In order to qualify to participate in the federally funded STTR, SBIR, 8a, and SBA programs, small businesses must comply with certain rules and regulations. Failure to comply with proper regulations can result in your company’s removal from these programs and can greatly diminish your chances of working with the federal government. One of the most important requirements small businesses must comply with is having DCAA-compliant time tracking methods, including a specific type of internal accounting, proper documentation, and very detailed policies for tracking employee time worked. Check out our list of the most frequently asked questions regarding DCAA-compliant time tracking.
How Can I Communicate the Importance of Timekeeping Requirements to Employees?
Business owners typically don’t want to micromanage every element of their employees’ workdays, and your employees certainly don’t want you hovering over their shoulders as they fill out their timesheets. However, you rely on your employees to accurately keep their time and ensure their timekeeping records are up to DCAA standards. So, it’s incredibly important that you clearly communicate the specific requirements for timekeeping, as well as the importance of those requirements and staying DCAA compliant.
It’s usually best to have those requirements communicated in writing, such as in the employee handbook. Here, you can clearly address all the critical elements of DCAA-compliant time tracking, and your employees can retain their copies of the handbook for reference to ensure that they’re meeting all timekeeping requirements.
Should Employees Track Time Spent on Non-Contract Activities Like Training or R&D?
Yes, all of your employees must record 100% of the time that they work, regardless of whether or not it is directly related to the government contract that requires DCAA-compliant timekeeping. This includes work on the government contract, commercial work, corporate activities, training, research and development, and any other activities for which your employees are clocked in.
How Do Employees Break Down Time Not Directed to a Specific Contract?
With DCAA-compliant time tracking, employees are required to break down time into direct and indirect cost accounts on a daily basis. Direct costs are those costs that can be directly attributed to a project, contract, task, or line item on the contract. Indirect costs are those that don’t directly correlate with a single cost objective, but are nonetheless essential to running your business. Examples of indirect costs include overhead expenses, employee benefits, rent, utilities, and so on. These must also be tracked for contracts requiring DCAA-compliant timekeeping systems.
Can a Supervisor Edit an Employee’s Timesheet for Them?
In the even that an employee’s timesheet needs to be edited or corrected, it is preferred that the employee themselves make those corrections. If circumstances for some reason do not allow the employee to make the necessary changes, they must provide consent to the administrator or accounting team member who is making the change.
It’s also extremely important to note that you must have an audit trail of all of these change in order to remain DCAA compliant. The DCAA auditor will use this audit trail when viewing each employee’s time entries, and will check to see when entries were made, if and when changes were made, and who performed each action.
Who Should Sign the Timesheets?
All timesheets require two signatures in order to be compliant with DCAA regulations. Both the employee completing the timesheet and their manager should sign every timesheet.
How Long Do I Need to Keep Old Timesheets?
DCAA compliance regulations require contractors to retain timesheet data for at least two years. In some cases, the DCAA or a government agency that you previously contracted with may request archived timesheets. When this occurs, you should be able to produce them upon request.
How Can I Ensure My Employees Are in Compliance with Timekeeping Requirements?
As we stated earlier, no business owner wants to micromanage their employees’ timekeeping. However, timekeeping compliance issues are the main reason government contractors fail a DCAA audit, so it’s incredibly important that your employees are complying with those requirements on every single timesheet. The best way to ensure this is happening without micromanaging is to conduct regular audits throughout the year to check timekeeping compliance.
At Peter Witts CPA, we provide specialized accounting and audit services for government contractors, helping you to ensure that every aspect of your accounting is in compliance with DCAA requirements. If you’re concerned about your ability to pass your next DCAA audit, contact us to learn how we can help your business’s accounting methods get back up to compliance standards before that happens.