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 checklist
- Everyone in your company needs to track time (doesn't matter if they're working on the government contract or not)
- Employees must record all hours they work (even overtime, vacation, unpaid, etc.)
- Employees must log time themselves (managers and supervisors shouldn't log time for others)
- Employees need to log time daily (at the end of each day, all the timesheet need to be completed)
- Employees to specify what project or job they worked on (all logged time needs to be categorized by project/job)
- You need to have clear-cut submission and approval procedure
- Both the employee and the supervisor need to have reviewed and approved the time records
- Employees must know the timekeeping procedure and requirments (via trainings and public procedures, plus you need evidence)
- You should constantly, although unobtrusively remind employees about time tracking guidelines
- If approved (ie. locked) timesheets are changed, you have to have immutable record of all the changes and have audit trail (so that it's clear to the government what and why things have been changed)
- Timesheets have to be published at least every month (if not more frequently)
- Whoever is responsible for approving timesheets can't run your payroll (your accountant and timesheet administrator should not be the same person)
- You have to be ready for unannounced inspections (ie. floor checks). The DCAA can visit and interview your employees to see if they are actually at work, how well they know procedures, whether they are working on the right projects, and if their time records back this up
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:
- You are able to maintain a good relationship with agencies you want to work with
- There are no delayed payments to your company
- You're more likely to get a pass for future contracts
- More transparent operations within the company overall
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.
To prevent people from adding backdated entries, Clockify offers lock timesheets and time entries feature. Enabling this 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.
There are two types of overtime: "uncompensated" and "unpaid" overtime:
- Uncompensated overtime - overtime that isn't compensated, as the contract provides the employee with a fixed salary - the salary is always the same, no matter the number of hours worked.
- Unpaid overtime - applies to individual who are paid by the hour - this overtime that should be compensated.
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
The admin of the workspace can keep track of, and has rights to audit other users' time entries in the Detailed report, if they need fixing.
Also, users can find and fix their own time entries within a certain time period (unless the lock timesheets option is on), if necessary.
If the employee is making the changes, he or she should notify the supervisor. If the supervisor (the admin of the workspace) is making the changes, he or she should inform the employee, so that everyone is kept in the loop.
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.
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.
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.
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.
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.
- Official DCAA website
- Official DCAA audit manual
- Official DOL Compliance Requirements
- Official DOL hours worked document
NOTE: Clockify by itself is not DCAA compliant
Although software by itself isn't and can't be 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 employee 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 case, you should approve time so no one can edit it.
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.
IMPORTANT: Currently, Clockify doesn't have approval feature. If someone changes their time records for the week, there is no audit trail that will show that. We're currently working time approval feature will address the issue. Once approved, time records can no longer be changed, unless the approval is withdrawn, in which case you'll have the written trail of who made changes, when, why, and what duration and billable amounts was in question. We expect time approval to be available within a couple of months.