Incurred Cost Submissions (ICE) Due Date

If a contractor performs cost reimbursable contracts subject to the Allowable Cost and Payment clause, the contractor is required to submit an incurred cost submission annually. The due date is 6 months after the close of the contractor’s accounting year. Most small businesses’ accounting year is December 31. In this case the due date is June 30. DCAA usually requires the incurred cost submission be submitted using their ICE model. It is complex. Contractors should provide for adequate time to meet this dead line. If you need an extension of time it is important to request an extension in advance with the contracting officer.

If you have questions about this subject please contact me.

Trusted Gaming in the Philippines: A Growing Industry




Gaming Industry in the Philippines

Gaming Industry in the Philippines

The gaming industry in the Philippines has grown rapidly in recent years. This growth has been driven by both online and land-based gaming options. The country has positioned itself as a regional leader in the gaming sector. Local and international players recognize the Philippines as a hub for entertainment and gaming opportunities.

Government Support and Regulation

The Philippine government supports the gaming industry. It has created clear regulations to ensure safe and fair practices. Agencies like the Philippine Amusement and Gaming Corporation (PAGCOR) oversee gaming operations. Their role is to regulate, license, and monitor gaming businesses. This ensures players enjoy reliable and secure experiences.

A Thriving Market for Online Gaming

Online gaming has become a major trend in the Philippines. More people have access to the internet and smartphones today. This trusted gaming in the Philippines makes online gaming more accessible than ever before. Players can now enjoy games from the comfort of their homes. Online casinos and sportsbooks are especially popular among Filipino players.

Many gaming platforms operate under licenses from PAGCOR. These licenses ensure that operators meet strict rules and regulations. Trusted gaming in the Philippines gives players confidence when they play online. They know their personal information and funds are secure. Online platforms also use modern technology, such as encryption, to protect their customers.

Land-Based Casinos: Entertainment Hubs

In addition to online gaming, the Philippines is home to world-class land-based casinos. These establishments attract tourists from all over the world. Cities like Manila host some of the biggest casino resorts in Asia. Resorts World Manila, Okada Manila, and Solaire Resort are among the top destinations.

These casinos offer more than just gaming. Visitors can enjoy fine dining, luxury hotels, and entertainment shows. This combination of gaming and leisure makes the Philippines a top choice for tourists and players alike.

Ensuring Fair and Responsible Gaming

The Philippine government promotes responsible gaming. PAGCOR has introduced measures to protect players. These measures include age restrictions, self-exclusion programs, and limits on gambling activity. Players can also find resources for help if they feel they are at risk.

Gaming platforms must comply with fair play standards. These standards include random number generation (RNG) systems. RNGs ensure that games are fair and unpredictable. Players can trust that their gaming experience is not manipulated. This creates a safer environment for everyone involved.

Economic Benefits of the Gaming Industry

The gaming industry contributes significantly to the Philippine economy. It creates thousands of jobs for locals. These jobs range from dealers and hospitality staff to technology and administrative positions. Gaming operators also pay taxes that help fund public services and development projects.

Tourism is another area that benefits from gaming. Many tourists visit the Philippines to experience its casinos and resorts. They also explore other attractions in the country. This boosts businesses in hospitality, travel, and retail.

Choosing the Right Platform for Gaming

Players need to choose the right platform for their gaming needs. Safety and reliability are key factors to consider. Licensed operators are the best choice for both online and land-based gaming. Players should look for licenses issued by PAGCOR or other recognized authorities. These licenses guarantee that the platform follows strict standards.

Customer support is also important. Reliable gaming platforms offer 24/7 support to help players with questions. Payment methods should be secure and easy to use. Many platforms now accept local and international payment options, making it more convenient for players.

Why the Philippines Stands Out

The Philippines stands out as a gaming destination in Asia. The combination of strong regulations, world-class casinos, and advanced online gaming platforms makes it unique. Tourists and locals trust the Philippine gaming industry for a safe and enjoyable experience.

