If you’re a government contractor, few phrases can trigger anxiety quite like “DCAA floor check.” Whether you’re new to government contracting or a seasoned professional, understanding what happens during these audits and how to prepare for them is crucial for maintaining compliance and protecting your contracts.

What Is a DCAA Floor Check?

A DCAA (Defense Contract Audit Agency) floor check is an unannounced audit where DCAA representatives physically verify that employees charging time to government contracts are actually present and working on the tasks they’ve recorded. Think of it as a spot inspection designed to validate the accuracy of your timekeeping practices and labor charging procedures.

These audits serve as a critical control mechanism to ensure that taxpayer dollars allocated to government contracts are being used appropriately and that contractors are maintaining accurate records of labor charges.

Why Do Floor Checks Happen?

The DCAA conducts floor checks for several reasons:

Routine Compliance Verification: Floor checks are a standard part of DCAA’s oversight responsibilities. Even if you’ve done nothing wrong, you may still experience routine floor checks as part of normal audit procedures.

Risk-Based Selection: Contractors with higher-risk profiles, larger contracts, or those new to government contracting may face more frequent floor checks.

Specific Concerns: Sometimes floor checks are triggered by specific issues identified during other audits, employee complaints, or inconsistencies in submitted documentation.

Random Selection: To maintain the integrity of the audit process, DCAA also conducts random floor checks without any specific triggering event.

What Happens During a Floor Check?

Understanding the floor check process can help reduce anxiety and ensure your team responds appropriately when auditors arrive.

The Arrival

DCAA auditors typically arrive unannounced during regular business hours. They’ll present their credentials and request to speak with a designated point of contact, usually someone from management or your contracts department. The unannounced nature is intentional – it ensures auditors see your actual day-to-day operations rather than a prepared presentation.

The Interview Process

Auditors will randomly select employees who have charged time to government contracts and conduct brief interviews. These conversations typically cover:

• Current work assignments and which contracts they’re supporting
• Their understanding of proper timekeeping procedures
• Verification that they’re working on the tasks recorded in their timesheets
• Their physical presence in the location indicated by their time records
• Knowledge of company policies regarding labor charging

Employees might be asked to show their current timesheet or explain their recent time charges. The auditor may also request to see work products or evidence of the tasks being performed.

Documentation Review

Beyond employee interviews, auditors will examine various records and documents:

• Current timesheets and labor distribution reports
• Work authorization documents
• Project assignments and task orders
• Company timekeeping policies and procedures
• Training records related to timekeeping compliance
• Internal audit or review documentation

Management Discussion

After completing their fieldwork, auditors typically conduct an exit interview with management to discuss preliminary findings, ask clarifying questions, and provide initial feedback about any concerns identified during the floor check.

Common Issues Auditors Look For

Being aware of what auditors focus on can help you identify and address potential problems before they become findings.

Ghost Employees: Auditors verify that employees charging time are real people actually performing work. They’ll check for employees who are on vacation, sick leave, or otherwise absent but still showing productive hours charged to contracts.

Mischarging: This includes employees working on one contract while charging time to another, charging indirect tasks to direct contracts, or charging unallowable activities to government contracts.

Timesheet Accuracy: Auditors examine whether employees are recording time contemporaneously (as work is performed) rather than recreating timesheets after the fact. They also check for patterns suggesting fabricated entries.

Unauthorized Work: Employees performing tasks outside their authorized scope or working on contracts they’re not assigned to can trigger significant findings.

Policy Compliance: Auditors assess whether employees understand and follow company timekeeping policies, including proper approval processes and correction procedures.

How to Prepare for Floor Checks

While floor checks are unannounced, maintaining ongoing readiness is your best defense.

Establish Strong Timekeeping Policies

Develop comprehensive, clear policies that address:

• Daily time recording requirements
• Proper labor charging procedures
• Guidelines for splitting time between projects
• Procedures for corrections and adjustments
• Consequences for non-compliance

Make these policies easily accessible and ensure they’re regularly updated to reflect current regulations and contract requirements.

Implement Regular Training

Conduct timekeeping training for all employees, not just those currently working on government contracts. Training should cover:

• Proper time recording procedures
• Understanding of direct vs. indirect charges
• Contract-specific requirements
• Ethical responsibilities in government contracting
• How to respond during a floor check

Document all training sessions and maintain records of employee participation.

Conduct Internal Reviews

Don’t wait for DCAA to find problems. Implement your own internal floor checks and timekeeping audits. This helps you:

• Identify and correct issues before official audits
• Familiarize employees with the floor check process
• Demonstrate a culture of compliance to auditors
• Build confidence in your systems

Maintain Supporting Documentation

Ensure work authorizations, project assignments, and task orders are current and readily accessible. Employees should know where to find documentation supporting their time charges, and managers should regularly verify that assignments match timesheet entries.

Create a Response Plan

Develop a written procedure for handling DCAA visits that includes:

• Designated points of contact for auditors
• Employee notification procedures
• Document gathering responsibilities
• Guidelines for employee interactions with auditors
• Management review and response protocols

Best Practices for Success

Foster a Compliance Culture: Make accurate timekeeping a core value of your organization. When employees understand the importance of compliance beyond just avoiding penalties, they’re more likely to maintain accurate records consistently.

Use Technology Wisely: Implement automated timekeeping systems that include built-in controls, audit trails, and real-time reporting capabilities. These systems can flag potential issues before they become audit findings.

