The Incurred Cost Submission: What It Wants From Your Timesheets
Your incurred cost submission is due six months after your fiscal year ends. Most of it comes out of your accounting system. Five schedules come out of your timesheets, and one of those is where small contractors get stuck.
Somebody has just told you that your incurred cost submission is due. You have six months from the end of your fiscal year, and you have no idea what it involves.
The short answer is fifteen schedules. Ten of them come out of your accounting system. Five come out of your labor records, and one of those five is the reason contractors call an accountant in a panic in month five.
That one is Schedule L. It reconciles every hour your people worked to your payroll tax return. The number ties or it does not, and what decides it is how hours got recorded back in February.
The short version
- It is due six months after your fiscal year ends. That is the deadline in FAR 52.216-7, and extensions are for exceptional circumstances only.
- Fifteen schedules, lettered (A) to (O). Ten are accounting. Five come from your labor records.
- Schedule L is the hard one. Your total labor has to reconcile to your IRS Form 941.
- Miss it and the government sets your rates. A contracting officer may establish them unilaterally, based on audited history and set conservatively.
- Fix your coding now, not in month eleven. Nobody has ever reconstructed a clean year from memory.
Before you read the rest
The five labor schedules are the ones you can still do something about. They are built from hours, and hours are captured all year rather than assembled at the end of it. TimeRewards stamps every entry with its author, its time and its cost objective as the work happens, on every plan from $9.99 a user.
Setup is shaped around the way your firm already codes its work, which is the part most people only see on a walkthrough.
What is the incurred cost submission?
It is the annual reckoning on cost-reimbursement work. Through the year you bill using provisional rates, which are estimates. At year end you show what you actually spent.
The government then trues up. If your real rates came in lower than your provisional ones, you owe money back. If they came in higher, you may be owed.
The formal name is the final indirect cost rate proposal. The clause that requires it is FAR 52.216-7, Allowable Cost and Payment, and it sits in every cost-reimbursement contract you hold.
If you are not sure whether you hold one, the contract types that trigger DCAA timekeeping covers the same list. Firm-fixed-price work sits outside this.
When is it due?
Six months after your fiscal year ends. The clause is exact about it.
The deadline, in the clause’s own words
“The Contractor shall submit an adequate final indirect cost rate proposal to the Contracting Officer (or cognizant Federal agency official) and auditor within the 6-month period following the expiration of each of its fiscal years.”
Source: FAR 52.216-7(d)(2)(i)
A December year end means a 30 June deadline. Note the word adequate. Filing something on time that turns out to be incomplete does not stop the clock.
What happens if you miss it?
The contracting officer can end up setting your rates for you.
FAR 42.703-2(c)(1) deals with a contractor that has not certified its proposal, where a waiver is not appropriate. The FAR overhaul moves the same sentence to 42.503-2(c)(1). In that situation the officer “may unilaterally establish the rates.” Miss the deadline altogether and you have no certified proposal, which puts you there.
Paragraph (c)(2) sets out how those rates get set. They use audited historical data, exclude unallowable costs, and are set conservatively so that improper costs are not reimbursed.
Conservatively means in the government’s favor. You will not like the number, and you will have spent the year billing against a rate that no longer applies.
Which schedules come from your timesheets?
Five of the fifteen. Here they are in the clause’s own words, so you can match them against what your system can produce today.
| Schedule | What FAR 52.216-7(d)(2)(iii) asks for |
|---|---|
| (G) | “Reconciliation of books of account (i.e., General Ledger) and claimed direct costs by major cost element” |
| (H) | “Schedule of direct costs by contract and subcontract and indirect expense applied at claimed rates, as well as a subsidiary schedule of Government participation percentages in each of the allocation base amounts” |
| (I) | “Schedule of cumulative direct and indirect costs claimed and billed by contract and subcontract” |
| (K) | “Summary of each time-and-materials and labor-hour contract information, including labor categories, labor rates, hours, and amounts; direct materials; other direct costs; and, indirect expense applied at claimed rates” |
| (L) | “Reconciliation of total payroll per IRS form 941 to total labor costs distribution” |
Read across those and one thing repeats. Every one depends on hours charged to the right place, and it needs a full year of them.
The other ten are accounting work: your G&A pool, your overhead pool, occupancy, allocation bases, cost of money, subcontracts, the certificate, and contract closing data. Those come from your ledger.
Why does Schedule L catch people out?
Because it compares two records that were never built to agree.
Your Form 941 is what you told the IRS you paid in wages. Your labor distribution is what your timesheets say people worked on. Schedule L asks you to tie one to the other.
For most small contractors those numbers live in different places. Payroll runs in one system. Hours live in a spreadsheet, or in a tool that nobody reconciles against payroll.
The gap is usually small and boring. Somebody was paid for 2,080 hours and recorded 1,960. Overtime got paid but never coded. A leaver’s final week never made it onto a timesheet.
None of that is fraud. It is a year of small omissions, and the reconciliation is where they all surface at once.
