Businesses with government contracts are beholden to regulations put forth by the Defense Contract Audit Agency (DCAA), which are expansive and include specific requirements for accounting and timekeeping. DCAA-compliant timekeeping requires that businesses demonstrate thorough daily time tracking, keep precise records with an audit trail for all charges, include extensive reporting, and more. Following DCAA-compliant timekeeping procedures is a critical part of passing DCAA audits. Scroll down to learn what you need to know.
How to Ensure You Have DCAA-Compliant Timekeeping
The DCAA “provides audit and financial advisory services to DoD [Department of Defense] and other federal entities responsible for acquisition and contract administration.” If you are a contractor who must meet DCAA requirements, keep the following in mind to ensure that you are following DCAA-compliant timekeeping.
Labor Distribution
The DCAA requires that the timekeeping system must have the capability to track and allocate labor costs to the correct project and task or work order. The system must also be able to produce labor distribution reports that show how labor costs were allocated.
Timekeeping Procedures
DCAA compliance dictates that contractors have a written record of procedures, methods, and rules utilized for recording time worked. These procedures should include instructions for how to report absences, holidays, and overtime.
Accurate Records
The DCAA requires that all employees working on government contracts keep accurate and complete timekeeping records. These records must include the employee’s name, the date and time worked, the project worked on, and the labor category. It’s important to note that all timekeeping records must be retained for a minimum of three years.
Timesheet Approval
DCAA-compliant timekeeping should include timesheets approved by the employee submitting them and by that employee’s supervisor (or another designated person with appropriate authority). Timesheet approvals need to indicate in writing that the supervisor has reviewed and verified the accuracy of the employee’s timesheet.
Overtime Authorization
Per the DCAA, any overtime hours submitted should be authorized in advance in writing by the project manager or other authorized personnel. This authorization should be in writing and include a justification for the overtime hours.
Thorough Audit Trail
A DCAA-compliant timekeeping system should make it easy for contractors to enter and track any changes to timesheets or records. Part of being prepared for DCAA audits is having this ongoing audit trail of timekeeping changes or adjustments, and this trail should note the date and time of each change made, the employee making the change, and the reason for the change.
Segregation of Duties
DCAA guidelines stipulate that contractors’ timekeeping systems segregate duties. In other words, part of DCAA-compliant timekeeping is ensuring that the person responsible for approving timesheets is not the same person entering the data into the system.
Compliance with Regulations
The timekeeping system a contractor utilizes must comply with all relevant federal and state labor laws, including the Fair Labor Standards Act (FLSA), Davis-Bacon Act, and the McNamara-O’Hara Service Contract Act.
Employee Training
The DCAA also requires that all employees responsible for timekeeping be trained on the proper procedures for recording time worked on government contracts. Training should cover how to report absences, holidays, and overtime, as well as how to use the timekeeping system and procedures.
_____
DCAA requirements for timekeeping on government contracts are rigorous and complex. Failure to comply with these timekeeping regulations can result in penalties ranging from the loss of present and future contracts to financial penalties and even criminal charges.
DCAA timekeeping and compliance can be stressful. GovCon can help. We have 20+ years of experience in helping government contractors achieve worry-free compliance, and our compliance experts can help you with DCAA-compliant timekeeping, accounting, audit prep, and more.
Whether you need support ensuring that your timekeeping is DCAA-compliant or you want to completely outsource your accounting to an expert, GovCon has experts ready to help. We offer four different levels of full or partial accounting services and support to meet your accounting and DCAA compliance needs. And as a QuickBooks Solutions Provider, we also offer an unbeatable accounting software solution package specifically designed for government contract bookkeeping and timekeeping to help you remain DCAA compliant. Contact us today for a free consultation to determine which package is the best fit for you.