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Incurred Cost Submissions Prepared for Four Years with Limited Labor and Cost Detail

Scenario

The client initially contacted CB&H to assist with its incurred cost submission for 2003. While discussing the engagement with the client, we were provided with a copy of the client’s 2002 incurred cost submission, and quickly realized it would need to be revised and resubmitted to DCAA. DCAA also contacted the client to inform them they had a single cost type contract in 2001, which required them to submit a 2001 incurred cost submission. To make matters worse for the client, it was also time for the client to prepare and submit its 2004 incurred cost submission. The client engaged CB&H to assist in the preparation of its 2001-2004 incurred cost submissions.

The client had limited or no labor detail, no segregation or allocation of direct and indirect costs consistent with FAR Part 31, and no written timekeeping policies and procedures. No timesheets were maintained prior to 2002, and from 2002 until mid-year 2004, the client was using email notifications to report time by day against a job in a master spreadsheet, but not costs by day by employee. Moreover, QuickBooks was recording labor as a lump sum costs against the Salaries and Expense account, and was not segregating these costs out by employee or by job.

CB&H Action Steps

The government contracting specialists from CB&H were able to use the master spreadsheet to assist in the preparation of the incurred cost submission for all but 2001. We discussed with the client various changes within its QuickBooks accounting system to determine allowability. For 2001, we were left with no option other than to record direct labor costs based on the number of hours billed, and allocate the remaining hours and associated labor costs to indirect labor. We then recommended that the QuickBooks file be restructured to segregate costs consistent with FAR Part 31. We also provided some guidelines and recommendations to help the client put a timekeeping policy and procedure manual in place. Finally, we were able to provide the client with indirect rate calculation tools to assist with the tracking and budgeting of target vs. actual costs.

Results

The client submitted four years’ worth of incurred cost submissions. One of the years was recently audited and, while the client is waiting on the final report, the auditor indicated the audit went well. The audit of the 2001 incurred cost submission will begin soon. The client now understands the significance of segregating and accumulating costs on a job cost basis and the importance of a having a good timekeeping system. The client also now understands the various contract types awarded by the government and the implications of being awarded a cost type contract. And the indirect rate calculation tools provided by CB&H have been instrumental in helping the client to manage its contracts and its overall profitability.