Schedules H and J are some of the most important parts of the Incurred Cost Submission. This VLOG will briefly explain the Incurred Cost Submission, how to complete Schedules H and J, and the importance of each schedule.
What is the Incurred Cost Submission (ICS)?
The incurred cost submission goes by many names/acronyms including final indirect rate proposal, incurred cost electronic submission, indirect cost rate submission, incurred cost proposal, ICES, ICS or ICP. Regardless of name, it is simply the mechanism for the true up of your actual indirect cost to the indirect costs provisionally billed for in a single contractor fiscal year. An ICS must be submitted for each business unit of a contractor that holds applicable contracts subject to the Allowable Cost and Payment clause (FAR 52.216-7) and is required to be submitted 6-months after fiscal year end.
What are Schedules H and J in the ICS?
Within the Incurred Cost Submission, there are many worksheets or tabs in an Excel workbook that are referred to as “schedules”. Previously, we discussed the importance of Schedules B through Fringe, Schedule I and Schedule K. Each schedule in the Incurred Cost Submission is responsible for a piece that culminates on Schedule I, which is the presentation of cumulative cost incurred, cumulative billings, and the calculation of the over or underbilling amount. One of those schedules that leads to Schedule I is Schedule H which is the summary of direct and indirect cost by contract and contract type. Additionally, Schedule J in the ICS is subcontractor information for flexibly priced projects with subcontract costs.
Why are Schedules H and J Important?
Schedule H is important because it is the place in the Incurred Cost Submission that shows the direct project costs by project type, as well as the absorption of all indirect costs by project. The total costs for Cost Type contracts on Schedule H get pulled over to Schedule I to be compared to the billings for Cost Type contracts, so if Schedule H is improperly completed, Schedule I can inaccurately state the over or under billing for the project.
Schedule J is important because it is the place in the Incurred Cost Submission that identifies the subcontracts a contractor has awarded to companies for which the contractor is the prime or upper-tier contractor, including inter-divisional efforts.
How is Schedule H Completed?
The first step to completing Schedule H is to gather all projects for the fiscal year at the billing level and enter in the contract information into Schedule H, organized by contract type. DCAA’s ICE model has sections on Schedule H for Cost Type, Time and Material, Other Flexibly Priced, Fixed Price, and Commercial type contracts, which can be expanded to include as many contracts as necessary.
After organizing the projects by contract type, it’s time to begin entering in the direct costs for each project. The first step is to enter in the direct labor costs, segregated by the overhead pool the employees belong to. For example, if you have an onsite and offsite overhead pool, the direct labor needs to be segregated by onsite and offsite on Schedule H in order for the correct overhead rate to be applied.
After adding in the direct labor costs by project, the next step is to enter in the non-labor direct costs by project. Generally, the non-labor direct costs present on the trial balance are grouped into 4 categories: Travel, Materials, Other Direct Costs, and Subcontracts. The total direct cost categories on Schedule H, meaning labor and non-labor categories, should reconcile to the totals on the year-end trial balance.
After the total direct costs by project have been entered in, DCAA’s ICE model should automatically calculate the claimed indirect costs by project. On Schedule H, these will be located in the columns to the right of the direct costs and in gray or blue colored cells.
Once the costs are totaled by project in the “Total Costs Column” of Schedule H, we recommend performing a reconciliation of the total costs on the trial balance (direct and indirect) to the total costs listed on Schedule H. Typically, there will need to be adjustments made to get it to reconcile, such as removing unallowable costs from the reconciliation.
How is Schedule J Completed?
Schedule J is one of the more straight-forward schedules within the ICS. After Schedule H is completed and all project costs are entered in, the subcontract costs by project need to be linked over to Schedule J. Schedule J lists the information for each subcontract that is issued under any flexibly priced contract on Schedule H. Schedule J lists the following information by subcontract type: subcontract number, prime contract number, prime contract value, subcontractors name and address, subcontractor’s unique entity ID, point of contact and phone number, subcontract value, subcontract period of performance, subcontract amount incurred in the ICS fiscal year, and the subcontract award type.
Schedules H and J in the Incurred Cost Submission are two of the important schedules in the ICS. These schedules create the total costs by contract and display the subcontract information for each flexibly priced contract with subcontract costs. Redstone GCI is available to assist contractors in assessing their incurred cost as adequate or inadequate as well as assist in the development of the proposal. Redstone GCI assists contractors throughout the U.S. and internationally with understanding the Government’s expectations in applying FAR Part 31 Cost Principles and completing incurred cost proposal requirements.
Adam is a Senior Consultant with Redstone Government Consulting, Inc. based in our firm’s Huntsville office. Adam supports our government compliance group and his role includes production of pricing models for cost volume proposals, the preparation of complex incurred cost submissions, data modeling and analysis related to indirect rates, and unallowable cost testing. Adam works closely with our directors and managers in performing testing and assessments of DFARS Business Systems, specializing in the accounting system. He also works with other team members to assist clients with compliance requirements of the U.S. Government. Education Adam holds a B.S. degree in Economics from The University of Alabama with minors in Computing Technology & Applications and Management Communication.