FICS permanently closesthe cost record.There is no reopeningafter final settlement.
Final Incurred Cost Submissions (FICS)
"FICS quality is determined by the quality of cost accounting maintained throughout the contract lifecycle — not by the effort invested at close. A firm that maintained compliant records across every contract year produces a FICS by exporting them. A firm that did not produces a FICS by reconstructing what it should have maintained — and the reconstruction is the finding."
Paper 7 covers FICS vs. ICS differences, rate true-up mechanics across all contract years, the exhaustive unallowable cost identification standard at final settlement, evidence retention requirements under FAR 4.703, and the six most consequential FICS findings — including post-settlement recovery risk.
At the annual ICS, DCAA typically samples cost categories and tests specific elements. The examination is designed to identify material unallowable costs in the current year while leaving final determination to the FICS process. At FICS, DCAA's examination is designed to be comprehensive — to identify all material unallowable costs across the entire contract lifecycle before granting final settlement.
What This Paper Defines
- Regulatory frameworks
- Architectural compliance
- DCAA audit proofing
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The Argument
Why the Exhaustive Unallowable Cost Standard at FICS Is More Demanding Than Annual ICS
At the annual ICS, DCAA typically samples cost categories and tests specific elements. The examination is designed to identify material unallowable costs in the current year while leaving final determination to the FICS process. At FICS, DCAA's examination is designed to be comprehensive — to identify all material unallowable costs across the entire contract lifecycle before granting final settlement. ""The FICS record availability test is simple: can DCAA trace any cost in your FICS to the original transaction record without your assistance? If the answer requires reconstruction, translation, or retrieval from an inaccessible archive, the records are constructively unavailable regardless of whether they technically exist.""
The Post-Settlement Recovery Risk
Final settlement creates finality — but not absolute finality. Post-settlement government recovery actions can occur when unallowable costs that were not disclosed in Schedule H are subsequently discovered. The recovery action includes the disallowed cost plus interest from the date of final settlement — plus potential penalties if the nondisclosure is determined to be knowing. This is why the FICS Schedule H must be exhaustive, not representative.
| Dimension | Annual ICS | Final FICS |
|---|---|---|
| Trigger | Calendar — 6 months after fiscal year end, annually while contracts are active | Contract completion — submitted when all cost-type contracts in the grouping reach physical completion |
| Scope | One fiscal year across all active contracts | All cumulative costs from contract inception — reconciling every annual ICS into one final cost position |
| Rate determination | Provisional actual rates, subject to adjustment in future ICS submissions and FICS | Final actual rates — permanently closes the cost accounting. No further adjustment possible. |
| Legal finality | Adjustable in subsequent submissions | Permanent after settlement. Post-settlement recovery only for fraud, material misrepresentation, or undisclosed unallowable costs. |
| Unallowable cost standard | Annual identification — DCAA examines current year | Exhaustive — must identify all unallowable costs across the entire contract lifecycle, across all closed years |
| Certification scope | One fiscal year's costs | All cumulative costs from inception — certifier attests to the completeness and allowability of the entire cost history |
FICS readiness is not built at final contract completion. It is built during every year of contract performance through compliant timekeeping, continuous unallowable cost segregation, accurate indirect rate calculation, and a complete audit trail generated at every operational event. A firm with daily ICS readiness across all contract years produces a FICS by exporting its continuously maintained records. A firm without it produces a FICS by reconstruction — and the reconstruction is the finding.
Strategic Insight
""The FICS record availability test is simple: can DCAA trace any cost in your FICS to the original transaction record without your assistance? If the answer requires reconstruction, translation, or retrieval from an inaccessible archive, the records are constructively unavailable regardless of whether they technically exist.""
Frequently Asked Questions
What triggers the FICS submission requirement specifically?
What does "constructive unavailability" of records mean practically?
How does a firm know when its contracts are "complete" for FICS purposes?
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