The Defense Contract Audit Agency (DCAA) requires government contractors to follow certain timekeeping guidelines. This lets government agencies know that they are paying fair and reasonable compensation for the services and goods that they purchase from private contractors and vendors. Consider the following nine tips to ensure DCAA compliant timekeeping for your business.
How To Ensure DCAA Compliant Timekeeping
You can help ensure that your timekeeping practices are compliant with the DCAA by using an electronic timekeeping system, allocating employee timekeeping to the proper contract or project (segmenting), establishing a timekeeping policy that follows DCAA requirements, and making your timekeeping policy available to employees, along with following additional tips below.
1. Use An Electronic Timekeeping System
An electronic timekeeping system automates the timekeeping processes and allows for real-time data collection of when your employees enter and leave work. This makes the timekeeping process much easier for government contractors when compared with manual methods and is recommended by the DCAA. Electronic timekeeping systems are more affordable and widely available than ever before, and they can easily be integrated with your existing electronic accounting systems.
2. Allocate Employee Timekeeping To The Proper Contract Or Project
It is imperative to allocate (segment) employee timekeeping to the proper contract or project. A common mistake that government contractors make is not properly documenting the specific project(s) each employee works on, which can lead to a failed DCAA timekeeping audit. Many reputable electronic timekeeping systems have the capability to segment each employee’s labor times by project or contract.
3. Establish A DCAA Compliant Timekeeping Policy
Your timekeeping policy refers to the procedure that you use to document your employee work times. Your policy should cover when times must be recorded, who fills in the timesheet, how your authorizations are set up, and how much time to record (only worked time should be recorded — not including breaks). This policy should serve as the guide that your business uses to ensure that all DCAA requirements are adequately followed each workday.
4. Make Your Timekeeping Policy Available To Employees
Another important tip to follow to ensure that your business is following DCAA compliant timekeeping guidelines is to make all of your employees aware of your timekeeping policy and ensure that each member of your team knows how to properly record their timesheet. It is also important to verify that each employee is following the timekeeping policy that you have established and implemented. This can be done via someone you appoint or hire as a supervisor or by self-auditing your employees’ timekeeping practices.
5. Ensure That Timekeeping Rules Are Being Followed
As mentioned, it is important to audit your team to ensure that they are following the DCAA compliant timekeeping policy you have in place. This can be done by conducting regular floor checks, reviewing timesheets, and asking each employee about the timekeeping policy that is in place.
6. Track Changes To Timesheets
All changes should be documented in the timekeeping system. This means if any changes are made (by you or an employee) to the recorded data, a note must be recorded detailing why the change is being made. It should be clear that a change was made to avoid any suspicious behaviors that the DCAA may detect, which could significantly delay an audit or lead to a failed audit.
Of course, tracking changes is much easier to do when using an electronic system. If your business uses a paper timekeeping system (which is acceptable by the DCAA), then any changes should be marked out with ink.
7. Sync Data Between Timekeeping And Accounting Software
Most electronic timekeeping systems allow you to seamlessly sync data between your timekeeping and accounting software so that you can stay organized and link relevant information together. Of course, there are also accounting systems that include timekeeping systems (e.g. Quickbooks). However, if you do use a separate electronic timekeeping system, then synchronization with your accounting software is imperative.
8. Understand The DCAA Rules For Electronic Timekeeping
The DCAA has certain rules that they expect government contractors to follow. A failure to follow the DCAA guidelines as they are established in the Federal Acquisition Regulation (FAR) could lead to consequences such as a disqualification for future contracts, fines, penalties, delayed payments, and even legal issues (including possible jail time if fraud occurs).
9. Work With A Licensed CPA Professional
Ultimately, the best way to ensure that your timekeeping system is in compliance with the DCAA requirements is to work with a certified public accountant that understands both timekeeping and DCAA compliance. It is particularly recommended that your business work with an outsourced CPA if you do not have an in-house CPA to handle your timekeeping or your current accounting team is not large enough relative to the size of your company to remain organized and on track.