Overview of Indirect Rates

What are Indirect Rates?

Indirect rates are basically a way for companies to account for the costs that are not directly related to a specific project or product. These costs are often necessary for the company to function, but they can’t be directly linked to a specific product or service.

An indirect rate is a percentage that a company adds to their direct costs to account for their indirect costs. Indirect rates can be complex and there are different ways of calculating them, depending on the type of company and the specific contract.

When it comes to government contracts, companies need to account for indirect costs as well as their direct costs. The government wants to make sure that the companies are not overcharging for their services, so they require companies to calculate their indirect rates.

What types of contracts have to account for Indirect Rates?

Cost-reimbursement contracts: These contracts require the government to reimburse the contractor for all costs associated with a project, including direct and indirect costs.

Time and materials contracts: These contracts are used when it’s difficult to estimate the total cost of a project upfront. Contractors are paid for their time and for the materials used, plus a fee that includes their indirect costs.

Fixed-price contracts: These contracts specify a set price for a project, and the contractor is responsible for covering all costs, including indirect costs, within that budget.

Indefinite delivery/indefinite quantity (IDIQ) contracts: These contracts specify a set price for a project, and the contractor is responsible for covering all costs, including indirect costs, within that budget.

Audits and Indirect Rates

When auditors review a company’s indirect rates, they are looking for a few key things to ensure that the rates are calculated correctly and are in compliance with government regulations. Here are some of the things that auditors may look for:

Proper segregation of costs: Auditors want to ensure that costs are properly segregated into direct and indirect categories, and that indirect costs are not being charged to direct cost categories.

Consistency in calculations: Auditors want to ensure that indirect rates are being calculated consistently and accurately across all contracts and projects.

Proper documentation: Auditors want to see documentation that supports the company’s indirect rate calculations, including financial statements, invoices, and other records.

Compliance with government regulations: Auditors want to ensure that the company’s indirect rates are in compliance with government regulations, such as the Federal Acquisition Regulation (FAR) or the Defense Federal Acquisition Regulation Supplement (DFARS).

Types of Indirect Rates

There are typically three types of indirect rate buckets that government contractors use to account for indirect costs. These buckets are:

Fringe Benefits: Fringe benefits are indirect costs that are related to employee compensation.

Overhead: Overhead costs are indirect costs that are related to the operation of a company

General and Administrative (G&A): G&A costs are indirect costs that are related to the overall management of a company.

Examples of Fringe Benefits

Health Insurance: The cost of providing health insurance to employees is an indirect cost that is typically included in the fringe benefit rate. This can include premiums paid for medical, dental, and vision insurance.

Retirement Plans: Employer contributions to employee retirement plans, such as 401(k) plans or pension plans, are indirect costs that are typically included in the fringe benefit rate.

Paid Time Off: The cost of providing paid time off, such as vacation, sick leave, and holidays, is an indirect cost that is typically included in the fringe benefit rate.

Worker’s Compensation Insurance: Employer payments for worker’s compensation insurance, which provides benefits to employees who are injured on the job, are indirect costs that are typically included in the fringe benefit rate.

Social Security and Medicare Taxes: The employer’s portion of Social Security and Medicare taxes, which are paid on behalf of employees, are indirect costs that are typically included in the fringe benefit rate.

Examples of Overhead Cost

Indirect overhead costs are expenses that are not directly associated with a specific project or contract but are necessary for running a government contracting business. Some examples of indirect overhead costs for a government contractor include:

Rent and utilities: The cost of renting or leasing office space and utilities such as electricity, water, and gas.

Office equipment and supplies: The cost of purchasing and maintaining equipment such as computers, printers, and telephones, as well as office supplies like paper, pens, and folders.

Depreciation and amortization: The cost of depreciating or amortizing the value of long-term assets such as buildings, equipment, or software.

Insurance: The cost of insurance premiums for general liability, property, and workers’ compensation insurance.

Professional services: The cost of hiring external consultants or contractors for services such as legal advice, accounting, or marketing.

Training and development: The cost of providing training and development programs for employees to improve their skills and knowledge.

Travel and entertainment: The cost of travel and entertainment expenses related to business operations, such as attending conferences or meetings with clients.

Examples of G&A Costs

Accounting and Auditing: The cost of hiring accountants and auditors to manage a company’s finances and ensure compliance with government regulations is an indirect cost that is typically included in the G&A rate.

Legal Services: The cost of hiring lawyers to provide legal advice and representation for a company is an indirect cost that is typically included in the G&A rate.

Human Resources: The cost of hiring and managing employees, including recruitment, training, and benefits administration, is an indirect cost that is typically included in the G&A rate.