Communicate Regularly: Keep employees informed about timekeeping requirements and any changes to policies or procedures. Regular reminders about proper timekeeping practices help maintain awareness and compliance.

Document Everything: Maintain detailed records of all timekeeping-related activities, including training, internal audits, corrective actions, and policy updates. Comprehensive documentation demonstrates your commitment to compliance.

Address Issues Promptly: When you identify timekeeping problems, address them immediately. Document the issue, the corrective action taken, and steps to prevent recurrence. Auditors look favorably on contractors who self-identify and correct problems.

What to Do When Auditors Arrive

Despite your best preparation, the arrival of DCAA auditors can create stress. Here’s how to handle the situation professionally:

Stay Calm and Cooperative: Train your team to remain professional and cooperative. Attempting to delay or obstruct auditors will only raise suspicions and could lead to expanded audit scope.

Provide Requested Information: Supply documents and information as requested, but don’t volunteer information beyond what’s asked. If you need time to gather documents, communicate realistic timeframes to the auditor.

Be Honest and Direct: Encourage employees to answer questions truthfully and directly. If someone doesn’t know an answer, they should say so rather than speculate or guess.

Take Notes: Document the audit process, including who was interviewed, what documents were reviewed, and any concerns raised by auditors. These notes can be valuable for follow-up actions and future preparation.

Follow Up Appropriately: After the floor check, review any findings with your team, implement necessary corrective actions, and document your response to any issues identified.

Conclusion

DCAA floor checks don’t have to be a source of fear for government contractors. By understanding the process, maintaining strong timekeeping practices, and fostering a culture of compliance, you can approach these audits with confidence. Remember, DCAA’s goal isn’t to catch you doing something wrong – it’s to ensure that government contracts are executed properly and that taxpayer funds are used appropriately.

The key to success is preparation and consistency. Treat every day as if a floor check could happen, because it could. When your timekeeping practices are accurate, well-documented, and consistently followed, floor checks become just another routine part of government contracting rather than a crisis to be managed.

By implementing the strategies outlined in this guide, you’ll not only be better prepared for DCAA floor checks but also build stronger overall contract management practices that benefit your entire organization. Remember, good timekeeping isn’t just about compliance – it’s about building trust with your government customers and maintaining the integrity that’s essential for long-term success in government contracting.

In March 2024, a mid-sized defense contractor learned the brutal cost of inadequate remote work timekeeping when DCAA auditors discovered systematic violations spanning 18 months of hybrid work arrangements. The contractor faced $8.4 million in penalties and contract suspension after auditors found employees routinely batch-entering weekly time records, insufficient supervisory controls for remote work validation, and absence of real-time project charge verification systems. This case exemplifies DCAA’s intensified scrutiny of remote work timekeeping practices that have emerged as the agency’s primary enforcement target for 2024-2025.

Legal Foundation: The Regulatory Framework Under Fire

The Defense Contract Audit Agency’s expanded remote work enforcement authority stems from three foundational regulatory sources. Federal Acquisition Regulation (FAR) 31.201-4 establishes the fundamental requirement that “costs must be reasonable, allocable, and allowable” with contemporaneous documentation proving proper labor distribution. Under this regulation, remote work arrangements create heightened risk because traditional supervisory oversight mechanisms are absent, requiring contractors to implement enhanced verification systems.

Cost Accounting Standards (CAS) 418 mandates that labor costs must be allocated to cost objectives based on beneficial or causal relationships, with particular emphasis on accurate time reporting systems. The standard explicitly requires that “the method of allocating labor costs shall be based on the employee’s actual activity” – a requirement that becomes complex in remote environments where physical supervision is impossible. CAS 418 violations trigger automatic penalties under FAR 52.242-3, which imposes financial penalties equal to the questioned costs plus associated overhead burdens.

10 USC 2324, governing allowable costs under defense contracts, provides DCAA with enforcement teeth through its requirement that contractors maintain “adequate records to support claimed costs.” The statute’s implementing regulation at 48 CFR 31.201-2 specifically addresses timekeeping adequacy, mandating that labor records demonstrate “the correct distribution of time by project numbers, contract number or name, or other identifiers.” Remote work violations of this requirement result in cost disallowance and potential False Claims Act liability under 31 USC 3729-3733.

For contractors seeking comprehensive guidance on these complex requirements, understanding DCAA timekeeping requirements provides essential foundation knowledge for building compliant remote work systems.

Common Violation Patterns: Where Contractors Fail

DCAA’s 2024 enforcement surge has identified four recurring violation patterns in remote work timekeeping that contractors consistently underestimate:

1. Weekly Batch Entry Violations

Weekly batch entry violations represent the most common and expensive error. Despite clear regulatory prohibition, contractors continue allowing employees to log accumulated weekly hours in single sessions rather than daily contemporaneous recording. This practice violates FAR 31.201-4’s documentation requirements and typically results in complete cost disallowance for affected periods.

2. Inadequate Supervisory Verification

Traditional timekeeping relied on physical presence for supervisory confirmation of hours worked and project charges. Remote arrangements require enhanced verification protocols, yet contractors frequently maintain pre-pandemic approval processes. DCAA auditors systematically challenge remote work charges lacking documented supervisory validation of actual work performance and proper charge distribution.

Understanding the comprehensive framework outlined in DCAA compliance requirements for federal contracts helps contractors identify these verification gaps before they become costly violations. The agency’s focus on supervisory controls has intensified significantly in remote work environments.

