What Do You Do If You're Struggling To Generate Accurate, Clear Reports?

This point cannot be stressed enough and is the first step to prep for the DCAA audit. The backlog in incurred cost audits only further solidifies the likelihood that the people preparing the Incurred Cost Submission may not be available to support an audit or the data needed to support the audit is difficult to find. The likelihood of an ICS audit year occurring years after submission has historically been high. Be sure to document as much as possible in a way that someone unfamiliar with your organization will understand since you may be long gone by the time an auditor shows up.

• While preparing the current ICS or in the course of performing your regular duties, you may receive information which impacts future incurred cost submissions.

For example:

• Do you have new intermediate cost pools this year (i.e. new fringe, IT, facilities, etc.)?
• Did the basis for the allocation of any of your cost pools change?
• Are you aware of potential changes to home office allocations which could impact the current fiscal year or future years?
• Is your company still able to track all data metrics needed for allocation (i.e. number of user licenses, headcount, square footage, etc.)?

We recommend keeping a list of these items so that the preparer of the next incurred cost submission has a head start. Maintaining such a record can also expedite the timeline for incorporating these changes into current or future submissions and provide some, if not all, of the information needed to document the change(s) in preparation for an audit. In addition, these changes may likely be considered a change in cost accounting practice, which has other compliance implications for CAS covered contracts that we won’t delve into here.

• Did the purpose of a specific account change from the prior year? Are the costs previously accumulated in one account now captured in multiple accounts? Did the purpose of a particular cost center or department change? Be sure to keep clear notes on these changes year after year, as they may prove invaluable during an audit.
• Save yourself the headache of scrambling to answer an auditor’s questions and be sure to keep all files used in the preparation of the ICS in a storage repository that is shared with multiple people and is routinely backed up. Keep the file structure simple and organized so that someone who is less familiar with the process can find documentation needed to support an audit.
• Keep the original source data, including the trial balance, project ledgers, 941s, Statement of Indirect Expenses, contract list, invoices, and all other information used to populate and calculate the final rates in the ICS. Having a single and organized place to find this data will save time, effort, and sanity when the auditor is asking questions.
• Were any assumptions, adjustments, or other information used to prepare the ICS? Be sure to document all of these including any applicable rationale that was used. This information can go a long way to support costs that are questioned by an auditor.

Capital Edge Consulting is a professional services company comprised of adept problem solvers who deliver tangible results to address today’s most complex U.S. government contracting challenges. Capital Edge helps clients address the challenging regulatory, contractual, and compliance requirements of U.S. federal contracts and we have experience working with a wide variety of industries that provide goods or services to the federal government including industries such as biotech and healthcare, nuclear energy, education, information technology, non-profit, professional services, defense, and software.