Government Contract Services - EY

1 Government Contract Services indirect cost rates indirect cost rates are necessary for Contract pricing and payment purposes on Government contracts, grants and cooperative agreements. Typically based on budgets for an ensuing project period, they can sometimes be derived from those allowable costs for a previously completed accounting cycle. The various types of indirect cost rates include predetermined rates, provisional rates and final rates. In addition to ongoing periodic monitoring of indirect cost rates, a contractor with a Contract containing the Federal Acquisition Regulation (FAR) , Allowable Cost and Payment clause or similar clauses where final price is based on actual costs incurred is required to submit a final indirect cost rate proposal to the contracting officer within 180 days following the completion of its fiscalyear. This formal submission under the Allowable Cost and Payment clause is accompanied by a contractor's certification that no unallowable costs, as set forth in FAR Part 31, Contract Cost Principles and Procedures or other Government requirements, were included in the final indirect cost rates the final indirect cost rate proposal shall not be accepted and no agreement shall be made to establish final indirect cost rates unless the contractor has executed a certification of final indirect costs.

2 Once submitted and accepted, the proposal is reviewed by the contracting officer and, in most cases, sent to the cognizant Government audit office for review, verification, testing and compliance analysis. The final indirect cost rates are negotiated with the contracting officer, but in some cases involving small companies, the final indirect rates are established through an audit determined procedure. In addition to the requirements for federal Government contractors, several state agencies have separate requirements for the preparation, negotiation and audit of indirect cost rates. The state regulations may require a contractor to prepare indirect cost rates in accordance with the Contract cost principles of FAR Part 31, in addition to unique state requirements. Practical experience Ernst & Young LLP's Government Contract Services (GCS) has assisted numerous commercial organizations, colleges, universities and not-for-profit organizations in developing indirect cost rate structures that have helped improve contractors' cost recovery.

3 Our professionals have routinely identified and remediated gaps between Contract requirements and a company's compliance practices. Typical Services have included: Assessing indirect cost rate structure and identifying areas of potential non-compliance with the Government 's rules, such as FAR. Part 31, Cost Accounting Standards (CAS), Office of Management and Budget (OMB) Circulars and special Contract requirements Helping interpret and apply requirements of OMB Circulars, OMB. Guidance and state agency regulations and guidance Helping prepare indirect cost proposals for interim billing purposes of final indirect cost rates and providing support during audit and subsequent negotiations with the Government Screening general ledger expense accounts for unallowable costs and assisting in the development of accounting practices for identifying and removing unallowable costs from indirect cost proposals Assisting clients with their analysis and response to DCAA audit issues involving the client's indirect rate structure and/or annual incurred cost submittals EY | Assurance | Tax | Transactions | Advisory About EY.

4 EY is a global leader in assurance, tax, transaction and advisory Services . The insights and quality Services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide Services to clients. For more information about our organization, please visit Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. 2014 Ernst & Young LLP. All Rights Reserved. SCORE No. WW0334. CSG No. 1401-1182726 NE. ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice.

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