Trusted gaming in the Philippines is not just a promise. It is a standard upheld by regulators, operators, and gaming professionals. As the industry continues to grow, players can expect more innovations and improvements. Whether online or in-person, gaming in the Philippines remains a top choice for entertainment.

The Future of Gaming in the Philippines

The future of gaming in the Philippines looks bright. Technology continues to drive new trends, such as mobile gaming and virtual reality. More operators are also investing in advanced security systems to protect players.

The Philippine government remains committed to fair and responsible gaming. New policies and innovations will keep the industry strong. As more players look for trusted gaming experiences, the Philippines will remain a key destination.

Conclusion

In conclusion, the gaming industry in the Philippines offers a safe, reliable, and exciting experience. Both local and international players can enjoy a variety of gaming options. With strong regulations, advanced technology, and world-class establishments, the Philippines is set to maintain its reputation as a leading gaming hub in Asia.

© 2024 Gaming Insights. All rights reserved.

Professional and Consultant Costs Update

There has been some movement on the allowability of professional services and consultants costs. DCAA seems to be tweaking its audit guidance to better reflect the FAR rule (FAR 31.205-33). I think it is a good move by DCAA. In summary I have provided below the criteria to meet this standard.

The government auditors need to understand what the professional services are for, the work product and the reasonableness of the compensation. Below I have highlighted some pointers.

1. This rule applies to professional services and consultant costs. This rule does not apply to contract labor. It applies to those that are members of a particular profession meeting the definition contained in FAR 31.205-33 it excludes temporary assignments or contract labor as well as employee relationships.

2. Secure evidence that there was an agreement. A written agreement is preferred.

3. Maintain evidence of the services provided by the consultant such as a scope of work and work product.

4. Acquire evidence of the compensation or billing rate.

5. Verification that the consultant met the terms of the agreement.

6. Provide evidence or explanation of what was accomplished for fees paid.

The DCAA audit guidance seems to emphasize that the form of the evidence is not controlling, it is the substance of the evidence that matters. It recognizes the special circumstances of the contractor may warrant differing forms of evidence. The bottom line is there must be evidence to support the above items. However, DCAA is now not requiring any specific form of evidence. DCAA is instructing its auditors to question costs under FAR 31.205-22 when this evidence is not available or not provided.

My advice is this.

1. Have agreements with all professional consultants, accountants and attorneys. These agreements should spell out scope of work, work product and compensation.

2. Maintain evidence of the scope of work, work product and compensation especially where this is not clearly spelled out in agreements or invoices.

3. It is my opinion that to play it safe have all consultants provide invoices of hours, rates and reimbursed expenses. with detail regarding the services provided. In the event of fixed priced services, require that the pricing for these services be spelled out with scopes of work.

4. Secure work product information and be able to answer the question of what was the end result of the fees paid.

5. The form of all of the above may vary, but it is very important that you have the evidence and be able to provide it to DCAA when requested. That is answer the questions, what were the services for, what was the work product, what was the end result as compared to the fee paid and what was the rate of compensation.

In summary, DCAA is no longer instructed to dictate the form of evidence, just that the evidence be provided to permit government evaluation of the services provided and the cost.

DCAA Waiving Incurred Cost Audit in Certain Cases For Small Contractors

A number of my clients have been advised that DCAA is waiving the incurred cost audit for cost reimbursable contracts. This appears to be limited to small business contractors. One contractor had 5 years waived. It appears that DCAA (in some of its offices in certain parts of the country) is making a risk assessment of small contractors. If they conclude the contractor imposes limited risk, DCAA has waived the audit and has accepted the incurred costs and indirect rates as proposed in the contractor’s incurred cost submission. I have seen in the last 6 months over ten such waivers. It seems this waiver approach is in response to the fact that DCAA is substantially behind in its incurred cost audits of contractors.

My observation is an important criteria for waiver is the quality and adequacy of the contractor’s incurred cost submission or proposal. Compliance in making the submission seem to be more important than ever. It seems DCAA is placing reliance on the quality and adequacy of the contractors incurred cost submission.

