DCAA-related timekeeping compliance is not a software certification. It is part of a contractor’s accounting system: labor must be identified and distributed to the right contract, project, indirect account, or other cost objective, with records that support the costs claimed. The precise clauses depend on the contract, so start by checking the solicitation and award, then build procedures and evidence that make each labor charge traceable.
What DCAA timekeeping rules actually require
The core requirement is to identify employees’ labor by cost objective and distribute direct and indirect labor appropriately. DFARS 252.242-7006(c)(9) calls for “A timekeeping system that identifies employees’ labor by intermediate or final cost objectives.” The clause also places timekeeping within a broader accounting system that includes labor distribution, monthly determination of contract costs, and reconciliation and control practices. Read DFARS 252.242-7006.
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Separately, FAR 31.201-2 requires contractors to keep adequate records and supporting documentation demonstrating that claimed costs were incurred, allocable, and consistent with applicable cost principles, accounting standards, contract terms, and limitations. A contracting officer may disallow costs that are inadequately supported. Read FAR 31.201-2.
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Applicability depends on the contract
DFARS 242.7502 addresses accounting-system requirements for contractors with cost-reimbursement, incentive-type, time-and-materials, labor-hour, and certain cost-based progress-payment contracts. DFARS 242.7503 prescribes the accounting-system clause when those types of contracts are contemplated. Verify the actual solicitation and awarded contract, including agency supplements and deviations; do not assume every government contract has identical clauses. DFARS 242.7502 and DFARS 242.7503.
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No particular application is mandated
The DFARS criterion concerns the capability and reliability of the accounting system, not a named product. DCAA’s Contract Audit Manual discusses both paper and electronic timekeeping. Buying an application—or labeling it “DCAA compliant”—does not by itself demonstrate that employees used it properly, that labor was charged to the right objectives, or that the resulting costs are adequately supported. DCAA CAM Chapter 5.
What a well-supported timesheet should capture
There is no universal form specified in the cited requirements. Design the record and related workflow so a reviewer can understand who performed the work, when it was performed, which cost objective received the labor, and how the entry was reviewed and, if needed, corrected.
- Employee identity and the work period covered.
- Hours worked, entered against the actual contract, project, indirect account, leave, or other appropriate cost objective.
- Employee certification and supervisor review or approval, with dates recorded.
- For corrections, a traceable history showing the original entry, what changed, why, when, and who approved the change.
- Links or references to relevant work authorization, contract requirements, or labor-category context where needed to explain the charge.
DCAA’s CAM discusses employee certification and supervisor approval as controls, and says direct labor should be traceable to work authorization documents. FAR’s support requirement makes a retained, understandable record important; the cited sources do not prescribe one universal correction form or deadline.
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Controls to put in place
- Write clear labor-charging procedures. Explain how employees choose among contract, project, indirect, leave, and other objectives; when entries are due; how corrections work; and who certifies, reviews, and approves records. DCAA guidance evaluates whether employees follow the contractor’s established procedures.
- Record the work actually performed. Employees should charge time to the correct objective based on the work performed. A project code, default allocation, or automated transfer is not evidence on its own that the underlying labor charge is correct.
- Certify and approve entries. Require employee certification and supervisor approval, and retain the associated dates and audit trail. A reviewer should be able to see both the submitted record and any subsequent changes.
- Make corrections promptly and transparently. Establish an internal process for missed, late, or miscoded time. Preserve the original entry and document the reason, correction date, and approver. The sources reviewed establish the need for adequate support and describe approval controls, but do not set a single correction deadline or form.
- Reconcile labor and accounting records. On a routine schedule, reconcile labor distribution with payroll and accounting records and investigate differences. DFARS treats appropriate labor distribution and reconciliation as elements of the accounting system.
- Train employees and check practice. Train staff on objective selection, certification, corrections, and approvals. Periodic management reviews or internal audits can reveal whether written procedures match actual behavior; floor checks may also test employee understanding.
- Retain evidence that can be traced. Keep time records and supporting material in a form that lets the contractor explain entries and connect them to payroll, approvals, and cost objectives. The applicable retention period depends on contract clauses and records requirements; the cited sources do not establish one universal duration.
What DCAA may examine during a floor check or labor review
DCAA may use interviews or floor checks to verify that employees exist, assess whether timekeeping controls are followed, and check the accuracy of labor-hour charges. An auditor may review procedures, observe or interview employees, compare observations or explanations with labor records and payroll, and trace charges to contract requirements. These are possible audit approaches, not steps guaranteed in every review. DCAA’s MAAR 6 floor-check explanation.
DCAA’s current Chapter 6 describes labor-cost charging evaluations as assessing compliance with policies and controls, reliability of the labor accounting system, and accuracy of labor hours charged to contracts, indirect accounts, or other cost objectives. The timing and extent of testing depend on risk and auditor judgment; DCAA favors testing close to the work when practical. DCAA CAM Chapter 6.
How to prepare employees
- Make the current timekeeping procedure accessible and train employees to explain how they record and certify time.
- Ensure employees can identify the correct cost objective for their work and know how to report an error or missed entry.
- Keep time records, payroll data, approvals, work authorizations, and relevant contract context organized so charges can be followed across records.
- Use internal reviews to identify inconsistencies between recorded labor and actual work or between timekeeping, payroll, and accounting records.
Choosing a paper or electronic process
Either format can support the necessary controls; assess the process rather than assuming one medium is compliant. When evaluating a timekeeping system or workflow, check whether it can:
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- Capture employee-level hours against contracts, projects, and indirect cost objectives.
- Support employee certification, supervisor approval, and traceable corrections.
- Distribute labor and reconcile it with payroll and accounting records.
- Associate labor with applicable work authorization and labor-category context.
- Produce audit trails and reports that make entries and approvals explainable.
- Apply appropriate access controls and support exports and retention that fit contract and organizational requirements.
These are practical evaluation criteria derived from the accounting-system and supporting-record requirements, not a vendor endorsement or a claim that a particular product has been tested.
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DCAA’s CAM index lists Chapters 5 and 6 as updated in August 2026, and DCAA notes that guidance memoranda may contain current audit direction not yet incorporated into the manual. Check the latest relevant CAM chapter and memo alongside the clauses in the specific solicitation and contract. DCAA Contract Audit Manual index. This general explanation is not legal or accounting advice.
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