Getting started with GovCon Timekeeping to support DCAA compliance.
How Do I Achieve DCAA Compliance?
The process of achieving DCAA compliance is a bit of a misnomer, as the DCAA does not actually certify contractors as compliant.
Instead, compliance means establishing and maintaining accounting practices that meet the DCAA's requirements for accuracy, reliability, and integrity, so that your firm is prepared for an audit. Timekeeping is a significant component of preparedness.
Comprehensive Financial Management
At its core, DCAA compliance requires that contractors have a detailed accounting system in place. This system must accurately track and manage all financial transactions, including those funded by the government. The goal is to ensure that taxpayer dollars are used responsibly and in accordance with the terms of the contract.
Regular Tracking of Physical and Financial Resources
Contractors are expected to implement systems for the regular tracking of both physical resources and financial expenditures. This includes maintaining records that outline how government funds are spent and ensuring that expenses are allowable, allocable, and reasonable under federal regulations.
Focus on Time Tracking
The DCAA places a significant emphasis on the importance of time tracking. Contractors must demonstrate that they have a reliable system for recording the time spent by employees on different projects or tasks.
This system should be able to distinguish between work done on government contracts and other activities, ensuring that billable hours are accurately captured and reported.
If we dig deeper into the time-tracking process, we find six major components.
1. Implement a DCAA-Compliant Accounting System.
Your accounting system must meet specific criteria outlined by the DCAA, including segregation of direct and indirect costs, tracking of employee labor by contract, and the ability to generate timely and accurate financial reports.
2. Establish Clear Timekeeping Procedures.
Develop and document clear procedures for timekeeping that meet the DCAA’s standards.
3. Conduct Regular Audits and Reviews.
Regular internal audits of your accounting and timekeeping systems can help identify and rectify any compliance issues early on. These reviews also demonstrate your commitment to maintaining DCAA compliance.
4. Train Employees on Compliance Procedures.
All employees should receive training on DCAA timekeeping compliance requirements and your company’s specific procedures for meeting them, including the importance of accurate time tracking and the proper allocation of costs.
5. Maintain Detailed and Accurate Documentation.
Keeping detailed records is crucial for DCAA compliance. This documentation includes not only financial transactions and timekeeping records, but also policies, procedures, and any changes made to your accounting system.
6. Seek Expert Advice.
Given the complexities of DCAA compliance, consulting with experts, such as accountants or attorneys who specialize in government contracting, can provide valuable guidance and help avoid common pitfalls.
How to Effectively Use DCAA Compliance Tools
Although several time-tracking software systems claim to be DCAA certified, the federal government does not have a formal certification process for these tools. That being said, the right tools are crucial to ensuring DCAA compliance.
According to the DCAA Compliance Guide Generally Accepted Government Auditing Standards (GAGAS or “The Yellow Book”) prohibit the DCAA from providing advice to contractors on accounting or estimating matters. Does this mean that if you need some help, you’ll immediately have to turn to an outside professional?
Not necessarily! With a reliable software solution built specifically to help you manage your DCAA requirements, you can navigate all the complexities of compliance.
Aspire timekeeping is cutting-edge time tracking software that allows you to achieve the following:
Better Manage Staff Time
Keep detailed records in real-time, tracking for employees’ vacation time spent, sick leave, training time, and the total time your staff spent on a project.
Prepare for DCAA Audits
You can flexibly configure Aspire Time to send notifications to everyone involved in ensuring DCAA compliance, so they stay aware of important milestones or achievements. For example, when a staff member submits their timesheets for approval, you can receive notifications and move along to the next step or lock the timesheet for further editing.
Mobile Accessibility
With device on any mobile device, Aspire Time enables workers to record time at project sites directly, even if application access is restricted on government-issued workstations.
Simplified Time Entry with the “Charge Categories”
Aspire Time's consolidated timekeeping model allows workers to see only the projects, tasks, and other work assigned to them (along with their respective rates). This tailored view simplifies time entry and significantly minimizes the risk of errors.
Efficient Timesheet Correction Process
If Aspire Time finds an error in your timesheet entry, it will facilitate a convenient correction process for your accounting and administrative personnel, allowing prompt rectification of timesheets with a complete audit history that aligns with DCAA guidelines.
Integrated DCAA-Compliance Controls
The Aspire software incorporates essential DCAA-compliance controls, such as daily time entry, leave approvals, allowable charges, and floor checks, directly into its interface. This integration ensures that adherence to compliance protocols is streamlined and intuitive for users.
Compatibility with any Payroll Provider
Aspire time is designed to synchronize seamlessly with any payroll system, supported by an easily configurable export file. This flexibility ensures smooth integration with existing payroll processes and enhances overall operational efficiency.
How to Prepare for a DCAA Audit
The DCAA audit process is a thorough examination of your accounting systems that’s designed to maintain the integrity of government expenditures and ensuring that taxpayer dollars are used appropriately. Preparing for a DCAA audit involves several key steps and a deep understanding of how auditors do their work.
Ensure Thorough Documentation
Before the audit begins, it's crucial to organize and review all financial documents, including contracts, invoices, payroll records, and timekeeping data. Your submissions should be clear, complete, and readily accessible. This not only facilitates the audit process, but also demonstrates your commitment to transparency and compliance.
Validate Employee Understanding and Compliance
You should Regular training sessions should be conducted to ensure that all employees, particularly those involved in government contracts, understand the compliance requirements. It’s essential to validate that they are following the established procedures for timekeeping and financial reporting. Meetings and reviews can help reinforce the importance of these procedures and clarify any uncertainties.
What DCAA Auditors Prioritize During a Compliance Evaluation
1. Procedural Compliance: The DCAA audit focuses heavily on the contractor’s adherence to established procedures and guidelines. This includes evaluating how well the company follows its own internal policies as well as compliance with federal regulations.
2. Accuracy of Documentation: Auditors scrutinize the accuracy and completeness of financial documents. They assess whether the reported costs are in line with contractual agreements and whether these costs are allowable, allocable, and reasonable according to federal standards.
3. Timekeeping and Labor Charging: Given the emphasis on timekeeping, the DCAA checks for a robust and reliable system to track employee hours worked on specific projects. This includes evaluating the segregation of direct and indirect labor, the approval process for time records, and the accuracy of labor charging to government contracts.
4. Internal Controls: The strength and effectiveness of a contractor’s internal controls are also under review. Auditors look for systems that prevent and detect errors, fraud, and noncompliance. This includes checks on the segregation of duties, authorization processes, and the overall financial management system.
Additionally, there are secondary considerations beyond those for key compliance criteria that businesses should also pay attention to the following elements:
Continuous Compliance and Communication
Staying compliant with DCAA requirements is an ongoing process. Regular communication with DCAA representatives can help address potential issues before they escalate. It's also beneficial to maintain a proactive stance by periodically reviewing and updating your compliance procedures.
Leverage the Right Technology
Implementing and using specialized accounting software can greatly assist in maintaining DCAA compliance. These systems can automate many of the processes required for compliance, such as timekeeping and generating appropriate reports, making it easier to manage documentation and internal controls.
Seek Expert Advice
For many contractors, navigating the complexities of DCAA compliance and preparing for audits can be challenging. Seeking advice from experts in government contracting and accounting can provide valuable insights and help ensure that your organization is well prepared for a DCAA audit.
