DCAA Compliant Timekeeping

When businesses win contracts from the US government, their timekeeping must be compliant with the Defense Contract Audit Agency (DCAA) and Department of Labor (DOL) regulations.

DCAA compliant timekeeping software

What is DCAA compliance?

When you obtain a government contract, DCAA (Defense Contract Audit Agency) is obliged to ensure your company follows the necessary timekeeping and accounting rules. On your part, this means your company should comply with the DCAA requirements to make it easier for the agency to assess you.

Observing these rules is known as DCAA compliance.

The DCAA timekeeping requirements regulate the documentation of employee working hours. In the government’s eyes, time tracking documents provide proof that no time was wasted and no fraud committed regarding work time.

That’s why, to achieve DCAA compliance, it's vital to keep clear timesheets that document each employee’s work hours.

DCAA performs unannounced audits to find out whether contractors abide by their regulations regarding timekeeping. Their representatives may visit your company and talk to employees to check whether everything is in order. This practice is known as a floor check.

A DCAA audit examines if businesses on government contracts do the following:

Benefits of DCAA compliant timekeeping

Following all the DCAA timekeeping requirements has many advantages apart from securing you a government contract. They include the following:

DCAA compliant timekeeping checklist

Navigating DCAA timekeeping requirements can get tiresome and complicated, and we’ll get to explaining them in detail in a second.

But first, here’s a simplified list of the DCAA time tracking conditions to help you get the gist of it:

DCAA timekeeping requirements

For a more in-depth understanding of DCAA compliant timekeeping, we take a closer look at the agency’s time tracking requirements.

DISCLAIMER: The timekeeping requirements listed here are taken from the Information for Contractors Pamphlet found on the DCAA website.

However, it’s worth noting that the official DCAA Contract Audit Manual (CAM) no longer matches the information found in the pamphlet, and some sections about timekeeping referenced in the CAM’s Keyword Index don’t exist in the relevant chapter of the manual (i.e. 5-909).

We advise you to contact your local DCAA field audit office (FAO) for more information.

Creating a company-wide timekeeping policy

The first step in ensuring compliance is to write up a formal timekeeping policy that reflects the DCAA requirements.

This policy will serve as a guide for your employees and provide the DCAA auditors with information on what to expect from your time tracking system.

Ensuring familiarity with timekeeping procedures

Everyone must be familiar with timekeeping procedures to ensure employees track their hours properly.

These procedures should be clearly laid out and easy to understand, for both employees and the supervisor.

During a floor check, DCAA representatives may question any employee, so it's important that everyone is prepared.

Practicing daily time tracking

All employees should track time every day individually in real-time. This also includes unpaid hours, overtime, and paid time off.

Employees should log their time only for the current day, and refrain from adding backdated entries or entries for the future.

Since all activities should be recorded daily as they happen, it's best to turn to a digital solution for this purpose, i.e. time tracking software, such as Clockify. It's easier to use, faster, and more precise than keeping time manually.

Also, with DCAA compliant timekeeping software, you and your employees will be able to add time anywhere, across multiple devices, and have all data synced.

With Clockify, employees can log their activities as time entries by using the work hours tracker.

Alternatively, they can manually enter time in the timesheet.

DCAA compliant timekeeping Logging time in the Timesheet

To prevent people from adding backdated entries, Clockify allows you to lock timesheets and implement timesheet approval. Enabling these features safeguards the time records against data tampering.

Keep in mind that supervisors aren't allowed to log time for their employees, unless there is a valid reason for it, such as timekeeping for employees on sick leave or a business trip.

Labor cost calculations

DCAA calculates your project costs based on the number of hours your team worked, regardless of whether they're paid by the hour or not.

Clockify automatically calculates labor costs based on hours worked. You simply define the hourly rate for each employee, and whenever you run a time report you'll also get labor costs, in addition to seeing hours worked.

Obligatory overtime recording

Regardless of whether employees are paid by the hour or have fixed salaries, all overtime must be recorded.

This is because employees' average hourly rate varies depending on the number of hours they've worked, i.e. it changes if they've worked overtime.

As mentioned in the previous point, without overtime recorded, it's impossible to calculate correct labor costs.

In Clockify, you can estimate the number of hours it'll take to finish each task assigned to a team member, which translates to how many regular working hours they are expected to spend on those tasks. You'll be able to track the progress of each project on the projects page (tracked vs estimated time) and the progress of each task once you click the chart icon of the individual project.

You'll be able to see the estimated vs tracked time for each task and check whether anyone worked overtime on their task or is close to the limits.

Alternatively, you can check your employees’ work hours in the weekly report and see whether anyone has clocked in over 8 hours a day or 40 hours per week.

DCAA compliant timekeeping labor cost calculated

There are two types of overtime:

Both types of overtime should be included in your employees' timesheets.

Not recording overtime can be interpreted as fraud. That’s because the company’s profits increase as every hour of overtime lowers the effective hourly rate it pays its exempt employees.

Need help calculating overtime pay? Try our Overtime Pay Calculators.