Executive Salaries: The cost of paying the salaries of top executives and management personnel is an indirect cost that is typically included in the G&A rate.

What are the penalties of inaccurate indirect rates?

If your indirect rates are found to be incorrect or not in compliance with government regulations during a DCAA audit or review, you may face several consequences, including:

Financial Penalties: The government may impose financial penalties on your company if your indirect rates are found to be incorrect or unallowable. These penalties can be significant and can result in financial losses for your company.

Contract Termination: If your indirect rates are found to be noncompliant with government regulations, the government may terminate your contract. This can be a significant blow to your business and may make it difficult to secure future government contracts.

Reputation Damage: Noncompliance with government regulations can damage your company’s reputation and may make it more difficult to do business with the government in the future. This can also impact on your ability to secure contracts with other customers who may be concerned about your compliance history.

Increased Scrutiny: If your indirect rates are found to be noncompliant, you may be subject to increased scrutiny by the government and may face more frequent audits and reviews in the future.

Benefits of keeping your Indirect Rates low

Competitive Advantage: Companies with lower indirect rates are generally more competitive in the government contracting marketplace. Lower indirect rates mean lower costs, which can allow companies to bid more competitively on government contracts.

Increased Profit Margins: Lower indirect rates mean that more of the revenue from government contracts flows directly to the bottom line, resulting in increased profit margins for the company.

Better Cost Control: Companies with low indirect rates are generally more focused on controlling costs and managing their operations efficiently. This can result in better cost control and financial management practices throughout the organization.

Reduced Risk of Audit Findings: Companies with lower indirect rates are less likely to be subject to audit findings related to indirect costs, reducing the risk of financial penalties or contract termination.

Improved Cash Flow: Lower indirect rates mean that more cash is available for the company to reinvest in its operations, pay down debt, or distribute to shareholders.

Conclusion

An understanding of indirect rates and its effect on a government contractor profit margin is key to an organization’s success. These guidelines can appear complex, but with the tools available to aide in your management systems, such as Hour Timesheet, you can be confident that you are staying within them. Furthermore, recording data accurately allows for tracking of employee work output as well as efficiency in other areas of your business operations. With project tracking features and customizable reporting functions, Hour Timesheet makes it easier to get the most out of your team and keep accurate track of indirect rates. Don’t wait! Start today by signing up for your free 30-day trial with Hour Timesheet now.

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The Keys Understanding DCAA Compliance

The term ‘DCAA compliance’ when referring to your timekeeping procedures is often just thrown around. But what is DCAA compliance, and what does it mean for your business? If you don’t understand what that means, Keep reading this blog post for assistance for keys to understanding DCAA Compliant Timekeeping

What Is the DCAA?

What does DCAA stand for? 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. Its purpose is to review all contracts with outside vendors and suppliers to ensure that taxpayer money is being spent in the most appropriate manner. With approximately 7,500 contractors being reviewed and audited every year, the agency’s responsibilities are substantial making Understanding DCAA Compliance critical for government contractors.

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.

For companies seeking government contracts, adhering to the DCAA requirements is imperative. Those that are found to be noncompliant with the agency’s standards run the risk of being hit with significant penalties. These run the gamut from termination of contracts to fines to prison time depending on the severity of the infractions. One of the most severe consequences of noncompliance is debarment, which means the contractor in question is no longer allowed to be considered for future federal contracts.

What Is an Audit and How does it Relate to Understanding DCAA Compliance?

Audits and reviews are the primary method the DCAA uses to determine whether or not a contractor is complying with the appropriate standards. What is a DCAA review? These typically examine a wide range of items, including direct costs, indirect cost pools, allowable costs and more.

There are a wide range of audits that a contractor may be subjected to, depending on the nature of the standards being looked at and the possible infraction. For example, audits may include:

Pre-award surveys — These reviews are conducted primarily to determine whether or not the contractor’s accounting system is up to DCAA standards. They typically involve the contractor demonstrating the system for an auditor.
Forward pricing — Under this type of audit, the DCAA evaluates the contractor’s estimate of the project’s cost. They are usually performed before the contract is awarded.
Incurred costs — These audits determine how accurate a contractor’s annual allowable cost representations are. This is performed after the awarding of the contract to ensure what the contractor has estimated the costs to be is truly what was quoted.

Keys to Understanding DCAA Compliance

Referring to Federal Acquisition Regulation and Cost Accounting Standards, respectively, FAR and CAS are rule sets used by the DCAA to establish its standards. FAR represents the guidelines for government procurement and is used by all federal agencies whenever purchasing goods or services. On the other hand, CAS refers to the rules used to establish consistency for government contractors’ cost accounting practices. This includes outlining how charges to contracts can be made and exactly what can be charged to them. Both of these frameworks inform and influence the DCAA regulations. Keys to Understanding DCAA Compliance are below.

