Choosing the wrong accounting system can cost government contractors everything. A failed DCAA audit doesn’t just mean embarrassment—it means suspended payments, contract termination, and in severe cases, allegations of fraud. Yet every year, contractors discover too late that their “DCAA compliant” software doesn’t actually meet the Defense Contract Audit Agency’s strict requirements.

The problem? Many accounting systems claim DCAA compliance in their marketing materials, but compliance isn’t about checking a box. It’s about demonstrating adequate internal controls, maintaining comprehensive audit trails, and proving your timekeeping and labor distribution systems can withstand scrutiny. Not all software is built to handle this burden.

In this guide, we’ll break down what actually makes an accounting system DCAA compliant, then evaluate the top five systems that government contractors rely on. Whether you’re a small business pursuing your first contract or an established contractor looking to upgrade, you’ll learn which solution fits your specific needs—and which expensive mistakes to avoid.

What Makes an Accounting System DCAA Compliant?

DCAA compliance isn’t a certification or badge you can earn. Instead, it’s a framework of requirements outlined in the Standard Form 1408 (SF 1408), also known as the Preaward Survey of Prospective Contractor Accounting System. The DCAA evaluates whether your accounting system provides adequate internal controls to ensure costs charged to government contracts are allowable, allocable, and reasonable.

Here are the core requirements your accounting system must meet:

Proper Segregation of Direct and Indirect Costs
Your system must clearly distinguish between costs that can be directly charged to a specific contract (direct costs) and costs that benefit multiple contracts or your general operations (indirect costs). This separation must be maintained consistently and be easily auditable.

Accurate Labor Distribution
You need a reliable method for tracking how employee time is distributed across contracts, indirect activities, and leave. The DCAA requires that labor charges are based on actual time worked, not estimates or budgets. Your timekeeping system must integrate with your accounting system to ensure labor costs flow accurately into job costing.

Comprehensive Audit Trail
Every transaction must be traceable from source documents through to financial reports. This means your system must track who entered data, when they entered it, and any modifications made. The audit trail must be tamper-proof—you can’t allow users to delete or modify historical records without leaving a clear record of the change.

Timely Recording of Costs
Costs must be recorded in the accounting period when they’re incurred, not when they’re paid. This accrual accounting approach ensures that contract costs reflect the true timing of expenses, which is essential for accurate indirect rate calculations.

Exclusion of Unallowable Costs
Your system must prevent unallowable costs (like entertainment, certain lobbying expenses, or alcoholic beverages) from being charged to government contracts. This typically requires specific account codes and controls that flag or block these costs from government jobs.

Compliance with Cost Accounting Standards (CAS)
For contracts subject to CAS, your system must maintain consistency in how you estimate, accumulate, and report costs. This includes your methods for allocating indirect costs and calculating overhead rates.

The challenge many contractors face is that general-purpose accounting software like QuickBooks or Xero was never designed with these specific requirements in mind. While you can sometimes configure these systems to meet DCAA standards, it requires extensive customization, constant vigilance, and often fails during a floor check—the DCAA’s on-site review of your accounting system.

Now let’s look at five accounting systems that were either purpose-built for DCAA compliance or can be configured to meet these strict requirements.

1. Hour Timesheet: Purpose-Built for DCAA Compliance

What It Is
Hour Timesheet is a cloud-based timekeeping and job costing system designed specifically for government contractors. Unlike general accounting software that tries to serve every industry, Hour Timesheet was built from the ground up to meet DCAA requirements without requiring contractors to become accounting experts.

DCAA Compliance Features

Hour Timesheet addresses every core DCAA requirement through features that work together seamlessly:

Immutable Audit Trail: Every timesheet entry, approval, and correction is permanently logged with user identification and timestamps. Supervisors can’t delete time entries—they can only add corrective entries that create a clear paper trail. If an employee tries to change a submitted timesheet, the system requires supervisor approval and documents the change reason.

Labor Distribution Reporting: The system generates labor distribution reports that show exactly how employee hours are allocated across multiple contracts, indirect activities, and leave types. These reports integrate directly with QuickBooks Desktop or can export to other accounting systems, ensuring your labor costs flow accurately into job costing without manual data entry.

