Current and accurate timekeeping is one of the most important responsibilities of a contractor and its employees when they have Government cost reimbursement and time and material/labor hour contracts. Direct labor is one of the significant elements of cost incurred and billed on Government contracts. FAR 16.301-3(a)(3) requires contracting officers to ensure a contractor has an adequate accounting system, which includes a timekeeping system, before award of a cost reimbursable contract. While there is no specific reference to an adequate timekeeping system for T&M/Labor hour contracts, FAR 52.232-7 requires the contractor to be able to support the hours and labor qualifications of the employees charged to the contract. Auditors will request documentation to support employee qualifications and labor hours on T&M/Labor hour contracts. An adequate timekeeping system includes having a written timekeeping policy and procedure to ensure the accuracy and integrity of direct labor costs charged and billed to Government contracts.
Inaccurate timekeeping can result in contractors being cited for accounting system deficiencies, withholding or disallowance of costs, termination of Government contracts and company liability under the False Claims Act (FCA) for improper billing of falsely reported hours. Employees are also responsible for accurate time reporting. Any employee that intentionally falsifies his/her timesheet or fails to follow a company’s policy can result in the company taking disciplinary action, which can include termination for cause as well as possible criminal prosecution. And beware, any disgruntled employee can report inaccurate timekeeping via a qui tam suit under the FCA and receive a government payment incentive based on the recovery.
What Do DCAA Auditors Expect?
Defense Contract Audit Agency (DCAA) Auditors will review timekeeping policies and procedures when performing a pre-award, post-award, or internal control accounting system audit as well as a Mandatory Annual Audit Requirement (MAARs) 6 Real Time Labor procedures, known as a floor check. An auditor’s expectation of adequate timekeeping practices includes, but is not limited to, the following:
- Written policies and procedures on timekeeping
- All employees (yes – direct and indirect) complete timesheets
- Time is entered for all contracts – Government and non-Government
- Timesheets are completed on a daily basis
- Employees certify their timesheets and supervisors review and approve the timesheets
- Only the employees make corrections to timesheets with an explanation; timesheets are resigned by employee and approved by the supervisor after correction is made
- All labor hours are recorded on timesheet, even for exempt employees (i.e., uncompensated overtime)
- Employees only have access to their authorized project numbers in an electronic timekeeping system
- Employees have documentation (e.g., work authorization) authorizing them to charge a project
- Password protections on electronic timekeeping systems
- Labor distribution report is reconciled to the payroll records
- Annual timekeeping training, and records to support employee attendance
Whew, they don’t expect much. While this may appear overwhelming, accurate timekeeping and documentation is required under Government contracts/billings.
What If I Have Remote Employees?
Today, many contractors have remote employees. Auditors will expect contractors to have a written Work-from-home policy that defines the classification of employees and type of work that can be performed remotely. The auditor will ensure the company has forms that employees complete authorizing them to work remotely and that they are signed by management. The auditor will also want to understand how the employee’s performance and taskings are monitored. Companies that have a large number of remote employees working on government cost reimbursable/T&M contracts and don’t have a written policy and procedure, may be cited with an accounting system deficiency.
Takeaways
An adequate timekeeping system requires:
- Access control
- Written policies and procedures
- Annual training of all employees on timekeeping policies and procedures
- Internal floor checks to ensure employees are prepared for a DCAA floor check
- Work authorizations
How Redstone GCI Can Help?
Redstone offers comprehensive support for your company's timekeeping needs. Our services include personalized face-to-face or webinar-based training sessions, meticulous examination and formulation of timekeeping policies and procedures, and access to Learning Management System (LMS) modules. These modules aid contractors in familiarizing themselves with the intricacies of timekeeping for government employees and understanding DCAA floor checks through our guide for employees. Additionally, we extend our expertise to provide guidance and assistance in addressing DCAA audit findings related to timekeeping concerns, ensuring your company remains compliant and efficient in its operations.
Redstone Government Consulting assists contractors throughout the U.S. and internationally with understanding the Government’s expectations. This includes assisting with accounting and timekeeping policies and procedures or training. We would be happy to be part of your team.
Lynne is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Item Determinations and support, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Professional Experience Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. Lynne was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Education Lynne earned a Bachelor of Science Degree in Accounting from the University of Central Florida. Certifications State of Florida Certified Public Accountant State of Alabama Certified Public Accountant Defense Acquisition Workforce Improvement Act (DAWIA) Level III- Auditing DAWIA Level III – Contracting