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

The employee handbook must address all critical elements of an adequate timekeeping system. Companies must provide all employees with an up-to-date policy or procedure handbook 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 and alerts to ensure employee 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. All employees must record 100% of the time worked.

Whether working on a government contract or commercial work, all time worked must be accounted for. With the Hour Timesheet mobile app the employees and 1099’s can add time from anywhere, whether they’re working from home or the office.

4. Employees must record all indirect time not identifiable to a given project to proper indirect cost accounts (Overhead, G&A, B&P, R&D, 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.

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

Hour Timesheet allows for leave tracking any kind

6. The system administrator(s) should initiate all job codes that appear in the timekeeping system.

Charge codes must be provided to employees authorized to work on a given project.

7. All timesheet entries must be recorded by the employee.

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.

8. Employees must charge to the appropriate project

Whenever the employee completes work or tasks, they must charge it accurately and directly to that project. 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.

9. Employees may not work on indirect tasks and record time as direct costs

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.

10. The employee is required to initiate all correction timesheet entries.

The employee must record all corrected timesheet data that includes a detailed audit trail. An audit trail is critical to remaining DCAA compliant.

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 the HTS administrator may make such changes with the employee’s consent. The DCAA may analyze each entry on an employee’s timesheet. 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 un-editable audit log that proper documentation. This activity log will include all of all the additions, deletions, approvals, and modifications made to your employees’ timesheets.

11. 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.

12. All employees should be provided documented timekeeping training.

The company’s employee handbook or new-hire orientation program typically includes this training. Either way the employee should become familiar with the company’s timekeeping policy before they begin working.

13. In order to be DCAA compliant, the company must retain timesheet data for at least two years.

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

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

Unfortunately, not knowing the keys to understand DCAA timekeeping compliance is one of the primary reasons 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.

We Can Help

What is DCAA accounting, and how can you ensure your organization is in compliance? Choosing Hour Timesheet’s solutions for your timekeeping provides you with a DCAA-compliant answer that is easy for you and your employees to use. Our simple, real-time time-tracking platform gives you the tools and resources needed to stay compliant and prepared for any audits that might come your way. To learn more about our software the Keys to Understanding DCAA Compliance and what it can do for you, reach out and speak with one of our representatives today.

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Is QuickBooks a DCAA Approved Accounting System?

When you are in the business of federal government contracts, DCAA compliance is non-negotiable. DCAA stands for the Defense Contract Audit Agency. QuickBooks provides an accounting package that is well suited for small to mid-sized businesses, but often, the question arises; Is QuickBooks a DCAA Approved Accounting System?. QuickBooks offers two options and several different versions depending on your unique business requirements. QuickBooks offers both a desktop solution and an online tool, and either can be set up to be DCAA/Federal Acquisition Regulation (FAR) Compliant, especially with our DCAA compliance checklist. The keys are Job Costing and Labor Distribution.

DCAA Contracts

Potential government contractors who wish to bid on certain types of contracts should know that although the contracts vary, there is a difference between direct costs and indirect costs.

A direct cost is a cost that can be tied directly to the production of goods or services. A direct cost may be variable. An example of a direct cost is labor cost or manufacturing supplies.
Indirect cost allocations include overhead expenses such as rent and insurances and general expenses like accounting department costs. Indirect costs are harder to pin down and harder to allocate to a specific project or item. Using a timesheet tracking application in conjunction with an accounting package like Quickbooks, you can better control the indirect cost allocations, particularly for general and administrative expenses, to the correct cost objective.
One type of DCAA contract is called a cost reimbursable contract, where the direct cost and a percentage of the indirect costs are paid. This type of contract requires the accounting system approval under FAR subpart 16.3.

What is QuickBooks? And Is QuickBooks a DCAA Approved Accounting System?

QuickBooks is an accounting software solution that allows for integration across multiple platforms to make payroll quick and easy. They have two main products that make their service worthwhile.

QuickBooks Desktop

This interface of web-based time tracking software and payroll makes QuickBooks Desktop an ideal tool for DCAA Compliance. We base this on our experience with hundreds of clients over several decades. Furthermore, the QuickBooks Desktop integrated payroll module permits the charging of time directly to the General Ledger. This includes Customer, Job, and Service Items, which are immensely beneficial.

QuickBooks Online

QuickBooks Online is a cloud-based solution that is not, at the outset, designed to meet the FAR and DCAA requirements and has some limitations. The good news is that there are ways to make the QuickBooks Online system meet all the government’s requirements without too much effort.