3. Project Charge Accuracy Failures

Project charge accuracy failures emerge when remote workers lack real-time access to current project information or charge number updates. Contractors must maintain systems showing “the correct distribution of time by project numbers, contract number or name, or other identifiers for a particular assignment” regardless of work location. Remote employees often default to previously used charge numbers or estimate project distributions, creating systematic mischarging violations.

4. Audit Trail Deficiencies

Remote work environments must maintain the same audit trail integrity as traditional office settings. This requires electronic systems capable of tracking entry timing, modification history, and approval workflows. Contractors using basic timekeeping software or manual processes invariably fail DCAA’s audit trail requirements, resulting in questioned costs and system adequacy findings.

Step-by-Step Compliance Requirements for Remote Work

Step 1: Implement Daily Entry Enforcement Systems

Deploy timekeeping software with mandatory daily entry requirements and system-level controls preventing batch entries. The system must prevent backdating entries and require appropriate authorizations for any corrections. Configure automatic reminders and lockout mechanisms that prevent employees from entering time for previous days without supervisor authorization and documented business justification.

Contractors should reference the DCAA compliance checklist for time tracking to ensure their systems meet all technical requirements for daily entry enforcement.

Step 2: Establish Enhanced Supervisory Verification Protocols

Develop written procedures requiring supervisors to verify remote work completion through project deliverables, virtual meeting attendance, or other documented work products. Supervisors must approve timesheets only after confirming actual work performance matches reported hours and project charges. This verification must occur within 24 hours of the work period and be documented in the timekeeping system.

Step 3: Deploy Real-Time Project Information Systems

Implement systems providing remote employees immediate access to current project numbers, contract identifiers, and charge codes. Employees must record their time daily, capturing all hours worked, including direct and indirect labor with proper authorization. This requires integration between project management systems and timekeeping platforms to ensure remote workers charge current, active project elements.

Step 4: Create Comprehensive Audit Trail Documentation

Install enterprise-grade timekeeping systems maintaining complete audit trails including entry timestamps, modification history, approval workflows, and user authentication records. These records must include who made the entry, when it was made, and what changes were implemented. The system must prevent unauthorized modifications and maintain indefinite record retention for audit purposes.

Understanding the technical specifications outlined in DCAA timekeeping software overview and key requirements ensures contractors select systems capable of maintaining proper audit trails.

Step 5: Establish Remote Work Policy Documentation

Develop written remote work timekeeping policies addressing entry requirements, supervisory responsibilities, system access protocols, and violation consequences. These policies must align with existing accounting systems and be distributed to all personnel with remote work authorization. Regular training and acknowledgment documentation ensures consistent implementation across the organization.

Cost Analysis: Compliance Investment vs. Violation Penalties

The financial calculus for remote work timekeeping compliance strongly favors proactive investment over reactive violation management:

Compliance Costs:

• Annual maintenance: $75,000 – $150,000
• Implementation: $200,000 – $500,000
• Training and policy development: $25,000 – $75,000

Violation Penalties:

• Average DCAA penalties: $8.4 million per contractor
• Contract suspension costs: $50,000 – $200,000 per month
• Professional services for resolution: $300,000+
• Lost contracting opportunities: Millions annually

Contract suspension during violation resolution typically costs contractors $50,000 to $200,000 per month in lost revenue and overhead absorption. Noncompliance can result in debarment, suspension, terminated or voided contracts, being listed in the Excluded Parties List System (EPLS), or civil and criminal penalties. Reputational damage from DCAA findings often eliminates future contracting opportunities worth millions annually.

Professional services costs for violation resolution including legal representation, accounting support, and system remediation typically exceed $300,000 for significant findings. These costs are unallowable and must be absorbed by contractors, creating additional financial pressure during already challenging audit periods.

Multi-State Federal Jurisdiction: Nationwide Enforcement Reality

DCAA’s remote work enforcement authority extends across all federal jurisdictions regardless of contractor location or employee work sites. This creates compliance challenges for contractors with distributed workforces spanning multiple states with varying labor laws and recording requirements. Federal regulations supersede state requirements, creating uniform national compliance obligations.

Contractors operating across state lines must ensure their timekeeping systems accommodate federal requirements while remaining compliant with applicable state wage and hour laws. This complexity increases when remote employees work from states with stricter documentation requirements than contractor home states. The solution requires systems capable of meeting the highest applicable standard across all jurisdictions.

Regional DCAA offices maintain consistent enforcement standards nationwide, eliminating contractor ability to shop favorable audit environments. The agency’s 2024 guidance emphasizes uniform application of remote work timekeeping standards regardless of regional variations in remote work adoption or contractor location.

Enforcement Reality: DCAA’s 2025 Strategic Focus

DCAA’s strategic plan for 2025 explicitly identifies remote work timekeeping as a high-risk audit area requiring enhanced scrutiny. This designation triggers automatic inclusion in contractor risk assessments and increased audit frequency for organizations with significant remote work populations. If a contractor fails to maintain DCAA-compliant timekeeping, the DCMA may take corrective action, including penalties.

The agency’s enforcement approach emphasizes proactive compliance verification rather than reactive violation discovery. This shift requires contractors to demonstrate system adequacy before problems emerge rather than remediate after audit findings. Contractors unable to provide real-time compliance evidence face immediate system adequacy challenges that can suspend contract performance pending resolution.

