Calculating Indirect Cost Rates Is The #1 Topic Among Federal ContractorsAugust 30, 2021
It's true. It's a hot topic, perhaps the most important for contractors to get right.
After all, how can you submit an accurate proposal without accurate indirect cost rates. Get your indirect cost rates wrong and you could risk losing everything, or risk owing the government a lot of money. It's a real fear. You could also lose the trust and confidence of your customers if your indirect rate calculations are (grossly) inaccurate. The good news, of course, is that Kline & Company can help you. In fact, we are very busy this year, right up to the day this newsletter goes to press, preparing Incurred Cost Submissions (ICE) to calculate indirect cost rates for our clients. Your compliant accounting system will help insure accuracy in your ICE.
Your general ledger must separate costs in accordance with 45 CFR 75, Subpart E; direct costs, indirect costs and unallowable costs. Straight from the FAR, regarding indirect costs, FAR 2.101 defines an indirect cost as "any cost not directly associated with a single, final cost objective but identified with two or more final cost objectives or an intermediate cost objective. It is not subject to treatment as a direct cost." Direct costs are incurred for one specific contract. Overhead costs provide support for two or more contracts. G&A costs refer to expenses of running the business rather than supporting a single or multiple contracts.
Of course this is only one topic, and you must be very familiar with all areas of the FAR. Better to call us if you need assistance - your DCAA Compliance team. Together, let's make sure your numbers are right.
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