It’s that time of year again (I know, I know), and even though your small business is just getting over the chaos of tax season, ReliAscent would like to remind our clients and all federal contractors that another important deadline is rapidly approaching: your Incurred Cost Proposal/ICE Submission is (more than likely) due on June 30th!Read the Full Blog Here
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At this time every year I start to think about Incurred Cost Reports. Just like I start to think about my personal income taxes at home right after the holidays. Most companies will have until the end of June to complete the incurred cost submission. That doesn't mean you shouldn't start early and not wait until the last minute. Many companies may enlist their CPA to complete this report to the government. This is the same CPA that is busy right now completing the tax return for the business. I have nothing against that if the CPA is well versed in government contracting and experienced with the format required for submitting the incurred cost proposal. The sad truth is that many of these preparers have not had a lot of experience with either the Federal Government contract requirements and/or with submitting an incurred cost report. Yes, all of this is public knowledge, all the requirements are known and public information but there are many fine points that are gained only through experience. Now, many times the DCAA will audit these incurred cost reports and go over them with a fine tooth comb. Your chances of getting your incurred cost report audited are probably higher than the odds of getting your personal tax return audited. For this reason alone, you want to make sure your incurred cost proposal is as good as possible. When you combine the audit risk with the fact that the DCAA is slightly behind schedule in auditing incurred cost proposals, you could not be audited for several years (some audits are as much as 6 to 7 years after submission). Again, it becomes imperative that the incurred cost report be done correctly. Another point is that if you have your CPA help you with the incurred cost report, they will probably not be able to begin work on the incurred cost proposal until after tax time which means after April 15th. While this is plenty of time usually to complete an incurred cost report for a small business, it could be done earlier and the worry could be eliminated.
If you haven't been monitoring your actual indirect costs thru the year, it is not too late to analyze and make an effort to control this before the end of the year. Why is this important? If you have a cost type contract with the Federal Government you will be required to do an Incurred Cost Report 6 months after the end of your fiscal year per FAR 42.705-1(b)(1)(ii). Assuming many companies have a December 31st year end, this means there are only a couple of months left to affect the final indirect cost rate. The contracting officer will then use the final indirect cost rate to adjust the billing on the contract if it differs from the provisional billing rate that the contractor used through the year. This could result in a loss of revenue that the contractor had received on the contract thru the year. By loss of revenue, it usually means that the government offsets these "over payments" against future invoices to the government or uses this in the calculation of the final contract closeout calculation of the contract.