DCAA Time Tracking Requirements: Ensuring Compliance in Government Contracts
Emily Maina
Last update on:
December 22, 2024 2:03 PM
Published on:
The Defense Contract Audit Agency (DCAA) is a government agency in the United States responsible for providing financial advice and conducting audits within companies that win contracts to complete work for the military and other government agencies. The DCAA ensures that government contracts are executed with transparency, accuracy, while adhering to established rules and regulations.
When a company is awarded a contract, the DCAA looks at its budget and financial plans to ensure that they are fair. While the company is working on the contract the DCAA performs unannounced audits called floor checks to ensure compliance.
In this article, we will cover the specifics of the DCAA’s time tracking requirements, the importance of complying, the risks associated with not complying, and what best practices to follow to ensure compliance.
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The DCAA provides a set of rules that contractors must follow when tracking the time employees work on government projects. Contractors need to follow these guidelines to avoid hefty penalties, prevent contract terminations, and build a good rapport with the government.
Some of these regulations include:
Creating clear guidelines and policies that align with the DCAA compliance guidelines
Employees should be informed of your company’s timekeeping policies so they know what is expected of them.
Total Time Accounting (TTA) by contractors All of the hours employees work, whether directly or indirectly related to the government contract – time off, overtime, holidays, vacations, and leave, must be recorded accurately.
Segregating direct and indirect labor costs
Direct costs: include those costs that are directly related and chargeable to the government contract.
Indirect costs: are the costs that cover functions that are not directly involved in the project such as administration and training of employees.
Accurately allocating project hours
Contractors must make sure the hours employees work on government contracts should be allocated to the correct project. If Incorrectly allocating work hours can lead to overpayment or underpayment, compliance violations, and potential criminal charges.
Implementing a time-tracking software system for government contractors
Choose a system that is robust, reliable, and DCAA compliant. Your timekeeping software of choice should streamline your time tracking processes.
Recording and submitting timesheets in a timely manner
Contractors are expected to submit their timesheets within a few days after the end of each pay period. A delay in submitting timesheets might raise concerns about the accuracy of the records and compliance with the DCAA’s rules.
Thoroughly documenting time tracking records and audit logs
All logs should be well documented, organized, and easily accessible for auditing purposes. Detailed records are essential for meeting compliance standards.
Regularly conduct internal audits
Internal audits should be run on a regular basis to identify errors and cases of fraudulent activity. Regular audits ensure accuracy and integrity.
Establishing an approval process for timecards
A responsible supervisor or manager should review and approve employee time cards as a way to verify the hours they worked. Having an approval process in place ensures time tracking records are not fabricated or altered.
Timekeeping practices must comply with labor laws
A contractor’s timekeeping practices must adhere to federal and state labor laws regarding minimum wage, overtime, and record keeping.
Providing targeted training for employees
Contractors should provide training to employees to teach them the importance of timekeeping, as well as the reasons they need to stay compliant with the DCAA policies and procedures.
Retaining historical records
Contractors are required to retain past time tracking records for a period of three to six years. The auditors may review these records to determine compliance.
Importance of DCAA compliance
There are many benefits that result from complying with the DCAA’s timekeeping requirements.
Let’s take a look at a few of the reasons why you’ll want to make every effort to comply with the DCAA’s timekeeping requirements.
1. Compliance helps build trust and credibility with the government.
Following the DCAA’s guidelines shows that as a contractor you are not only responsible, but you follow financial and operational rules. Following the rules creates a doorway for opportunities to be awarded for future contracts.
Note: To help contractors comply further, we put together a guide on navigating laws surrounding prevailing wages.
2. Compliance reduces the amount of fraudulent timekeeping records
When contractors comply with the DCAA’s timekeeping requirements, they are better able to avoid mistakes such as fraudulent time cards and manual errors.
3. Compliance encourages accountability and transparency
When timekeeping requirements are met, contractors are in a better position to account for the amount of work done by employees, which increases transparency and helps determine project costs.
