Encoursa Webinar: Preparing for the Incurred Cost Proposal
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An Incurred Cost Proposal reconciles actual costs incurred with amounts billed against each contract. Contractors performing work on flexibly priced contracts (T&M and cost-type) must submit an incurred cost proposal (ICP) within 6 months of the close of their fiscal year. A completed ICP provides the contractor with their claimed rates which, when approved, become final indirect rates for the period in question. This webinar will focus on the requirements for submitting an ICP, the importance of timely reconciliation and review the strategies and best practices for successful preparation and completion of your ICP.
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Encoursa Webinar: Preparing for the Incurred Cost Proposal
- 1. PREPARING THE INCURRED COST PROPOSAL Presented by Robert Jones, Left Brain Professionals
- 2. Host: Liz Briggson, CPA Connect on LinkedIn: https://www.linkedin.com/in/lizbriggsoncpa/ Welcome to Encoursa! To get the most out of this presentation: Utilize the GoToWebinar ‘Questions’ pane for live interaction Download the hand-outs Respond to the polling questions If you qualified for CPE credit, your certificate will be available for you to download from your Encoursa dashboard one hour after the conclusion of the event For any questions about today’s webinar, please contact Encoursa via email at: support@encoursa.com
- 3. GOVERNMENT CONTRACTS & ACCOUNTING EXPERT Email: robert@leftbrainpro.com Phone: (614) 556-4415 LinkedIn: https://www.linkedin.com/in/rjones330/ Website: www.leftbrainpro.com/ Robert Jones CPA, CPCM, NCMA Fellow Professional Background Masters in Accountancy – College of Charleston Business Management, Compliance, Operations Controller Defense Contracts Manager Instructor and Speaker
- 5. We Know Government Contract Accounting
- 6. Who we are Left Brain Professionals is a boutique accounting firm that serves government contractors. We specialize in accounting system design & implementation, audit support, training, and cybersecurity compliance.
- 7. Our Services
- 8. Our Team Robert E. Jones Government Contracts & Accounting Expert CPA, CPCM, NCMA Fellow Melissa Metzger Government Accounting & Finance Advisor MAFM, CPA Candidate Steven Bressler Government Contract Associate steve@LeftBrainPro.commelissa@LeftBrainPro.comrobert@LeftBrainPro.com
- 9. Learning Objectives • Identify the requirements for submitting an ICP. • Recognize the contents of the ICP. • Identify required and recommended documents. • Discover strategies and locate resources for completing the ICP. • Recognize common mistakes made when completing the ICP.
- 10. Room Poll What is your knowledge level regarding preparing an ICP ? A. What’s an ICP? B. I know what it is, but not sure how to prepare one. C. I’ve prepared an ICP, but could use help. D. I’m an expert on preparing an ICP.
- 11. Identify the Requirements for Submitting an ICP
- 12. Requirements for Submitting ICP Flexibly-Priced Contracts • Cost-type (CPFF, CPIF, CPAF, cost-sharing) • T&M Cont…
- 13. Requirements for Submitting ICP, Continued… FAR 52.216-7(d)(2) Allowable Cost or Payment Clause "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 Contracting Officer. The Contractor shall support its proposal with adequate supporting data.“ (even if the clause is excluded from the contract) Cont…
- 14. Requirements for Submitting ICP, Continued… FAR 42.708 Indirect Cost Rates Provides CO with procedures to settle final indirect rates and prescribes final vouchering process (within 120 days of final rates) and includes “quick close-out”. Both Clauses Apply: • At the prime & subcontract level. • To for-profit and non-profit entities • To small and large businesses • To SBIR-STTR Phase II Cont…
- 15. Requirements for Submitting ICP, Continued… ICP Due Date Due six months after close of fiscal year (June 30 for calendar year organizations). Submitted to your cognizant agency with whom you perform the most work. Ultimate reconciliation of costs incurred to amounts billed. • Determines the over/under on each contract. Cont…
- 16. Requirements for Submitting ICP, Continued… Risk Assessment Framework Low <$5M Based on risk analysis. $5M to <$100M Based on risk analysis. Medium $100M to $250M Mandatory audit every 5th year. >$250M to $500M Mandatory audit every 4th year. High >$500M to <$1B Mandatory audit every other year. $1B or more Audit must be performed each year.
