DCAA Timekeeping Requirements: A 2026 Compliance Guide for Government Contractors
If you bill the federal government for labor, your timekeeping system is one of the first things the Defense Contract Audit Agency (DCAA) will look at. The rules are not in a single statute — they are a layered set of expectations rooted in the Federal Acquisition Regulation (FAR), the DFARS, and DCAA's own audit manual (DCAM). This is the short, useful version.
Where the rules actually come from
- FAR 31.205-46 and 31.201-2 require that costs charged to government contracts be allowable, allocable, and supported by accurate, contemporaneous records.
- DCAM Chapter 5 lays out what DCAA expects to see when it reviews a contractor's labor system — including periodic "floor checks."
- For contractors with cost-reimbursement work, DFARS 252.242-7006 ("Accounting System Administration") imposes a list of system criteria — explicitly including time and labor controls.
DCAA reads these together. Their working position is that, to be allowable, labor cost must be accurate, current, complete, and supported by evidence created at the time the work was performed.
The seven controls DCAA actually inspects
When DCAA looks at a labor system, they are checking — explicitly or implicitly — for seven things:
- A written timekeeping policy every employee has acknowledged.
- Training records showing employees understand how to charge time to the right cost objective.
- Daily entry — each employee enters their own time, at least daily, against specific job, task, or indirect codes.
- Segregation by cost objective — direct contract work, indirect labor, leave, and unallowable activity are charged distinctly.
- Supervisor review and approval of timesheets — a meaningful review, not a rubber-stamp click.
- An audit trail of corrections — any change is logged with who, when, and why; the original entry is preserved.
- System access controls — employees cannot edit other employees' time, and only specific roles can release time to payroll.
If your system cannot produce evidence for each of these on demand, you have a gap.
Where most contractors fall short
A few patterns show up in nearly every DCAA finding we see:
- Paper or spreadsheet timesheets with no real edit history.
- Manager-entered or manager-corrected time without an employee re-attestation.
- End-of-pay-period bulk entry ("daily" became "Friday at 4pm for the whole week").
- No segregation of unallowable time — bid & proposal, lobbying, marketing — when these need to flow to specific indirect pools.
- Floor-check unreadiness — employees cannot articulate which contract they are charging or why.
Each of these is fixable, but several only with a system that is actually built for it.
A short self-check
Before your next audit cycle, ask:
- Can you produce, for any pay period, the exact time at which each entry was made?
- For any correction, can you produce who made it, when, and why?
- Can a randomly selected employee, asked today, name the cost objective they are currently charging and pull up their last five days of entries?
If any answer is "not really," start there.
This is informational, not legal or audit advice. Your contract terms and your CO/ACO's expectations always govern.