DCAA Floor Check

How would you fare in a DCAA “floor check” audit of your timekeeping system?

Every federal contractor knows the importance (and the benefits) of a compliant timekeeping system. It’s essential to day-to-day business operations, for forecasting and business planning, and accurate reporting is required by the DCAA Compliance requirements defined in the FAR. The provisions in the False Claim Act outline civil and criminal penalties for fraud associated with time sheet policies and procedures; a very strong motivation for time reporting compliance! As you know, being a federal contractor, when a government contract is awarded the DCAA time tracking requirements and rules apply to the entire company. Once policies and procedures are defined, the training begins (and continues) so that compliance is achieved and maintained. It’s an ongoing part of doing business, and a DCAA timesheet audit will certainly examine the company’s adherence to the requirements. It’s always smart for management to revisit the timekeeping training plan!

With the luxury of ‘extra time’, if that exists, you or your contracting officer might enjoy reading some of the DCAA’s guidance to their national staff of auditors. But then again, you may find something else to enjoy! After all, you have the Kline & Company team onboard! While we certainly encourage a friendly and professional relationship with the DCAA auditing staff, we also encourage you to develop insights that help you understand the auditor’s directives, their boss’s expectations, and the government’s audit processes—beyond what you learn in the course of an audit at your company! In other words, you may want to take a periodic look at your compliance with DFARS 252.242-7006 Accounting System Administration Requirements Audit Compliance, which you can find at www.dcaa.mil. There are 18 specific DFARS criteria that guide the auditor. Your compliance requires that you understand them. The Contracting Officer should fully understand the details of the DCAA’s Master Audit Program, found in the Guidance section of their website. Timekeeping is included in the accounting system audit.

Straight from the document, you can see exactly how the DCAA defines the purpose and scope of their accounting audits: The compliance with DFARS 252.242.7006, Accounting System Administration Requirements Audit is conducted to examine contractor compliance with the system criteria as prescribed in section (c), System Criteria.

As a part of the accounting system examination, auditors will:

Determine if the contractor is compliant with the accounting system criteria in DFARS 252.242-7006(c); and report both significant deficiencies and less severe deficiencies in compliance with DFARS criteria.

Of importance to contractors are the specific steps for determining Labor Accounting Compliance, found in section E-1 of the DFARS document. The tracing of direct and indirect labor charges, the proper charging to cost objectives (contract), manual and electronic system controls and access, and the handling of executive compensation are all uniquely identified in the audit requirements.

We recommend that you periodically revisit your timekeeping system to ensure compliance with the FAR. This includes; the right system in place (manual or electronic), policies adequately documented and followed, timekeeping system controls including clocking in and out, the ability to track and trace all changes, and integrating the timekeeping system with your accounting software.

Questions about timekeeping compliance or labor costs?
Call 603-881-8185 or email us at cpa@klineco.com!