Just as there are many benefits that come from following the DCAA’s guidelines, there are painful consequences that come to those who do not meet the DCAA’s requirements as well.
Some of the consequences associated with non-compliance include:
Penalties and fines for overpayment or misuse of funds.
Contract termination leading to a loss of revenue and a damaged reputation for the company.
Disqualification from future opportunities, since outside companies may view your business as untrustworthy.
Claims of fraud, lawsuits, debarments, and criminal charges.
Revisiting previously completed work, which increases business costs, delays project completion, and wastes valuable time, effort, and resources.
Best practices for DCAA compliant time tracking
By observing the following practices, your company can better comply with the DCAA’s time tracking requirements.
DCAA Time Compliance Checklist
Common challenges in time tracking and solutions
It’s not uncommon for contractors to face challenges when tracking employee time. From manual errors, inputting incorrect data, and losing timecards, operating your company without an efficient and reliable time-tracking system can have serious consequences.
We’ll cover a few of the most commonly seen challenges below and offer practical solutions to help you overcome time-tracking obstacles.
Inaccurate time entries
Employees might forget to log their time each day, which leads to incomplete and inaccurate records. This can be avoided by automating your timekeeping process and implementing a system with additional features such as alerts, notifications, and reminders.
Use a system that enforces your company’s policies and requires a supervisor to follow-up on late entries. A time-tracking app like Timeero is equipped with the features you need to streamline your current timekeeping process.
Complex time-tracking systems
Employees might find your company’s time-tracking system difficult to navigate. Make sure the system you choose has a user-friendly interface and offers hands-on training sessions that guide employees through the software.
Difficulty differentiating between direct and indirect hours
The DCAA guidelines have strict rules about billable and non-billable hours. A lot of employees have difficulty differentiating the two. Misclassifying these hours can lead to costly penalties.
To avoid accidental misclassification, your company can do the following:
provide clear guidelines and employee training on timekeeping requirements
use a system that has features designed to automatically classify hours
allow supervisors to review and adjust incorrectly classified entries
Poor adaptation by employees
Employees might view time tracking as a form of micro-management and therefore resist any strict procedures that may be implemented. However, it is important to communicate the importance of time tracking, especially in matters of compliance and billing.
To avoid employee pushback, inform your employees of the benefits that result from following timekeeping procedures.
Records are inconsistently reviewed by supervisors
If a supervisor fails to review and approve records, your company may be found guilty of non-compliance. Without consistent and thorough reviews, fraudulent activities like time theft and buddy punching may go left unchecked.
To make sure records undergo a detailed review, you can automate approval workflows and add alerts and reminders for pending approvals.
Unauthorized edits to time records
Employees or managers may alter time sheets without prior approval, which can be risky if an audit were to take place. Implementing strict access control mechanisms should be used to make sure only people with authorized access can make changes to time records. Additionally, your timekeeping system should have the ability to keep a detailed historical log of any changes made to timecards.
Managing distributed teams
When employees work in different time zones or locations it can be difficult to track time. Using cloud-based solutions can ensure the records are accessible from any location. You can also set clear guidelines on how remote employees should log their time and conduct regular check-ins to verify compliance.
Tracking the time of employees with flexible schedules
When employees work flexible and varied schedules, it may be difficult for them to track their time accurately. To resolve this issue, employees can log their time as soon as they finish their assigned task.
Companies that win government contracts are often held in high regard and are expected to deliver top-notch results. But project completion isn’t the only thing that builds a company’s reputation. Meeting the requirements of the DCAA when it comes to timekeeping is an important part of establishing your company’s identity.
By using DCAA-compliant timekeeping software, your company will be able to issue accurate payments, comply with labor laws, build client relationships, and streamline time-tracking operations.
Emily Maina is a tech-savvy writer with a passion for creating content. With years of experience in the industry, she is well-versed in the latest trends and developments in the tech industry. When she’s not working, Emily enjoys exploring the great outdoors or watching her favorite shows.