We’ve released an eBook titled “The Financial Leader’s Monthly Action Plan.” Each month, we are posting excerpts here on our blog. For the month of April, the theme is “Make ICS month a breeze with an ERP.”
Government contractors are required to prepare and submit a report of all indirect expenses for the prior year within six months of closing their books. These Incurred Costs Submissions (ICS) are a big deal as they are legally a "claim against the government" within the meaning of the False Claims Act. As such, the reports must be both timely and highly accurate.
The report is required if a contractor completed contracts during the year containing the Allowable Cost and Payment clause (FAR 52.216-7). This clause is present in all cost-reimbursable contracts and within time and materials contracts whenever an indirect rate is applied to non-labor costs. Although the content of the claim is meticulously outlined in the clause, the specific form and format may differ among various agencies.
For the vast majority of government contractors that operate on a calendar year, the deadline for submitting this ICS is June 30th. It means June is typically a harried and difficult month as contractors race to turn in their submissions before the clock strikes midnight—in other words, it’s akin to April’s tax season.
Be better prepared for ICS audits
There is a high probability you’ll need to undergo an ICS audit. Participants in both the 2022 and 2023 GAUGE surveys were asked to identify which Defense Contract Audit Agency (DCAA) audits they underwent in the preceding year. In 2022, the leading response was ICS — 26% of participants had undergone it.
In 2023, ICS maintained its position as the top audit, increasing that metric to 32%. The survey also found that 46% of participants see government oversight (audits) as increasing.
The best way for contractors to get their reports in on time while also ensuring high accuracy is to employ digital tools that can make generating the claim a walk in the park. Unanet’s ERP offers users the capabilities not just for preparing the claim, but also for reconciling it with the company's official records, ensuring precision and backup in the event of a DCAA audit.
Integrating these tools into the ERP system transforms claim preparation into a natural extension of daily accounting activities, rather than a separate and specialized project.
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