DCAA AUDIT: How to Survive Timesheet Regulations

Surviving the timesheet regulations for a DCAA audit is one of the most challenging aspects of an audit. According to the DCAA Contract Audit Manual:

Timekeeping procedures and controls on labor charges are areas of utmost concern. Unlike other costs, labor is not supported by external documentation or physical evidence to provide an independent check or balance. The key link in any sound labor time charging system is the individual employee. It is critical to labor charging internal control systems that management indoctrinates employees on their independent responsibility for accurately recording time charges. This is the single most important feature management can emphasize in recognizing its responsibility to owners, creditors, and customers to guard against fraud and waste in the labor charging functions. (CAM 4-15).

So what are some best practices that can be implemented so that individuals are able to contribute and be in compliance?

According to DCAA News, a group of writer’s and consultants who provide information about the Defense Contract Audit Agency (DCAA), “Use DCAA compliant software. These software packages will keep everything at hand and make sure that all needed reports are developed.”

Once you have the right software in place, here are some best practices for contractors looking to be in full compliance and to survive a DCAA audit.

Segregate responsibilities for labor-related activities. 

This means that the person in charge of payroll should not be the same person in charge of timekeeping; or a supervisor in charge of the contract budget should not be the one initiating employee charges. In smaller companies, less employees means that you may not be able to have as much segregation, but wherever possible keep potential conflicts of responsibility separate. The best way to do this is to set up clear procedures as well as deterrents to any possible violations. These procedures should be reiterated often to all employees to minimize confusion and instill the importance of diligence.  CAM 4a-15

Setup good timekeeping procedures.  

Some general best practices for keeping timesheets can be found here. But some practices that are especially crucial to observe for DCCA compliance include:

1. Recording time daily on employees timesheet-This can be effectively enforced if your timesheet software has an email reminder that can be automatically sent to employees if they have not submitted their timesheet by a certain hour each day.
2. Correctly distributing the hours among the correct projects and project numbers. It’s important to have timesheet software that keeps projects separate and assigns them to the correct employee.
3. Documentation in place to track changes to the timesheet is vital. Mistakes are bound to happen, but if you have the correct software, it can create the proper checks to ensure that if corrections are made they are properly recorded-the original entry, the changed entry, and documentation of agreement from the employee regarding the chance.
4. Recording paid and unpaid hours is necessary. So is verifying that the hours on the timesheet accurately reflect the actual hours worked as well as the proper cost objective at the end of each work period.

There is a lot that goes into proper timesheet management in order to be able to pass a DCAA audit. You can find a copy of the 2016 DCAA manual here.The following post will cover additional best practices for setting up the proper system to record working hours. The first step however is always the right timekeeping software to automate many of these regulations and keep you on track.