What is DCAA Compliant Accounting Software?

DCAA-compliant accounting software is software that meets DCAA requirements. Your chosen accounting package – in this case, QuickBooks is set up to meet the requirements. Timekeeping and the allocation of costs are of particular importance. Consequently, QuickBooks Time Tracking software integration is an essential aspect of DCAA compliance.

Refer to DCAA compliance explained for more information.

Any accounting package set up to meet compliance requirements will be subject to strict internal controls to ensure financial integrity. One of these internal controls should be an internal accounting system audit regularly. There should also be regular checks on a monthly basis to see that all the income and expenditures balance.

The Benefits of Being DCAA Compliant for Small Businesses

If you are DCAA compliant, you may be one step closer to securing funding from the federal government programs SBIR and STTR. These programs gear towards supporting innovation and technology in small businesses. Integrating Hour Timesheet’s DCAA-compliant timesheet with QuickBooks will be invaluable in pursuing this kind of opportunity.

Is QuickBooks DCAA Compliant?

Yes, QuickBooks can be set up to be DCAA compliant, but it doesn’t automatically meet DCAA standards and requires additional configuration to be compliant. Certain elements of the software do meet the standards, including the ability to properly segregate direct costs from indirect costs. This can be accomplished by using the software’s reporting features to separate costs by project as well as items versus expenses. When searching for DCAA-compliant accounting software, QuickBooks also operates under general ledger control, which is required under the standards. Another example of how the platform conforms with DCAA standards is its support of separating preproduction costs in a number of ways.

On the other hand, as a DCAA-compliant accounting system, QuickBooks as it is distributed falls short in a number of ways. For instance, it does not automatically calculate indirect rates per your company’s rate structure. It also fails to offer time tracking capabilities required to identify employees’ work according to intermediate or final cost objectives. Satisfying these and other requirements calls for expert configuration of the platform as well as integration with time tracking software that provides additional functionality. These are areas in which Hour Timesheet’s solutions can be of exceptional benefit to your enterprise. We provide you with the expertise necessary to make the most of your QuickBooks setup and ensure you are making QuickBooks DCAA compliant.

There are three areas to consider:

Chart of Accounts establishment
Flow of transactions
Cost and Computations

It’s important to note that one should always bear Generally Accepted Accounting Principles (GAAP) in mind when analyzing your accounting system.

Even if you understand all the regulations, it is still best to refer to the DCAA compliance checklist. Where possible, seek professional assistance! Be ready to implement policies and procedures that need to be applied consistently across your business.

Keys to Compliance

Employee time tracking posted daily with required explanations for edits and record locking.
Printable timesheet reports.
Policies & Procedures oriented toward FAR Compliance Criteria found in DCAA’s SF-1408 pre-award audit checklist.
Consistently applied labor dollar distribution accommodating uncompensated OT for salary exempt personnel.
Indirect Cost Pools and the ability to compute and forecast Indirect Rates applied to Direct Costs under Cost Reimbursable Awards.
Progress billing + Cumulative dollar values reported against award ceilings tied to cost proposals.
Identification and segregation of Unallowable Costs as defined per FAR 31.205.

This isn’t a comprehensive list, but it gives a good idea of what to expect. One of the best ways to help navigate QuickBooks DCAA compliance with timekeeping and accounting systems is to partner with a company that has a demonstrated knowledge of government contracts. It can also be helpful to review multiple services and look for important features in DCAA compliant time tracking systems.

What Happens if You Fail a DCAA Audit?

You may lose your contract or face a suspension of payment. Be assiduously aware of remaining compliant. Floor checks are routine, and timekeeping records are an essential part of your compliance. A floor check is the DCAA’s way of verifying your employees.

One way to help ensure you pass your DCAA audit is to get any requested information to your auditors quickly. This can speed up your audit, and help ensure the DCAA auditor has all the information they need. In order to do this, it’s best practice to keep excellent records and track every process and transaction. Hour Timesheet allows businesses to keep these kinds of records, in a convenient, cloud-based place.

Is QuickBooks a DCAA Approved Accounting System? Let Hour Timesheet help!

Hour Timesheet isn’t just a timekeeping software provider for government contracts looking to pass a DCAA audit. We also partner with dozens of CPA firms and consultants who can assist you with the entire life cycle of getting a DCAA-approved accounting system. Call Us Today! We can introduce you to our extensive list of experienced partners and answer the million dollar question…Is QuickBooks a DCAA Approved Accounting System?

