.80$ - -

Fringe Rate 38.13%

Overhead Pool 2,302,459.26$ 2,731,899.28$ 5,034,358.54$ Sch C -

Overhead Base: AllocationDirect Labor 45,000,000.00 45,000,000.00 TB 3,515,250.69 Fringe on DL 17,160,525.03 17,160,525.03 Sch E 1,340,523.28

DL - Unbillable 55,000.00 55,000.00 TB 4,296.42 Fringe on DL 20,973.98 20,973.98 Sch E 1,638.42

B&P Labor 1,100,000.00 1,100,000.00 Sch B 85,928.35 Fringe on B&P 419,479.50 419,479.50 Sch E 32,768.35

IR&D Labor 500,000.00 500,000.00 Sch B 39,058.34 Fringe on IR&D 190,672.50 190,672.50 Sch E 14,894.70

Total Overhead Base 64,446,651.01$ -$ 64,446,651.01$ 5,034,358.54$ -

OH Rate 7.81%

ARONSON LLC - EXAMPLESchedule E - Reconciliation of Claimed Allocation Bases








Schedule E – Basis of Allocation

Schedule E

Pool & Description Expenses per

G/L Adjustments Expenses

Claimed Ref

G&A Pool 6,685,239.42$ 2,903,275.61$ 9,588,515.03$ Sch B -

G&A Base: AllocationDirect Labor 45,000,000.00 45,000,000.00 TB 5,186,020.59 Fringe on DL 17,160,525.03 17,160,525.03 Sch E 1,977,663.02

OH on Direct Labor 4,855,773.96 4,855,773.96 Sch E 559,603.19 DL - Unbillable 55,000.00 55,000.00 TB 6,338.47

Fringe on DL 20,973.98 20,973.98 Sch E 2,417.14 OH on Direct Labor 5,934.83 5,934.83 Sch E 683.96

Direct Travel 250,000.00 250,000.00 TB 28,811.23 Other Direct Costs 350,000.00 350,000.00 TB 40,335.72

Unbilled ODC's 100,000.00 100,000.00 TB 11,524.49 Subcontractors 15,000,000.00 15,000,000.00 TB 1,728,673.53

Materials 400,000.00 400,000.00 TB 46,097.96 U/A subject to G&A 3,000.00 3,000.00 Sch B 345.73

Total Cost Input G&A Base 83,201,207.81$ -$ 83,201,207.81$ 9,588,515.03$ -

G&A Rate 11.52%

Pool Fringe Benefit Expenses - Schedule C-2Base Total labor dollars excluding fringe labor dollars - Schedule E

Pool Overhead Expenses - Schedule CBase

Pool General and Administrative Expenses - Schedule BBase Total Cost Input G&A (total direct costs before B&P/IR&D costs) - Schedule E

Pool Facility Expenses (intermediate) - Schedule DBase Allocated based over Labor Hours for all applicable labor

ARONSON LLC - EXAMPLESchedule E - Reconciliation of Claimed Allocation Bases


Direct labor & B&P/IR&D dollars and applicable fringes - Schedule H







Proof of Rates – Not Required but Recommended PROOF

ICS RATE PER ICS PER TB

Direct Labor 45,000,000.00$ 45,000,000.00$ Fringe Costs 38.13% 17,160,525.03 19,888,069.80

Overhead Rate 7.81% 4,855,773.96 2,302,459.26

DL - Unbillable 55,000.00 55,000.00 Fringe Costs 38.13% 20,973.98

Overhead Rate 7.81% 5,934.83

B&P/IR&D Costs 1,758,700.00 Facility Costs 2,755,954.36

Direct Travel 250,000.00 250,000.00 Other Direct Costs 350,000.00 100,000.00

Unbilled ODC's 100,000.00 350,000.00 Subcontractor 15,000,000.00 15,000,000.00

Materials 400,000.00 400,000.00

Subtotal 83,198,207.81 87,860,183.42

G&A Rate 11.52% 9,588,169.30 4,926,539.42

TOTAL CLAIMED COSTS 92,786,377.11$ 92,786,722.84$

Unallowable Costs Sch B 12,000.00 12,000.00 G&A Alloc on U/A Sch E 345.73

TOTAL COSTS PER ICS 92,798,722.84$ 92,798,722.84$

Immaterial Difference 0.00% - - Due to Rounding

TOTAL COSTS PER TB 92,798,722.84$ 92,798,722.84$

ARONSON LLC - EXAMPLEProof ICS to Trial Balance








Schedule H







Schedule H (Continued)







