DCAA Timekeeping Requirements: 7 Controls to Review Before Your Next Audit

For government contractors, accurate timekeeping involves more than recording employee hours and processing payroll. Labor costs must be assigned to the appropriate contracts and cost objectives, and organizations need sufficient documentation to support those charges during an audit.

Although many contractors have established procedures for submitting and approving timesheets, those processes do not always provide the level of detail or accountability needed for government contract accounting. Inaccurate project assignments, undocumented corrections, and inconsistent employee practices can raise questions about the reliability of labor records.

The Defense Contract Audit Agency (DCAA) examines contractors’ accounting practices and supporting records to evaluate compliance with applicable requirements. Contractors preparing for an audit should review how employee time is recorded, classified, approved, corrected, and reconciled with their accounting systems.

The following seven controls provide a practical starting point for evaluating those procedures.

What Are DCAA Timekeeping Requirements?

DCAA timekeeping requirements are commonly used to describe the labor-recording practices and internal controls relevant to government contract audits. These include accurate recording of employee time, appropriate labor allocation, documented corrections, and procedures for reviewing and supporting labor charges.

The specific legal and contractual obligations vary. For example, DFARS 252.242-7006, Accounting System Administration, establishes criteria for contractors subject to that clause, including a timekeeping system that identifies labor by cost objective and a labor distribution system that assigns direct and indirect labor appropriately.

DCAA’s Information for Contractors manual provides additional guidance on timekeeping procedures, employee responsibilities, and internal controls.

The seven areas below reflect these sources and established government-contract accounting practices. They should be treated as a review framework rather than a universal checklist of statutory requirements.

DCAA Timekeeping Checklist: 7 Controls to Review

1. Establish Clear, Documented Timekeeping Procedures

Effective timekeeping begins with written procedures that employees can understand and follow consistently. These procedures should explain how to record hours, select the appropriate charge codes, submit timesheets, and correct errors. They should also establish the responsibilities of employees, supervisors, and accounting personnel.

DCAA guidance recommends communicating timekeeping instructions to employees and providing training on the organization’s procedures. Written policies should reflect how the company actually operates, including any approved exceptions for employees working remotely or without regular access to the timekeeping system.

During an internal review, contractors should determine whether employees understand their responsibilities and whether the procedures are being followed consistently across departments and locations.

2. Record Employee Time Daily

DCAA’s published timekeeping guidance recommends that employees personally record their labor hours each day. This practice helps preserve the accuracy of time records by reducing reliance on memory when employees work across multiple projects or assignments.

Contractors should also establish procedures for recording all hours worked, including applicable direct and indirect labor and uncompensated overtime. The treatment of these hours in payroll and cost accounting must follow the relevant requirements and company policies.

Although daily employee entry is an established DCAA-recommended practice, the binding obligations for a particular contractor depend on its applicable contracts and regulations.

Organizations should periodically review whether employees are recording time as work occurs and whether late or corrected entries are handled according to documented procedures.

3. Assign Labor to the Correct Contract or Cost Objective

Accurate labor allocation is essential to government contract accounting. Employees may perform work for several contracts during the same reporting period, making it necessary to distinguish the hours associated with each assignment.

Consider an engineer who spends part of the day supporting one government contract, several hours working on another, and the remainder performing internal administrative duties. Recording the entire day against a single contract would misrepresent how the employee’s time was spent.

For contractors subject to DFARS 252.242-7006, accounting system criteria specifically address identifying employee labor by cost objective and distributing direct and indirect labor appropriately.

Contractors should review whether their timekeeping processes capture sufficient project and task information to support accurate labor distribution and subsequent accounting entries.

4. Maintain Accurate and Controlled Charge Codes

Employees need reliable information to select the appropriate contract, project, or task when recording their time. Outdated charge codes, unclear project descriptions, or inconsistent naming conventions can lead to incorrect labor allocations even when the hours themselves are accurate.

DCAA guidance recommends providing employees with accessible project numbers and descriptions to support accurate time charging. Organizations should also establish procedures for maintaining those assignments as projects begin, change, or close.

Electronic timekeeping systems can support this process through configurable validation rules, restrictions on available charge codes, and notifications when required information is missing.

These controls do not eliminate the need for employee training or supervisory oversight, but they can help identify errors before the information reaches accounting.

5. Document Timesheet Corrections

Corrections are a normal part of timekeeping, particularly when employees work across numerous projects or assignments. However, changes to previously recorded hours or labor allocations must be handled carefully to preserve the reliability of the underlying records.

