"All employees of Government Contractors must comply with the DCAA (Defense Contract Audit Agency) regulations and Federal Accounting Regulations (FAR). Failure to comply with such rules may result in penalties and lose government contracts"
Defense Contract Audit Agency

What is DCAA Compliance?

DCAA compliance is about following its recommendations and guidance to remain compliant with federal law regarding government contracts. DCAA audits are driven by the rules outlined in FAR, CAS and GAGAS.

For timekeeping (and accounting) DCAA requirements need to be implemented in the organization to ensure prevention of fraudulent billing to the government. Note that this means that the submitted timesheets become legal documents of the company.

The primary area of emphasis includes:

  1. Internal control systems
  2. Management policies
  3. Accuracy and reasonableness of cost representations
  4. Adequacy and reliability of records and accounting systems
  5. Financial capability, and
  6. Contractor compliance with contractual provisions having accounting or economic significance such as the cost principles

Timesheet is an important part of DCAA compliance because information generated from timesheets is also used for payroll, billing, project planning, cost accounting and pricing purposes.

DCAA Audits

DCAA has set up a goal of doing unannounced floor checks yearly (and sometimes as often as twice a year) at the government contractor site or the vendor work site. To comply with these audits, various guidelines are provided by the DCAA. During these checks, DCAA may talk to the employees and look at whether the timesheets are completed daily (and not done backdated or in the future). If there is a change made to the timesheet, they will like to see the reason for the change.

Also, there is other contractor specific audits that may occur either in the proposal stage (generally for fixed-price contracts) or in project execution stage (for variable price contracts and Time and Labor contracts). These audits may cover accounting procedures, adequacy of the accounting systems etc.

More information on DCAA Real Time Labor Evaluations .

Compliance Criteria

According to research done by Microsoft, no silver bullet solution guarantees compliance with the DCAA. Instead, contractors need to:

  1. Invest in proper procedures using the guidelines of the DCAA and FAR procedures.
  2. Creating a proper procedure in your company is more important than buying an expensive system that claims to do most of the things for you.
  3. DCAA does not mandate the use of any timekeeping system for compliance. Paper-based system or Excel-based timesheet are equally good as long as they comply with the guidelines. The only problem with a proper paper-based or excel based system is that they are difficult to maintain and becomes more expensive in the long run.

Guidelines for DCAA Time Tracking

Following are the general guidelines (but not limited to) for an accurate time tracking system to comply with the DCAA audits

  1. Timesheet must be filled in each day

    All work hours should be filled in and saved by the end of each working day. OfficeClip Timesheet has a DCAA option and when enabled creates a prompt for the user to save time daily. Manager can also create a report of all time recorded.

    DCAA Compliance Setup

  2. Any change in already saved timesheet should also contain a reason

    Changes to the recorded time should automatically prompt the employee to write a reason code. This reason code is then recorded in the timekeeping history.

    DCAA Compliant Timesheet

  3. Clearly defined procedures and instructions for accurately recording work hours

    DCAA mandates clearly defined procedures and instructions for accurately reporting regular and overtime hours. Organization must put checks and balances in place to catch mistakes and fraudulent time entries.

    DCAA Compliance Rules

  4. Employees should only record time on assigned projects

    Organization has responsibity to assign work items to employees and make sure that they only bill time on their assigned items.

    DCAA Compliance Allocation

    Rules can be set in OfficeClip timesheet to keep track of daily and weekly limits employee can work.

  5. The supervisor must approve all timesheet and log all changes

    When the DCAA mode is switched on, all changes to the timesheet are recorded. The recording shows the previous value (before change) and the new value (after change).

  6. Ability to create reports for auditor and managers

    An auditor may be able to see the history of all changes made to the timesheet. The system should be able to create reports regarding the employee timesheet to make sure that they are filled in a timely fashion.

    DCAA Compliance Report

  7. All timesheet must be signed (manually or electronically) and a trail is kept

    In an adequately audited electronic system, the signature is equivalent to user signing into the system using password and system storing all events in a non-editable format. Also, timesheets can be printed out and physically signed by the supervisor if needed.

    DCAA Compliance Signature

  8. Supplemental documents must be saved and can be produced to the auditors

    OfficeClip allows additional documents to be scanned and stored along with the timesheet for future reference.

How OfficeClip Timesheet handles DCAA requirements

One of the critical aspects for the auditors is to get the information they need at their fingertips. Using a timekeeping system like OfficeClip Timesheet allows compliance in the following way:

  • Recording time every day: DCAA option in OfficeClip Timesheet ensures recording of time on a daily basis and the Manager can also create a report of all time recorded even though the timesheet is sent for approval every week.
  • Any Change must have a reason: Any changes to the recorded time should automatically prompt the employee to write a reason code. This reason code is then recorded in the timekeeping history.
  • Timesheet Approval: Timesheet allows approval by the supervisor and each approval (or rejection) is recorded. Keep supervisor as well as accounting on the approval paths.
  • History of Changes: When the DCAA mode is switched on, all changes to the timesheet are recorded.
  • Rules: Setup rules for edit checks.
  • Audit Reports: OfficeClip Timesheet has various reports and one specific audit report to give auditors up to date status of the timesheet.
  • Accurate Charging time against charge code: Each employee can only see the charge codes they are supposed to bill. It reduces some inadvertent billing against incorrect charge codes.
  • Notification: Enable automatic reminders for timesheet completion.
  • Documents: Scan and store documents for future reference.

DCAA Compliance feature is only available in the enterprise edition of the timesheet.


Blog: DCAA compliance requirements for Timesheet
Blog: What to expect from DCAA Audits for Labor and Timekeeping


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