There is no guarantee that any small business contractor will receive the waiver, as the waivers I have observed are subject to DCAA discretion. DCAA audit decisions are inconsistent from office to office depending on the circumstances. I recommend that the contractor submit a compliant and quality incurred cost submission on time that meets the DCAA adequacy criteria. This should improve your chances.

Deferred Compensation

A common question I am asked recently involves deferred compensation under government contracts. Often small businesses and especially small R&D business find the need to defer the payment of compensation to owners and employees. The answer to the question is yes you can charge or accrue deferred compensation under government contracts. However, as one might expect there are rules that must be followed. I would only move forward with caution on deferred compensation plans as the rules are very specific and auditors will consider it an item of interest. It will be very important to follow the rules carefully. These rules include:

a.
Must have a policy on this subject. The actual terms of the awards are normally in the form of an agreement.

b.
Must make an award before the service is provided. After the fact awards in periods subsequent to when the service was provided are unallowable.

c.
Must comply with the CAS 415, Accounting for the Costs of Deferred Compensation. The requirements include.

There is a requirement to make the future payment(s) which the contractor cannot unilaterally avoid.

·
The deferred compensation award is to be satisfied by a future payment of money, other assets, or shares of stock of the contractor.
·
The amount of the future payment can be measured with reasonable accuracy.

·
The recipient of the award is known.

·
If the terms of the award require that certain events must occur before an employee is entitled to receive the benefits, there is a reasonable probability that such events will occur.

·
For stock options, there must be a reasonable probability that the options ultimately will be exercised.

For plans other than ESOP’s, amounts must be discounted to the present value of the future payments to be made. Under ESOP plans the amount assignable is the amount contributed and incurred in the year contributed.

Of course there are special provisions for payment arrangements including principle and interest, forfeitures, nonmonetary
compensation, etc. In these special rule cases 48 CFR 9904.415-50 should be consulted.

If any of these conditions are not met then the cost will be assigned to the cost accounting period that cost is actually paid.

Client Remarks

I just got off the phone with DCAA and he has approved our time/accounting system for cost-type contracts. Ed ….., I want to thank you for your hard work and assistance on this. This was a major strategic initiative for our company and we couldn’t have done it without your help.

What Are Unallowable Costs For Small Business Government Contractors?

Unallowable costs are defined by FAR 31.2. Costs can also be deemed unallowable by the contracting officer’s decision. This regulation, FAR 31.2, defines costs as unallowable in two broad categories. One is expressly unallowable costs. This one is manageable it includes those costs that are unallowable 100% under all circumstances. This is a relatively short list. The second is what is called circumstantial unallowable costs. In other words, it depends on the specific circumstances. It depends on a number of criteria.

As they say, for every rule there are exceptions and limitations. This is definitely the case in government contracting. The circumstantial unallowable costs fit this criterion quite well. Those keen on knowing the ins and outs of it better can seek advice from a financial advisor, potentially from the likes of Lincoln Frost. Apparently, the majority of FAR 31.2 focuses on this latter category defining rules, exceptions, and criteria for allowability.

Most small businesses do not incur costs often falling into this latter category. However, there are circumstances where the contractor incurs an indirect unallowable cost, which could affect the business fund. In order for a business to function properly, these unallowable costs may need to be reduced. If not, there is a risk that the business could incur heavy financial losses, thereby hampering its expansion plans. Aside from this, their poor financial records might make it impossible for them to obtain business loans (similar to a bpi loan). Nevertheless, if these unallowable costs are controlled, it might be possible for a business to get a loan and flourish.

