If you’re a government contractor, incurred cost submission (ICS) is a critical requirement that can’t be overlooked. Each year, contractors with cost-reimbursement contracts must prepare and file an ICS with the Defense Contract Audit Agency (DCAA).
In this guide, we’ll walk you through ICS preparation, explain what an incurred cost submission is, and provide a step-by-step framework to make the process less daunting.
What Is an Incurred Cost Submission?
At its core, an incurred cost submission is a detailed report of your over/under billings under your cost-type contracts with the U.S. Government. It achieves this by calculating your actual indirect cost rates and reconciling them to your provisional billings. Contractors submit this report to the DCAA so the agency can audit:
- Costs charged to contracts are allowable, allocable, and reasonable.
- Indirect cost rates (like overhead and G&A) are calculated correctly.
- Changes in cost accounting practices, when applicable
- Unallowable costs are properly excluded from claimed costs
Failing to file on time or filing incorrectly can lead to payment delays, disallowed costs, or even suspension of contracts.
Why ICS Preparation Matters
Timely and accurate ICS preparation is crucial because it:
- Is required
- Ensures accurate billings
- Timely identifies over/underbillings
- Avoids penalties – Incomplete submissions risk disallowances and increased audit scrutiny.
- Maintains compliance – A strong ICS builds trust with contracting officers.
- Supports future opportunities – Ongoing compliance is often a prerequisite for new awards.
Given the stakes, it’s no surprise that ICS is a top focus for contractors during the summer months leading up to the typical June 30 deadline.
Key Components of an ICS
The DCAA provides a standard Incurred Cost Electronically (ICE) Model, which outlines the required ICS schedules. While every contractor’s ICS will look slightly different, most include:
- Schedule A–E: Indirect cost pools and allocation bases.
- Schedule F–H: Contract costs by type and funding.
- Schedule I: Cumulative costs by contract.
- Schedule J: Subcontract information.
- Schedule L–N: Reconciliation of books and financials.
The detail required is extensive, which is why many contractors find value in an ICS guide or expert Incurred Cost Submission support.
Step-by-Step ICS Preparation Guide
Preparing your Incurred Cost Submission requires more than completing schedules, it demands accurate financial data, proper reconciliations, and alignment with DCAA requirements. A clear, step-by-step approach helps you minimize errors, strengthen compliance, and ensure your submission is accurate, supported, and audit-ready.
- Gather Financial Records Early
Collect general ledger data, payroll records, and subcontractor invoices well before the typical June 30 deadline. Accurate source data is the foundation of your submission.
- Review Cost Pools and Bases
Confirm that your overhead, fringe, and G&A cost pools are segregated correctly. Misclassifications here are one of the most common audit findings.
- Complete the ICE Model
Work through each schedule carefully. Double-check formulas, allocations, and supporting documentation.
- Reconcile to Your Financial Statements
Helps your ICS ties directly to your trial balance and financial reports. Reconciliation helps prevent audit flags.
- Conduct a Compliance Check
Compare your submission against the Incurred Cost Adequacy Checklist: DCAA > Customers > Checklists & Tools > Incurred Cost Submission Adequacy Checklist This step allows you to review your submission against the same requirements DCAA will review for upon submission.
- Submit and Retain Records
Submit the ICS electronically by the deadline and retain all supporting documentation for potential audit review.
Preparing Your ICS Submission?
Download the free ICS Filing Checklist to help identify missing documentation, reduce filing errors, and prepare for upcoming submission deadlines.
Common ICS Pitfalls to Avoid
For government contractors, your Incurred Cost Submission (ICS) is more than a compliance requirement—it’s a direct reflection of your accounting system’s integrity. When done correctly, it reinforces credibility with the DCAA and protects your ability to win and retain cost-reimbursable contracts. When done poorly, it can trigger audits, delays in indirect rate approvals, payment withholds, and unnecessary scrutiny.
Even experienced contractors stumble during incurred cost submission. Avoid these common ICS mistakes:
- Missing subcontractor details in Schedule J.
- Misallocating indirect costs.
- Failing to exclude expressly unallowable costs.
- Submitting late or without proper reconciliation.
How RKI Accounting Helps Contractors with ICS
Preparing your Incurred Cost Submission (ICS) doesn’t have to feel like a burden. With the right guidance, contractors can stay compliant, reduce audit risk, and protect their government contracts.
At RKI Accounting, we focus exclusively on supporting government contractors through their ICS prep. Our team helps you:
- Manage the full ICS process – from data collection through final submission.
- Conduct audit readiness reviews – making sure your submission is DCAA-ready.
- Optimize indirect rates – while keeping compliance front and center.
We understand the challenges contractors face and provide tailored solutions to help you file with confidence, on time, and without unnecessary stress.