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DOE M&O contractors now subject to revised incurred cost reporting requirements

The countdown is on. March 31, 2022, marks the first deadline for Department of Energy (DOE) management and operating (M&O) contractors to restate their fiscal year 2020 incurred costs into a wholly different format than what has been in place for more than a decade. As a result of the DOE Office of Inspector General’s (OIG) multiyear review of the Cooperative Audit Strategy, the previous Statement of Costs Incurred and Claimed (SCIC) reporting is shifting to a DCAA-esque incurred cost proposal (ICP) format as required per FAR 52.216-7(d).  

The reporting differences between the two formats can be daunting when comparing the summary-level single page required by the SCIC to the multipage ICP, which requires 15 separate exhibits or schedules, including details for each indirect rate, by cost element and direct contract costs with applied claimed indirect rates. One key element of the ICP format is a cumulative view of claimed contract costs compared to cumulative billings. Due to the changes in the DOE audit strategy and the reporting format required, it is not clear how DOE OIG will interpret requirements to report claimed, unaudited costs from prior to fiscal year 2020.   

While the immediate deadline is focused on resubmissions of fiscal year 2020 SCICs, the OIG has been unequivocal that it expects M&O contractors’ ICPs to be prepared following the FAR 52.216-7(d) format (as supplemented by the OIG) from fiscal year 2021 forward. The best course of action to address any concerns is to communicate with your contracting officer. There may be deadline exceptions available if agreed upon in advance. Contractors should take the time to submit correctly in the format required by FAR 52.216-7(d) and implement revisions to their accounting systems to facilitate the preparation of ICPs in future years.  

Additionally, all future audits of incurred costs will be performed by DOE OIG auditors, DCAA auditors or contracted independent audit firms. The OIG determined that independence was threatened due to the historical Cooperative Audit Strategy framework which, by design relied on M&O contractors’ internal auditors to audit incurred costs. In summary, not only did the OIG prescribe a different format for contractors to summarize their claimed incurred costs, but also mandated that federal or contracted independent auditors, not M&O contractor internal audit functions, perform audits of incurred costs. 

For more information on the new ICP reporting format, contact our industry specialists.

Patrick J. Fitzgerald
Megan LeBrun
Joseph McCaffrey
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