For government contractors, timekeeping is one of the most heavily scrutinized areas during a DCAA audit. Even contractors with well-designed accounting systems can face findings if timekeeping practices are inconsistent, undocumented, or poorly integrated with QuickBooks Online.
DCAA views timekeeping as a core internal control because labor is often the largest cost charged to government contracts. This article explains key timekeeping requirements, best practices for daily entry, how QuickBooks Time integrates with QuickBooks Online, and common compliance risks auditors look for.
Why Timekeeping Matters for DCAA Compliance
DCAA auditors rely on timekeeping records to confirm that:
- Labor costs are charged accurately to the correct contracts
- Employees record time daily
- Labor charges are supported by approved records
- Payroll and labor distribution reconcile to the accounting system
When timekeeping fails, auditors often question all related labor costs, not just individual entries.
Core DCAA Timekeeping Requirements
While specific expectations may vary, DCAA generally requires that contractors maintain timekeeping systems that:
- Require daily recording of labor hours
- Capture time by contract or task
- Prevent unauthorized changes
- Document corrections clearly
- Ensure labor charges flow accurately to accounting records
Compliance depends on both system configuration and employee behavior.
Best Practices for Daily Time Entry
Daily time entry is one of the most common audit focus areas.
- Require Same-Day Entry
Employees should record time each day worked, not at the end of the week. Delayed entry increases the risk of errors and audit findings.
- Record Actual Hours Worked
Time entries must reflect actual hours worked, not scheduled or estimated time. Estimates undermine credibility during audits.
- Train Employees on Compliance Expectations
Employees must understand that timekeeping is a compliance requirement — not just an administrative task. Training should cover:
- How to enter time correctly
- Why accuracy matters
- What to do if corrections are needed
Integrating QuickBooks Time with QuickBooks Online
QuickBooks Time can support DCAA-aligned timekeeping when configured and managed properly.
Key Integration Considerations
- Time entries should map accurately to contracts or projects in QuickBooks Online
- Labor categories should align with accounting and payroll
- Payroll should reconcile to timekeeping records
- Labor distribution reports should tie back to QuickBooks Online
Integration failures often occur when systems are connected technically but not aligned procedurally.
Handling Time Corrections the Right Way
Corrections are sometimes necessary — but how they are handled matters.
Best Practices for Corrections
- Document the reason for the change
- Require supervisor approval
- Avoid deleting original entries
- Maintain an audit trail showing what changed and why
Unexplained or frequent corrections raise red flags during audits.
Common Timekeeping Compliance Risks Auditors Identify
DCAA auditors frequently flag the following issues:
Risk #1: Late or Batch Time Entry
Time entered days or weeks later undermines reliability.
Risk #2: Inconsistent Contract Coding
Labor charged inconsistently across contracts or tasks creates allocation concerns.
Risk #3: Manual Payroll Adjustments
Adjusting payroll without reconciling to timekeeping records raises immediate questions.
Risk #4: Lack of Written Policies
Without documented timekeeping policies, contractors cannot demonstrate compliance expectations.
Aligning Timekeeping With Labor Distribution
Timekeeping is only one part of labor compliance. Labor distribution must:
- Flow accurately from timekeeping into QuickBooks Online
- Match payroll expenses
- Reconcile to financial reports
Regular reconciliation helps identify issues early and reduces audit stress.
The Role of Policies and Training
Written timekeeping policies connect system configuration to daily behavior. Effective policies should define:
- Daily entry requirements
- Approval processes
- Correction procedures
- Consequences for non-compliance
Policies are only effective when supported by training and enforcement.
Final Thoughts
Timekeeping compliance is not about perfection — it is about consistency, documentation, and discipline. When QuickBooks Online and QuickBooks Time are configured correctly and supported by trained staff and clear policies, contractors significantly reduce audit risk.
Strong timekeeping practices protect labor costs, support accurate billing, and build confidence during audits and prime contractor reviews.
About GovCon
GovCon supports government contractors with QuickBooks Online configuration, DCAA-aligned timekeeping practices, accounting services, audit support, and training. With over 21 years of experience, we help contractors build compliant systems that stan