Key Enforcement Statistics:

• 73% of contractors with remote work arrangements undergo timekeeping reviews
• 340% increase from pre-pandemic audit frequency
• 67% lower violation rates for proactive compliance programs
• $8.4 million average penalty for major violations

Contractors maintaining proactive compliance programs demonstrate measurably better audit outcomes, with violation rates 67% lower than reactive organizations. This data supports the business case for immediate compliance investment rather than risk-based delay strategies that proved catastrophic for numerous contractors throughout 2024.

For contractors seeking to build comprehensive understanding of their compliance obligations, reviewing how to achieve DCAA compliance in timekeeping for government contractors provides the foundation necessary to navigate these complex requirements successfully. Additionally, understanding the keys to understanding DCAA compliance offers strategic insights into maintaining long-term compliance effectiveness.

The regulatory landscape demands immediate action from government contractors seeking to maintain their competitive position and avoid devastating compliance failures. DCAA’s enforcement focus on remote work timekeeping represents a permanent shift in audit methodology that requires corresponding evolution in contractor compliance approaches. Organizations must implement DCAA approved timekeeping systems that can withstand the agency’s intensified scrutiny while supporting efficient remote work operations.

Ready to Implement DCAA-Compliant Timekeeping?

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A defense contractor learned this lesson the hard way when an 18-month suspension from federal contracting resulted from improper after-hours timesheet corrections that DCAA classified as fraudulent mischarging rather than administrative errors. The financial impact exceeded $2.3 million in lost contract opportunities, demonstrating how a seemingly minor timekeeping practice can trigger severe enforcement actions under federal fraud statutes.

The distinction between legitimate administrative corrections and fraudulent mischarging has never been more critical for government contractors operating under Defense Contract Audit Agency (DCAA) oversight. With civil penalties under the False Claims Act now reaching treble damages plus fines up to $27,018 per violation as of 2025, understanding the regulatory framework governing after-hours time corrections has become a survival imperative for federal contractors across all jurisdictions.

Legal Foundation: The Statutory Framework Governing Time Corrections

The regulatory architecture governing after-hours time corrections rests on three foundational pillars that determine whether corrections constitute permissible administrative adjustments or prosecutable fraud.

31 U.S.C. §3729 – The False Claims Act establishes the criminal framework for fraudulent time reporting. Under this statute, contractors face civil penalties of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act, plus 3 times the amount of damages which the Government sustains for each false claim. Current penalty adjustments place maximum fines at $27,018 per violation, with treble damages applying to all government losses.

FAR 52.216-7 – Allowable Cost and Payment governs the reimbursement standards that determine cost allowability. This clause requires that claimed allowable costs include only those recorded costs that, at the time of the request for reimbursement, the Contractor has paid by cash, check, or other form of actual payment for items or services purchased directly for the contract, establishing the temporal requirements for legitimate cost claims.

48 CFR 31.201-4 – Determining Allocability provides the third regulatory pillar by establishing that costs must be allocable to specific contracts based on relative benefits received. After-hours corrections that reallocate costs between time periods or projects must satisfy this allocability test to avoid fraud classifications.

These statutes apply with uniform force across all federal jurisdictions, from contractors in California’s defense corridor to aerospace manufacturers in Alabama, creating a consistent national compliance standard that transcends state boundaries.

Common Violation Patterns: Where Administrative Corrections Cross Into Fraud Territory

DCAA auditors have identified recurring patterns in after-hours time corrections that consistently trigger fraud investigations rather than administrative correction acceptance.

Pattern 1: Retroactive Benefit Optimization occurs when contractors systematically adjust timesheet entries to maximize reimbursable hours on cost-plus contracts while minimizing hours on fixed-price work. This pattern typically emerges during month-end or quarter-end periods when contractors identify unfavorable cost variances.

Pattern 2: Cross-Period Labor Arbitrage involves moving labor hours between accounting periods to optimize indirect cost rate applications or avoid exceeding contract ceilings. DCAA views these corrections as attempts to manipulate government payments rather than correct genuine errors.

Pattern 3: Supervisory Override Without Documentation presents the highest fraud risk when management personnel make time corrections without adequate supporting documentation or employee acknowledgment. The absence of contemporaneous correction justification creates the inference of intentional misrepresentation.

Pattern 4: Systematic Weekend/Holiday Corrections raises immediate red flags when contractors routinely adjust time entries during non-business hours, particularly when corrections consistently favor more profitable contract classifications.

The Department of Justice has successfully prosecuted contractors under all four patterns, with settlements ranging from $850,000 to $12.7 million in recent enforcement actions, demonstrating the severe financial consequences of crossing the administrative-fraud boundary. The Defense Contract Management Agency (DCMA) coordinates with DCAA during these investigations to ensure comprehensive contractor oversight.

Step-by-Step Compliance Requirements: The Five-Point Protection Protocol

Step 1: Implement Real-Time Correction Authorization Systems Establish electronic controls requiring supervisory approval for any timesheet modification occurring more than 24 hours after original entry. The system must capture the correction requestor’s identity, timestamp, original entry, revised entry, and documented justification before processing changes. This creates the contemporaneous documentation chain essential for demonstrating administrative rather than fraudulent intent.