The typical expressly unallowable costs for small businesses in most situations include the following:

Promotional Advertising (FAR 31.205-1)

Promotional activities of any kind (FAR 31.205-1)

Bad debt expense (FAR 31.205-3)

Federal income tax (FAR 31.205-41)

Contingencies (FAR 31.205-7)

Interest expense, other financing costs and professional services related to financial costs. (FAR 31.205-20)

Recreation, entertainment, and amusement (FAR 31.205-14)

Fines and penalties (FAR 31.205-15)

Organizational and re-organizational costs (FAR 31.205-27)

Charitable contributions and political contributions (FAR 31.205-8)

Certain types of travel costs such as first class air fare, hotels and meals over the Federal Per Diem Rates. There are exceptions to this rule of course. (FAR 31.205-46)

Expenses representing a distribution of profits (FAR 31.205-6 and others)

Alcoholic beverages (FAR 31.205-51)

Good will (FAR 31.205-49)

Losses on contracts (FAR 31.205-48)

Personal use of anything, as compared to allowable documented business use (FAR 31.205-46/31.205-6)

Asset write-ups from business combinations, contractors are prohibited from charging depreciation for the write-up. This item rarely effects small businesses (FAR 31.205-52).

There are certain circumstantial unallowable costs that small business contractors commonly incur that DCAA likes to target and question. Some of these include:

Compensation, if considered unreasonable it will be questioned. This is especially a focus area of DCAA for the compensation paid to owners and executives of closely held small contractors. (FAR 31.205-6)

Bonuses and incentive compensation. Bonuses and incentive compensation must be based on a written plan or policy implying an agreement with the employee. These plans should be performance based to the extent possible. DCAA frowns upon profit sharing. (FAR 31.205-6)

Legal costs: Certain legal costs are unallowable. Some of these include legal costs associated with organization and re-organizations, costs associated with patents not required by a government contract, patent infringement, legal costs to defend against allegations of fraud or noncompliance, etc. (FAR 31.025-47)

Consultant costs: This is a DCAA cherry picking target. The substantiation now required for allowable consultant costs is significant. DCAA is very much focused on this item in audits of small contractors. Need a well-documented agreement that spells out scope of work, contractor need, rates, period of performance, detailed accounting on invoices, work product, etc. Failure to provide this documentation will put the allowability of these costs in jeopardy. (FAR 31.205-33)

Related Party Rental Costs: This is another cherry pick target for DCAA. If the contactor and its landlord or lessor are under common management, ownership or control in most cases the allowable rent costs are limited to ownership costs. Ownership costs include depreciation, property taxes, insurance, other facility costs and cost of money. Small business owners that purchase a building with the intent to lease it back to the owner’s government contracting business is not a good idea if the owner has more than 50% ownership of both the lessor and lease or executes common control. The costs will be limited to ownership costs in most cases. (FAR 31.205-36). Businesses, however, whether governmental or non-governmental, are now required to follow ASC 842, a lease accounting standard published by the Financial Accounting Standards Board (FASB). Almost all leases must be represented on the balance sheet with liability and an ROU asset under ASC 842. That is why small businesses could be seen much more interested in including lease accounting software that can assist them in stripping away some burden from their shoulders.

Travel Costs: Allowable costs limited to lowest available coach air fare. In some situations business class is appropriate and provided for in the regulation. Hotel and meals are limited to the Federal Travel Regulation Per Diem Rates. The lodging rate is a not to exceed, receipt required, the meals/incidental per diem is a fixed rate. (FAR 31.205-46)

Auto Expense: If the contractor does not keep a mileage log it is likely DCAA will question the cost on lack of business purpose grounds. Need to document business mileage to win on this one. (FAR 31.205-46 and FAR 31.205-6).

Of course the government can make a case for unallowable cost for any cost that it perceives to be unreasonable. Burden of proof for reasonableness rests with the contractor (FAR 31.201-3).

This document is not intended as a complete discussion on the subject. The subject of unallowable costs is a large and complex one. The intent of this document is to identify those costs that a small business contractor is likely to incur and to point out the DCAA cost challenges a small business contractor is likely to encounter.

