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Incurred Cost SubmissionsJohn S. Sroka, CPAAcquisition Cost/Price Analyst

Incurred Cost ProposalsAllowable cost and payment clauserequires the submission (FAR 52.2167)Requires a signed certification statingallowability of all costs submitted in theclaim (FAR 52-242-4)2

Incurred Cost ProposalsDocumentation necessary tosubstantiate the claim forreimbursement of direct costsDocumentation necessary tosubstantiate the claim for indirect costs3

Incurred Cost ProposalProcess necessary to move fromprovisional rates to a final rate for theyearProcess necessary to adjust billingsbased on the revisions to a final rateProcess necessary to facilitate closingout the contract4

Incurred Cost SubmissionSubmission must be received by theGovernment no later than six months fromthe end of the fiscal year (FAR and OMB)Guidance/format of proposal in DCAAPamphlet No. 7641.90, “Information forContractors” – Chapter 6For more information – http://www.dcaa.mil5

Incurred Cost SubmissionFailure to submit and certify will resultin a unilateral decision by contractingofficerUnilateral rates are usually set low toprotect the government’s interest inregards to unallowable cost6

Incurred Cost SubmissionSubmission is to be sent to thecontracting officer (two copies)Contracting officer will make adetermination regarding the adequacyof the submissionPrior to any audit you will be notified bythe contracting officer7

Model Incurred Cost ProposalFiscal Year Ended 6/30/04Schedule ASummary of ClaimedIndirect Expense RatesSchedule BFringe Expenses (FinalIndirect Cost Pool)Schedule CIndirect Expenses (FinalIndirect Cost Pool)8

Incurred Cost Submission:Schedule A: SummaryDESCRIPTIONAMOUNTREFERENCEFringe RatePool 3,192,456Schedule BBase 9,135,842Schedule EClaimed Fringe34.94%Indirect RatePool 4,525,455Schedule CBase 12,048,844Schedule EClaimed Indirect37.56%9

Schedule B: Fringe ExpensesFRINGE EXPENSESFISCAL YEAR ENDED 6/30/04ExpensesACCOUNTSHolidayVacationSick LeavePersonal AbsenceEmployer FICAFUIPer G/L SUIWorkers' CompensationHealth InsuranceLife InsuranceDisability InsuranceTuition BenefitsDeferred CompensationPension PlanEmployee WelfareTotal Fringe Pool sts- 1,097,46712,4553,342,456 (150,000) 3,192,456[1]Notes Explaining Adjustments:[1] Amount relates to accrued but unfunded post retirement benefit expenses.10

Schedule C: Overhead Exp.FISCAL YEAR ENDED 6/30/04ACCOUNTSIndirect SalariesFringe on Indirect Sal.Medical ConsultantsOffice SuppliesPrinting &DuplicatingData ProcessingMaintenanceEXPENSESPER G/L iness UtilitiesSeverance ExpenseLegal FeesAudit FeesTravelEntertainmentRecruitmentBad DebtsDues & SubscriptionsConventions/SeminarsInterest ExpenseMiscellaneousRentTotal G&A PoolADJUST ,01854,67887,9651,00122,2521,031,243 4,582,205- ,750) 4,525,455NOTES[1][2][3][4][5][6][7]11

Notes to Schedule CNotes Explaining Adjustments:[1] Compensation questioned is based on a compensationsurvey completed during FY 2004[2] This is the fringe benefit costs associated with the adjustedindirect labor.[3] Expense of wives of the President, and Vice President on apersonal trip not claimed per FAR 31.205-046, Travel[4] Unallowable cost per FAR 31.205-14, Entertainment[5] Unallowable cost per FAR 31.205-34, Recruitment[6] Unallowable cost per FAR 31.205-3, Bad debts[7] Unallowable cost per FAR 31.205-20, Interest12

Model Incurred Cost ProposalFiscal Year Ended 6/30/04Schedule DSchedule ESchedule GFacilities or OtherIntermediate Indirect CostPoolReconciliation of ClaimedAllocation BasesReconciliation of Books ofAccount and Claimed DirectCosts13

Schedule E: Claimed Allocation Bases6/30/04DescriptionFringe Base:Direct LaborIndirect (G&A) LaborLedgerAdjustmentCosts 7,984,7111,151,131 (30,000.00)7,984,7111,121,131 9,135,842Total LaborIndirect Base:Contract direct costsLaborTravelMaterialOther Direct CostsSubcontractsSubtotal Direct CostsPlus: Fringe Applied to LaborTotal Indirect Base (30,000.00) 9,105,842 7,984,71134,563964,453172,006103,253 9,258,9862,789,858 12,048,844NotesSched. GSched. CSched. G14

