Incurred Cost Submission Guide for Contractors

An incurred cost submission is the annual package a government contractor submits to establish final indirect cost rates for a fiscal year, typically on applicable cost-reimbursement contracts. It summarizes claimed direct and indirect costs and is supported by accounting records, schedules, reconciliations, and allocation data. DCAA may review the submission to assess whether claimed costs are allowable, allocable, reasonable, and adequately documented.

Examples of incurred costs can include direct labor charged to a contract, materials used to perform work, subcontractor charges, travel, facilities expenses, fringe benefits, and general and administrative expenses. Whether a cost is recoverable depends on the contract, applicable FAR cost principles, the contractor’s accounting practices, and sufficient supporting documentation. Costs must be classified and allocated consistently.

Government contractors with applicable cost-reimbursement contracts generally need to prepare an incurred cost submission after the end of their fiscal year. The requirement is commonly tied to the contract’s Allowable Cost and Payment clause. Contractors should review their contract terms, funding structure, and cost-type contract activity to confirm their obligations and establish a reliable annual preparation calendar.

Supporting documentation commonly includes the general ledger, trial balance, labor distribution reports, timekeeping records, payroll data, invoices, subcontract files, indirect-cost pool schedules, allocation-base calculations, and reconciliations to financial records. Clear explanations of adjustments and consistent links between schedules are essential. Organized records allow reviewers to trace claimed costs back to source evidence without unnecessary delays.

Indirect rates distribute shared business costs—such as fringe, overhead, and G&A—across the appropriate allocation bases. An incurred cost submission uses actual fiscal-year costs and bases to calculate final rates, subject to applicable contract and regulatory requirements. Accurate pool composition, base calculations, and reconciliations are critical because unsupported or inconsistently allocated indirect costs can trigger questions or adjustments.

Under FAR Part 31, a cost generally must be reasonable, allocable to the contract, compliant with applicable cost principles and contract terms, and supported by adequate records. Some costs are expressly unallowable, while others may require specific documentation or treatment. Contractors should apply written policies consistently and identify unallowable costs during the accounting process rather than waiting until submission preparation.

Preparation starts with reconciling submission schedules to the general ledger and confirming that labor, billing, indirect-rate, and allocation records are complete. Maintain clear support for significant adjustments, identify unallowable costs, and ensure accounting practices align with written policies. A structured internal review before submission helps surface gaps early and gives responsible staff practice explaining the data and its supporting evidence.

Yes. QMS Learning’s Government Contract Accounting & CAS Compliance Pathway is designed for controllers, CFOs, and DCAA-compliance leads. It covers CAS, FAR Part 31 cost principles, DCAA audit preparation, indirect rates, and incurred cost submissions. The pilot pathway also includes AI Workbench access, manager dashboard visibility, and Audit-Evidence Package export to support practical, team-wide learning.