Time Entry Validation: Hour Timesheet enforces daily time entry and prevents retroactive changes beyond your company’s policy timeframe. Employees can’t estimate their time at the end of the week—they must account for every day. The system also prevents the common DCAA violation of “rounding” time to neat numbers.

Approval Workflows: Supervisors must review and approve timesheets before time flows to payroll or accounting. The system tracks who approved what and when, creating the oversight documentation the DCAA expects to see.

Leave Management: Hour Timesheet tracks leave accruals and usage with the detail the DCAA requires. When an employee takes PTO, it’s clearly marked and separated from billable contract hours, preventing the compliance violation of charging leave time directly to government contracts.

Best For
Hour Timesheet is ideal for small to mid-size government contractors (10-500 employees) who need turnkey DCAA compliance without enterprise-level complexity. It’s particularly valuable for:

• Companies using QuickBooks Desktop who need compliant timekeeping integration
• Contractors facing their first DCAA audit and needing to quickly establish proper controls
• Professional services firms (engineering, consulting, IT services) where labor is the primary cost
• Businesses that want their employees to track time via web or mobile apps without training overhead

Integration Capabilities
Hour Timesheet integrates natively with QuickBooks Desktop (Pro, Premier, and Enterprise), automatically syncing time data to create payroll records and job costing entries. For contractors using other accounting systems, Hour Timesheet exports detailed timesheet data in formats compatible with Deltek, Unanet, ADP, Paychex, and other platforms.

Pricing
Hour Timesheet uses transparent per-user pricing starting at $8 per user per month, with discounts for annual billing. There are no hidden setup fees, and the company offers a 30-day free trial. For a 50-person company, you’re looking at roughly $400/month—significantly less expensive than enterprise ERP solutions while delivering the DCAA-specific functionality most contractors actually need.

Why It Ranks #1
Hour Timesheet earns the top spot because it solves the specific problem government contractors face: achieving DCAA compliance without overhauling their entire accounting system. While enterprise ERPs like Deltek offer more features, most contractors don’t need manufacturing modules or complex project accounting. They need bulletproof timekeeping and labor distribution—and that’s exactly what Hour Timesheet delivers, at a fraction of the cost and complexity.

2. Deltek Costpoint: Enterprise ERP for Large Contractors

What It Is
Deltek Costpoint is a comprehensive enterprise resource planning (ERP) system designed specifically for government contractors and professional services firms. It’s the industry standard for large defense contractors and has been around for decades, with deep functionality that covers everything from project accounting to manufacturing cost tracking.

DCAA Compliance Features

Costpoint was built with DCAA compliance as a core design principle:

Complete Accounting System: Unlike Hour Timesheet, which focuses on timekeeping and job costing, Costpoint handles your entire accounting operation—general ledger, accounts payable, accounts receivable, project accounting, billing, and financial reporting. This integrated approach means all your DCAA compliance requirements are managed within a single system.

Sophisticated Labor Management: Costpoint’s labor module tracks time at a granular level, supporting complex scenarios like multiple labor categories, burden structures, and union rules. It handles situations where employees work on multiple contracts with different billing rates and overhead structures.

CAS Compliance: For contractors subject to Cost Accounting Standards, Costpoint provides built-in tools to maintain consistency in cost accounting practices. It can handle multiple indirect cost pools, complex allocation bases, and the detailed reporting CAS requires.

Government Billing: Costpoint generates invoices in formats required by various government agencies, including WAWF (Wide Area Workflow) submissions and progress payment requests. This integration between your accounting system and billing reduces errors and speeds up cash flow.

Best For
Deltek Costpoint is designed for large government contractors (typically 500+ employees) with complex needs:

• Defense contractors with manufacturing operations
• Companies managing hundreds of simultaneous contracts
• Firms subject to Cost Accounting Standards (CAS)
• Contractors who need sophisticated revenue recognition and project accounting

Considerations

The power of Costpoint comes with significant tradeoffs:

Cost: Licensing fees often start at $100,000+ for initial implementation, with annual maintenance fees of 18-20% of the license cost. Smaller contractors often can’t justify this investment.