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8a Firms and DCAA Compliance

Are you 8a certified small business and looking to stay compliant with DCAA standards? The Defense Contract Audit Agency (DCAA) is responsible for auditing and monitoring government contracts. As such, all businesses that contract with the U.S. Government must comply with the DCAA’s requirements. Here’s what you need to know about 8a firms and DCAA compliance, and how it affects your business.

What is DCAA and How does it Relate to 8a Firms and DCAA Compliance?

The Defense Contract Audit Agency (DCAA) is a federal agency within the U.S. Department of Defense (DoD). Its mission is to provide audit and financial advisory services for DoD acquisitions in support of national security objectives. It’s important for small businesses that contract with the government to understand their responsibilities under the DCAA guidelines and remain compliant at all times in order to avoid any issues or penalties from non-compliance.

Understanding Your Responsibilities Under The DCAA Guidelines

The first step towards complying with the DCAA guidelines is understanding them clearly. This includes knowing your obligations related to timekeeping, accounting, payroll, labor costs and more. You must also make sure that your accounting systems are up-to-date and accurate so that they can be easily audited by the DCAA if necessary. Additionally, you should ensure that all of your employee records are kept properly as required by law, as these will also be subject to review during an audit from the DCAA. Finally, it’s important to keep accurate records of all transactions related to your contracts with the U.S. Government so that you can demonstrate your compliance when needed.

How Can You Ensure You Are Compliant?

There are several steps you can take to make sure you remain compliant with the DCAA guidelines at all times:
First, create a comprehensive audit plan for yourself and your staff that outlines what needs to be done in order to stay compliant with all regulations set forth by the DCAA; this should include regular internal audits as well as external audits performed by certified professionals whenever possible.

Second, work closely with experts who understand the complexities of federal contracting requirements so they can provide guidance and advice on keeping up-to-date on changes in regulations.

Thirdly, make sure you have adequate training in place for yourself and your staff so everyone understands their roles and responsibilities when it comes to staying compliant; finally, invest in technology solutions such as software or apps designed specifically for helping companies stay in compliance with governmental regulations like those set forth by the DCAA—this could save you time, money and headaches down the road!

8a Firms and DCAA Compliance…Conclusion:

In conclusion, 8a certified business owners who contract with the US Federal Government must understand their responsibilities under the Defense Contract Audit Agency’s guidelines so they can remain compliant at all times. While there may seem like a lot of information involved in making sure this happens correctly, taking some basic steps like creating an audit plan, working closely with experts in federal contracting law, providing training for employees on compliance procedures and investing in technology solutions like Hour Timesheet specifically designed for helping companies remain compliant can greatly reduce stress levels while ensuring successful outcomes during audits from the DCAA!

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DCAA Compliance Guidelines For Your Small Business

Small business contractors working for the Department of Defense (DoD) have a duty to achieve and maintain compliance with strict government regulations and requirements. Failing to meet DCAA compliance guidelines could endanger a contractor’s current engagement or bar them from applying for and obtaining future federal contract opportunities.

Regulations and requirements specific to contractors are governed and monitored by the Defense Contract Audit Agency (DCAA) and include providing your employees with everything they need to do their jobs with ease and success.

If you are seeking your first or next government contract, we want to help you achieve and maintain the required DCAA compliance for small business owners.

Tips and Strategies for Your Small Business to Maintain Continuous DCAA Compliance

The most important thing to remember working with the DOD is how critical it is that you don’t fall behind standard DCAA Compliance Guidelines, which primarily entails keeping track of your business finances and your employees’ time tracking to ensure timely regular payments and their ongoing productivity and success.

Our team at Hour Timesheet understands how much you have to think about. With your business’s success in mind, we have compiled our three top tips and strategies to help you keep your small business DCAA compliant to protect your project, small business and future federal prospects.

1. Follow DCAA Compliance Guidelines for your accounting processes

The best way to prepare for an unanticipated audit is to set yourself up for continuous preparedness by instituting standard policies and procedures to keep everything running smoothly. If everyone is on the same page and can access records essential for audits in an instant, you won’t need to worry about moments of panic and chaos if you get the auditing call or visit.

We recommend that you make it regular practice to organize all invoices, track expenses, account for employee timesheets and check everything twice to ensure optimal efficiency, which can empower your team to maintain DCAA compliance.

2. Back up your pricing for proposals

Each time you create a proposal, you need to bid appropriately and back up your pricing with supporting research results and data. Make this task a priority because, if you have to undergo a DCAA audit, they will want this information, and it’s essential that you can easily provide all the data that supports your requested budget and subsequent uses of the funds.

Create a proposal template that allows you to include critical information, such as contract rates, labor hours and any other costs in an easily accessible way that you can explain to the auditors without hesitation.

