Incurred Cost Audit

Scope

Examines all indirect cost pools (overhead, G&A, fringe, etc.) to verify that claimed costs are allowable under FAR Part 31, allocable to the appropriate cost objectives, and reasonable. Reviews direct cost charging, labor distribution, and the treatment of unallowable costs such as entertainment, lobbying, and fines.

Frequency

Annual — required for every fiscal year in which the contractor has cost-type government contracts. Contractors must submit within 6 months of fiscal year end. DCAA prioritizes audit scheduling based on risk assessment, dollar magnitude, and adequacy of the contractor's submission.

What to Expect

Auditors review the ICE submission for completeness and adequacy, then perform detailed testing of cost accounts, labor charges, subcontractor costs, and indirect rate computations. The audit may result in cost questioned (unallowable) and cost unsupported (inadequate documentation). Final results establish actual indirect rates for contract closeout. Can take 6-18 months.

Key Documents

• Incurred Cost Electronically (ICE) model submission
• Schedule H — Home Office Expenses
• Schedule I — Summary of Direct Costs
• Schedule O — Cumulative Indirect Cost Claims
• General ledger and trial balance
• Timesheets and labor distribution records

Other post-award Audits

Other DCAA Audit Types