Schedule GRECONCILIATION OF BOOKS OF ACCOUNT AND CLAIMEDDIRECT COSTSFISCAL YEAR ENDED 6/30/04DESCRIPTIONDirect Costs:Direct LaborTravelMaterialOther Direct CostsSubcontractsTotal Direct CostsAMOUNTSPER G/L 006103,253 9,258,986 - 7,984,71134,563964,453172,006103,253 9,258,986--NOTES15

Model Incurred Cost ProposalFiscal Year Ended 6/30/04Schedule HDirect Costs by Contract/Subcontract, DirectIncurred and Indirect Expense Applied atthe Claimed RateSchedule H-1Government Participation in the IndirectCost PoolsSchedule ISchedule of Cumulative Direct and IndirectCosts Claimed and BilledSchedule JSubcontract Information16

Schedule HSCHEDULE OF DIRECT COSTS BY CONTRACT/SUBCONTRACTAND INDIRECT EXPENSE APPLIED AT CLAIMED RATESFISCAL YEAR ENDED CONTRACTS(NOTE 1)Fringe @34.94%DIRECTCOSTSPLUS FringeG&A @37.56%TOTALCOSTS 7,609,428 -16,773 -539,719 -43,630 -103,253 2,587,206 10,900,009 4,094,043 14,994,05271,52971,52926,86698,395 7,609,428 16,773 539,719 43,630 103,253 2,658,734 10,971,537 4,120,909 57,412284,758106,955391,713TOTAL 7,984,711 34,563 964,453 172,006 103,253 2,789,858 12,048,844 4,525,546 16,574,390(Sched G)Explanatory Notes:(1) Claimed Fringe rate (34.94%) over the contract fringe rate ceiling (34%). Applied the ceiling rate (34%) to Direct Labor Dollarsto compute Fringe Benefit cost. Applied .94% over ceiling rate to the Direct labor dollars ( 7,609,428) to calculate the fringecosts over contract ceiling of 71,529.17

Schedule H-1GOVERNMENT PARTICIPATION IN INDIRECT EXPENSE POOLSFISCAL YEAR ENDED 6/30/2004CONTRACT TYPECost TypeFirm Fixed PriceCommercialTOTALNOTE:FRINGE EXPENSE POOLBASEAMOUNT%INDIRECT EXPENSE POOLBASEAMOUNT% 7,609,428210,968164,31595%3%2% 10,971,537792,549284,75891%7%2% 7,984,711100% 12,048,844100%The purpose of this schedule is to present a general overview of theextent cost-type and flexibly priced contracts participate in theabsorption of indirect expenses.18

Schedule IClaimed vs. BilledSchedule must include the total costs of the prioryears previously settledSchedule must include the total cost of the amountsclaimed but not yet settled (current submission)Schedule must include costs that pertain to contractlimitationsThe total of item 1 and item 2 above less item 3equals the net cumulative settled/claimedSchedule must include total cumulative billings todateSchedule must include an amount equal to item 4less item 5 to arrive at the over or (under) billings19

Schedule JSUBCONTRACT INFORMATIONFISCAL YEAR ENDED 6/30/2004Subcontractor'sPoint of Contact andSubcontract No. Prime Contract No. Name and AddressPhone No.Subcontracts Issued:P.O. #XYZ0998R 500-96-XXXXSmall CompanyMs. Donna Charleston1445 Southpark Blvd. Marketing ManagerBuffalo, NY 14206(716) 883-8700 X317P.O. #XYZ0776R 500-96-XXXXNOTE:Tanza Enterprises87B Executive ParkFairfax, VA 22033Mr. Mike TanzaPresident(703) 983-5640Subcontract ValueCosts Incurredin FY 2004 110,500.00 87,912.00 895,000.00 15,341.001. Subject schedule is to provide identification of subcontracts you have awarded to companies for which youare the prime or upper-tier contractor. This information is required for all cost type, flexibly priced, T&Mand labor hour subcontract awards.20

Model Incurred Cost ProposalFiscal Year Ended 6/30/04Schedule KSummary of Hours and Amountson T&M Labor Hour ContractsSchedule LReconciliation of Total Payroll toTotal Labor DistributionSchedule MListing of Decisions/Agreements/Approvals and Description ofAccounting/OrganizationalChanges21

