DCAA Timekeeping Requirements for Government Contractors (2026)

DCAA timekeeping requirements trip up more government contractors than any other compliance area — not because they're complicated, but because the gap between "how most companies track time" and "what DCAA actually requires" is wider than people expect. Timekeeping violations are the single most common finding in DCAA accounting system audits. They account for the majority of "material weakness" designations that put cost-plus contracts at risk and delay new contract awards.

This guide covers what DCAA's timekeeping requirements actually are, why after-the-fact entries get flagged, how direct vs. indirect hours must be classified, what happens during a floor check, and the five violations auditors find most often. If you're preparing for a pre-award accounting system review or want to close the gaps before an auditor arrives, start here.

The Regulatory Basis: FAR 52.232-7 and CAS 401/402

DCAA's timekeeping requirements derive from two regulatory sources that every GovCon firm needs to understand. Neither mandates a specific software platform — they define outcomes your system must produce.

Beyond these two, DCAA's own audit guidance (MRD 11-PAS-007 and successor guidance) establishes specific timekeeping system attributes that auditors check during accounting system reviews and floor checks. These aren't part of a single regulation — they're DCAA's operationalization of what the FAR and CAS require in practice.

Daily Entry vs. After-the-Fact Timekeeping

This is the most consistently misunderstood DCAA timekeeping requirement, and the one that generates the most audit findings. DCAA requires timesheets to be prepared contemporaneously — meaning employees record their hours on the day the work is performed, not reconstructed days later.

"After-the-fact" timekeeping is defined as entering hours after the period during which the work was performed — whether that's entering Monday's hours on Wednesday, or completing a full week's timesheet on Friday afternoon from memory. Both are problematic. DCAA's concern is simple: hours entered after the fact can't be verified, can be biased toward profitable labor categories, and represent a control environment failure.

The practical standard most GovCon accounting professionals apply: employees should enter time at minimum by end of business the following day. Same-day entry is ideal. End-of-week batch entry (entering all five days on Friday) is a risk. End-of-month entry is a material weakness.

The fix is cultural as much as technical. Your timekeeping policy must require daily entry, and supervisors must enforce it — not just tolerate late submissions. If your current system allows batch entry without flagging late submissions, that's a control gap.

Direct vs. Indirect Labor: The Classification Rules

Every hour an employee works must be classified as either direct or indirect. This sounds simple. In practice, misclassification is the source of most CAS 402 findings.

Direct labor is time that can be specifically identified with a final cost objective — typically a government contract. An engineer writing code for Contract A is direct labor for Contract A. A program manager attending a project review for Contract B is direct labor for Contract B.

Indirect labor is time that benefits multiple contracts or the organization generally but can't be traced to a specific contract. This includes overhead time (general technical support, indirect project management), G&A time (accounting, HR, executive leadership, business development), bid & proposal time, and leave categories (vacation, sick, holidays).

The classification must be consistent per CAS 402. If your firm classifies program management time as direct labor on some contracts and overhead on others, that's a finding — even if the allocations are reasonable in isolation. Your written accounting policies must define what goes where, and your timekeeping system must enforce it through labor category structure.

For a deeper look at how these labor categories flow into your indirect cost pools, see our guide on DCAA labor allocation in QuickBooks.

Supervisor Approval Requirements

DCAA requires that employee timesheets be reviewed and approved by a supervisor who has firsthand knowledge of the work performed. This is not a formality — it's a control. The supervisor approval requirement means:

• Supervisors must actually review time entries, not rubber-stamp them. They should be capable of identifying misallocated hours — an employee charging Contract A for time spent on Contract B, or charging direct labor for activities that are clearly G&A.
• Approvals must be documented. Electronic approval with timestamp is ideal. A physical signature is acceptable but harder to produce on short notice during an audit. Paper-only systems with signatures collected at month-end are a common weakness.
• Self-approval is not permissible for most employees. Exceptions exist for senior executives and sole proprietors, but even then, DCAA expects a documented rationale.
• Approvals must happen before billing. Approving timesheets after invoices have been submitted creates reconciliation problems and signals poor controls.

The most practical setup: weekly supervisor approval cycles, with electronic approval captured in your timekeeping system. If your system doesn't have an approval workflow, it doesn't meet DCAA requirements regardless of how accurate the time entries are.

Floor Checks: What DCAA Auditors Actually Do

A DCAA floor check is an unannounced (or short-notice) visit to your facility during which auditors interview employees and verify that what people are actually doing matches what the timesheets say. Floor checks are one of DCAA's primary tools for detecting timekeeping fraud and control environment failures.

During a floor check, an auditor will typically:

• Select a sample of employees at random and ask them to describe what they're currently working on
• Pull that employee's current timesheet and verify the charge matches the work description
• Check submission timestamps to verify entries are being made contemporaneously
• Review leave balances and usage to ensure holiday, sick, and vacation time is being charged as indirect labor rather than buried in contract charges
• Verify supervisor awareness — auditors may ask supervisors whether they reviewed a specific employee's time entries and what the work involved

Preparation for floor checks is straightforward: employees should always be able to describe what they're working on and which charge code it belongs to. That requires regular reinforcement, not a one-time onboarding session. Many firms conduct internal floor check simulations quarterly — a manager randomly asks employees to describe their work and verify it matches the current timesheet. DCAA views this as a sign of a mature control environment.

