7 Things You Need To Know About DCAA Compliance



You just scored a government contract.

Go team!

*runs mini lap of honor around the office*

But now it’s time to deliver on it. And that means … compliance.

Not a word that inspires much enthusiasm, we admit, but stay with us. It’s never been easier to follow Defense Contract Audit Agency (DCAA) compliance rules for government projects. At least where time tracking is concerned.

We call it the time trackers’ guide to DCAA compliance.

For a more in-depth look at what DCAA compliance means for time tracking, head over to our Resource Center to read our DCAA compliance checklist.

1. Everyone needs to track their time

Yep, everyone.

The DCAA expects everyone in your company to follow its guidelines when it comes to time tracking—whether they are working on the government contract or not. The requirements include:

  • Daily time entries by every employee.
  • Correct hours allocated to each project.
  • Clear-cut submission and approval procedures.
  • Cast iron audit trails (more on this below).
  • A record of unpaid time as well as paid time (more on this below).
  • Evidence that your employees know all of this.

This could mean a lot of extra training. (The DCAA recommends staff meetings, company manuals, workplace signage, and employee orientation … among other things.)

But you know what? Life doesn’t have to be that complicated.

We’d always recommend you do your own training, of course, but to make things a little easier, our customer service superstars offer free support to every single employee who uses TSheets. Not just the administrator on your account. Every single employee.

Definitely worth the phone call.

The customer service team is available Monday to Friday, 6am to 6pm (MST), on (888) 836-2720. Or just use the red ‘help’ button right there on your screen to start a chat.

“Michelle helped me so early in the morning in figuring out the new system for me,” said Sandra from Federal Solutions, Inc. “This was my first time in TSheets and she popped right in to help me out.”

2. Don’t cut corners

No matter how cool it looks.

As you’ll know from the bidding process, time tracking is a critical component of DCAA compliance.

The DCAA Manual pulls no punches on this. “Timekeeping procedures and controls on labor charges are areas of utmost concern,” it reads. Adding, “The key link in any sound labor time charging system is the individual employee.”

No pressure then!

In the DCAA’s eyes, the most important part of time tracking isn’t your managers, foremen, or supervisors. It’s everyone. And in a traditional time keeping setup, that “key link” could be your weakest link, because your timesheets may only be as accurate—and legible—as your employees’ memories or handwriting.

What time did you finish work last Thursday?


It’s time to go digital.

3. Get a handle on labor costs

It’s no surprise that the government is just as invested as you are in keeping labor costs under control. And that’s a good thing. Its taxpayers’ dollars they are spending, after all.

But unlike buying materials—which come with receipts—paying for people’s time isn’t always as clear cut. So the DCAA expects records that go back as far as The Rolling Stones. And they want them broken down by every single gig, band member, and roadie.

Which is where TSheets’ Manual Time Card comes in. It can help you make your time tracking DCAA compliant by giving you an easy way to log accurate, daily records for each project your team works on. It won’t let you add hours you haven’t worked yet—a key DCAA requirement—and lets you update, review, submit, and approve your timesheets from any computer, anywhere. You can also set up daily reminders to ensure no one forgets to add their time.

Even better, not just from your point of view but the DCAA’s too, is that every single entry you make is automatically logged and time stamped—including revisions—so you can see exactly:

  • Who has been working on which job and for how long.
  • Who has submitted their timesheet and who hasn’t.
  • Who edited a timesheet, why, and when the change was made.
  • Who approved a timesheet.

Try it yourself. It’s totally free.

4. Ditch the filing cabinet

As if keeping hard copies of your timecards wasn’t hard enough, in the old days the endless DCAA paper trail also had to include any corrections or clarifications you made.

Actually, it still does.

But now the job of filing, storing, and retrieving them can take literally seconds, no matter where you, or your DCAA auditors, happen to be. As our Audit Proof Your Employee Time Cards video explains, when stored securely online with TSheets, this record is so robust it can even be used in court to settle labor disputes.

“Within TSheets there is an unchangeable log that shows your time entries, any edits made, attempted edits, and also details associated with each action in the account.” Jessie Bryant, TSheets.

Imagine if the DCAA came asking for a list of all your timesheet entries and amendments for an old project, outlining exactly who added or changed which record, when they did it, and why.

Now that would be a headache.

5. Keep an eye on overtime

When you’re working on a government contract, you need to be able to track every single hour your employees put in—whether they get paid for them or not.

This is because the DCAA calculates your overall project costs based on the total number of hours your team clocks up (even if their paychecks don’t tell the same story). They call it “uncompensated overtime” and it’s something to keep an eye on–especially with salaried employees.

To stop you burning all your own free time just to keep track of this, you need a system that can instantly track employees’ overtime and highlight it on their timesheets, or on detailed project reports, so you can see straight away who has gone over their allocated hours.

6. Sync timesheets and payroll in a snap

Great timing is a beautiful thing. But when it comes to DCAA compliance, it is only part of the story.

Before you can even have a shot at a government contract, you need to ensure your accounting system is also up to snuff.

In truth, this is a whole other project in itself and we’d recommend you get expert advice on it (a TSheets PRO may be able to help)—but when it comes to the time tracking side of DCAA compliant accounting, here are a few pointers to get you started.

Unless you are a “very small” company, according to the DCAA Manual (read more about this on the Small Business Administration website), the first thing you need to have in place is a clear distinction between your payroll and time tracking systems. This also means that whoever is responsible for approving timesheets can’t run your payroll. (It’s all about preventing “labor mischarging,” which carries a possible prison sentence of up to five years. Yikes!)

Assuming your accountant and timesheet administrator are not the same person, you’re good to go. And you should definitely take advantage of the huge time and money savings that come from syncing your payroll system with your timesheets. It doesn’t matter what payroll software you use either, because with some friendly, open source code you can link any payroll system to your timesheets and run them seamlessly side by side.

Even better, if you are already using QuickBooks Online, QuickBooks Desktop, Square Payroll, Gusto, flint or Denali Payroll, it’s even easier. The link to your timesheets is already there, just waiting to be made live.

Cue fist bump.

7. Be ready for inspections

You’ve got all your training and procedures in place.

Your employees know how to track their time.

You are pretty much audit proof.

Can they throw anything else at you?

Well, yes. Actually they can.

The DCAA has the power to do what it calls “floor checks”, which is government speak for site visits and interviews to see whether your employees are actually at work, how well they know your procedures, that they are working on the right projects, and to see if their time records back this up.

But now you’ve read our time trackers’ guide to DCAA compliance, they will, of course!

To start tracking your time the smart way, sign up for a free trial today.

Want to learn more?

Check out our DCAA compliance checklist for time tracking over in our Resource Center.