Now is a great time to consider incurred cost submissions for government contractors. In the first of our government contracting podcasts, Managing Director Eric Poppe and manager Javier Diaz share valuable insight to help accountants handle incurred cost submission requests.
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Hello. Welcome to Cherry Bekaert's GovCon podcast, where we discuss current government contracting trends, compliance matters, and best practices to guide federal contractors forward.
ERIC POPPE: My name is Eric Poppe. I'm a senior manager with Cherry Bekaert, and with me is Javier Diaz, part of our Government Contract Services team. Javier, thanks for joining me.
JAVIER DIAZ: Thanks for having me.
ERIC POPPE: Today I was hoping we could talk about incurred cost submissions. We're wrapping up tax season and financial statements are about to be issued. Companies that have flexible-price contracts will have time on their hands, so what better way to use that time than to prepare an incurred cost submission, since you have to submit it to the government? Do you have any tips to recommend when preparing an incurred cost submission?
JAVIER DIAZ: Tip number one is to start early. The Incurred Cost Submission (ICS) includes numerous schedules that need reconciliation, plus additional reconciliations with Form 941s and reconciling your financial statements to your trial balance. Many accountants underestimate the time required to assemble an ICS, and if they rush it at the last minute, DCAA may return it as inadequate.
ERIC POPPE: A lot of rejections are for simple reasons. The general ledger account doesn't reconcile to the trial balance, or adjustments aren't explained. Many issues stem from rushing to complete the submission.
JAVIER DIAZ: Historically, DCAA had large backlogs and would look for reasons to kick submissions back to contractors, which could restart the statute of limitations. Small issues often prompt DCAA pushback. What do you think?
ERIC POPPE: Data collection for the ICS can be time-consuming. Pulling final vouchers and invoices is straightforward for a small company, but for a large IDIQ with many tasks and cost-reimbursable contracts, assembling cumulative billings, labor categories, and hours takes time. Depending on your accounting system, you may have system-generated reports or you may need extensive manual data gathering, especially for closed-out contracts.
JAVIER DIAZ: Identifying unallowable costs and completing the related scrubs takes time if it's not handled at the point of entry.
ERIC POPPE: One item auditors frequently request is the executive compensation supplemental schedule. Companies should assemble that schedule and include all benefit details early. If a contractor is ready to submit and wants a final check, is there anything they should do before submitting?
JAVIER DIAZ: DCAA's webpage provides an adequacy checklist for the ICS. Contractors can use that checklist to review each schedule and reduce the risk of DCAA returning the submission.
ERIC POPPE: That's a really good idea. Javi, that's all the time we have today. Thank you everyone for tuning in and have a great day.