Top 5 DCAA Timekeeping Audit Findings

These are the findings that appear most frequently in DCAA accounting system audit reports. Most are preventable with policy and system changes.

1. After-the-fact timesheet preparation
   Hours entered days or weeks after the work period — detected through submission timestamp analysis. This is the #1 finding and can be a Material Weakness if widespread. Fix: enforce daily entry policy with system-level alerts for late submissions and a written corrective action plan if the pattern continues.
2. Inadequate supervisor review
   Approvals completed by individuals without firsthand knowledge of the work, self-approvals at non-executive levels, or approvals that post-date invoice submission. Fix: implement electronic approval workflows with timestamps, assign supervisors based on actual work knowledge, and separate the person who approves from the person who processes billing.
3. Misclassification of indirect costs as direct
   Employees charging B&P, IR&D, or G&A activities to specific contracts — often because they ran out of the right charge codes or didn't understand the distinction. This inflates contract costs and can trigger contract modification requests. Fix: provide clear written guidance on what each charge code covers, and build charge-code access controls that limit employees to categories appropriate for their role.
4. Missing or unrecorded leave
   Employees taking paid time off but charging a contract for the day — or not charging any leave code at all (effectively "working for free" on paper). Both create problems: the former inflates contract costs, the latter creates an inconsistency between payroll records and timesheets. Fix: verify that total hours on timesheets reconcile to paid hours on payroll for every employee, every period.
5. No audit trail for timesheet corrections
   When an employee corrects a timesheet entry, the system must preserve the original entry, the correction, who made it, when, and why. Systems that allow silent overwrites — no record of what was changed — fail this requirement. Fix: use a timekeeping platform that logs all edits with user ID and timestamp, and require a written reason for any correction to a previously approved entry.

For the full picture of what DCAA examines beyond timekeeping, including cost pool segregation, unallowable cost tracking, and incurred cost submissions, see our DCAA compliance checklist for small government contractors.

What Your Timekeeping System Must Actually Do

DCAA doesn't mandate specific software, but auditors evaluate whether your system produces the outputs the regulations require. A compliant timekeeping system must:

• Require employee certification — employees must affirmatively certify their own time entries (electronic signature or equivalent)
• Capture submission timestamps — so auditors can verify contemporaneous entry
• Support supervisor approval workflows — with documented approver identity and approval timestamp
• Maintain a complete change log — every edit, who made it, when, and preferably why
• Require labor category selection per entry — employees can't submit a timesheet without specifying whether hours are direct (with contract number) or indirect (with category)
• Export to your accounting system — timekeeping data must flow directly into your QBO or GL without manual re-entry; any manual transcription step is a control gap
• Reconcile to payroll — total hours in the timekeeping system must match total paid hours in payroll, to the penny, every period

Most commercial timekeeping platforms meet these technical requirements. The gaps are almost always in how the system is configured and enforced — not in what it's capable of. QuickBooks Time, Unanet, Deltek Time & Expense, and Harvest all work; the question is whether the workflows around them enforce DCAA's requirements.

For how timekeeping data connects to QuickBooks and drives your indirect rate calculations, see our guide on QuickBooks DCAA compliance setup. The labor distribution process depends entirely on clean, classified timekeeping data flowing into the right cost pools. If the timekeeping is wrong, the rates are wrong — and the invoices are wrong.

How GovieRates Automates DCAA-Compliant Timekeeping

The DCAA timekeeping requirements above aren't complicated in isolation — the problem is enforcement. Ensuring daily entry, consistent classification, supervisor approval, payroll reconciliation, and audit trail integrity across every employee, every period, without manual oversight, is where most GovCon firms develop gaps.

GovieRates addresses this by connecting your timekeeping platform directly to your accounting workflow:

• Timekeeping system integration — syncs with QuickBooks Time, Unanet, and other platforms to pull classified hours by employee and contract each pay period, eliminating manual transcription
• Late-entry alerts — flags employees with entries submitted more than one business day after the work date, so your payroll admin can follow up before the period closes (not after the auditor asks)
• Payroll reconciliation check — automatically compares total timekeeping hours to total paid hours per employee, highlighting any mismatch before the allocation journal entries are posted
• Labor distribution automation — uses classified timesheet data to generate the direct/indirect allocation journal entries in QuickBooks, with full source documentation attached
• Audit-ready reporting — generates a DCAA-format timesheet summary per period showing hours by employee, contract, and category — the report format auditors request during accounting system reviews

The result: timekeeping data that's classified, reconciled, and documented before it ever hits your general ledger. GovieRates starts at $79/month. For firms on cost-plus contracts, the cost of a single misclassification finding — contract modification, billing adjustment, and the accounting hours to resolve it — typically exceeds several months of that fee. And the indirect rates those timesheets drive affect every invoice you send. See how the rates connect to your billing in our indirect cost rate guide and wrap rate calculator guide.