Implementation Time: Expect 6-12 months (or longer) to fully implement Costpoint. You’ll need dedicated project managers and often external consultants to configure the system properly.

Complexity: Costpoint’s extensive functionality means a steep learning curve. You’ll need accounting staff who understand both government contracting and the software’s intricate modules.

Overhead: The system requires IT infrastructure, whether on-premises servers or cloud hosting, plus dedicated administrators to maintain it.

Why It Ranks #2
Costpoint is an exceptional tool for large contractors who need its enterprise capabilities. However, most small to mid-size contractors are better served by more focused, affordable solutions. It ranks second because while it delivers unmatched functionality for complex organizations, that power is overkill—and prohibitively expensive—for the majority of government contractors.

3. Unanet: Mid-Market Project-Based ERP

What It Is
Unanet (specifically Unanet GovCon) is a cloud-based ERP solution designed for government contractors and project-driven professional services firms. It sits in the middle ground between focused tools like Hour Timesheet and enterprise solutions like Deltek, offering more functionality than specialized timekeeping software but with less complexity than full enterprise ERPs.

DCAA Compliance Features

Unanet provides solid DCAA compliance capabilities:

Integrated Timekeeping and Accounting: Like Costpoint, Unanet combines time tracking with project accounting, eliminating the need for separate systems. Time flows directly into project costs, overhead calculations, and financial reporting.

Project-Centric Design: Unanet organizes everything around projects and contracts. This structure naturally aligns with how government contractors think about their business, making it easier to track costs by contract and generate the reports the DCAA expects.

Configurable Workflows: The system allows you to configure approval workflows, cost allocation rules, and reporting structures to match your specific business practices. This flexibility helps you maintain consistency in your cost accounting methods.

Labor Compliance: Unanet tracks time by project, task, and labor category, with built-in controls to prevent common DCAA violations. The system enforces timesheet submission deadlines and maintains a complete audit trail of all entries and changes.

Best For
Unanet works well for growing contractors in the sweet spot between small businesses and large enterprises:

• Mid-size government contractors (100-1,000 employees)
• Architecture, engineering, and consulting firms with project-based work
• Companies that have outgrown QuickBooks but aren’t ready for Costpoint-level complexity
• Firms that want business intelligence and dashboards for better decision-making

Considerations

Learning Curve: Unanet is more complex than dedicated timekeeping tools. Plan for several months of training to get your team comfortable with the system.

Cost: Pricing typically ranges from $50,000-$200,000+ depending on modules and user count—more affordable than Costpoint but still a significant investment compared to Hour Timesheet.

Implementation: Most implementations take 3-6 months and require working with Unanet’s implementation team or certified partners. This adds to the total cost and delays the time to value.

Customization Needs: While Unanet offers flexibility, you may need to customize reports and workflows to exactly match your DCAA audit needs. This requires understanding both the software and DCAA requirements.

Why It Ranks #3
Unanet excels for mid-market contractors who need more than timekeeping but aren’t large enough to justify Costpoint. It’s a strong option if you’re growing rapidly and need a system that can scale with you. However, many contractors at this size still find they can meet DCAA requirements more affordably by pairing Hour Timesheet with their existing accounting software rather than replacing everything with a mid-market ERP.

4. QuickBooks Desktop + Hour Timesheet Integration: The Hybrid Approach

What It Is
Many government contractors already use QuickBooks Desktop for their accounting needs. Rather than replacing QuickBooks entirely, they can add Hour Timesheet for DCAA-compliant timekeeping while maintaining their existing accounting workflows. This hybrid approach leverages QuickBooks’ strong accounting features while addressing its critical timekeeping gaps.

Why QuickBooks Time Alone Isn’t Sufficient

QuickBooks offers its own time tracking tool (QuickBooks Time, formerly TSheets), but it falls short of DCAA requirements in several critical ways:

• Insufficient Audit Trail: QuickBooks Time allows users to edit or delete historical time entries without maintaining adequate documentation of changes. During a DCAA floor check, this lack of a permanent audit trail is a red flag.
• Limited Approval Controls: The approval process in QuickBooks Time is basic and doesn’t enforce the oversight the DCAA expects. Supervisors can approve time in bulk without reviewing individual entries, and there’s limited documentation of who approved what and when.
• Weak Labor Distribution: While QuickBooks Time can track time by customer and service item, it doesn’t generate the detailed labor distribution reports the DCAA requires, particularly for contractors with multiple indirect cost pools.
• Correction Documentation: When time entries need to be corrected, QuickBooks Time doesn’t force users to document the reason for corrections in the detail the DCAA expects.