3. Work with industry thought leaders who can help you maintain DCAA compliance with confidence

It’s important that you don’t underestimate how vital it is that you can prove you have consistently maintained DCAA compliance guidelines. Our team at Hour Timesheet works daily to continue enhancing our timekeeping software to help you prepare for an audit as if it could happen at any moment. The best part is that you will be prepared if it does, and you can relax in the meantime.

Contact us to learn more about our simple employee time tracking system designed for DCAA compliance.

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What Is the Difference Between DCMA and DCAA?

If your organization has been awarded a government contract, you need to understand two government contract agencies that require your compliance: DCAA (Defense Audit Contract Agency) vs. DCMA (Defense Contract Management Agency).

As of December 2021, the Department of Defense (DoD) reported working with approximately 20,000 contractors within the DOD’s area of responsibility.

With so many government contract organizations spread throughout the world, it’s crucial that the U.S. government develops and regularly updates regulations that keep the DoD and contract organizations aligned in their goals and according to government regulations.

What Is the the Defense Audit Contract Agency (DCAA)?

The Defense Contract Audit Agency (DCAA) is a government agency connected to the DoD, working on behalf of various government agencies.

The DCAA functions to ensure consistent compliance with government regulations such as Defense Federal Acquisitions Supplement (DFARS), the Cost Accounting Standards (CAS) and the Federal Acquisition Regulation (FAR).

What Does the DCAA Audit Cover, Entail and Establish?

The DCAA performs regular audits on government contracted organizations to ensure that each one follows the government’s recommendations and regulations to the letter. Every contractor that applies for and is awarded a government contract understands that it could be selected to undergo a Defense Audit Contract Agency audit at any time.

DCAA compliance means that, per the outcome of the audit, the government contractor follows the federally established guidelines and may proceed with the contract.

Who Needs to Maintain DCAA Compliance?

Every contractor awarded a government contract from the DOD and other government agencies must follow all the federally established laws and guidelines. It is impossible to know if or when a contractor might receive an audit, so it is imperative that contractors commit to continuous compliance.

How to Stay DCAA Compliant

Government contractors must focus on documenting and accounting for various expenditures related to their business, including:

Hiring
Employee time management and payroll
Equipment needs
Any other financial factors related to the organization’s ongoing operations

The Risks and Penalties of Non-Compliance

If a government contractor is found to be non-compliant in one or more areas during an audit, they risk not being able to apply for future government contracts offered by the DoD.

What Is DCMA?

The Defense Contract Management Agency (DCMA) focuses on a part of the DoD that works directly with government contractors to ensure the government is getting the most value and highest quality from each mutual engagement. Operating under the direction of the Under Secretary of Defense for Acquisition, Technology and Logistics, the DCMA is a relatively new area and focal point.

The agency manages each contract issued by the DoD and oversees matters like the delivery of materials and disbursement of requested funds for government projects.

The DCMA is more proactive and cooperative, working in tandem with government contractors to ensure mutual success, rather than what is more of an accountability or watchdog function of the DCAA (Defense Contract Auditing Agency).

The Compliance Requirements for the DCMA

Government contractors must meet certain criteria and expectations to ensure DCMA compliance, including setting and adhering to a specific schedule agreed to in the proposal. They must also prove that they are compliant with agreed upon bookkeeping, time tracking and finances.

The DoD provides each government contractor with at least 32 specific guidelines to follow.

Similar to the DCAA non-compliance penalties, government contractors may lose the ability to apply for and secure future government contracts. Worse penalties involve the cancellation of the current contract.

The DCMA vs. DCAA: How Different Are They?

The DCMA and DCAA primarily differ in the way that each agency interacts with government contractors and the overarching requirements.

Our Time Tracking Software Can Keep You DCAA Compliant Without Worry

Our time tracking solutions at Hour Timesheet can help you achieve and maintain ongoing, pitch perfect DCAA compliance as a government contractor to keep your current contract and receive many more.

If you’re ready to tighten up your time tracking activities and keep the Defense Contract Auditing Agency happy, start your free trial today

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How To Keep Track Of Employee Hours

Time tracking remains the most effective way to measure your employees’ value to your business. It is also the most practical way to pay them for their commitment and service to your organization. That’s one reason why it is so important to find out how to keep track of employee hours.

Additional benefits of learning how to track employee time worked include Defense Contract Audit Agency (DCAA) compliance, accurate payroll reporting, employee performance, time management, project progress, billing clients, and identifying potential issues and problems. Now that we have some thoughts in mind about why employee time tracking is so important, let’s dive deeper into this topic.

