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June 1, 2023

Utilizing Business Managed Services for Incurred Cost Submission Support

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Managed accounting services offer government contractors specialized expertise in setting up compliant accounting systems, accurate cost tracking, compliance assurance, and support for generating the Incurred Cost Submission (ICS). These services cover accounting system setup, cost tracking, compliance management, documentation, and audit support.

Why Managed Accounting Services for ICS Support

Cost reimbursable type contracts account for over 40 percent of contract dollars awarded. Many contractors steer clear of this very large pool of revenue due to fear of noncompliance. In this blog we describe how to leverage manage services to get your share of this very large revenue pool. Every government contractor who is awarded and working on a cost-reimbursable type contract will be required to produce and submit an incurred cost report.

In related blog, Incurred Cost Submission - What You Need to Know we described the ICS requirements. Producing the ICS requires accounting knowledge and skills as well as a thorough understanding of compliance requirements. Manually producing an accurate ICS is a tedious and time-consuming task. Utilizing managed services powered by a DCAA compliant ERP system provides the support required to streamline the creation of the ICS. In this blog we also describe our process and how setting up an integrated accounting, timekeeping, and payroll system provides the data required for automated ICS preparation. Configuring these systems properly requires knowledge of government compliance as well as an accounting staff with skills in government accounting, the FAR Part 31 requirements, and cost accounting standards.

AtWork OneLynk

AtWork Business Managed Services for Incurred Cost Submission

AtWork's managed services provide organizations specialized expertise, time and resource savings,
compliance assurance, enhanced accuracy and quality control, efficient and timely submissions, and scalability. 

How should a government contractor's accounting, timekeeping and payroll system be setup to support producing the incurred cost submission?

To support the generation of the incurred cost submission (ICS), a government contractor's accounting and payroll system should be set up in a way that aligns with government cost accounting regulations and facilitates accurate cost tracking and reporting. Here are some key considerations:

Chart of Accounts: Develop a comprehensive chart of accounts that reflects the various cost elements and categories required for the ICS. This includes direct costs, indirect costs, fringe, overhead and general & administrative pools, and specific cost accounts as described by the government ICE Model. The chart of accounts should be structured in a manner that allows for easy classification and allocation of costs.

Cost Allocation: Implement a cost allocation methodology that accurately assigns costs to specific contracts, indirect cost pools, and appropriate cost categories. This ensures that costs are appropriately distributed and reflected in the ICS. The allocation method should be consistently applied and compliant with government guidelines.

Labor Tracking: Establish a labor tracking system that captures detailed information on employee labor hours and rates. This includes tracking direct labor hours and recording labor expenses by job codes or contract numbers. The system should also account for different labor categories, such as regular time, overtime, fringe benefits, and any other labor-related costs required for the ICS.

Timekeeping and Payroll: Implement a timekeeping system that accurately captures employee work hours and integrates with the payroll system. This enables the precise recording of labor costs and ensures compliance with labor regulations. The payroll system should calculate wages, taxes, benefits, and any other payroll-related expenses for accurate cost reporting in the ICS.

Indirect Cost Pools: Configure the accounting system to track and accumulate indirect costs into appropriate cost pools. This includes expenses such as rent, utilities, depreciation, general and administrative costs, and fringe benefits. The system should accurately capture and allocate these costs based on predetermined rates or allocation methodologies approved by the government.

General Ledger and Subsidiary Ledgers: Set up a robust general ledger system that integrates with subsidiary ledgers, such as accounts payable, accounts receivable, and fixed assets. This ensures that all financial transactions are recorded accurately and can be traced back to supporting documentation. The system should provide the necessary level of detail required for the ICS, such as project-level expenses, subcontractor costs, and other relevant financial data.

Compliance Controls: Implement internal controls and workflows within the accounting system to ensure compliance with government regulations. This includes segregation of duties, approval processes, and periodic reviews to prevent errors and fraudulent activities. The system should generate audit trails and maintain documentation to support the ICS.

Reporting Capabilities: The accounting system should have robust reporting capabilities to generate the required schedules and reports for the ICS. This includes the ability to generate Schedule H (Direct Costs), Schedule I (Indirect Costs), Schedule J (Cumulative Allowable Costs), and other supplementary reports as needed. The system should also provide data export options to facilitate data analysis and audit support.

By setting up an accounting, timekeeping and payroll system that aligns with government requirements, contractors can streamline the generation of the ICS, ensure accurate cost tracking and reporting, and demonstrate compliance during audits and reviews. It is advisable to consult with accounting and compliance experts to tailor the system to the contractor's specific needs and regulatory obligations. In a related blog, Basics of Indirect Rates - How to Calculate Them, we describe the requirements for setting up the chart of account to support calculating indirect rates.

What skills are required to produce a government contractor's incurred cost submission?

Producing a government contractor's incurred cost submission (ICS) requires a combination of technical accounting expertise, knowledge of government regulations, such as, FAR Part 31 and cost accounting standard (CAS), and attention to detail. Here are some key skills that are typically required:

Accounting and Finance Knowledge: A solid understanding of accounting principles and financial management is crucial. Knowledge of Generally Accepted Accounting Principles (GAAP), Federal Acquisition Regulation (FAR), Defense Federal Acquisition Regulation Supplement (DFARS), and Cost Accounting Standards (CAS) is essential for proper cost classification, allocation, and reporting.

Government Contracting Regulations: Familiarity with government contracting regulations specific to ICS is vital. This includes understanding the requirements outlined in FAR Part 31 and the specific clauses relevant to cost allowability, allocability, and reasonableness. Knowledge of contract types (e.g., cost-reimbursement, time-and-materials) and indirect cost rate structures is also beneficial.

