Incurred Cost Submissions (ICE)
Generally speaking contractors executing cost reimbursable type contracts subject to the Allowable Cost and Payment Clause are required to submit an Incurred Cost Submission. Some prime contractors also invoke this requirement on time and material contracts as well. The submission requirements are significant and a burden, especially to small businesses. Liability can also attach for penalties for including unallowable costs. Making a compliant and adequate submission is important to success.
The incurred cost submission should be made within six months after the close of the contractor’s fiscal year or calendar year. If this due date cannot be met it is a good idea to request the contracting officer provide an extension of time. The submission must meet DCAA requirements and their adequacy review. The DCAA prefers the use of its Incurred Cost Electronically (ICE) model for this purpose. It includes schedules A though T, with optional schedules as well.
The model can be overwhelming at first glance. Many clients prefer that I develop the submission for them to meet this requirement. I also support them in DCAA adequacy reviews and ultimately the audit. My participation in developing the submission will make certain the submission is accepted and is completed in a compliant manner, given your accounting system adequacy status and contract requirements.
However, for those desiring to complete this submission on their own, I offer below guidance and instructions in making the submission. This guidance is general and must be adjusted to reflect unique contractual circ*mstances. Unique cost structures may also require adjustment to this guidance as not one set of guidance fits all circ*mstances. The items below are more of a general approach or process than a step by step guide. The contractor’s unique contractual requirements, cost structure and cost accounting practices will require adjustments to the standardized steps listed below.
I. ICE Set Up (The model may be obtained from DCAA at http://www.dcaa.mil/ or I can provide a copy if needed.
a. Click on Set up Tab and click on Enable Macros under Options.
b. Enter company name, location and fiscal year end date.
c. Under the indirect pools section answer questions and state the number of different types of indirect cost pools and specifics on the Fringe pool and allocation base. This is necessary in order for the ICE model to structure the model worksheets and allocations. The responses will depend on your cost structure and indirect cost pools.
d. Under Pool information state yes and define pool as G&A. Name any other indirect cost pools such as Overhead and G&A. Make sure the model has an entry for each of your indirect cost pools.
e. Click the Run Pool Set up.
II. Indirect Cost Pools
a. Either enter or cut/paste account no., account name and ending balance for each account in the indirect cost pool (G&A) under schedule B. Schedule C is only used for multiple overhead pools. Schedule D is for intermediate indirect cost pools. Schedule Fringe is only for a separate fringe pool. Repeat these steps for all indirect cost pools as labeled above.
b. For each indirect cost pool, (Schedules B, C, Fringe and D as appropriate) complete the following. Enter or cut/past account no. in column A under account no. Do the same for account name under column B. Enter or cut/paste ending balance in column C. Complete this process for each account.
c. Verify amounts back to general ledger.
d. Enter adjustments in column I. These will mainly be adjustments for unallowable costs as negative amounts.
e. List each adjustment as a note in column M. Below the schedule describe each adjustment in an explanatory note.
f. Delete all DCAA notes and text boxes.
g. Do not enter any data or change the cells colored in aqua or yellow. These contain formulas and links.
h. Double check that the subtotals, totals and other formulas are operating properly.
III. Schedule H
a. Unhide columns B through H. Add rows as needed for project line items for each type of contract.
b. Enter or cut/paste contract no. and task/CLIN in columns A and B by contract type (This data should be taken from your project cost report including all projects). I often add a column for the contractor project no. as a matter of reference.
c. Enter or cut/paste direct labor into the appropriate column labeled labor. Do the same for travel, material, ODC and subcontracts under their prospective columns.
d. Verify totals and all data calculates properly.
e. Enter B&P and IR&D in the rows labeled under the appropriate column.
f. Delete DCAA instructions and text boxes.
g. Notice that schedule H information now is linked to schedules E, H-1, Summary H, G, G-1 and I. Verify these amounts are correct. Add explanatory notes as may be appropriate.
h. Notice that the indirect costs are automatically allocated to each contract based on schedules B, C and Fringe. This is all summarized by schedule E. The rates are taken from schedule A. I recommend that the indirect cost allocations be validated for accuracy.
IV. Schedule I
a. Notice that contract information and schedule H total costs have been linked over to schedule I for cost reimbursable contracts. Verify accuracy.
b. Enter prior years cumulative incurred cost from prior year schedule I column J to current year schedule I column F if applicable.
c. Enter cumulative billing information by contract columns K, L and M.
d. Delete DCAA instructions and text boxes.
e. Recheck nos. and note over/under billed calculation column N.
f. Complete physically complete and Penalties columns with yes or no. Generally penalties apply to contracts exceeding $650,000.
Note: Current year costs for time and material contracts are derived from schedule K, not schedule H.
V. Schedule J
a. If any subcontracts were awarded under either cost reimbursable or time and material contracts complete the information requested on schedule J.
VI. Schedule K
For each time and materials contract complete schedule K. For each contract list each labor category including hours and billing rate. Below the labor categories enter any materials or ODC‘s billed. The schedule will apply the G&A rate if applicable listed in schedule A.
VII. Schedule L
a. Link general ledger labor accounts from schedule B, C, D, Fringe, H as may be applicable to the appropriate lines in the general ledger half of the Schedule L.
b. Insert the quarterly form 941 taxable wages by quarter.
c. Insert adjustments as indicated and needed.
d. Both the general ledger labor amount and the Form 941 amount plus adjustments must be agree.
e. Remove DCAA instructions and text boxes.
f. Provide any explanatory notes such as reasons for adjustments as applicable.
VIII. Schedule M
If applicable, list any decisions or agreements with the contracting officer that impact direct or indirect costs. Should also list any accounting or organizational changes that impact the allocation of costs to contracts.
IX. Schedule N
This is the Certification of Indirect Costs. It needs to be signed by an officer for the submission to be considered adequate and auditable.
X. Schedule O
This is the schedule for contract closing information. If any contracts were physically completed during the year, complete this schedule for each physically completed contract.
XI. All Other Schedules
All other schedules are considered “optional” by DCAA as indicated in the flowchart. Some auditors do request the optional schedules be completed. I do not complete these voluntarily unless compelled by the government. Contractors are free to complete these schedules if preferred.
