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/
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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

4.
Preparing the
Incurred Cost
Proposal

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

22.
Required Supporting
Documents

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

26.
Recommended
Supporting Documents

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:
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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