Cost Accounting and Allocation: Proficiency in cost accounting methods and practices is necessary to accurately allocate costs to specific contracts, indirect cost pools, and cost categories. This involves understanding direct and indirect costs, labor distribution, fringe benefit calculations, overhead allocation methodologies, and other cost accounting techniques.

Analytical Skills: Strong analytical skills are essential for reviewing and analyzing financial data to ensure accuracy and consistency. This includes identifying and resolving cost discrepancies, reconciling accounts, and conducting variance analysis to validate cost reasonableness and compliance.

Attention to Detail: Producing the ICS requires meticulous attention to detail. The ability to review financial records, supporting documentation, and cost transactions with a critical eye ensures that all costs are accurately recorded and comply with applicable regulations.

Documentation and Reporting: Proficiency in preparing and organizing documentation is necessary for supporting the ICS. This includes maintaining detailed records of costs, invoices, labor data, subcontractor expenses, and other relevant documentation. Strong reporting skills are also required to generate the various schedules and reports required by the government.

Compliance Management: Understanding compliance requirements and being able to ensure adherence to government regulations is crucial. This involves staying up to date with changes in regulations, understanding the implications for cost allowability, and implementing internal controls to mitigate compliance risks.

Audit Support: The ability to provide audit support during the ICS review process is valuable. This includes responding to auditor inquiries, addressing compliance issues, and preparing necessary documentation to support cost reasonableness and allowability.

Communication and Collaboration: Effective communication skills are essential for collaborating with various stakeholders involved in the ICS process. This includes working closely with finance teams, project managers, contract administrators, and auditors to gather information, resolve issues, and ensure the accuracy and completeness of the ICS.

Time Management:The ICS process has strict deadlines, and effective time management skills are necessary to meet them. Being able to prioritize tasks, manage multiple deadlines, and work efficiently under pressure is crucial.

Having individuals with these skills within the contractor's finance and accounting team or engaging external accounting experts with government contracting expertise can greatly contribute to the successful production of the ICS.

How can managed accounting services support the generation of the incurred cost submission?

Managed accounting services can provide valuable support in generating the incurred cost submission (ICS) for government contractors. Here are some ways in which managed accounting services can assist in this process:

Accounting System Setup: Managed accounting services can help contractors establish an accounting system that complies with government regulations and requirements. They can configure the system to track costs, allocate expenses correctly, and generate the necessary reports for the ICS.

Cost Tracking and Allocation: Managed accounting services can ensure accurate and reliable tracking of costs throughout the contract period. They can help establish processes for allocating costs to specific contracts, overhead pools, and indirect cost categories as required for the ICS.

Compliance Management: Government contracts have specific accounting and compliance requirements that must be met in the ICS. Managed accounting services can help contractors stay up to date with these regulations, including Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) clauses, and ensure the ICS is compliant with the established guidelines.

Documentation and Reporting: Generating the ICS involves compiling and organizing a significant amount of financial data and documentation. Managed accounting services can assist in preparing and organizing the necessary supporting documents, such as invoices, labor records, indirect rate calculations, and subcontractor costs. They can also generate the required financial reports and schedules, such as the Schedule H (Direct Costs), Schedule I (Indirect Costs), and Schedule J (Cumulative Allowable Costs).

Audit Support: The ICS is subject to audit by government agencies such as the Defense Contract Audit Agency (DCAA). Managed accounting services can help contractors prepare for the audit by ensuring that the ICS is accurate, complete, and supported by appropriate documentation. They can assist in responding to auditor inquiries, resolving any issues that arise, and addressing compliance concerns. In a related blog, Compliance and Audit Requirements For Government Contractors, we describe the accounting related audit requirements.

Cost Estimating: In addition to the ICS, managed accounting services can support contractors in developing cost proposals for new contracts or modifications. They can provide assistance with cost estimating, pricing, and ensuring compliance with government requirements, which may involve using historical cost data from the ICS.

By leveraging managed accounting services, government contractors can streamline the process of generating the ICS, enhance accuracy and compliance, and free up internal resources to focus on core business operations.


AtWork Systems designed OneLynk to enable GovCon's to navigate through the challenges of growing a GovCon business by providing a DCAA compliant ERP system to deliver exceptional performance. While a government contractor is maturing in the government market, as either a prime or subcontractor, OneLynk is there to instill the processes and systems needed to help achieve government compliance. AtWork Systems offers fractional subject matter experts - across functions like accounting, HR, financial, contract and project management - to help startups step out on the right foot or to help more mature firms transform ad hoc or inadequate processes into higher levels of performance. The combination of AtWork Systems' OneLynk and associated professional services is available as a comprehensive, secure, and affordable means of gaining the competitive advantage.

AtWork OneLynk

OneLynk: Comprehensive DCAA Compliant ERP System

OneLynk provides systems, processes and procedures, and fractional subject matter experts for
accounting, HR, finance, contract and project management, for optimal government compliance.

Learn More About AtWork Systems

AtWork Systems is an Arlington, Virginia based managed services and software development company. Its principals have decades of experience doing business with and working for federal, state, and local government. They developed OneLynk as a configurable and scalable SaaS platform that digitizes and optimizes processes while providing just in time business intelligence for decision making. OneLynk contains a suite of easily configurable web applications for automating and monitoring business transactions, including: human capital management, accounting, timekeeping, expense management, procurement, contracts and project management, payroll services and more. Discover the latest ERP System for Government Contractors at

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