Tracking Employee Work Hours

Considering all the benefits of tracking employee time, you are probably wondering about the best way to do it. These days, you have plenty of options, ranging from manual pen and paper techniques and desktop timeclocks to comprehensive automated time tracking software programs that do it all.

Like most businesses, you probably don’t have time to take the traditional route and would rather find a user-friendly, high-functioning and customizable software tracking tool. You might find yourself lost in a sea of time tracking technology, requiring guidance regarding what you need along with best practices and standards.

What to Look for in Time Tracking Software

You might not know how to start your search with so many software options available. Here are four things to look for in time tracking software.

Payroll Integration

Payroll integration allows your payroll system to sync with other software programs. With integrated payroll capabilities, you can quickly and easily access vital information, including historical time and attendance records, all signed documentation from all employees, information about employees’ benefits and tax details, and workers’ compensation files.

Track Employee Hours and Job Costs

Job costing is a method included in different time tracking software that allows you to track all costs and revenue attached to each project. You can track everything from human resource investments to material costs and more.

Leave Tracking

Leave tracking is a crucial feature included with time tracking software, ensuring that your HR team and employees always know the status of vacation, PTO and sick time. Anyone who has managed leave time manually knows that requests for leave slips can fall through the cracks. Leave tracking also lets employees check their available time to avoid any missteps or confusion before making vacation plans. Finally, time tracking software’s inclusion of leave tracking lets everyone in the office know when an employee is out of the office.

Location Tracking

Employees who work remotely or who are frequently away from their desks can let other workspace members know where they are with location tracking capabilities enabling them to not only track employee work hours from Hour Timesheet’s simple and free mobile app.

Frequently Asked Questions

Is your software DCAA compliant?

Yes! Hour Timesheet provides detailed audit documentation, manager approvals and daily employee reminders to enter time tracking information, including authorized charge codes.

Will my team still need to do any manual data entry?

You won’t need to do much manual data entry, if any. We have automated and streamlined nearly every facet of employee time tracking.

Our Solutions Will Streamline Your Time Tracking Processes

At Hour Timesheet, our time tracking software will be a game-changer for your payroll department and employees. We offer an integrated system that ties everything together to keep valuable employee information at your fingertips. You won’t need to wonder about how to track workforce hours again.

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Facts about Employee Time Tracking

6 Facts about Employee Time Tracking

Despite the mixed feelings on time tracking, having the right time management software can be beneficial to both workers and business. Below are several time management statistics and six Facts about Employee Time Tracking to help shed some light on the process and its potential value for organizations of all shapes and sizes.

Time Management Defined

First, what does time management refer to? Essentially, it is the use of a system to log and monitor a person’s activities. Many organizations utilize these systems to track employee hours and how they are using their time on the clock. However, it can also refer to tracking personal time through a private app as well as organization-wide project time tracking, which can be much more complex.

1. Time Tracking May Improve Time Management Skills

First on the list of Facts about Employee Time Tracking is that using even a simple software to track time can help hone a person’s time management capabilities. Such self-development gives an advantage to both individuals and companies. For instance, one in eight surveyed people reported they never feel under control at work. However, when armed with effective time management, it’s possible to gain control over the demands of the day through organization and improved productivity.

2. Employee timekeeping Identifies Areas of Improvement

Did you know the average employee is only productive for two hours and 23 minutes each day? That means a lot of time is being spent on non-work-related tasks such as browsing social media and making personal calls. Although it may appear to take up time to log the employee’s activities, it works to reveal timeframes or tasks where work is not being executed appropriately.

3. Workers in the U.S. Spend 2.5+ Hours on Emails Daily

Drafting and replying to emails is an essential part of many jobs. That being said, a lot of time is devoted to the task and at times, unjustifiably so. The right time management software could expose such waste and steps can then be taken to reduce squandered time.

4. Employee Timekeeping Errors Lead to 50 Million Lost Hours in the U.S.

5. Time of Day Impacts Productivity Levels

According to a 2021 report, productivity rates drop down significantly, all the way to 45%, between the hours of noon and 3 p.m. Freelancers also see a dip, with activity rates falling to 43% between 3-6 p.m.

6. Time Theft Is a Challenge for 75% of Businesses

Time theft can be a serious problem for any size of business. One study even found it causes U.S. employers to lose $11 billion annually. Fortunately, time tracking has been shown to reduce lapses in productivity up to 80% by combating the various form of time theft, such as buddy punching, finishing early and using work time to engage in personal activities.

Don’t Let Valuable Time Slip Away

These industry Facts about Employee Time Tracking and statistics only scratch the surface of the potential benefits time management has in store. If you want to see just how effective time management could be for your business, consider upgrading to Hour Timesheet’s innovative time tracking software. Our easy-to-use platform eliminates hours of tedious manual data entry and streamlines your business’s ability to track employee and contractor hours in real time.