How Hour Timesheet Fills the Gaps

The Hour Timesheet + QuickBooks Desktop integration creates a DCAA-compliant solution:

Employees Use Hour Timesheet: Team members track their time through Hour Timesheet’s web or mobile interface, which enforces daily entry, prevents backdating beyond policy limits, and creates an immutable audit trail.

Supervisors Approve in Hour Timesheet: All timesheet approvals happen in Hour Timesheet, with documented approval chains and the ability to add comments or request corrections. This oversight meets DCAA expectations.

Data Syncs to QuickBooks: Approved time automatically syncs to QuickBooks Desktop, creating payroll records and job costing entries. The integration is bidirectional—you set up employees, customers, and service items in QuickBooks, and Hour Timesheet pulls that information for time tracking.

Labor Reports from Hour Timesheet: When you need labor distribution reports for DCAA audits, you generate them from Hour Timesheet, which has the granular time data and reporting capability QuickBooks lacks.

Accounting in QuickBooks: You continue using QuickBooks for all your accounting functions—A/P, A/R, financial statements, tax reporting. Nothing changes except that your timekeeping is now DCAA compliant.

Best For
The hybrid approach is ideal for:

• Small to mid-size contractors already comfortable with QuickBooks Desktop
• Companies that want to maintain their existing accounting workflows
• Firms that need DCAA-compliant timekeeping without replacing their entire accounting system
• Contractors looking to minimize disruption and training overhead

Pricing
You’ll need QuickBooks Desktop (starting around $1,800/year for three users) plus Hour Timesheet ($8-10 per user per month). For a 30-person company, you’re looking at roughly $4,000-5,000 annually—far less than implementing a full ERP while maintaining DCAA compliance.

Why It Ranks #4
This hybrid approach deserves recognition because it solves a real problem: many contractors are deeply invested in QuickBooks and resistant to changing their entire accounting system. By adding Hour Timesheet, they can achieve DCAA compliance without the disruption and expense of replacing QuickBooks. The only reason it ranks behind Hour Timesheet as a standalone is that some contractors prefer not to manage two systems, even when they integrate seamlessly.

5. Jamis Prime: Specialized Government Contractor ERP

What It Is
Jamis Prime is an ERP system focused exclusively on government contractors. Like Deltek, it’s a comprehensive solution covering accounting, project management, contracts management, and business intelligence. Jamis targets the mid-market space, positioning itself as more accessible than Costpoint while offering deeper functionality than basic accounting software.

DCAA Compliance Features

Jamis Prime includes DCAA-focused capabilities:

Integrated Timekeeping: The system includes built-in time entry with approval workflows and audit trails designed to meet DCAA standards. Time integrates directly with project costing and payroll.

Contracts Management: Jamis tracks contract ceiling amounts, funding, modifications, and billing, helping contractors avoid the costly mistake of overrunning contract values.

Compliance Tools: The system includes features specifically for government contractor compliance, including provisional billing rates, contract closeout workflows, and FAR-compliant billing formats.

Project Cost Tracking: Jamis provides granular project accounting, tracking costs by contract, task, and cost type. This level of detail supports both DCAA audits and internal project management.

Best For
Jamis Prime works for specific scenarios:

• Mid-size contractors (100-500 employees) who want an ERP but find Costpoint too expensive
• Companies that need contracts management integrated with accounting
• Firms in specific industries where Jamis has developed specialized functionality
• Contractors already using Jamis products who want to maintain that relationship

Limitations

Smaller User Base: Jamis has a smaller market share than Deltek or Unanet, which can mean fewer resources for troubleshooting, less community support, and fewer third-party integrations.

