What a DCAA Timesheet Audit Reviews
A timesheet audit generally follows the transaction from the employee's time entry through accounting and contract-cost reporting. The review should establish that employees record time consistently and that supervisors approve records according to documented procedures.
- Employee time entries: Confirm that hours are recorded for the appropriate work performed and contract or indirect activity.
- Corrections: Verify that changes are documented, attributable to the person making the correction, and appropriately approved.
- Payroll reconciliation: Compare approved hours with payroll records and investigate material differences.
- Labor distribution: Confirm that approved hours flow to the correct projects, contracts, tasks, or indirect cost pools.
- Supporting records: Retain approvals, policies, reports, and other evidence needed to trace labor charges.
The DCAA Timekeeping & Labor Cost Tracking Guide provides additional educational context on DCAA timekeeping requirements, labor-cost tracking practices, and audit readiness.
Timekeeping Controls and Approval
A sound timekeeping process begins with a written policy that explains when employees must record time, how they should allocate hours, and how corrections are documented. Employees should record actual time worked rather than reconstructing hours from memory at the end of a pay period.
Approval controls should establish a clear review path between the employee and responsible supervisor. A Timesheet Approval Checklist can provide a structured way to verify required approvals, dates, project assignments, corrections, and supporting documentation before payroll processing.
Timesheet Software Finance describes the broader use of timesheet systems in finance and business workflows, including the connection between time records, labor accounting, payroll, and financial reporting.
Connecting Timesheets to Labor Costs
The audit trail becomes particularly important when approved time is transferred into payroll and accounting. Finance teams should be able to trace a labor transaction from the employee's original entry through approval, payroll calculation, labor distribution, and the resulting accounting entry.
Invoice and accounting workflows may also depend on accurate coding. For example, gl coding determines how transactions are classified for reporting and review, making consistent coding important when labor-related costs ultimately flow into financial records.
Related records such as accruals should also be supported when labor or other expenses are recognized before final invoices or payroll information are available. Documentation should explain the basis for the amount, accounting period, approval, and subsequent adjustment.
Audit Trails and Supporting Evidence
Audit evidence should show what happened, when it happened, and who performed or approved each relevant action. Audit Trails can provide detailed records of actions, timestamps, and data changes in invoice-processing workflows, illustrating the type of traceability that supports transaction review.
Procurement transactions may intersect with labor and project accounting, particularly when contractors track subcontractor or project-related expenditures. Audit Trails For PO can preserve records of actions involving purchase orders, vendor payments, approvals, automation, and reconciliation.
Period-end accounting requires similar documentation. Audit Trails For Accruals can record preparation, review, approval, and posting steps for accrual processes, helping finance teams maintain evidence that supports audit and compliance requirements.
ERP and Government Contractor Workflows
An ERP should connect timekeeping, project accounting, payroll, labor distribution, and financial reporting without breaking the traceability between source records and accounting entries. Before an audit, contractors can review system permissions, integrations, data mappings, approval workflows, and reconciliation procedures.
The DCAA-Compliant ERP: 2026 Buyer's Guide + AI Audit Tips discusses ERP selection and audit-readiness considerations for government contractors, while ERP for Government Contractors: The Complete Guide (2026) covers ERP features, DCAA compliance, integration, migration, and implementation considerations.
When finance systems process related transactions such as invoices and sales taxes, Audit Trails for Sales Tax Verification illustrates how transparent logs can document verification actions and associated journal-entry activity.
Best Practices for DCAA Timesheet Readiness
Contractors can strengthen timesheet audit preparation by reviewing controls throughout the year rather than waiting for an audit request. Periodic testing should compare time entries with payroll, project records, contract assignments, and accounting outputs.
- Document the policy: Keep timekeeping rules current and accessible to employees and supervisors.
- Review exceptions: Examine late entries, corrections, unusual allocations, and missing approvals promptly.
- Reconcile regularly: Compare approved timesheets with payroll and labor-distribution records.
- Preserve evidence: Retain approvals, correction histories, system records, and supporting documentation according to applicable requirements.
- Test traceability: Select transactions and follow them from the original timesheet through payroll and accounting.
For specialized legal-service environments, Legal Timesheet Software describes software used to manage time records in legal and professional-services workflows, providing useful context for understanding structured time capture and financial administration.
Summary
A DCAA Timesheet Audit examines whether labor time is recorded accurately, approved appropriately, supported by documentation, and transferred consistently into payroll and accounting records. Effective preparation combines written policies, employee timekeeping, correction controls, supervisory approvals, reconciliations, system traceability, and organized audit evidence. When these elements work together, contractors can demonstrate a clear connection between employee activity, labor costs, contract accounting, and financial reporting.