Step 2: Establish Correction Threshold Limitations Define maximum correction amounts requiring escalating approval levels. Corrections exceeding 10% of weekly reported hours must receive department head approval, while corrections exceeding 25% require CFO authorization and independent verification. These thresholds create procedural safeguards against systematic manipulation while accommodating legitimate error correction needs.

Step 3: Deploy Independent Verification Requirements Mandate that all after-hours corrections receive independent verification from personnel not involved in the original time reporting chain. This verification must include contract charge number validation, customer approval requirements, and allocability assessments under FAR cost principles. Independent verification breaks the control concentration that enables fraudulent schemes.

Step 4: Create Correction Pattern Monitoring Systems Implement automated monitoring to identify correction patterns exceeding normal administrative error frequencies. Flag employees making corrections on more than 15% of their timesheets, corrections consistently favoring higher-margin contracts, or corrections clustered around period-end closing dates. Pattern recognition enables proactive intervention before violations reach prosecutable thresholds.

Step 5: Establish Comprehensive Audit Trail Documentation Maintain complete documentation chains for all corrections, including original timesheet images, correction requests, approval authorizations, independent verifications, and employee acknowledgments. Documentation must remain accessible for the seven-year retention period required under 10 USC 2324 – Allowable costs under defense contracts, ensuring compliance with potential DCAA audit inquiries.

These five steps create the regulatory compliance framework necessary to demonstrate good faith administrative correction practices rather than intentional fraud schemes.

Financial Impact Analysis: Compliance Costs Versus Violation Penalties

The economic calculus strongly favors comprehensive compliance implementation over risk acceptance given the severe penalty structure governing time correction violations.

Compliance Implementation Costs typically range from $75,000 to $250,000 for mid-sized contractors, including system modifications, policy development, training programs, and ongoing monitoring procedures. Advanced time tracking solutions can streamline these compliance requirements while maintaining cost-effectiveness for contractors of all sizes.

Violation Penalty Calculations under current enforcement patterns demonstrate catastrophic financial exposure. A contractor facing 100 improper time corrections could face maximum penalties of $2,701,800 ($27,018 × 100 violations) plus treble damages on all government overpayments. When combined with suspension and debarment risks, total financial impact frequently exceeds $10 million for systematic violations.

Secondary Compliance Costs include increased audit frequencies, enhanced oversight requirements, and reputational damage affecting future contract award competitiveness. DCAA compliance requirements become more stringent following violation discoveries, creating ongoing operational cost increases that compound initial penalty assessments.

The return on investment for comprehensive compliance systems typically exceeds 1,000% when calculated against potential violation costs, making implementation a fundamental business necessity rather than optional risk mitigation.

Multi-State and Federal Jurisdiction Enforcement Patterns

DCAA enforcement authority extends across all federal jurisdictions, creating uniform compliance requirements regardless of contractor geographic location or operational scope. Recent enforcement actions demonstrate consistent application of fraud versus administrative error classifications across diverse regional markets.

West Coast Enforcement Patterns in California, Oregon, and Washington have focused on aerospace and technology contractors, with average settlements of $3.2 million per case involving systematic time correction violations. The proximity to major Defense Department installations has resulted in enhanced audit frequencies and more aggressive prosecution postures.

East Coast Regional Variations across Virginia, Maryland, and the District of Columbia reflect the concentration of federal contracting activity, with enforcement actions averaging $4.7 million in settlements. The presence of multiple oversight agencies creates layered compliance risks requiring enhanced documentation standards.

Southern Regional Characteristics spanning Texas, Florida, and Alabama demonstrate particular focus on construction and engineering contractors, where after-hours corrections frequently relate to project completion pressures. Average penalty assessments reach $2.8 million per systematic violation case.

Midwest Enforcement Trends across Illinois, Ohio, and Michigan emphasize manufacturing and logistics contractors, with violations typically involving cross-contract labor reallocation during peak production periods. Settlement amounts average $2.1 million but include higher suspension and debarment rates.

This geographic consistency in enforcement approach reinforces the federal nature of compliance requirements and eliminates any regional safe harbor assumptions contractors might consider.

Current Enforcement Priorities and Emerging Compliance Challenges

DCAA’s 2025 enforcement priorities reflect evolving fraud detection capabilities and increased focus on systematic rather than isolated violations. The agency has deployed advanced data analytics tools capable of identifying statistical anomalies in time reporting patterns, making previously undetectable violations discoverable through automated analysis systems outlined in the DCAA Contract Audit Manual (CAM).

Artificial Intelligence Integration in audit procedures now enables pattern recognition across contractor populations, identifying industry-wide correction trends that suggest coordinated manipulation schemes. This technological advancement requires contractors to ensure their correction practices withstand statistical analysis rather than merely satisfy individual transaction review.

Cross-Contract Analysis Capabilities allow auditors to identify labor shifting patterns across multiple simultaneous contracts, revealing optimization schemes previously concealed within individual contract analysis. Contractors must now consider the cumulative pattern effect of their correction practices across their entire contract portfolio.

Real-Time Monitoring Systems provide DCAA with immediate visibility into contractor timekeeping systems, enabling intervention during correction processes rather than after-the-fact audit discovery. This shift from retrospective to concurrent oversight requires contractors to maintain continuous compliance rather than periodic compliance preparation.

The convergence of enhanced detection capabilities with unchanged penalty structures creates an enforcement environment where historical violation patterns face unprecedented discovery likelihood, making comprehensive compliance implementation an immediate operational requirement rather than future planning consideration.