Schedule LLabor ReconciliationEXPENSESPER G/LDESCRIPTIONDirect LaborGeneral and Administrative:WagesFringe:Holiday WagesVacation WagesSick LeavePersonal AbsenceSeverance Pay (in full)Overtime Premium(included in ODCs) Total Labor Distribution 7,984,711Schedule F1,151,131Schedule C2,3215,8129871,08213,567Schedule BSchedule BSchedule BSchedule BSchedule C2709,159,88122

Schedule L (cont’d)RECONCILIATION OF TOTAL PAYROLLTO TOTAL LABOR DISTRIBUTIONFISCAL YEAR ENDED 6/30/2004PER IRSFORM 9411st. Quarter2nd. Quarter3rd. Quarter4th. QuarterPlus: Current Year AccrualLess: Prior Year's AccrualOther AdjustmentsTOTAL PAYROLL 9,9999,159,881Journal Entry # 62Journal Entry # 62** Reference the source for any items used in this reconciliation.23

Schedule MListing of Decisions/ Agreements/Description of Accounting System1. Detail contract ceilings2. Detail any provisional rates and theirceilings3. Detail accounting system in narrative formnoting any changes during fiscal year24

Model Incurred Cost Proposal FiscalYear Ended 6/30/04Schedule NCertificate of Final IndirectRatesSchedule OContract ClosingInformation25

Schedule NCERTIFICATEOF IRECTCOSTSCOSTSThisis to certifythat IIhavereviewed thisproposal toestablish finalindirect costThisThisisistotocertifycertifythatthat osts includedin overedbyrate) areallowable inaccordance withthe costprinciples ofthe applicabletothosecontractstowhichthe hosecontractstowhichRegulation (FAR) and its supplements applicable to those contracts to dindirectcostrateswillapply;andindirect cost rates will apply; and2.2.Thisproposal doesnot includeany costswhich areexpressly cablecostprinciplesoftheFARoritssupplementsunder applicable cost principles of the FAR or its ature:Nameof gOfficial:Official:Title:Title:Title:Dateof Execution:DateDateofofExecution:Execution:26

Schedule OCONTRACT NO.Cost Type:500-96-XXXXPerformance PeriodFromTo7/1/20006/30/2004ToClose (1)YesCeilingAmount (2) 39,329,329 ContractFee (3)CumulativeHoursActual3,146,346Explanatory Notes:(1) Indicate whether the contract is ready to close based on all information available. If the contract is not ready to close(e.g. a contract modification is being pursued), the reasons why should be stated in a footnote.(2) Provide the overall contract ceiling amount, before fee, for the type of contract.(3) Provide fee amount as provided by the contract. Include details of the fee computation for all flexibly priced incentive fee andlevel of effort type contracts, along with the contract modification used, in a footnote.27

Other Schedules1. Comparative analysis of each pool2. Comparative analysis of the directcosts3. Reconciliation of Tax Returns4. Contract Brief5. Executive Compensation Information28

Model Incurred Cost ProposalFiscal Year Ended 6/30/04Attachment 1Attachment 2Financial Statement/AuditReport/Management Letter941 Payroll Tax ReturnsAttachment 3Federal Tax ReturnAttachment 4Attachment 5Board of Director MinutesList of work sites and number ofemployees assigned to each site29

Executive CompensationBenchmark Established by Public Law105-85, Section 808Limits the allowability of compensationcosts under government contractsLimit beginning Jan 2004 is 432,851Includes CEO and four highlycompensated employees in managementpositions30

Executive CompensationCompensation is defined as:Wages and salaryBonusesDeferred compensation31

CompensationIssue pertains to reasonablenessReasonableness becomes an issue ofwhat a prudent business person wouldincur in a competitive businessenvironment32

PenaltiesFAR 42.709If an expressly unallowable cost isclaimed, the penalty is equal to -The amount of the unallowable cost; plusInterest on the paid portion, if any, of thedisallowance33

General ProvisionsIf the indirect cost was determinedunallowable for that contractor beforesubmission of the indirect proposal, thepenalty is twice the amount of theunallowable costs34

Expressly UnallowableFAR 31.001“Expressly unallowable cost” means acost which, under applicable law,regulation, or contract, is specificallynamed or stated to be unallowable35

Expressly UnallowableAlcoholic Beverages. Costs of alcoholicbeverages are unallowableBad Debts. Bad debts, includinglosses arising from uncollectibleamounts and other claims, relatedcollection costs, and related legalcosts, are unallowable36

ResponsibilitiesThe auditor recommends assessingpenalties to the contracting officerThe contracting officer determineswhether penalties should be assessedThe contracting officer determineswhether penalties should be waived37