SF1408 Part 2 – The Importance of Using a Timekeeping System to Maintain Compliance

One of the most important aspects of government contracting is maintaining compliance with a timekeeping system. As we touched on in part 1 of our SF1408 blogs and reviewed in our “DCAA compliant software” blog, remember that timekeeping software alone is not enough to ensure compliance. DCAA requires that the timekeeping process itself—collectively including policies, manual procedures, and tools—be compliant; timesheet software alone is not audited for compliance or certified, nor approved as DCAA compliant. However, timesheet software like Unanet has been reviewed by auditors at hundreds of customer sites and, along with the customer policies and procedures, approved as supporting DCAA timekeeping requirements.

That said, let’s dive into the timekeeping requirements and what auditors are looking for. But first, let’s quickly review one of the DCAA’s most valuable resources for new contractors: Manual No. 7641.90.

DCAA Manual No 7641.90: Information for Contractors

In case you missed it in our SF1408 part 1 blog, here is a short overview of DCAA Manual No. 7641.90: Information for Contractors. Believe it or not, the DCAA doesn’t just loom over contractors with audits; they provide a lot of helpful resources for contractors to understand the various audits they may undergo and how to prepare! DCAA Manual No. 7641.90 provides an introduction to the DCAA and explains several audits including price proposals, incurred cost proposals, Pre-Award Survey, and more. This document is a must-read for anyone new to government contracting. Enclosure 2 of the document addresses timekeeping regarding the Pre-Award Survey.

If you are just getting started in the government contracting world, use this link below to access the DCAA Information for Contractors.

https://www.dcaa.mil/Content/Documents/DCAAM_7641.90.pdf

Keeping Track of Your Time

Timekeeping procedures and controls on labor charges are areas are of critical concern for government contractors. The key to accuracy in labor charging is your employees. Training, training, and more training is critical so that employees understand the organizations policies and procedures and abide by them. Establishing a culture that understands the criticality of accurate and timely labor charging will encourage employees to get it right the first time. Timekeeping systems must meet the following requirements:

  1. There should be a segregation of responsibilities for labor-related activities. Internal controls must be established. An example would be that the responsibility for timekeeping and payroll should be separated.
    1. Policies and procedures must be crystal clear 
    2. Controls must be monitored, and violations dealt with swiftly
  2. A culture emphasizing to employees the importance of accurate and timely timesheets. Reminders and training plans will help reinforce proper time charging.  
  3. Employees need to have training and detailed instructions on completion of the timesheet:
    1. Record time daily 
    2. Record time on the timesheet
    3. Time should be recorded by identifier (project, contract name, etc.). Employees should be able to access the description of the identifiers and their descriptions in the work authorization system.
    4. Documented process to change time sheet if needed
    5. Record all hours worked
    6. Certification that the number of hours worked and on what tasks are correct at the end of each period.
  4. A policy for timekeeping must be in place that includes the following:
    1. The supervisor should approve and cosign all timesheets
    2. The supervisor is prohibited from completing an employee's timesheet unless the employee is absent for a prolonged period on some form of authorized leave. If the employee is on travel status, the supervisor for the employee may prepare a timesheet. Upon his or her return, the employee should turn in his/her timesheet and attach it to the one prepared by the supervisor.
    3. The guidance should state that the nature of the work determines the proper distribution of time, not availability of funding, type of contract, or other factors.
    4. The company policy should state that the accurate and complete preparation of timesheet are the employee's responsibility. Careless or improper preparation may lead to disciplinary actions under company policies, as well as applicable Federal statutes.

DCAA Labor Floor Checks or Interviews

DCAA can send in auditors periodically, unannounced, to perform labor floor checks of your employees. The goal of the labor floor check is to make sure employees are working, performing their assigned job classification, and that they are authorized and charging to the right job number. These audits are meant to determine the adequacy and accuracy of the timekeeping system for reimbursement of labor costs under cost reimbursable, time and material (T&M), and labor hour contracts.

Accurate timekeeping is very serious to the government and there are penalties for non-compliance. Manipulating charges to a contract may be subject to criminal charges. The penalties for this violation can be levied against the employee that falsified the timesheet, the approving supervisor, managers and officers, as well as the company. Protect everyone in your company by making accurate and timely timekeeping a non-negotiable requirement. 

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Unanet Success Story


Burns & McDonell was able to gain greater project visibility with Unanet’s time keeping solution and the flexibility that they gained allowed them to establish more best practices around their business rules and processes. After implementing, Burns & McDonnell:

  • Achieved a quick and ongoing return on their software investment
  • Has more accurate entry of time that led to better visibility into project issues and an enhanced ability to forecast true costs to complete projects
  • Is able to be compliant with DCAA requirements through an improved annual process
  • Maintains ad hoc reporting tools directly in the hands of their project management team
  • Experiences better control over timesheet review and approval without undue administrative overhead

Read the full success story!

Why Unanet for Government Compliance?

Unanet is purpose-built with the project or contract in mind. It is uniquely designed for government contractors and has been battle-tested for compliance rules and regulations. Our compliance features are built into the tool, making compliance part of the fabric of your business. Unanet currently has over 1,000 clients using and trusting the system. Unanet supports compliant accumulation and allocation of costs utilizing time keeping, expense accounting, cost pools, indirect rates, revenue recognition, and project management all in one truly integrated system. Whether you are a small new or a seasoned larger GovCon, you can count on Unanet for your compliance needs. Unanet is recognized by the audit agencies as being “compliant ready,” giving you an immediate advantage in the audit process.

Make sure you’re prepared for an audit of your timekeeping system. Learn more about SF1408 in our white paper, “Valuable Information for Government Contractors – SF1408 and Timekeeping,” or register for a demo to see how Unanet helps smooth the path to compliance.

Still want more? Check out the related content below and read our SF1408 part 1 blog!

Kim Koster

Kim Koster

Kim is an experienced executive who brings over 30 years of experience in project management, project accounting, EVMS,  government contract and accounting compliance, and communications.

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