Ready to Implement DCAA-Compliant Timekeeping?

Hour Timesheet provides the integrated compliance solution your organization needs to meet critical September deadlines. Our platform ensures accurate labor cost capture, maintains year-end documentation requirements, and provides the audit trails government auditors demand during fiscal year-end reviews.

Don’t risk missing crucial September compliance deadlines. Hour Timesheet’s proven system helps contractors maintain compliant practices while streamlining year-end preparation and submission processes.

Start Your Free Trial Today  see how Hour Timesheet ensures your organization stays DCAA-compliant and audit-ready

For government contractors operating under federal contracts, DCAA compliance isn’t just a regulatory requirement—it’s essential for business survival. The choice between time tracking solutions can make the difference between passing audits with confidence and facing costly compliance failures. While both Hour Timesheet and QuickBooks Time offer time tracking capabilities, their approaches to DCAA compliance couldn’t be more different.

Hour Timesheet provides a purpose-built solution specifically designed from the ground up for DCAA requirements. Every feature, workflow, and reporting function has been crafted with government contractor compliance in mind. In contrast, QuickBooks Time operates as a general business time tracking tool that requires significant third-party integrations, extensive customization, and ongoing maintenance to achieve even basic DCAA compliance.

Key DCAA Requirements Comparison

The Defense Contract Audit Agency has strict requirements for daily time entry that form the foundation of compliant timekeeping. These requirements demand that all employees working on government contracts record their time daily, with no advance entries or retroactive time logging allowed beyond the same business day.

✅ Daily Time Entry Requirements

Hour Timesheet:

Built-in daily time tracking reminders and alerts

Prevents time entry in advance or days after the fact

Automated notifications to ensure daily compliance

Real-time validation of daily time entry

QuickBooks Time:

Basic time tracking capabilities

Requires manual processes to enforce daily entry

No built-in DCAA-specific compliance alerts

Relies on manager oversight for daily entry compliance

✅ Audit Trail & Change Tracking

When DCAA auditors review your timekeeping system, they’re looking for comprehensive audit trails that document every change, modification, and approval in your time tracking process. The ability to demonstrate who changed what, when they changed it, and why the change was necessary can determine whether you pass or fail an audit.

Hour Timesheet:

Detailed audit trails for all time entries and modifications

Automatic reason code prompts for time changes

Complete history of all edits with timestamps

Built-for-purpose audit reporting

QuickBooks Time:

Basic edit history available

Limited audit trail functionality

Requires third-party solutions for comprehensive audit trails

Manual processes needed for change documentation

✅ Supervisor Approval Process

DCAA compliance requires robust supervisor approval processes that ensure all time entries are reviewed and approved by authorized personnel before being used for billing purposes. The complexity of government contracts often demands multiple levels of approval, with different supervisors responsible for different aspects of project oversight.

Hour Timesheet:

Multi-level supervisor approval workflows

Manager approval tracking and reporting

Automated approval notifications and reminders

Complete approval audit trail

QuickBooks Time:

Basic approval functionality

Limited workflow customization

Requires additional configuration for DCAA compliance

Less robust approval reporting

✅ Cost Allocation & Job Costing

Accurate cost allocation lies at the heart of DCAA compliance, as government contracts require precise tracking of labor hours to specific projects, tasks, and contract line items. The ability to demonstrate that billed hours directly correspond to work performed on specific contracts is fundamental to maintaining contractor eligibility.

Hour Timesheet:

Direct integration with authorized charge codes

Automated cost allocation to projects/contracts

DCAA-compliant labor distribution

Real-time project cost tracking

QuickBooks Time:

Basic project time tracking

Requires QuickBooks Online/Desktop integration

Manual setup required for proper cost allocation

Limited DCAA-specific cost reporting

Implementation & Setup

The speed at which you can achieve DCAA compliance directly impacts your ability to bid on and perform government contracts. Extended implementation periods can delay contract start dates and increase overall project costs.

Hour Timesheet

Setup Time: Minimal – designed for DCAA out-of-the-box

Configuration: Pre-configured DCAA compliance features

Training: Streamlined for government contractors

Maintenance: Automatic updates maintain compliance

QuickBooks Time

Setup Time: Extensive – requires significant customization

Configuration: Manual DCAA compliance setup needed

Training: General time tracking + compliance training required

Maintenance: Ongoing compliance monitoring required

Reporting & Documentation

DCAA audits require extensive documentation and reporting that demonstrates compliance with federal acquisition regulations. The quality and accessibility of this documentation often determines audit outcomes.

Hour Timesheet

Advantages:

DCAA-specific reporting templates

Automated compliance reports

Audit-ready documentation

Integration with payroll for labor distribution

QuickBooks Time

Limitations:

Generic reporting requires customization

Additional tools needed for DCAA reporting

Manual report generation for audits

Limited compliance-specific documentation

Integration Capabilities

Modern government contractors require time tracking systems that integrate seamlessly with their existing accounting, payroll, and project management tools. The quality of these integrations can significantly impact operational efficiency and compliance accuracy.

Hour Timesheet

Direct QuickBooks Desktop & Online integration

Payroll system connectivity

Mobile app with offline capability

API for custom integrations

QuickBooks Time

Native QuickBooks integration

Limited third-party DCAA compliance tools

Requires additional software for full compliance

May need GovBooks or similar add-ons

Pricing Considerations

Understanding the true cost of DCAA compliance requires looking beyond initial subscription fees to include implementation, training, maintenance, and ongoing compliance monitoring expenses.