Which Contractors Must Have an Adequate Government Contract Accounting System

An adequate or approved accounting system is not required for all government contractors. Although it is a good idea to maintain an accounting system that properly charges costs to contracts by cost element, an adequate government contract accounting system is only required for contractors that perform cost type contracts (see FAR Subpart 16 on cost type contracts). Contracting officers are only supposed to award cost type contracts to contractors that maintain an adequate accounting system. Adequate accounting systems are validated by DCAA through their accounting system audits. These audits are typically requested by the contracting office when there is a government need. Contractors that perform fixed priced contracts are not subject to this requirement. Contractors that base fixed priced contracts on pricing subject to cost or pricing data requirements (FAR 15.4) are required to provide adequate cost or pricing data. This usually involves the ability to properly pool indirect costs, segregate direct costs from indirect costs and exclude unallowable costs. This is necessary to calculate indirect cost rates for cost proposals. Competitive fixed priced contracts based on adequate price competition and other contracts exempt from cost or pricing data such as commercial items contracts are exempt from cost or pricing data requirements. In these two cases an adequate accounting system is not normally required.

Edward D. Moore

Principal

E: emoore@dcaaconsulting.com

W: www.dcaaconsulting.com

dcaaConsulting is a professional consulting company specializing in Defense Contract Audit Agency audits and related matters, government contract proposals and pricing, the Federal Acquisition Regulation and the Cost Accounting Standards.

DCAA attacking compensation

DCAA attacking compensation rates. DCAA is using their own generalized survey and mis-labeling personnel into wrong categories. In addition their survey does not take into account technical expertise or clearances very well. Contractors should do their homework find a survey that fits their business and employee skill sets and bench mark their compensation. These surveys can be used to offset any DCAA attacks on compensation.

Allowability of Compensation Costs For Privately Owned Contractors

I am often asked about compensation in a private small business environment. Often DCAA raises this issue in its audit reports questioning the costs as unreasonable or unallowable. It is a focus area for DCAA for sure. The FAR itself also focuses on it suggesting it requires special treatment. It is a crucial item requiring special attention.

The allowability of compensation is governed by FAR 31.205-6. To be allowable the cost must be reasonable. It must be for services provided. It cannot be for services provided in a prior year. Labor costs paid in the current year for a prior year are unallowable. The burden of proof for reasonableness is on the contractor not the government. That is DCAA can question the cost without substantiating their position. It is the responsibility of the contractor to demonstrate that the cost is reasonable.

Reasonableness is defined as what a prudent business person would do. In other words what is reasonable in light of industry established practices. The government usually assesses reasonableness of compensation by using salary surveys. DCAA uses a selected survey and varies from agency to agency. Often the government will judge the reasonableness of compensation without any survey at all. It will make a subjective determination from their own personal vantage point. The burden is on the contractor to demonstrate reasonableness.

Another important point for privately or closely held contractors is that owner compensation cannot exceed the amount that is deductible as compensation under the Internal Revenue Code. Any excess would be unallowable.

Bonuses

An even more common DCAA questioned cost is bonuses or incentive compensation. Practically every privately owned closely held contractor maintains some form of a bonus program. These programs are usually informal and subjective. In this form, the cost is unallowable. For this reason it is a hunting ground for DCAA auditors, a gold mine for DCAA to cherry pick questioned costs.

Bonuses and incentive programs are allowable costs if certain criteria are met. These include:

1. The bonuses must be based on a written agreement, plan or policy implying an agreement.
2. The criteria should avoid subjective evaluations. The more objective the evaluation criteria the better.
3. The basis for the award is supported. This means the criteria for award must be supported and documented.

Recommendations:

1. Maintain support for owner and executive compensation. This can be industry statistical comparisons, salary surveys, etc. The challenge is to secure relevant data that resembles the personnel in question. Often these surveys are to general. Remember burden of proof for reasonableness is the responsibility of the contractor. DCAA may question the costs without this support. DCAA very well may question the cost any way if it exceeds what they consider reasonable. In any event you will have a basis to refute whatever the DCAA position is.

2. Develop agreements, plans or policies to address bonuses. This must be written. It is best to base the bonus compensation on objective criteria versus a subjective year end evaluation. Profit distribution concepts should be avoided as DCAA may conclude the bonus is a profit distribution. Profit distributions are unallowable.Please contact me if you have questions about the FAR position on compensation of bonuses.