Integration Challenges: While Jamis has APIs, contractors often find it harder to integrate with other specialized tools compared to more widely-used platforms.

Cost vs. Alternatives: Jamis pricing is comparable to Unanet but higher than the Hour Timesheet + QuickBooks approach. For many contractors, it’s difficult to justify the added cost when simpler solutions meet their compliance needs.

Implementation: Like other ERPs, Jamis requires significant time and resources to implement properly—typically 3-6 months.

Why It Ranks #5
Jamis Prime is a solid solution for contractors who need its specific functionality and prefer working with a company focused exclusively on government contracting. However, it ranks last on this list because most contractors are better served by either more affordable focused solutions (Hour Timesheet) or more comprehensive enterprise platforms (Deltek) depending on their size and complexity. Jamis occupies an awkward middle ground where the total cost of ownership doesn’t always align with the value delivered for typical government contracting scenarios.

DCAA Compliant Accounting Systems: Quick Comparison

How to Choose the Right DCAA Compliant System

Selecting the right accounting system isn’t about finding the most feature-rich option—it’s about matching the solution to your specific situation. Here’s how to make that decision:

Consider Your Company Size
Small contractors (under 100 employees) rarely need enterprise ERP functionality. You’re better off with focused solutions that deliver DCAA compliance without forcing you to manage modules you’ll never use. As you grow beyond 100-200 employees, evaluate whether you need the project management and business intelligence capabilities that mid-market ERPs provide.

Budget Realistically
Don’t just look at licensing costs. Factor in implementation fees, training time, ongoing maintenance, and the opportunity cost of having your team focused on system implementation rather than winning contracts. For many contractors, spending $100,000 on an ERP implementation means forgoing $100,000 in business development—and that trade-off doesn’t always make sense.

Assess Your Timeline
If you’re facing a DCAA audit in 90 days, you don’t have time for a 6-month ERP implementation. In urgent scenarios, you need a system you can implement quickly. Hour Timesheet and similar focused tools can be up and running in days, allowing you to establish compliant processes before your audit begins.

Evaluate Your Existing Systems
If you’re already using QuickBooks Desktop and your team is comfortable with it, think carefully before ripping it out. The hybrid approach of adding compliant timekeeping to your existing accounting software often delivers better results than forcing your team to learn an entirely new ERP—especially if your accounting needs are relatively straightforward.

Think About Support Needs
Large ERP implementations typically include dedicated account management and support teams, but you pay dearly for that service. Smaller, focused tools may have less hand-holding during implementation but often provide responsive support for the specific problems they solve. Consider which support model fits your team’s technical capabilities.

Plan for Growth
Choose a system that can scale with your business. If you’re a 50-person contractor today but expect to be 200 people in three years, make sure your chosen solution won’t become a bottleneck. That said, don’t pay for enterprise capabilities you won’t need for 5+ years—you can always migrate systems as you grow.

Conclusion: DCAA Compliance Isn’t Optional

Choosing a DCAA compliant accounting system isn’t a luxury or a “nice to have”—it’s essential for survival as a government contractor. The DCAA has become increasingly stringent in its audit approach, and contractors with inadequate accounting systems face real consequences: suspended payments, contract termination, and reputational damage that makes winning future work nearly impossible.

The good news? Achieving DCAA compliance doesn’t require spending six figures on enterprise software. For most small to mid-size contractors, purpose-built solutions like Hour Timesheet deliver the specific compliance capabilities you need at a fraction of the cost and complexity of full ERP systems.

The key is being honest about your actual needs. If you’re a 50-person professional services contractor, you probably don’t need manufacturing cost tracking or complex revenue recognition. You need bulletproof timekeeping, clean labor distribution reports, and an audit trail that can withstand scrutiny. Focus on solving those specific problems rather than buying functionality you’ll never use.

Ready to ensure your accounting system meets DCAA standards? Hour Timesheet offers a free 30-day trial with full access to all DCAA compliance features. See for yourself why government contractors trust Hour Timesheet to protect them during audits while keeping costs reasonable and implementation simple.

Start your free trial today or schedule a personalized demo to discuss your specific DCAA compliance needs.