Hour Timesheet

All DCAA compliance features included

No additional compliance modules required

Transparent pricing for government contractors

Cost-effective for compliance requirements

QuickBooks Time

Base subscription + additional compliance tools

Third-party integration costs

Potential consulting fees for setup

Hidden costs for full DCAA compliance

Making the Right Choice

Government contractors requiring immediate DCAA compliance will find Hour Timesheet’s purpose-built approach significantly more efficient than attempting to adapt a general business tool. Organizations that need automated compliance monitoring, minimal implementation time, and dedicated government contracting support will benefit from

Hour Timesheet’s specialized focus

Government contractor requiring immediate DCAA compliance

Need purpose-built compliance features

Want minimal implementation time

Require dedicated government contracting support

Need automated compliance monitoring

Seeking lower total cost of ownership for compliance

QuickBooks Time limitations:

Not DCAA compliant out-of-the-box

Requires significant additional investment

Complex setup and maintenance

Generic solution not optimized for government contractors

Key Take-Aways

1. “Built for DCAA, not adapted for it” – Hour Timesheet was designed specifically for government contractor compliance requirements
2. “Compliance confidence from day one” – Immediate DCAA compliance without complex setup or third-party add-ons
3. “Lower total cost of compliance” – Avoid hidden costs of making QuickBooks Time DCAA compliant
4. “Audit-ready automatically” – Built-in audit trails, reporting, and documentation that auditors expect

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A Virginia-based defense contractor learned this lesson at a cost of $23 million in questioned costs and an 18-month suspension from federal contracting. Their crime? Implementing a weekly time entry system that violated fundamental DCAA timekeeping requirements under 48 CFR 31.201-4 and Cost Accounting Standard (CAS) 418. The Defense Contract Audit Agency (DCAA) rejected their entire accounting system, triggering contract suspensions across multiple federal agencies and forcing the contractor into compliance remediation that took nearly two years to complete.

This case demonstrates why weekly time entry systems represent one of the most costly compliance failures in federal contracting. Deficient timekeeping is the reason for contractors’ failing DCAA accounting system audits, and weekly systems violate core regulatory requirements that have been consistent across all federal agencies since the implementation of the Federal Acquisition Regulation.

Legal Foundation: The Regulatory Framework That Demands Daily Entry

Federal contractors operate under strict timekeeping requirements established in multiple regulatory authorities that explicitly mandate contemporaneous time recording. These regulations create an interlocking compliance framework that leaves no room for interpretation regarding weekly time entry systems.

48 CFR 31.201-4 – Determining Allocability establishes the foundational requirement that costs must be “incurred for the same purpose in like circumstances.” Weekly time entry systems fail this test because they require employees to reconstruct time allocations days after work performance, creating inherent inaccuracy in cost allocation that violates the regulation’s requirement for precise cost tracking.

Cost Accounting Standard 418 – Allocation of Direct and Indirect Costs under 48 CFR 99.418 mandates that “costs incurred for the same purpose in like circumstances shall be treated consistently.” Weekly systems create inconsistent treatment because they allow different employees to apply different reconstruction methodologies, violating the standard’s consistency requirements. CAS 418 specifically requires that timekeeping systems provide “adequate support” for cost allocations—a requirement that weekly reconstruction cannot satisfy.

10 USC 2324(f)(1) – the Truth in Negotiations Act implementation—requires contractors to maintain accounting systems that provide “adequate cost data.” Weekly time entry fails this standard because reconstructed time allocations cannot provide the accuracy level required for adequate cost data, particularly in multi-contract environments where precise labor allocation determines contract profitability and compliance.

Common Violation Patterns: How Contractors Trigger DCAA Rejection

DCAA auditors consistently identify five violation patterns in weekly time entry systems that trigger immediate system rejection and questioned cost determinations.

Reconstruction-Based Time Allocation represents the most fundamental violation. When employees enter time on Friday for the entire week, they inevitably reconstruct time allocations based on memory rather than contemporaneous recording. DCAA auditors document this through employee interviews and system testing, demonstrating that weekly systems cannot provide the accuracy required under 48 CFR 31.201-4.

Cross-Contract Allocation Errors occur systematically in weekly systems because employees cannot accurately recall daily task switching between different contracts or projects. This creates CAS 418 violations when similar work receives different cost treatment based on reconstruction timing rather than actual work performance patterns.

Supervisory Review Inadequacy emerges when supervisors approve weekly timesheets without daily visibility into actual work performance. This violates the supervisory review requirements under DCAA guidance, which demands that supervisors have sufficient knowledge of employee activities to validate time allocations—impossible with weekly reconstruction.

Documentation Deficiencies manifest when weekly systems lack contemporaneous supporting documentation for time allocations. DCAA requires that timekeeping systems maintain adequate supporting records, but weekly systems cannot produce contemporaneous documentation because time entry occurs days after work performance.

System Control Weaknesses appear in weekly systems that lack adequate controls to prevent retroactive time manipulation. Without daily time entry requirements, these systems typically allow unlimited retroactive changes without appropriate audit trails, violating internal control requirements under federal cost accounting standards.

Step-by-Step Compliance Requirements: Building DCAA-Acceptable Daily Systems

Compliance with DCAA timekeeping requirements demands implementation of daily time entry systems with specific control features that satisfy all regulatory requirements across federal agencies.