- 17. Room Poll When is the ICP due? A. Six months after close of fiscal year B. June 30 for calendar year organizations C. December 31 annually D. Both A & B
- 18. Contents of the ICP
- 19. Contents of the ICP Cont… Schedule A Summary of Rates Schedule B G&A Pool Schedule C Overhead Pool1 Fringe Fringe Schedule D Occupancy/Facilities Schedule E Allocation Bases Schedule F Facilities Capital Cost of Money (FCCOM) Schedule G Reconciliation of G/L to job ledger Schedule H Job Cost Ledger
- 20. Contents of the ICP, Continued... Cont… Schedule I Reconciliation of Costs Incurred to Amounts Billed Schedule J Subcontracts Issued Schedule K T&M Hours & Dollars by Labor Category Schedule L Labor Reconciliation Schedule M List of Accounting Decisions & Organizational Changes Schedule N Contractor Certification Schedule O List of Completed/Closed Contracts
- 21. Contents of the ICP, Continued... Supplemental A-1 Comparative Analysis of Overhead (& Fringe) Supplemental A-2 Comparative Analysis of G&A Supplemental A-3 Comparative Analysis of FCCOM Supplemental A-4 Comparative Analysis of Direct Costs Supplemental B Organization & Compensation Info Supplemental C List of Prime Contracts Supplemental O Contract Briefs
- 23. Required Supporting Documents Cont… • General Ledger • Job Cost Ledger • Indirect Rate Reports • List of Prime Contracts (including contact info) • List of Subcontracts Issued (including contact info) • List of Closed Contracts
- 24. Required Supporting Documents, Continued… • 941s, W-3, year-end payroll summary report • Invoiced amounts by contract • Timesheet and/or invoice data for hours and rates • By labor category • Prior year ICP
- 25. Room Poll Which is NOT a required supporting document? A. General Ledger B. Job Cost Ledger C. List of open contracts D. List of closed contracts
- 27. Recommended Supporting Documents Cont… • Accounting Policies & Procedures • Financial Statements (audit or review not required) • Federal & State Income Tax Returns • Internal Audit Reports & Schedule • Securities and Exchange Commission • 10-K Annual • Report (publicly traded companies)
- 28. Recommended Supporting Documents, Continued… • Minutes from board of directors’ meetings • Listing of delay claims and termination claims submitted which contain costs relating to the subject fiscal year
- 29. Room Poll Federal & State Income Tax Returns are- A. Required Supporting Documents B. Recommended Supporting Documents C. Irrelevant to the ICP D. None of the above
- 30. Strategies for Completing the ICP
- 31. Strategies for Completing the ICP Cont… • Start early • Monthly reconciliation of job cost ledger • Monthly/quarterly reconciliation of labor • Ensure homogenous G/L accounts for W-2 labor • Label W-2 labor accounts • Monthly calculation of rates
- 32. Strategies for Completing the ICP, Continued… Cont… • Monthly calculation of rates • Monthly reconciliation of indirect rates • Quarterly monitoring of over-/under- billing • Start as you close the fiscal year
- 33. Room Poll The job cost ledger should be reconciled- A. Daily B. Weekly C. Monthly D. Annually
- 34. Resources for Completing the ICP
- 35. Resources for Completing the ICP Cont… • Hire a professional • You don’t prepare your own taxes, you shouldn’t prepare you own ICP • DCAA • ICE Model • There is no requirement to use the ICE model. Contractor can use own templates as long as they contain the required information. • Incurred Cost Submissions Training
- 36. Resources for Completing the ICP, Continued… Cont… • Incurred Cost Audit Program • Audit Guidance on Using Materiality in Incurred Cost Audits • Incurred Cost Submissions Adequacy Checklist
- 37. Room Poll The ICE Model is required when completing the ICP- A. True B. False
- 38. Common Mistakes
- 39. • Numbers don’t tie out or match across schedules • Formula errors in DCAA template • DCAA template recalculates claimed amounts and rates multiple times which opens the door for errors • Failure to complete required schedules Common Mistakes Cont…
- 40. • Schedule L Labor is often the most difficult • Labor accounts comingled or not homogenous • Labor accounts not clearly labeled • Manual JEs to labor account that doesn’t tie to payroll records • Labor accruals • Schedule I • Need analyze over/under billing by contract Common Mistakes, Continued… Cont…
- 41. • Supplemental O • Many clients don’t prepare contract briefs • Labor • Labor qualifications for T&M contracts • Timekeeping Common Mistakes, Continued…
- 42. Preparing the Incurred Cost Proposal An Incurred Cost Proposal reconciles actual costs incurred with amounts billed against each contract. Contractors performing work on flexibly priced contracts (T&M and cost-type) must submit an incurred cost proposal (ICP) within 6 months of the close of their fiscal year. A completed ICP provides the contractor with their claimed rates which, when approved, become final indirect rates for the period in question.
- 43. Room Poll Given what you learned, what’s your comfort level on preparing an ICP? A. I’ve got it now! B. I’m a little fuzzy, but I think I can manage. C. I’m still unclear of how prepare an ICP. D. I don’t get it, can you do it for me?
- 44. Connect with us Download the presentation Left Brain Professionals Inc. @LeftBrainPro Email us Support@LeftBrainPro.com @LeftBrainPro Left Brain Pro LeftBrainPro www.LeftBrainPro.com/presentations
- 45. Introducing Our Accounting Service Bundles for Government Contractors! Choose from one of three value priced plans to meet your specific business needs and we will simplify your government contract accounting into a seamless, virtual accounting environment while ensuring DCAA compliance. You’ll get a secure, easy and efficient way to take care of your government contract accounting needs. Contact us for more information or to get started today – Support@LeftBrainPro.com
- 46. For information on our upcoming webinars, visit us at LeftBrainPro.com/events for more details.
- 47. Thanks for attending today’s event! Encoursa is committed to helping accounting and finance professionals develop personally and professionally through continuing education. Join us for Left Brain Professionals’ next event on January 19th: Streamlining your Month-End andYear-End processes! Self-Study Courses by Robert Jones: Find us here! https://encoursa.com/ https://www.linkedin.com/company/ encoursa/ Please take the course survey following the program.You can log in to your Encoursa user account to access your CPE certificate, the recording, and materials. Laying the Foundation for GovCon Accounting Fundamentals of Indirect Rates Advanced Indirect Rates