Timekeeping Compliance

Timekeeping compliance in government contracting means maintaining accurate, contemporaneous labor records that allow every hour charged to a federal contract to be traced, verified, and audited by the Defense Contract Audit Agency or other cognizant audit authority.

What is Timekeeping Compliance?

Labor is typically the largest cost on government service contracts, making the timekeeping system the backbone of a DCAA-compliant accounting environment. FAR 31.201-2 requires that costs be authorized by the contractor's approved policies and adequately documented. DCAA's timekeeping standards require that employees record time daily (or no less frequently than weekly), charge hours to the correct contract or indirect account, and certify their own timesheets without supervisor alteration.

Key requirements include: employees must enter their own time (supervisors may not enter time on behalf of employees); labor transfers between contracts must be documented and approved; the system must flag unsupported labor charges; and historical periods must be locked so prior charges cannot be modified without an audit trail.

DCAA regularly conducts floor checks, unannounced visits where auditors ask employees to produce their timesheets and verify charges match current assignments. Employees who cannot explain what they are working on, or whose timesheets do not match their actual work, create findings that can escalate to fraud referrals. Uncompensated overtime must also be tracked and disclosed if it is material to labor cost calculations.

Why timekeeping compliance matters for government contractors

Labor mischarging, intentional or inadvertent, is one of the most common triggers for False Claims Act investigations and DCAA findings. Even a single floor check finding can lead to a formal accounting system deficiency designation, which suspends cost reimbursements and jeopardizes contract award eligibility.

Example

A cybersecurity firm employs 40 engineers on multiple DoD task orders. DCAA conducts an unannounced floor check and interviews six employees. One employee is charging 8 hours per day to a specific task order but tells the auditor they have been working on a different contract for the past two weeks. DCAA issues a timekeeping deficiency finding. The firm responds by implementing daily timesheet certification controls and a supervisor review workflow, which DCAA accepts as a corrective action.

Frequently Asked Questions

Do employees need to enter time every single day?

DCAA strongly prefers daily time entry, and auditors view weekly or less-frequent entry with skepticism. While the FAR does not specify a daily requirement explicitly, DCAA guidance treats contemporaneous entry as a fundamental control. Many GovCon accounting platforms enforce daily submission through automatic reminders.

Can a manager correct an employee's timesheet?

A manager may remind an employee to correct an error, but the employee must make the correction and certify it. Supervisors who alter employee timesheets without the employee's knowledge create a significant audit risk and potential fraud exposure.

What is a DCAA floor check?

A floor check is an unannounced DCAA audit visit to a contractor's facility. Auditors select a sample of employees and verify that their current timesheet entries match the work they are actually performing. Discrepancies trigger formal findings that may expand into broader accounting system reviews.

What happens if labor is misallocated between contracts?

Misallocated labor must be corrected through a labor redistribution entry with documented justification. Patterns of misallocation, even if corrected, can indicate systemic control weaknesses that DCAA will escalate in its risk assessment of the contractor.