The term ‘DCAA compliance’ when referring to your timekeeping procedures is often just thrown around. If you don’t understand what that means or how to verify that you are, Hour Timesheet can help.

Simply put, DCAA stands for Defense Contract Audit Agency. This is the federal government agency responsible for conducting DCAA audits of the Department of Defense (DoD) contracts. As imagined, the DoD is very strict about its rules and regulations surrounding DCAA compliance and timekeeping. The DoD will award government contracts to businesses that use web-based timekeeping if they meet all requirements. If a company follows all of the following DCAA timekeeping requirements, they are likely to get a government contract.

1. The company must document all timekeeping procedures in a policy or procedure handbook provided to all employees.

They must address all critical elements of an adequate timekeeping system. Companies must provide all employees with an updated policy or procedure booklet regarding time entry procedures.

2. Every employee must record all of his/her time daily.

Attempting to track time worked in advance or days after the fact is not acceptable. Hour Timesheet comes equipped with reminders to all users to ensure their time is entered daily. This means that no matter the size of the company, Hour Timesheet is equipped for every employee to track time. This DCAA timekeeping feature is especially useful for any companies participating in SBIR and STTR programs. They may be smaller businesses, but they must ensure they remain DCAA compliant to qualify for their funding.

3. Employees must charge time by the day and by project or job code and indirect cost accounts (overhead, G&A, B&P, etc.).

This is known as cost accounting. This is the formal mechanism of determining and controlling products or services’ costs. The primary objective of cost accounting is to determine the fair and accurate market value of an item. Then to understand the basis for fixing its selling price. From there, you need to determine what factors affect its cost control and, at the same time, its price reduction.

How can cost accounting be used?

Once you’ve determined this, you can identify and eliminate wastes such as materials, expenses, equipment, tools, and other items. Next, ask how to optimize the utilization of resources. Then correctly analyze the direct cost of both the process and operations. Once that is complete, determine the profitability of the product and help manage the maximization of these profits. Don’t forget to assist in the preparation of budgets and implement budgetary control. And finally, aid management in the formulation and implementation of an incentive bonus plan based on productivity and cost objectives.

4. All employees must record 100% of the time worked.

This is true on all projects to the proper job codes, whether working on a government contract or commercial work. The beauty with the Hour Timesheet mobile app is employees can add time from anywhere, whether they’re working from home or the office. This allows many government contractors to get their jobs done more efficiently.

5. Employees must record all indirect time not identifiable to a given project to proper indirect cost accounts (overhead, G&A, B&P, etc.)

One example of an indirect cost is overhead. This usually includes the indirect costs involved in support operations or direct production. These costs are directly related to a project or projects. However, they cannot be allocated to one specific contract. This is because they overlap across many different projects.

What are some contracting overhead costs that a company should track?

Overhead costs can vary greatly. They may include the depreciation of equipment used on multiple projects. It could also include supplies, and quality assurance shared across multiple contracts. Overhead can also include costs like indirect labor costs and training. Government contractors cannot track any unallowable costs as indirect costs. Government agencies are prohibited by law to reimburse for any unallowable costs.

6. Employees must record all PTO, vacation, sick, holiday, and other leave time to the proper accounts.

The good news is, with Hour Timesheet software, tracking any kind of leave time such as this is very easy and keeps you DCAA compliant.

7. The system administrator or accounting department should initiate all job codes that appear in the timekeeping system.

Project codes must be provided to employees authorized to work on a given project. Many companies use codes as opposed to the contract number to simplify the charging process for employees. To follow DCAA compliance, every charge must directly relate to a specific contract and a task within that contract.

8. All timesheet entries must be the employee’s own.

An employee must record their time based on work completed. They should track all time entries, irrespective of whether the time is billable or non-billable. This must happen daily. Additionally, under no circumstances is a manager or supervisor allowed to record their employees’ time unless there is an extreme situation. Employees should follow these timekeeping requirements at all times, in any circumstance. This will make payroll procedures easier for the manager, and much more accurate.

9. Under no circumstance may an employee work on one project and record time to a different project.

Whenever the employee completes work or tasks, they must charge it accurately and directly to that project. They require this to avoid falsely overcharging one project and undercharging another. Hour Timesheet can be setup to restrict which codes an employee can charge their time; therefore, an employee cannot charge to a project they have not been assigned.

10. Under no circumstance may an employee work on indirect tasks and record time as direct costs to a project, or vice versa.

An indirect task is work that is not explicitly tied to a project. To remain DCAA, compliant employees must never charge the time it takes to complete these tasks to any project. This would violate DCAA compliance and regulations, and would not fall under DCAA compliant time keeping.

11. The employee should make all correction timesheet entries.

The employee must record all corrected timesheet data in a detailed audit trail. An audit trail is critical to remaining DCAA compliant. If and when the DCAA decides to inspect your business (and they always will at some point), they will look over every time card entry.

The employee’s supervisor must approve every correction time entry in a detailed report, in the event of a DCAA audit.

In the unusual circumstances where the employee cannot make the changes to timesheets, then accounting or the administrator may make such changes with the employee’s consent. The DCAA will analyze every entry from your employees with a fine-tooth comb. Thanks to your detailed audit trail, the DCAA will see who edited a time card after it was submitted. They will also be able to see when the changes were made, and why. Hour Timesheet creates an uneditable audit log that will provide a locked record. This will include all of all the additions, deletions, approvals, and modifications made to your employees’ timesheets.

12. The employee’s supervisor must approve all employee timesheet data.

Each timesheet requires two signatures, in order to comply with DCAA compliance regulations. Hour Timesheet allows for online signatures at both the employee and manager levels. This allows managers to regulate any uncompensated overtime or leave management requests.

13. Employees should be provided documented DCAA compliance & timekeeping training, whether by formal or informal means.

The company’s new employee handbook or new-hire orientation program typically includes this training. Either way the employee is familiar with the company’s timekeeping training before they begin working full-time hours.

14. In order to be DCAA compliant, the company must maintain timesheets for at least two years.

That means the company must be keep their files in a secure and easily accessible location. Should the DCAA or any government agency require you to produce copies of them, they should be available. Hour Timesheet keeps the timesheets indefinitely for all employees, current, and past.

15. The company must conduct audit or floor checks randomly throughout the year to monitor employee timekeeping compliance.

Unfortunately, DCAA timekeeping compliance is the reason government contractors fail an audit. Hour Timesheet can help. We have the employee and contractor time tracking experience to ensure total compliance. Sign up for Hour Timesheet today and work with an experienced implementation rep to review your account for total compliance. All for FREE.