In the previous two articles in this series we looked at what is required for a DCAA timekeeping system and what types of systems will meet these requirements. Today I want to look at how the DCAA monitors these systems and what you, as a government contractor, might expect to do to be compliant. As labor is typically the largest expense in a government contract, it makes sense that they would focus on how it is recorded, how it is turned into a bill to the government and how the contractor assures its accuracy. The FAR Part 31.201 requires that all costs (including labor) are evaluated for allowability, reasonableness and allocability. The timekeeping system is a big part of that requirement. The DCAA Contract Audit Manual provides the DCAA auditor tools for evaluating the allowability and allocability in Para 5-901 and evaluation of the reasonableness in Para 5-800, 6-412 & 6-413.
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Last week we looked at the DCAA requirements for Timekeeping on a government contract and this week I want to explore the different types of systems. The DCAA Contract Audit Manual describes two types of acceptable timekeeping systems:
For many new government contractors and/or small government contractors, it may be confusing as to what is required and why it is required relative to timekeeping and timekeeping records. This is a very important topic to the government and the government contractor should not underestimate the importance or the need to do it in accordance with what the government expects. In our experience, issues related to timekeeping account for easily the majority of audit findings by the DCAA. Failure to meet these expectations will most certainly result in some stiff lessons, including delayed payment and/or refusal of future contracts. So what is exactly required by the government?