Your company modernized operations by implementing electronic timekeeping, eliminating paper timesheets and streamlining payroll processing. Employees swipe badges, managers approve time electronically, and your payroll integrates seamlessly with your accounting system. Then DCAA auditors questioned whether your electronic system actually meets government contract timekeeping requirements under FAR 31.201-4 and discovered your clock-in system tracks attendance but doesn’t capture the job costing detail, daily entry certification, or audit trail documentation proving labor charges to government contracts reflect actual work performed. Here’s what contractors miss about electronic timekeeping: modern technology provides efficiency and accuracy for payroll, but DCAA compliance requires specific capabilities proving time charged to government contracts is accurate, allowable, and properly allocated. Understanding how to configure electronic timekeeping for government compliance—or when to supplement attendance systems with purpose-built solutions—protects your contract portfolio while leveraging technology investments.

The Legal Framework Electronic Timekeeping Must Satisfy

DCAA timekeeping requirements stem from Federal Acquisition Regulation cost principles establishing that labor costs must be supported by adequate documentation. FAR 31.201-2 mandates reasonable costs, meaning labor charges must reflect actual time employees spent on contracts, not estimates, averages, or statistical distributions. FAR 52.232-7, the Payments under Time-and-Materials and Labor-Hour Contracts clause, creates specific requirements that contractors maintain and make available time records supporting labor charges—requirements enforced through DCAA audit procedures detailed in Contract Audit Manual Chapter 5.

The DCAA standard for timekeeping adequacy requires systems capturing six essential elements: daily time entry showing hours worked each day, charging to specific contracts or cost objectives reflecting actual work performed, employee certification attesting to time accuracy, supervisory approval confirming work performance, contemporaneous recording prohibiting after-the-fact reconstruction, and complete audit trails showing any corrections or changes. Electronic systems must deliver all six elements, not just convenient clock-in/clock-out functionality serving payroll needs.

Cost Accounting Standard 418, governing allocation of direct and indirect costs, reinforces timekeeping requirements by mandating that labor cost allocation must be based on actual causal relationships between work performed and contracts benefiting from that work. Your timekeeping system must capture information supporting cost allocation decisions—which means tracking work activities, not just attendance hours. When employees work on multiple contracts during a day, your system must record the specific distribution of time across those contracts, not apply allocation percentages after the fact.

What Contractors Must Understand About Electronic System Capabilities

Here’s what contractors miss about electronic timekeeping: badge swipe systems, biometric attendance tracking, and mobile clock-in apps excel at capturing when employees arrive and depart, but they rarely capture what work employees performed or which contracts benefited from their time. Your attendance system prevents time theft and ensures accurate payroll hours, but DCAA needs job costing information proving labor charges to government contracts reflect actual project work, not convenient cost allocation assumptions.

The daily time entry requirement creates the first major compliance gap in basic electronic systems. Many attendance platforms record weekly totals or allow batch time entry at week-end, violating DCAA’s mandate for daily contemporaneous recording. Understanding DCAA timekeeping requirements means implementing systems requiring employees to record time daily with system-enforced controls preventing submission delays. The requirement isn’t arbitrary—daily entry ensures accuracy by capturing information while fresh in employees’ minds, reducing errors from weekly reconstruction attempting to remember Monday’s activities on Friday afternoon.

Contract-level detail represents another critical capability gap. Your attendance system might track department, cost center, or general project codes serving internal cost accounting needs, but DCAA requires charging to specific government contracts with sufficient detail to support cost accumulation by contract line item, task order, or work package when your contracts require that granularity. Generic codes like “Government Work” or “Defense Projects” don’t satisfy compliance requirements when you’re performing multiple simultaneous contracts requiring separate cost tracking.

The certification and approval workflow separates compliant electronic systems from simple attendance tracking. DCAA requires employee certification—an affirmative statement that recorded time is accurate and represents actual work performed—plus supervisory approval confirming the employee actually performed the certified work. Electronic signatures satisfy these requirements when properly implemented with audit trails showing who certified, when certification occurred, and preserving original certified records. Badge swipes don’t constitute certification, and manager approval of payroll hours differs from supervisory certification of contract work performance.