Recording paid time off

Paid time off includes:

By providing timekeeping data on paid time off, you ensure you avoid labor accounting fraud in the eyes of the government.

In general, all work-related time must be reported.

Categorizing all logged time by project/task

DCAA requires the company to specify on what task and project the employees spent their work time.

Each time an employee starts working on a task, they should create a time entry under the project the task belongs to.

To make sure all entries fall under a specific project in Clockify, you can go to your workspace settings and select "Project" as a required field. This way, employees won't be able to track time on an activity unless they select a project.

You can make tasks linked to specific projects by default, so when employees select a task, they will automatically select the project the task falls under as well.

To make sure all entries have a specified task, just select "Task" as a required field in your workspace settings. Employees won't be able to track time on an entry without selecting a task.

Recording all changes

All changes in time tracking data need to be recorded so that the government has an insight into why the changes were made.

To make sure all the data is correct and in sync, you can again turn to Clockify's locked timesheets feature. This way, no one will be able to make changes to entries after a date and time you select.

Clockify also allows you to keep track of all the changes via an audit log. By activating this feature, you can see who changed what and when.

Employees signing off time entries

All time entries must be personally signed off by the employee.

In Clockify, once the user is done with a task, they can click "End", and the time entry will be added to their personal list of all time entries they worked on.

Employees and supervisors co-approving time records

Users can submit their weekly timesheets for official approval. Then, supervisors can see their timesheets in a detailed report and make sure everything is categorized properly.

When employees and supervisors make sure everything is in order, admins can officially approve timesheets. Once a timesheet is approved, it can no longer be edited by anyone.

If there is a mistake and employees need to make changes to approved timesheets, they can log additional time and submit the new entry for approval.

Alternatively, admins can withdraw approval and edit the timesheet. When an admin withdraws approval, an audit log of the changes will remain so that you (and DCAA) can easily trace them.

Separation of timekeeping from labor-related responsibilities

You should separate responsibility for timekeeping from that for payroll and other labor-related activities.

The payroll staff should not have any control over employees’ time tracking data.

When the monthly time tracking is done, the manager can request that all employees generate summary reports on their tracked time and then export them as a PDF. Once the manager receives the reports, they can forward them to payroll.

Clockify summary report example

DCAA compliant timekeeping Summary report in timekeeping software

Allocating charges to appropriate cost objectives

Make sure to include the hourly rates for all team members in the workspace, to properly calculate billable hours

If you have a default hourly rate for the entire Clockify workspace, simply indicate the price in the workspace settings, and all projects and team members' rates will be calculated according to this rate.

You can also set specific hourly rates for each project on the project's page.

Alternatively, you can set hourly rates for individual team members working on each project, and the rates will be calculated based on that data.

Once you have the hourly rates sorted out, it'll be easy to calculate the price for each project, in compliance with the DCAA requirements.

To calculate the price for a project, go to the summary report, select the period when your team worked on that project, and filter results by the said project. You can then generate results as a PDF report and send it out.

Properly assigning tasks to employees

The project's manager should clearly indicate who's in charge of what task — the manager assigns the job, the employee performs it.

In Clockify, you can simply:

Securing time tracking software accounts

Employees must properly secure their accounts within the company’s time tracking software.

Once users receive invites to join Clockify, they get a link to generate their own, secure passwords.

DCAA encourages password changes at least once every 6 months to keep data completely secure.

If you want to go the extra mile to secure user access, you can rely on Clockify’s single sign-on system (SSO) feature that comes with the Enterprise plan.

Signing timesheets

All timesheets must be signed, preferably electronically.

But, the supervisor can print out the timesheets and manually sign them if necessary.

Issuing information on costs monthly

Information on costs and billing has to be issued at least once a month.

You can easily generate this data monthly in Clockify. Just go to the summary report, select "last month” in the date picker, and you'll get a chart showing how many hours you've tracked in the previous month.

You'll get info on how much of it was billable vs non-billable each day of the month. You can also find information about your earnings in the header of the chart.

Once you have the desired data, you can export the document as a PDF or Excel and prepare it for the DCAA representatives.

Exporting a report in Clockify

DCAA compliant timekeeping Excel export of timesheets and timekeeping records

Obligatory participation in timekeeping

Finally, all employees within the company must participate in timekeeping and cooperate to meet the necessary requirements.

NOTE: Using time tracking software is not enough to be DCAA compliant

Clockify does allow you to track time in a way that's compliant with the DCAA regulations, but using Clockify or any other time tracking software doesn’t make you DCAA compliant by default.

For example, in Clockify, admins can edit employees' timesheets (albeit, with a clear audit log). However, bear in mind that, according to DCAA, managers shouldn't edit employees’ timesheets without their explicit knowledge and consent. So, you’re responsible for using your timekeeping software in a DCAA compliant way.

In this particular case, you should lock time so that no one can edit it, at least not without a written trace (for audit purposes).

We advise you to consult with your legal department to learn more about the DCAA requirements and understand the best way to operate within the agency’s regulations.