Schedule H – With Indirect Rate Ceilings







Schedule I







Schedule I (Continued)







Schedule K







Ramifications of Non-Compliance








Associated Risk for non-compliance: • Administrative Contracting Officer (ACO) can unilaterally decrement

your rates up to 16.2% if submissions are not on time! (FAR 42.703-2(c)(2))

• Rates established unilaterally will be: ̶ Based on audited historical data or other available data as long

as unallowable costs are excluded; and ̶ Set low enough to ensure that unallowable costs will not be

reimbursed.

Be timely with your submissions!








Failure to provide an Incurred Cost Submission can also compromise the status of your accounting system.

Failed accounting system affects your ability to win new/follow-on work







Unallowables and Penalties Unallowable Cost • DCAA’s guidance on Identifying Expressly Unallowable Costs!! Penalties • Penalties for claiming unallowable costs FAR 42.709-1. • If the indirect cost is expressly unallowable under a cost principle in the FAR, the

penalty is equal to— – Deemed Unallowable during Audit

• The amount of the disallowed costs allocated to contracts that are subject to this section; plus

• Interest on the paid portion, if any. – Deemed Unallowable prior to ICS

• Two times the amount of the disallowed costs allocated to contracts that are subject to this section; plus

• Interest on the paid portion, if any.

These penalties are in addition to other administrative, civil, and criminal penalties provided by law.







Statute of Limitations








• In October, 1994, the Federal Acquisition Streamlining Act (FASA) established a six (6) year Statute of Limitations for claims under the Contract Disputes Act (CDA).

• FAR Clause 33.206 Initiation of a claim • (b) The contracting officer shall issue a written decision on any

Government claim initiated against a contractor within 6 years after accrual of the claim, unless the contracting parties agreed to a shorter time period. The 6-year period shall not apply to contracts awarded prior to October 1, 1995, or to a Government claim based on a contractor claim involving fraud.








• “Accrual of a claim” means the date when all events, that fix the alleged liability of either the Government or the contractor and permit assertion of the claim, were known or should have been known. For liability to be fixed, some injury must have occurred. However, monetary damages need not have been incurred.

• Historically this was thought by the Government to start tolling on the date the audit was complete. However, based on 2 recent court decisions (Boeing and Raytheon) it is in fact per the date of submission (were known or should have been known).







Statute of Limitations Schedule N


This is to certify that I have reviewed this proposal to establish final indirect cost rates and to the bestof my knowledge and belief:

1. All costs included in this proposal to establish final indirect cost rates for the period January 1, 2016 to December 31, 2016, are allowable in accordance with the cost principles of the Federal Acquisition Regulation (FAR) and its supplements applicable to the contracts to which the final indirect cost rates will apply; and

2. This proposal does not include any costs which are expressly unallowable under applicable cost principles of the FAR or its supplements.

Firm: ARONSON LLC - EXAMPLE

Signature:

Name of Certifying Official:

Title:

Date of Execution:

FAR Part 52.242-4-- Certification of Final Indirect Costs.As prescribed in 42.703-2(f), insert the following clause: Certification of Final Indirect Costs (Jan 1997)(a) The Contractor shall --(1) Certify any proposal to establish or modify final indirect cost rates;(2) Use the format in paragraph (c) of this clause to certify; and(3) Have the certificate signed by an individual of the Contractor's organizationat a level no lower than a vice president or chief financial officer of the businesssegment of the Contractor that submits the proposal.(b) Failure by the Contractor to submit a signed certificate, as described in this clause, may result in final indirect costs at rates unilaterally established by theContracting Officer.(c) The certificate of final indirect costs shall read as follows: (see above)

ARONSON LLC - EXAMPLESchedule N- Certificate of Final Indirect Costs









This means there are 3 areas contractors need to be aware of:

1. This is encouraging DCAA to deem contractors ICS as inadequate and have them recertify.

2. Contractors should not recertify unless the revisions change the indirect rates proposed. This will restart the clock.

3. Contracting Officers not likely to negotiate with contractors when the clock is running out. The Government will unilaterally determine the rates.