Reach out to us today to learn more!

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Myths about Time Management Software | Hour Timesheet

Time management is essential to your business because it lets you increase the quality of your work and services. Have you ever thought about implementing time management software? This lets you and your employees keep track of the time spent working on various projects and tasks, which can lead to improved productivity and morale. This software can also help your team learn how to make the best use of the day. Let’s dispel some common time management myths. Read on to learn more.

1. Time Management Software Is Too Complex

Don’t believe this myth; time management software isn’t difficult to learn. Although it’s complex in functionality, it’s designed to be easy to use. Individuals usually learn how to use the technology quickly.

While some time management software tools need mastering, others are straightforward. It all depends on finding the right software and/or tools that fit your preferences and needs. In some cases, these tools can be integrated with other productivity programs or apps.

2. Time Management Software Is Costly

Avoiding time management software because it seems too expensive? If so, you’re not alone, however, not all time management software is expensive because most of them are cloud-based. This means it can be paid for monthly as a subscription. Additionally, you may already own free or low-cost options, enabling you to save money.

3. Time Management Software Is Only Suitable for Managers or Specialists

You don’t have to be a manager or IT specialist to use time management software. It can be a helpful and powerful tool for anyone, regardless of one’s position, work status or job experience. It can also help workers monitor progress on tasks as well as stay accountable.

4. Time Management Software Can Be a Distraction

This myth is quite the contrary. In fact, time management software can help employees stay focused on their work and meet deadlines. Doing so helps workers get the most done in the time allotted for each task. This means more productivity and less wasted effort.

Why Choose Us for Your Time Management Software Needs?

Hour Timesheet is proud to provide your small- or medium-sized company with a DCAA compliant time tracking solution that can improve your processes. While complex and robust in functionality, our time management software is easy to use as it has a simple user interface. We can also ensure that you are always in compliance with DCAA timekeeping requirements.

Have a remote workforce? If so, our Hour Timesheet Mobile© app can help your remote workers track breaks, drive time, lunch, employee location and more. It can even integrate with other helpful accounting and HR apps. You can sign up for a free 30-day trail account to try our software. Our experts can even help you setup your account at no extra charge.

If you’re ready to streamline your timekeeping processes, reach out to us today.

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Tips for Managing Remote Teams with Time Tracking Software

Not too many years ago, the idea of working from home was met with general skepticism from the business world. Today, however, it seems as though remote work is here to stay. The benefits for employees are numerous, and employers are seeing higher workforce satisfaction as a result. Despite the advantages it provides, there are some challenges that come from managing remote teams.

One of the biggest of these is keeping track of everyone’s hours. Fortunately, time tracking software can help. Hour Timesheet’s powerful platform enables your team to check in from wherever they are and keep you appraised of what they’re doing with regular reports delivered straight to you. To help you make the most of this arrangement, here are some tips for managing remote teams with time tracking software.

Resist the Urge to Micromanage

Just because you’re not physically hovering over employees’ shoulders doesn’t mean you’re not stressing them out. You may be tempted to send regular check-in emails or Slack messages to keep tabs on everyone’s progress, but this can become a real nuisance. Using time tracking software means you can check in with a glance at your dashboard, which makes nagging virtually unnecessary.

Lay Out the Expectations Clearly

One of the most important tips to manage remote teams is to make sure everyone knows what the boundaries are from the outset. Leaving things like start times and lunch breaks vague can encourage some people to take advantage. If you expect everyone to be logged in by 8 am, you need to make that clear immediately and in no uncertain terms. Having a time tracking platform is the easiest way to make sure everyone is holding up their end of the bargain.

Choose a Platform That Integrates With Your Systems

A time tracking solution is not as valuable as it could be if it is siloed from the rest of your processes. That’s why it’s important to choose one that connects with your payroll software and other systems such as QuickBooks. It’s much more likely that everyone will be onboard with regularly using it and not leaving it to gather dust.

Managing Remote Teams with Hour Timesheet Promote Transparency

Implementing time tracking software keeps your team honest and engaged because they will know you can see how they’re spending their time at any given moment. This takes the burden of monitoring them off your shoulders and ensures everyone knows what’s going on at all times.

Why Choose Hour Timesheet to Manage your Remote Workers?

With a wide range of features including mobile app integration, location tracking and leave time management, our solution is the perfect way to managing remote teams. Our software is DCAA compliant, meaning you can be sure it fulfills all the highest expectations for government contracts.

To learn more about what we have to offer and how it can benefit your business, reach out to speak with us today or schedule your live demo.

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