DCAA Compliant Timekeeping

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

DCAA compliant timekeeping software

DCAA compliant timekeeping checklist

What is DCAA compliance?

Each time you obtain a government contract, the 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 to the DCAA requirements, in order to make it easier for the DCAA to assess you - this is known as DCAA Compliance.

These DCAA timekeeping requirements focus on documentation for employee working hours - in the eyes of the government, this documentation of the time tracked provides proof there was no time wasted, or fraud concerning the employee working hours.

Because of this, it's vital to keep and maintain clear, straightforward timesheets for each employee, timesheets that document these working hours.

DCAA performs unannounced audits to find out whether their requirements regarding timesheets are followed. Their representatives may visit your company and workplace and talk to employees to check whether everything is in order - this is known as the Floor Check.

In the case of a DCAA audit, business with DCAA-compliant contracts require daily time tracking, precise records with audit trails for all changes, extensive reporting, specific supervisor approvals and more.

Benefits of DCAA compliant timekeeping

Accurate DCAA timekeeping, and following all the DCAA requirements ensures:

DCAA timekeeping requirements


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 the employees and the supervisor.

During the Floor Check, DCAA representatives may select any employee to question, so it's important that everyone is familiar with the procedures.


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

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

Considering time is supposed to be recorded daily, as each activity happens, it's best to turn to a digital solution for this purpose, i.e. time tracking software. It's easier and faster to use, and more precise than adding time in ink.

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 together.

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

Or, 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 offers lock timesheets and timesheet approval. Enabling theses feature will keep all data accurate, as all time entries before a certain set point will be locked for adding or editing.

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 on a business trip.


You have to calculate labor cost in relation to the actual number of hours the employee has worked, even if he or she is on a fixed salary

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

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


All overtime must be recorded, regardless whether employees are paid by the hour, or have fixed salaries

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

Also, 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 much their regular working hours on such tasks are. 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 whether someone went into overtime with his or her task, or is close to the limits.

Alternatively, you can check your employees time results in the Weekly report and see whether someone 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: "uncompensated" and "unpaid" overtime:

They should both be included in your employees' timesheets.


All paid time-off must be recorded

This includes national holidays, sick leave, vacation, pay during bereavement.

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 - this is known as Total Time Accounting.


The DCAA requires the company to indicate on what task and project the employees spent their work time

Each time an employee starts working on a entry, he or she should indicate the project the entry belongs to.

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

When it comes to projects, each time you start working on an entry, indicate the task it encompass within that project, in the project picker. Each task is by default linked to a specific project, so when you select a task, you've automatically selected its project as well.

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


All changes on time data are to be recorded, so that the government has an insight in why the changes were made

To make sure all the data is correct and in sync, you can again turn to Clockify's lock timesheets feature, so no one will be able to make changes to entries before a certain point (except account administrators).

For complete change log, you can always check server logs to see what changes were made. If you're self‑hosting Clockify, you can check your server's logs any time you want and get a detailed picture of who changed what and when.


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

In Clockify, once the users is done with a task, he or she can click "End" and the time entry will be added to the list of time entries bellow.


Both the employees, and the supervisor, have reviewed and approved the time records

Users can submit their weekly timesheets for an official approval. Then, the admins can see their timesheets in the Detailed report and make sure everything is categorized properly.

Once everything is in order, admins can officially approve timesheets. Once a timesheets is approved, it can no longer be edited by anyone.

In case the timesheets needs mending, users can log additional time and submit the additional for approval again, or admins can withdraw approval and edit the timesheet. You can prevent adding backdated time by locking timesheets past a certain date.

When time becomes unapproved, a permanent copy of all the previously approved time entries (along with their original hourly rates) will be created in the Withdrawn tab for audit purpose, so you always have a written trace of all the changes.


You should separate timekeeping data from payroll, and from other areas of the business

Though there is a strong connection between time tracking data and payroll, as this data often determines the pay, these two components do not serve the same internal function.

The payroll staff should not have any control over the working hours of employees.

The employees should not adjust their time tracking data to fit with the payroll capacity.

Not complying to this rule would be "labor mischarge", which is an offense that carries up to 5 years in prison.

Once the time tracking for the month is done, the manager can request that all employees generate reports on their tracked time in the Summary report, and then export it as a PDF. Once the manager receives the reports, he or she can forward it to payroll.

DCAA compliant timekeeping Summary report in timekeeping software


Time is to be charged to clients by project or day

Make sure to include the hourly rates for all team members in the workspace, to properly calculate billable hours. If you hold a default hourly rate for the entire workspace, only indicate the price in the workspace settings, and all projects and team members' rates will be calculated according to this hourly rate.

For more specific results, indicate the hourly rates for each project on that project's page.

Or, indicate the hourly rate of individual team members working on each project, and the rates will be calculated according to these most specific results.

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 Summary report, select the time period when your team worked on that project, and filter by said project. You can then generate results as a PDF report, and send it out.


Jobs must be properly assigned 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.

Simply, define, and add tasks in the project's Task tab., add team members in the Team tab, and assign team members with the tasks corresponding to their job descriptions.


The employees must properly secure their accounts within time tracking software

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

A password-related DCAA timekeeping requirement states that passwords should be changed no less than every 6 months, to keep data completely secure.

The best way to secure access is by using a single sign-on system (SSO).


All timesheets must be signed, preferably electronically

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


Timesheets, information on costs and billing have 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 last month.

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

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

DCAA compliant timekeeping Excel export of timesheets and timekeeping records


All employees must participate in the timekeeping

To make sure everything is in order and that there are optimal conditions for DCAA Compliance, all employees within the company must participate in the timekeeping, and cooperate, to meet the necessary requirements.

Further reading

NOTE: Using 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 only as long as you use it in a way that's compliant with the DCAA regulations.

For example, in Clockify admins can edit employees' timesheets; but according to DCAA, admin shouldn't edit other people's timesheets without their knowledge and consent. So even thought software allows you to do something, you have to limit yourself from doing it. In this particular case, you should approve time so no one can edit it, at least not without a written trace (for audit purposes).

You should always consult with your legal department before choosing any software, learning what DCAA compliance actually means, and what's the best way to operate within the DCAA regulations.