--- title: "The Adventures of Government Auditors: What We’ve Learned from 2013 Incurred Cost Proposal (ICP) Audits" description: Government contractors having undergone DCAA incurred cost proposal audits during this past year have learned several important trends and lessons. image: https://info.redstonegci.com/hs-fs/file-510782726-jpg/images/redstone-government-consulting-dcaa-audit.jpg --- [ PAY INVOICE](https://redstonegci.com/invoice-payment/) [Call Us Today 256-704-9800](tel:2567049800) [info@redstonegci.com](Mailto:info@redstonegci.com) [![Redstone_Logo](https://info.redstonegci.com/hubfs/redstone%20logo%20version%201%20-%20rgb-1.png)](https://www.redstonegci.com/) # The Adventures of Government Auditors: What We’ve Learned from 2013 Incurred Cost Proposal (ICP) Audits [Posted by Darryl Walker on Mon, Jan 27, 2014 @ 07:01 AM](https://info.redstonegci.com/blog/author/darryl-walker) - [Tweet](https://twitter.com/share) ![Redstone Government Consulting DCAA Audit](https://info.redstonegci.com/hubfs/images/Redstone-Government-Consulting-DCAA-Audit.jpg "Redstone Government Consulting DCAA Audit")Government contractors having undergone [DCAA incurred cost proposal audits](https://redstonegci.com/consulting/government-compliance/incurred-cost-proposals/) during this past year have learned several important trends and lessons, some of which will likely continue into 2014, and produce added administrative hardships for most contractors. Some initiatives undertaken by DCAA in conjunction with the DCMA may mitigate the level and duration of audit effort and hasten contract close-outs for some contractors.  For example, more contractors will most likely be subject to low-risk determination criteria and expand the number of companies who could escape those audits.  We had believed for several years that a more educated and experienced DCAA audit staff would demonstrate enhanced audit proficiency with respect to cost regulations and more practical approaches in undertaking ICP audits, if for no other reason than to expedite reduction of ICP audit backlog.  We had expected a relaxation in DCAA’s audit approach toward exhaustive audit transaction testing plus a better understanding and application of cost regulations in correctly identifying unallowable costs.  Further, we believed that sooner or later auditors would take a more reasonable posture of recognizing when disallowance of cost positions were clearly tenuous with minimal questioned costs allocable to contracts generating the ICP audit requirement.  ## Trends and Challenges in ICP Audits But we were largely wrong in our predictions given our 2013 experience with our clients, and we unfortunately see little change in certain [DCAA ICP audit policies](https://redstonegci.com/consulting/government-compliance/incurred-cost-proposals/) during 2014.  ICP audits continue to take months to complete; exhaustive transaction testing continues with requests for layers of unnecessary documentation irrespective of regulatory records retention periods, and; many audits are not completed until after the six-year Statute of Limitations resulting in government appeals courts frequently rejecting government claims to recover audit questioned costs because of the statute. One silver lining for contractors ICPs for which audit years have exceeded the Statute of Limitations and those audits are not yet started is that DCAA and other audit agencies may wholesale discontinue audits even if in progress.  The agencies may abandon those audits altogether and move on to ICPs where the six-year statutory time frame for asserting a claim has not expired.  ## Predictions of Audit Trends and Issues for 2014 Where ICP audits are undertaken, five predictions of audit trends and issues for 2014, in case you have not already guessed, follow:  - Continued detailed and never-ending transaction testing, to include requests for documentation going well beyond that what is needed to sufficiently justify nature and purpose of costs—examples, more time expended to validate actual payment of accrued costs and testing of labor transactions (where a contemporaneous review of labor records was not performed); - Retroactive challenges to cost accounting practices and calculating questioned costs using practices that DCAA considers “better”, albeit such practices were considered adequate during the year in which the practices were used; - Questioning executive compensation—standards for questioned costs are highly subjective and challenges to executive compensation continue notwithstanding the beatings DCAA has taken in the courts where DCAA’s position has been rendered “fatally flawed”; - Questioning other costs considered easy pickings—professional and consulting fees, travel expenses (airline costs), advertising, certain legal costs, and business meetings and other company events where recreation appears to be blended with professional activities, and; - Insufficient or garbled explanation as to basis for questioned costs, either during interim or exit meetings with contractors, or verbiage within draft audit report, and demands for contractor responses within unreasonable time frames. [![Learn More About Our Incurred Cost Proposal Submission Services](https://no-cache.hubspot.com/cta/default/203971/interactive-168719282754.png) ](https://info.redstonegci.com/hs/cta/wi/redirect?encryptedPayload=AVxigLLzXlMcEU0wh0Sc9jPhtLEInR96el8%2FPQJu%2BQj3TcxJTUXWXzTGrTA2hJd4uuIAfKdDnWOYKf12aFAn%2BcEOHVj4%2FEuznREtkeyHDmgOqZuwzGIB8bSReKsZAFxmjM5WYeQuu7Rwn8dF21pAYq6fZzwt99z1%2FGGx2l30R4jyQy0bjyX45QlGb0ZpczkenSlEKZGW0WAPBTgfOoCRmTuGDpRUGP6CEhrDCXWVWVUeYRNGzoVYEA%3D%3D&webInteractiveContentId=168719282754&portalId=203971) ### Written by [Darryl Walker](https://info.redstonegci.com/blog/author/darryl-walker) ![Darryl Walker](https://info.redstonegci.com/hubfs/images/Staff_/Darryl-Walker.png) Darryl Walker is a Emeritus Advisor for Government Compliance with Redstone Government Consulting, Inc., and formerly served as an Owner and Technical Director for the Beason & Nalley Government contract consulting group for over ten years. He provides content for our Government Insights Newsletter, provides training courses to government contractor and business community leaders, and consults with government contractors regarding a vast range of issues including cost proposals and presentations, internal controls, proposal preparation, compliance with the FAR and Cost Accounting Standards, litigation support, specialized claims, defective pricing issues, liaison with procurement and DCAA audit officials, and accounting and management systems compliance. Prior to joining Redstone Government Consulting, Darryl worked with the Defense Contract Audit Agency (DCAA) for almost 34 years in a variety of technical and management capacities. During his tenure with DCAA, Darryl provided audit services to a wide range of government agencies, including the Department of Defense, NASA, Department of Energy, Department of Interior, General Services Administration, and Department of Justice. During his experience with DCAA, Darryl audited over 3,000 government contractors throughout the Southeastern United States, Europe, and the Middle East. Education Darryl is a graduate of Texas Wesleyan College with a major in accounting and minor in economics. ## About Redstone GCI Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals. Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs. One thing our clients can be certain of is that with the Redstone GCI Team in your corner, there is no problem too big and no issue too technical for our team to tackle. 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