Daily Time Entry Mandate: Implement systems that require employees to enter time daily, preferably at task completion or by close of business each day. This satisfies the contemporaneous recording requirement under 48 CFR 31.201-4 and eliminates reconstruction-based allocation errors that trigger DCAA rejection. The system must prevent time entry for future dates and limit retroactive entries to the same business day.

Supervisory Approval Controls: Establish supervisory review processes that occur within 72 hours of time entry, ensuring supervisors have sufficient knowledge of employee activities to validate allocations. This control satisfies DCAA requirements for adequate supervisory oversight and creates the documentation trail required for cost accounting standard compliance. Supervisors must certify that reviewed time allocations reflect actual work performed.

Audit Trail Maintenance: Configure systems to maintain complete audit trails for all time entry modifications, including original entries, changes, change dates, change reasons, and approver identification. This documentation satisfies the supporting record requirements under CAS 418 and provides DCAA auditors with the evidence trail necessary to validate cost allocations during compliance reviews.

Cross-Reference Documentation: Implement procedures that cross-reference time entries with project documentation, work orders, meeting records, and other contemporaneous records that support time allocations. This creates the “adequate support” required under CAS 418 and demonstrates that time allocations reflect actual work performance rather than reconstruction or estimation.

System Security Controls: Establish role-based access controls that prevent unauthorized time modifications and ensure appropriate segregation of duties between time entry, approval, and payroll processing functions. These controls satisfy internal control requirements and prevent the system manipulation issues that commonly trigger DCAA system adequacy determinations.

Cost of Non-Compliance vs. Cost of Compliance: The Financial Reality

Non-compliance with DCAA timekeeping requirements creates financial exposure that far exceeds compliance implementation costs across multiple regulatory enforcement mechanisms.

Questioned Cost Exposure represents the immediate financial impact when DCAA rejects weekly time entry systems. Non-compliance can lead to civil or even criminal penalties, with questioned costs typically ranging from $500,000 to $50 million depending on contract volume and duration of non-compliance. These questioned costs require contractor response, often including independent public accountant validation, creating additional costs of $50,000 to $200,000 per response.

Contract Suspension Consequences trigger when DCAA determines that weekly time entry systems create inadequate accounting systems. Failing to meet DCAA timekeeping requirements can result in refusal of future contracts, with suspensions lasting 12-24 months while contractors implement compliance remediation. During suspension periods, contractors cannot compete for new federal work, creating opportunity costs that often exceed $10 million annually for mid-sized contractors.

Legal and Professional Services Costs accumulate during compliance remediation, typically ranging from $200,000 to $1 million for system redesign, implementation, and DCAA re-audit processes. These costs include legal representation, accounting system consulting, software implementation, training, and ongoing compliance monitoring required to restore contractor status.

Daily System Implementation Costs typically range from $15,000 to $75,000 for software licensing, configuration, training, and policy implementation. Annual maintenance costs range from $3,000 to $15,000 depending on contractor size and complexity. These compliance costs represent less than 0.1% of typical contract values while preventing millions in potential questioned costs and suspension consequences.

ROI Analysis demonstrates that compliance investment delivers 20:1 to 100:1 return when measured against non-compliance consequences. Weekly system rejection creates financial exposure averaging $5-15 million per contractor, while daily system implementation costs average $25,000-50,000, creating clear economic justification for compliance investment.

Multi-State Federal Jurisdiction: Nationwide Regulatory Enforcement

DCAA timekeeping requirements apply uniformly across all federal contracts regardless of contractor location, creating nationwide compliance obligations that affect contractors in all 50 states and territories.

Federal Acquisition Regulation Authority under 48 CFR extends to all executive branch agencies, including Department of Defense, Department of Homeland Security, General Services Administration, and civilian agencies. Contractors performing work for any federal agency must comply with identical timekeeping requirements, regardless of contract location or contractor headquarters state.

Defense Contract Management Agency Coordination ensures that DCAA timekeeping determinations affect contractor eligibility across all federal agencies. A timekeeping system rejection in one state immediately impacts contractor ability to perform federal work nationwide, creating compliance consequences that transcend individual contract locations or agency relationships through the Defense Contract Management Agency coordination process.

State Jurisdiction Limitations do not apply to federal contract compliance requirements. State timekeeping laws, wage and hour regulations, and employment requirements represent minimum standards that cannot override federal contractor obligations under FAR and CAS requirements. Contractors must satisfy both state and federal requirements, with federal standards typically creating more stringent obligations.

Interstate Contract Performance requires consistent timekeeping compliance across all performance locations. Contractors with operations in multiple states must implement identical daily time entry systems nationwide to ensure compliance continuity and prevent audit findings based on inconsistent timekeeping practices across different locations.

Territory and International Application extends DCAA requirements to contractors performing federal work in U.S. territories, overseas locations, and international settings. The regulatory framework applies regardless of work location, creating uniform compliance obligations for all federal contract performance regardless of geographic considerations.

The $23 million lesson learned by the Virginia defense contractor serves as clear precedent: weekly time entry systems represent prohibited timekeeping practices under federal regulations. Contractors operating under FAR and CAS requirements must implement daily time entry systems with adequate controls, documentation, and supervisory review to satisfy DCAA compliance standards and avoid the substantial financial consequences of non-compliance across all federal contracting jurisdictions.

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