For government contractors, winning a contract is only the beginning. Once work starts, your accounting systems—and especially your timekeeping system—must meet strict standards. One of the most closely reviewed areas in a DCAA audit is labor, which means your timekeeping process must be accurate, consistent, and fully documented.
If your system falls short, it can delay payments, trigger audit findings, or even put contracts at risk.
That’s why DCAA compliant timekeeping is not just an administrative task. It is a foundational part of your compliance strategy.
Why Timekeeping Matters for DCAA Compliance
For government contractors subject to the Federal Acquisition Regulation (FAR), labor is often the contractor’s largest cost that is covered by federal funds. Because of that, the Defense Contract Audit Agency (DCAA) places heavy emphasis on how time is recorded, approved, and corrected. The time recording determines how much a government contractor can charge the government.
The DCAA is not just looking for accurate totals. It is evaluating whether your system has the right controls in place to prevent errors, ensure accountability, and create a clear audit trail.
This is where many contractors run into trouble. The issue is not always the data—it is the process behind the data. (Click here to read more about common DCAA audit triggers.)
The Core Requirements of a DCAA Compliant Timekeeping System
A truly DCAA compliant timekeeping system is built on policies and procedures that employees follow consistently. While systems may differ, there are several core requirements that every contractor must meet.
- Time must be recorded daily.
- Employees should enter their time each day, not at the end of the week or pay period. This reduces the risk of inaccuracies and ensures labor is recorded in real time.
- Total Time Accounting.
- All employee time—not just time spent on government task order—must be recorded.
- All Employees record time.
- All employees—not just employees working on the government task order—must track their time.
- Employees must record their own time.
- Not supervisors. This reinforces accountability and creates a clear audit trail.
- All time must be charged to the correct project or cost objective.
- Misallocating labor, even unintentionally, can create compliance issues.
- Supervisors must review and approve timesheets.
- This approval should be indicated in writing, and it’s not just a formality—it confirms that the recorded time is reasonable and accurate.
- Any changes to timesheets must be documented.
- Corrections should include a clear explanation, a timestamp, and approval. Silent edits or overwritten entries are a major red flag during audits.
- Timesheets must be locked after approval.
- A compliant system prevents changes after final approval unless a formal correction process is followed.
- The system must include electronic signatures.
- These signatures confirm that both employees and supervisors have reviewed and approved the entries.
- Employees must be trained in the company’s timekeeping policies.
- The policies should be documented in writing, and all employees should understand the importance of compliance.
Choosing the Right DCAA Compliant Timekeeping System
Many businesses assume that payroll systems like ADP or Gusto are sufficient for time tracking. While these platforms are useful for payroll processing, they often lack the controls required for DCAA compliant timekeeping.
For example, they may not provide:
- Detailed audit trails for time edits
- Required approval workflows
- Digital signatures tied to time entries
- Proper system controls to lock timesheets
Without these features, even well-intentioned time tracking can fail to meet DCAA standards.
The right system depends on your size, complexity, and existing tools. Several platforms are commonly used by government contractors because they support DCAA compliance requirements.
- Hour Timesheet: Often the most cost-effective option. It provides the core features needed for compliance and works well for smaller teams.
- BigTime: A strong choice for organizations that also need project management functionality alongside time tracking. It offers more robust tools for managing projects and labor allocation.
- Rippling: Combines timekeeping with payroll and HR features. It is often considered the most user-friendly option for employees, particularly because it integrates payroll visibility with time tracking.
- Unanet: An enterprise-level solution that integrates timekeeping, accounting, and project management into one system. It is best suited for larger contractors with more complex needs.
Each of these systems includes the key elements required for DCAA compliant timekeeping, including approvals, audit trails, and system controls.
How Bay Business Group Can Help
Selecting a system is only part of the process. Implementation is where most compliance issues occur.
At Bay Business Group, we work with government contractors to understand their contract requirements, evaluate their current systems, and implement timekeeping solutions that meet DCAA standards. When a client comes to us and says, “We just won an award and need a timekeeping system,” we don’t just recommend software. We look at their accounting platform, payroll setup, and operational workflow to ensure everything works together.
Our team helps configure systems, establish policies, train employees, and build processes that hold up under audit scrutiny.
Turning Compliance Into Confidence
DCAA audits do not start with your financial statements. They often start with your systems.
A strong DCAA compliant timekeeping system gives you confidence that your labor costs are accurate, your processes are defensible, and your contracts are protected.
If your organization is preparing for a new contract, upgrading systems, or unsure whether your current setup meets DCAA standards, Bay Business Group can help.
Schedule a free 30-minute consultation to learn how we can support your timekeeping system, strengthen your compliance, and position your business for long-term success.