DCAA compliance explained for electronic timekeeping means understanding these systems must deliver complete audit trails demonstrating compliance, not just efficient payroll processing.

Five Essential Steps for Electronic Timekeeping Compliance

Step 1: Implement Daily Time Entry with Mandatory Submission Controls

Configure your electronic timekeeping system requiring employees to record time daily with system-enforced submission deadlines preventing delayed entry. Deploy automated reminders notifying employees of unsubmitted timesheets before end of each workday, escalating to management alerts when employees approach deadline violations. Build system controls preventing payroll processing for employees with incomplete timesheet submissions, creating operational incentives ensuring compliance.

Design user interfaces making daily time entry simple and intuitive—compliance fails when systems create unnecessary complexity discouraging daily submission. Mobile-responsive platforms enabling employees to submit time from any device eliminate “I was away from my desk” excuses preventing daily entry. The goal is making daily compliance easier than delayed reconstruction.

Establish exception procedures for legitimate situations requiring retroactive time entry—travel, illness, system outages—with mandatory management approval and documented business justification for each exception. Track exception frequency by employee identifying individuals requiring additional training or supervision ensuring consistent daily entry compliance.

Step 2: Deploy Contract-Level Job Costing with Activity Detail

Build electronic timekeeping with hierarchical charging structures enabling employees to record time to specific contracts, then task orders or contract line items, then work activities or labor categories as your contracts require. Create dropdown menus or search functions helping employees quickly locate correct charge codes without memorizing complex numbering systems. Validate charge code availability preventing employees from charging to closed contracts or unauthorized accounts.

Implement favorite or frequently-used contract lists enabling employees to access their primary charge codes quickly while maintaining ability to search full contract listings for occasional charges. Balance ease of use with system controls ensuring proper cost accumulation supporting contract requirements and DCAA audit procedures.

Deploy activity code capabilities when your contracts require distinguishing between engineering, manufacturing, testing, or other work activities within single contracts. This detail supports earned value management, technical performance assessment, and cost allocation verification during audits demonstrating labor charges align with contract deliverables and technical progress.

Step 3: Create Electronic Certification and Approval Workflows

Implement electronic signature capabilities meeting legal standards for binding attestations including user authentication, tamper-evident record preservation, and audit trail maintenance showing certification dates and any subsequent modifications. Build certification language into timesheet submission workflows requiring employees to affirmatively acknowledge accuracy before system acceptance—passive submission without certification doesn’t satisfy DCAA requirements.

Deploy supervisory approval workflows routing submitted timesheets to appropriate managers based on organizational structure, project assignments, or contract requirements. Create approval dashboards showing managers pending timesheets requiring review with aging indicators highlighting items approaching deadline for timely approval. Build escalation procedures routing unprocessed approvals to higher management preventing approval bottlenecks delaying payroll or contract billing.

Establish periodic recertification requirements for previously approved timesheets when significant changes occur—contract modifications, rate adjustments, or error corrections—requiring fresh management review and approval confirming continued accuracy after modifications. Maintain complete audit trails showing original submissions, all modifications, and resulting approvals demonstrating system integrity.

Step 4: Establish Comprehensive Audit Trail and Change Documentation

Configure electronic systems maintaining complete transaction histories capturing original time entries, all modifications with date/time stamps, user identification for every action, and business justification for changes requiring approval. Build system architecture preventing unauthorized deletion or modification of historical records ensuring audit trail integrity for required retention periods extending minimum three years after final contract payment.

Implement change control procedures requiring documented justification for timesheet corrections with approval workflows scaled to correction significance—small clerical errors might require supervisor approval while material changes affecting contract charges require management review and documented business rationale. Create correction reports monitoring frequency and patterns identifying potential compliance issues or training needs.

Deploy automated backup systems ensuring audit trail data protection through redundant storage, disaster recovery procedures, and retrieval capabilities enabling DCAA auditors to access historical records efficiently without requiring manual reconstruction or supplemental documentation development.

Step 5: Build Integration Between Timekeeping and Job Costing Systems

Create seamless integration feeding approved timesheet data directly into project accounting and job costing systems without manual intervention, allocation formulas, or statistical distribution. When employees record 8 hours to Contract A, your job costing must charge exactly 8 hours of that employee’s labor rate to Contract A—zero tolerance for disconnects between timekeeping and cost accounting.

