DCAA-compliant timekeeping
Labor is the largest cost on most government contracts and the one with the least documentary evidence behind it. A delivered part has a packing slip. An hour has a timesheet. That is why timekeeping gets the scrutiny it does.
The requirements
- The employee records their own time. Not a supervisor, not an administrator. The person who worked the hours.
- Daily. Recorded as worked, not reconstructed at the end of the week from memory or a calendar.
- All hours, all cost objectives. Total time accounting — direct contracts, indirect codes, leave, bench. Not just billable hours.
- Corrections leave a trail. The original entry stays visible, the change is attributable to a person, the date is recorded, and there is a reason. Never an eraser, never an overwrite.
- Supervisor approval. By someone with knowledge of the work, after the fact, on a defined schedule.
- The employee understands the rules. A written policy, training on it, and evidence the training happened.
This is the principle behind most of the specific rules, and it is what a floor check is testing. If an employee says their manager fills in their time, the finding writes itself.
From hours to the general ledger
Employee records hours by charge code, daily
↓
Supervisor approves
↓
Labor distribution — hours × rate, by cost objective
↓
Job cost ledger General ledger
↓ ↓
└────── must reconcile ──────┘
↓
Payroll registers and tax filings
Four things have to agree: hours in the timekeeping system, dollars in labor distribution, labor cost in the general ledger, and gross wages in payroll. Check it at every close. The incurred cost submission will require a reconciliation of claimed labor to payroll tax filings, and finding a break then means unwinding a year.
Floor checks
DCAA performs labor evaluations — floor checks — unannounced. An auditor arrives, selects employees, and confirms that the person is where the charge code says they are, doing what it says they are doing, and recording it themselves.
Typical questions: What are you working on right now? What charge number are you using? Who told you to use it? What do you do if you work on something else for two hours? What happens if you make a mistake? Who approves your time?
Contractors fail these on culture, not on systems. An employee who says "I put in forty every week" or "my PM tells me what to charge" produces a finding regardless of how good the software is.
Where it goes wrong
| Practice | Why it is a problem |
|---|---|
| Filling in the week on Friday | Not contemporaneous. The single most common finding. |
| Charging to a contract with budget left | Mischarge. Bench time is indirect. |
| Supervisor entering time for staff | Breaks employee ownership. |
| Salaried staff recording only forty hours | Uncompensated overtime distorts effective rates and cost allocation. Record all hours worked. |
| Corrections made by overwriting | No audit trail. |
| Charge codes left open after period of performance | Cost lands on a contract that cannot be billed for it. |
| Proposal work charged to a running contract | B&P is indirect and separately identified. |
What to have in place
- A written timekeeping policy, short enough that people read it, covering daily entry, total time, corrections, and approval.
- Training at hire and annually, with a record of who completed it.
- An electronic system with a per-entry audit trail. Paper is permitted and much harder to defend.
- Charge codes opened and closed against period of performance, with someone accountable for closing them.
- A monthly reconciliation of timekeeping to labor distribution to the general ledger to payroll.
- Your own internal floor checks once or twice a year. Ask your staff the questions before an auditor does.
Frequently asked
Can employees fill out timesheets weekly?
No. Time has to be recorded daily, as worked. Weekly reconstruction is the most common timekeeping finding there is, and it is visible in the audit trail of any electronic system.
What is total time accounting?
Recording all hours worked, not only the hours you intend to bill. For salaried exempt staff who work more than forty hours, recording only forty overstates the effective hourly rate on whatever they charged and misallocates the rest.
How should timesheet corrections be handled?
The original entry stays visible, the change is attributable to the person who made it, the date is captured, and a reason is recorded. An electronic system does this automatically. On paper it means a line through, an initial, a date, and a note.
What is a floor check?
An unannounced DCAA visit where an auditor interviews employees to confirm they are working on what they are charging and recording their own time. Preparation is cultural: if your staff can explain their charge codes and the correction process, you pass.
Related
Direct vs. indirect costs in a GovCon business
How to decide whether a cost is direct, indirect, or unallowable — and why consistency matters more than the individual call.
Read →What DCAA looks at
The audits a small government contractor actually encounters, what each one examines, and what to have ready before the notification letter arrives.
Read →Job cost accounting by contract and task order
Accumulating cost by contract, task order, and CLIN so that job cost, the general ledger, and your billings all agree.
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