DCAA guidance recommends procedures that identify the original charge, the corrected charge, and documentation of the employee’s concurrence with the change.

For organizations using electronic timesheets, an audit log can provide a useful record of modifications, including the information changed, the person responsible, and the date of the correction.

A contractor reviewing its procedures should be able to explain how corrections are authorized, how the original information is preserved, and what documentation supports the final entry.

6. Apply Consistent Timesheet Review and Approval Procedures

Employee responsibility remains an important part of accurate timekeeping, but supervisory review provides an additional opportunity to identify errors or questionable labor charges.

DCAA guidance recommends employee certification and supervisor approval of timesheets. Contractors should establish clear procedures defining who is authorized to review and approve time, what information must be examined, and how discrepancies are resolved.

Organizations with multiple departments, project managers, or reporting structures may need more detailed approval workflows to ensure that labor assignments receive appropriate review.

Consistent approval procedures help establish accountability and provide supporting documentation when questions arise about reported hours or contract charges.

7. Reconcile Labor Records and Retain Supporting Documentation

Timekeeping records must ultimately support the labor costs reflected in the contractor’s accounting system. A reliable process should allow accounting personnel to trace recorded hours through labor distribution and into the appropriate cost accounts.

DFARS 252.242-7006 includes accounting system criteria addressing reconciliation of subsidiary cost records to the general ledger, as well as documentation and approval of adjusting entries.

Contractors must also retain relevant records in accordance with applicable requirements. FAR Subpart 4.7 addresses contractor records retention and identifies retention periods for certain accounting, payroll, and timekeeping records. Applicable contracts and other circumstances may establish additional obligations.

Organizations should evaluate whether they can retrieve the records needed to support labor charges and explain how those amounts were recorded and reconciled.

How Time Tracking Software Can Support DCAA Timekeeping Controls

Maintaining consistent timekeeping procedures becomes more complicated as organizations add employees, contracts, departments, and approval requirements. Electronic time tracking software can help manage these processes by providing a central system for recording employee time and supporting the associated administrative controls.

Journyx offers project time tracking capabilities for government contractors that can support several areas of a contractor’s timekeeping program.

Daily entry reminders encourage employees to maintain current records, while configurable data validation helps identify incomplete or incorrect entries. Audit logs preserve information about timesheet changes, and approval workflows allow organizations to establish review procedures appropriate to their operations.

Journyx also offers timesheet reporting and integrations with accounting and ERP systems, helping organizations connect employee time records with their financial processes.

These capabilities can support a contractor’s internal controls, although software alone cannot establish or guarantee DCAA compliance. The contractor remains responsible for its written policies, system configuration, employee practices, and applicable contractual obligations.

Frequently Asked Questions About DCAA Timekeeping

Does DCAA Require Employees to Record Time Daily?

DCAA’s Information for Contractors guidance recommends that employees record their own labor hours daily. Contractors should maintain written procedures addressing timely entry, employee responsibility, and corrections. Whether a particular procedure is legally or contractually required depends on the regulations and contract provisions applicable to the organization.

Can Supervisors Correct Employee Timesheets?

DCAA guidance emphasizes employee responsibility for timekeeping and recommends documenting corrections, including the employee’s concurrence. Organizations should establish procedures governing when an authorized individual may correct a record and how those changes are documented. Electronic audit logs and approval workflows can help support these procedures.

Does DCAA Approve or Certify Time Tracking Software?

DCAA does not approve or certify commercial timekeeping or accounting software products. An accounting system includes the contractor’s policies, procedures, controls, and actual operating practices in addition to its software. Contractors must evaluate whether their complete accounting and timekeeping processes satisfy applicable requirements.

Strengthening Your Timekeeping Process Before an Audit

Preparing for a DCAA audit requires a clear understanding of how labor moves from the employee’s timesheet into the company’s accounting records. Reviewing these seven controls can help contractors identify weaknesses in their procedures and determine where additional documentation, training, or system improvements may be appropriate.

A dependable timekeeping process should provide employees with clear instructions, give supervisors the information needed for effective review, and allow accounting teams to support reported labor charges with reliable documentation.

Journyx helps government contractors manage employee time entry, validation, approvals, and audit records while connecting timekeeping with existing financial systems.

See how Journyx can support your organization’s timekeeping and audit documentation processes.

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