Core Timekeeping Requirements
Employees should record their actual hours worked and charge those hours to the appropriate project, contract, task, labor category, or indirect activity. Time should be recorded consistently with the contractor's established procedures rather than adjusted to meet a predetermined budget or desired cost distribution.
- Record actual hours worked against the appropriate charge codes or activities.
- Distinguish direct labor, indirect labor, leave, and other applicable categories.
- Submit time within the organization's established reporting period.
- Obtain appropriate supervisory review and approval.
- Document and preserve corrections rather than obscuring the original entry.
- Maintain records that support reconstruction of labor transactions during an audit.
These requirements should apply consistently across employees, contracts, projects, and accounting periods, with documented procedures for exceptions such as missed entries, leave, transfers, and corrections.
Employee and Supervisor Responsibilities
Employees are responsible for recording their own time accurately and promptly. They should understand which activities are direct or indirect, how to select charge codes, how to report leave, and how to request corrections. Employees should not knowingly record time to a contract or project for work performed elsewhere.
Supervisors provide a separate layer of review. Their responsibility is to verify that submitted hours reasonably correspond with the employee's assignments and known work activity. Approval controls should make it clear who reviewed the time and when the approval occurred.
The DCAA Timekeeping & Labor Cost Tracking Guide provides educational guidance on DCAA timekeeping requirements, labor cost tracking practices, compliance rules, and approaches government contractors can use to remain audit-ready.
Corrections, Audit Trails, and Records
Corrections are an important part of compliant timekeeping. When an employee identifies an incorrect charge, the correction process should preserve enough information to show the original entry, revised entry, person making the change, timing, and applicable approval.
This connects directly with Timekeeping Compliance, which covers the broader concept of maintaining timekeeping practices that support audit, risk, and internal-control workflows. A contractor should periodically review whether written procedures, system configuration, and actual employee behavior remain aligned.
Record retention should also support the contractor's applicable contractual, regulatory, and accounting obligations. Timekeeping records should remain accessible in a form that allows authorized personnel to trace labor from the employee entry through approval and subsequent accounting activity.
ERP Integration and Accounting Controls
Timekeeping information often feeds payroll, project accounting, billing, labor distribution, and financial reporting. ERP integration should preserve important information such as employee identity, contract, project, task, labor category, charge code, hours, approval status, and accounting period.
Contractors evaluating their broader ERP environment can use DCAA-Compliant ERP: 2026 Buyer's Guide + AI Audit Tips to understand ERP selection, migration, integration, clean-core architecture, and approaches for extending finance workflows around an ERP.
Strong integration also helps finance teams reconcile labor information with project costs and billing records. This creates a more consistent financial record from the original time entry through downstream accounting processes.
Procurement, Tax, and Related Finance Controls
DCAA timekeeping requirements primarily concern labor reporting, but government contractors operate within broader financial control environments. Procurement workflows should maintain clear authorization and documentation for requisitions, sourcing, approvals, and spending. Where labor or project activity is connected to a purchase order, finance teams can maintain clear relationships between authorized spending and associated project records.
Tax validation is another related control area. Finance teams should consider jurisdiction rules, nexus, exemptions, taxable classifications, and potential overcharges when reviewing project-related transactions. The distinction between sales tax and use tax can be relevant when determining the appropriate treatment of taxable purchases and supporting audit documentation.
These adjacent controls should remain appropriately separated from labor controls while contributing to a consistent financial governance framework.
Related Finance Requirements
Government contractors may manage other requirements alongside timekeeping policies. E Invoice Requirements, for example, address electronic invoicing processes and their role in broader finance and business workflows. These requirements are distinct from labor timekeeping but may interact with billing and accounting processes that depend on accurate project information.
Similarly, Disclosure Requirements concern information organizations may need to present or provide within specific financial and business contexts. Maintaining clear documentation across these areas helps finance teams distinguish timekeeping evidence from other compliance records while keeping related workflows organized.
Best Practices for Maintaining Compliance
Contractors should periodically test timekeeping controls rather than relying only on policy documents. Reviews can sample employee entries, supervisor approvals, corrections, charge-code usage, access permissions, and the transfer of approved labor data into accounting systems.
Training should be refreshed when contracts, organizational structures, charge codes, or system workflows change. Managers should reinforce the principle that employees record actual work performed and promptly correct errors through the established process.
A useful governance cycle combines documented procedures, employee training, system configuration reviews, supervisory oversight, reconciliation, and retention of supporting evidence. This approach helps maintain accurate labor costing and supports reliable financial reporting over the life of a government contract.
Summary
DCAA Timekeeping Requirements center on accurate recording of actual labor, appropriate cost classification, timely submission, supervisory approval, controlled corrections, audit trails, and adequate record retention. When these practices are supported by effective system controls and ERP integration, government contractors can maintain traceable labor costs and stronger financial reporting while preparing organized records for audit review.