Implement reconciliation procedures comparing timesheet system totals to job costing labor accumulation by employee, project, and accounting period. Investigate any variances immediately requiring root cause analysis and corrective action before variances accumulate into systematic problems discovered during DCAA audits. Monthly reconciliation demonstrates system integration integrity while identifying interface failures requiring immediate correction.

Establish validation controls preventing cost accounting system acceptance of labor charges lacking proper timesheet support—no manual labor entries, no allocation percentages, no after-the-fact distributions circumventing timekeeping records. These controls enforce fundamental requirement that labor costs charged to government contracts must flow from approved timesheet documentation.

The Investment in Compliant Electronic Timekeeping

Implementing DCAA-compliant electronic timekeeping systems costs between $15,000 and $45,000 for small to mid-sized contractors depending on user count, integration requirements, and existing technology infrastructure. Purpose-built solutions like Hour Timesheet deliver required capabilities at price points accessible for small businesses while enterprise implementations requiring custom ERP integration may reach higher investment levels. Annual subscription costs typically range $3,000 to $12,000 based on user licensing and support services.

Let me show you the value: contractors with compliant electronic timekeeping systems process payroll more efficiently, reduce administrative burden on employees and managers, generate reliable job costing data supporting project management decisions, and demonstrate professionalism to DCAA auditors through systematic compliance rather than scrambling to reconstruct documentation during audits. Your timekeeping investment supports both operational efficiency and regulatory compliance—dual value justifying the expenditure.

Contractors with inadequate electronic systems face audit findings requiring costly manual timesheet reconstruction, questioned costs when labor charges can’t be supported by adequate documentation, and competitive disadvantages when accounting system deficiencies appear in past performance evaluations affecting source selection. The cost of inadequate timekeeping extends beyond immediate audit impacts to affect future contract opportunities through damaged reputation with government customers.

Understanding Timekeeping Requirements Across Federal Agencies

DCAA timekeeping standards apply uniformly across all federal agencies and contract types. Your electronic system must satisfy identical requirements whether supporting Department of Defense contracts, NASA programs, Department of Energy work, or civilian agency agreements. The six essential elements—daily entry, contract detail, certification, approval, contemporaneous recording, and audit trails—create national compliance standards eliminating agency-specific variations.

Fixed-price contracts require the same timekeeping rigor as cost-reimbursement contracts when fixed prices were established using cost or pricing data or when contract modifications require equitable adjustment calculations based on actual costs incurred. Time-and-materials contracts face enhanced scrutiny because labor hours directly drive contract payments. Your electronic timekeeping must serve all contract types in your portfolio through consistent compliance approach.

Your Path to Electronic Timekeeping Success

The electronic timekeeping landscape rewards contractors who implement purpose-built solutions designed specifically for government contractor compliance rather than adapting commercial attendance systems serving different business needs. DCAA auditors evaluate system capabilities against regulatory requirements, not technology sophistication—your $100,000 attendance platform receives identical scrutiny as contractors using $10,000 specialized government contractor systems.

For contractors seeking electronic timekeeping combining operational efficiency with DCAA compliance, Hour Timesheet provides purpose-built solutions delivering all six essential elements auditors require. Our platform enforces daily time entry, captures contract-level detail with activity tracking, implements certification and approval workflows, maintains comprehensive audit trails, and integrates seamlessly with major accounting systems feeding approved time directly into job costing.

Your timekeeping system represents the foundation of government contract cost accounting. Build that foundation on compliant technology serving both operational needs and regulatory requirements.

Additional Resources

Related Hour Timesheet Articles:

• DCAA Timekeeping Requirements
• DCAA Compliance Requirements for Contractors
• DCAA Compliance Explained

Official Regulatory References:

• FAR 31.201-2 – Determining reasonableness
• FAR 52.232-7 – Payments under time-and-materials contracts
• Cost Accounting Standards 418 – Allocation of costs
• DCAA Contract Audit Manual – Chapter 5
• Defense Contract Audit Agency