The Defense Contract Audit Agency (DCAA) sets forth compliance regulations that primarily apply to businesses and contractors engaged in services for specific government agencies therefore its worth a read to better understand the importance of DCAA compliant timekeeping and who is subject to these specific requirements and regulations.

1. Department of Defense (DoD)

2. General Services Administration (GSA)

3. National Aeronautics and Space Administration (NASA),

4. Department of Homeland Security (DHS)

These regulations aim to ensure accuracy, integrity, and security in financial dealings and project execution. Specifically, DCAA compliance is crucial for contractors involved in manufacturing, R&D, IT services, and consulting that directly support national security and defense projects. Compliance is not only mandatory for prime contractors but also for subcontractors operating at any tier within the defense supply chain.

Types of Contracts Subject to DCAA Compliance

Fixed-Price Contracts, where the payment does not change regardless of the resources used or time expended, require strict adherence to DCAA regulations.

Cost-Reimbursement Contracts, which cover all allowable costs up to a predetermined limit, demand detailed accounting to justify expenditures.

Time-and-Materials Contracts, blending aspects of both fixed-price and cost-reimbursement agreements, necessitate precise timekeeping and expense tracking to comply with DCAA standards. Lastly,

Indefinite Delivery/Indefinite Quantity (IDIQ) Contracts, offering flexibility in both the quantity and timing of services, mandate rigorous financial documentation to satisfy DCAA requirements.

Employees Subject to DCAA Compliance

Employees subject to DCAA compliance encompass both hourly wage earners and salaried professionals. For hourly employees, detailed records of work hours are critical for verifying the direct labor charges applied to defense contracts. This level of tracking ensures labor costs are accurately billed and reimbursed. Similarly, salaried employees, even those not directly billing hours to a project, must maintain precise timekeeping records. This practice supports the allocation of labor costs across projects, contributing to the accurate calculation of indirect rates and overheads.

Types of Activities Subject to DCAA Compliant Time Tracking

DCAA compliant time tracking must encompass a wide array of activities to ensure comprehensive oversight and accurate reporting. These activities include, but are not limited to:

• Direct Labor: Time spent by employees directly working on a project, such as engineering, software development, or manufacturing, must be accurately recorded. This is critical for justifying the direct charges applied to defense contracts.
• Indirect Labor: Activities not directly billable to a specific contract but essential to the organization, like administrative support, facility maintenance, and employee training, also require meticulous tracking. This ensures the proper allocation of overhead costs.
• R&D Activities: Time dedicated to research and development that may contribute to future defense projects calls for precise tracking to support claims for reimbursement under applicable contracts.
• Travel and Downtime: Travel time related to a specific contract and downtime attributable to project-specific factors must be documented accurately. These records aid in the calculation of costs and reimbursement rates.

Best Practices for DCAA Compliant Timesheets

Automate Time Tracking: Utilize time-tracking software equipped with functionalities that comply with DCAA standards, including real-time monitoring and automated overtime calculations. such as Hour Timesheet

Employee Training and Awareness: Conduct regular training sessions to familiarize your team with the criticality of proper time entry and the implications of non-compliance.

Consistent Time Entry: Encourage a culture of punctuality where time is recorded daily, rather than retrospectively, to maintain the integrity of your timesheets.

Audit Trails: Ensure your timesheet system maintains thorough audit trails to provide a clear, historical record of all changes made, offering transparency during audits.

Robust Approval Processes: Implement stringent supervisor review and approval workflows to catch errors and confirm the authenticity of time reported.

Call to Action

For those seeking to fulfill DCAA requirements with precision, it’s vital to choose a timesheet system that not only simplifies your daily timekeeping tasks but also fortifies your defense against audit scrutiny.

Discover how a reliable hour timesheet solution can be the centerpiece of your compliance strategy, ensuring that accountability and efficiency go hand in hand. Contact us to learn more or schedule a demo.