Tips for Surviving an ICS Audit







TIP #1

Adequate Incurred Cost Submission • Proof the Trial Balance to Submission • Verify that all unallowables have been removed • Go to each Tab and validate information ties to related schedules • Verify formulas and hyperlinks throughout • Make sure to sign AND date Schedule N • Save all data used to develop ICS • Pull DCAA’s checklist and verify before submission

(http://www.dcaa.mil/incurred_cost_checklist.html)






http://www.dcaa.mil/incurred_cost_checklist.html


TIP #2

Compiled Data for Audit

Stephen Covey’s, The 7 Habits of Highly Effective People “Begin with the End in Mind”

• Have support data available, accessible and with copy of submission.

– The audit of the incurred cost submission will likely occur at a later date (often much later).

– The individual who prepared the submission or support data may not be accessible or even working for your organization

– Appoint a point of contact who will manage the audit, review all data provided and follow up on all requests.







TIP #3

Common Pitfalls to Avoid • Lack of adequate documentation to support cost • Lack of description of work provided by subcontractors &

consultants • Reclassification of time without proper description &

approval • Out of period costs claimed • Forgetting to put certain Unallowables in the base of G&A • Forgetting to account for Indirect Rate Ceilings







TIP #4

Common Questioned Costs • Business Meetings • Employee Moral • Executive Compensation • Bonuses • Credit Card Expenses (Travel & Per Diem) • Marketing Costs • Leased Autos • Legal Fees • Management Fees







DCAA Resources & Audit Programs

Go to DCAA web site http://www.dcaa.mil/ Under Guidance • Contract Audit Manual (CAM) – Chapter 6 Incurred Cost Audit Procedures • Selected Area of Cost Guidebook: FAR 31.205 Cost Principles • FAR Cost Principles Guide Directory of Audit Programs • Risk Assessment Checklist • Audit Program for Incurred Costs - Post Year End Incurred Cost Audit – AP 10100

(Feb 2016) Audit Process Overview

• Information for Contractors Under Checklist and Tools • Incurred Cost Electronically (ICE) (customize to contractor indirect rate structure) • Incurred Cost Adequacy Checklist






http://www.dcaa.mil/


Donna Dominguez is a director in Aronson LLC’s Government Contract Services Group, where she provides a wide range of financial compliance advisory services for government contractors. She is experienced in matters related to Federal Acquisition Regulations (FAR), cost accounting standards (CAS), incurred cost submissions, DCAA/cognizant audit support, provisional billing rates, establishing/revising indirect rate structures and cost proposal support. Donna works with contractors to help them grow their business while keeping their accounting systems adequate in the eyes of the government and their billing systems current and relevant. She is also involved in supporting the government contracting community as a frequent guest speaker on a variety of compliance topics. Donna earned her bachelor’s degree in accounting from the University Maryland and has completed additional coursework in contracts administration. She is a contributor to Aronson’s Fed Point blog and has co-authored articles for NCMA Contract Management Magazine.

Director, Government Contract Services Group

301.222.8232

[email protected]

Donna M. Dominguez







301.222.8232

Contact Donna Dominguez / Aronson LLC

[email protected]

https://www.linkedin.com/in/donna-dominguez-664b26b








Aisha N. Mian is a managing consultant in Aronson LLC’s Government Contract Services Group. She has more than eight years of experience in the government contracting industry, with expertise in both project control and financial compliance. Her professional skills include contract/project financial analysis and various areas of financial compliance, including preparation of incurred cost submissions; support in evaluating, preparing and advising appropriate indirect rate structures; preparation of disclosure statements; and analysis and impact of cost accounting standards (CAS). She has also worked alongside in-house DCAA auditors supporting audits for incurred cost submissions during her time in the industry. Aisha has been a guest speaker on financial and government contracting topics at the GWSCPA Government Contracting Conference and has hosted Aronson LLC webinars related to government contracting topics. She earned her bachelor’s degree in finance from George Mason University and her MBA from the Robert H. Smith School at the University of Maryland College Park.

Managing Consultant, Government Contract Services Group

240..364.2614

[email protected]

Aisha N. Mian







240.364.2614

Contact Aisha Mian / Aronson LLC

[email protected]

https://www.linkedin.com/in/aishamian







demystifying dcaa incurred cost submissions › wp-content › uploads › 2018 › 02 › ...•...

Documents