What makes Schedule L tie
TimeRewards holds the labor record all five of those schedules are built from. Every hour lands against a named cost objective as it is worked. Corrections keep the original value with the author, the timestamp and the stated reason. Nothing has to be reconstructed later, because it was captured correctly the first time.
Pulling a year of hours by contract is an export, not a project. 100+ pre-built exportable reports are on every plan including the $9.99 tier, alongside one-click DCAA compliance. Schedule H wants direct costs by contract. Schedule K wants labor categories, rates and hours. Both are a report you run.
Your accountant or your ERP assembles the ten accounting schedules, which is where they belong. The five that come from labor are decided in February, and that is the year we carry for you.
What actually goes wrong?
Four things, and all four are coding problems rather than submission problems.
A year of “general admin”
One catch-all code absorbs everything nobody wanted to think about. It looks tidy in March. In month eleven you have to explain what a quarter of your labor was doing, and nobody remembers.
Contract codes that changed mid-year
A task order gets renumbered. Somebody starts using the new code in July. Now Schedule H needs one contract’s costs and your records hold two.
Hours that do not reconcile to payroll
This is Schedule L. Paid hours and recorded hours drift apart quietly, and nobody looks until the submission asks.
Corrections with no history
Somebody fixed a timesheet by overwriting it. The record now shows the corrected number and nothing else. An auditor asking what changed has no answer to read.
Our guide to what DCAA expects from a timekeeping system covers the last one in detail, and it is the cheapest of the four to fix.
Do you need the DCAA ICE model?
You do not have to use it, and it will not save you.
ICE stands for Incurred Cost Electronically. It is a spreadsheet DCAA publishes to help contractors lay out the schedules. There are two versions and either is accepted: version 1.08 from July 2026, and version 2.0.1h from May 2019.
It is genuinely useful for structure. It is not a shortcut, and DCAA says so themselves.
DCAA’s own disclaimer on the ICE model
“Use of the DCAA ICE Model does not guarantee adequacy of the incurred cost proposal by DCAA.”
Source: dcaa.mil, ICE Model page
One practical note if you do use it. The submission portal will not accept a macro-enabled file, so save the Visual Basic version as .xls or .xlsx before you upload.
What should you do if yours is months away?
Fix the coding this month. Doing that turns the submission into an assembly job instead of a reconstruction, and it costs a fraction of the panic.
Open last month’s timesheets and check three things. Can you pull every hour by contract for a date range. Does the total match what payroll paid. Can you see what changed on any entry that was corrected, and why.
If all three are yes, your submission is an assembly job. If any is no, you have found the gap while there are still months left to close it.
If the answer is that your accounting cannot hold the structure at all, that is a different problem, and whether you actually need a GovCon ERP is the question to answer first.
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Seven checks before your incurred cost submission
Run these now rather than in month five. Each one takes minutes.
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If the award is recent, what to do after winning a federal contract covers the wider sequence, and who should approve timesheets covers the process question. For the standard itself there is our DCAA compliance overview and the government contractors page. The time card calculator and the employee cost calculator will both check figures by hand, and any unfamiliar term is in the glossary.
Questions people actually ask
Generally no. The requirement comes from FAR 52.216-7, Allowable Cost and Payment, which sits in cost-reimbursement contracts. On firm-fixed-price work the government pays the agreed price rather than your actual costs, so there is no rate to true up. If you hold a mix, the clause applies to the cost-reimbursement side and you should assume a submission is due.
In the clause’s words, a “Reconciliation of total payroll per IRS form 941 to total labor costs distribution.” In practice you are showing that the wages you reported to the IRS and the hours in your timekeeping system describe the same year. Differences are expected and normal, and what matters is that you can explain each one. Accrued payroll, bonuses and non-labor compensation all create legitimate gaps.
No. It is a spreadsheet DCAA publishes to help you lay out the schedules, and two versions are offered with either acceptable. It is worth using for the structure alone. Using it does not make a submission adequate. DCAA says so plainly: the model “does not guarantee adequacy of the incurred cost proposal by DCAA.” One practical detail: the submission portal will not take a macro-enabled file, so save the Visual Basic version as .xls or .xlsx first.
Get an accountant who has done these before, this week. Then pull your labor data first, because it takes longest and it is where the questions come from. If your hours do not reconcile to payroll you need the explanation ready rather than discovered. An extension is sometimes possible through your contracting officer, and asking early goes better than asking late.
No product files it for you, and any vendor suggesting otherwise is overselling. Ten of the fifteen schedules are accounting work built from your general ledger, so an accountant or a GovCon ERP assembles those. What a timekeeping system does is hold the labor record the other five are built from, and that record has to be right all year rather than at the end of it.
There is no threshold in the regulation, so treat this as judgment rather than a rule. The test an auditor applies is whether you can explain what the hours were for. A small indirect pool that everyone understands is fine. A large one that nobody can break down invites questions across the whole submission, because it suggests the coding was not being watched. If you cannot describe what is inside it, split it now while the year is still live.
Schedule L is decided in February
One-click DCAA compliance and exportable reports on every plan, from $9.99 per user, with a fourteen-day trial that does not ask for a card. Hours coded properly all year make the submission an assembly job.