Timekeeping System

Why is a timekeeping system so important to the government?

• Many contracts are labor intensive, with the preponderance of contract cost comprising labor charges

• Labor charging systems are often the easiest to manipulate by the fewest number of people

• History of timekeeping fraud with government contractors

• Adequate timekeeping systems are critical in gaining government’s trust in company’s ability to ensure proper charging and billing of labor costs to government programs

• Inadequate timekeeping system will damage creditability of customer and raise specter of added audit oversight or investigation

• Deficiencies and irregularities in timekeeping systems have led to more criminal investigations of government contractors than any other type of anomaly found in an accounting system

• Anytime DCAA notes significant timekeeping deficiencies during an audit, the audit scope will be expanded and possible referrals of suspected irregular conduct to government investigative agencies are likely especially

• if those deficiencies have gone undetected for a long period

Objectives of a Timekeeping System

Ensure that proper and reliable contract labor costs, identified as either direct or indirect, are billed to government via a system of accurate, timely, and complete posting of labor hours on individual employee timecards

Requirements for an adequate Timekeeping System

• A system that identifies labor costs by employee by cost objective

• A system that identifies and segregrates unallowable costs

• A system that verifies that the amounts being charged the government are actually paid by the contractor

• Employee Timesheet Training

What procedures do government auditors expect to be in place to ensure accurate labor charges to contracts?

• The contractor has written Policies and Procedures addressing all important aspects of their Timekeeping System. Please see Timekeeping Policies and Procedures.
• Employee Responsibility and Accountabiity
• Employee has control or possession of timesheet
• Employees prepare timesheets daily - Daily Time Reporting
• Supervisors or other personnel do not prepare timesheets for employees
• Timesheets not filled out or signed in advance of time worked
• Timesheet signed (authorized, certified) by employee at end of pay period
• Timesheets collected by appropriate official (or system)and reviewed;
• Supervisor approves timesheet (signature, or electronic approval)
• Employee Charge Numbers
• Employee is given correct project or time charge number via work authorization before work commences. This is know as a Work Authorization.
• The contractor has appropriate time charges available for employees. Proper time charges include, Direct Charge numbers, charge numbers for training, sick, vacation, bereament, etc.
• Paid absences charged to correct indirect code
• Indirect duties (training, meetings, etc.) properly charged
• All time worked recorded (for total time recording, not for pro-rata method). This includes all time to include overtime. Also, some contracts and projects require overtime to be authorized, and a contractors time and labor system shall take into consideration these requirements.
• Proper procedures to correct incorrect timesheets. These procedures shall address:
  • Corrections to timesheets not yet submitted, and
  • Timesheets that have been submitted, but not approved, and
  • Approved Timesheets.
• Overtime Procedures
• The contractor has adequate procedures to authorize and approve overtime. These procedures include direct and indirect time, and include any contract requirements for overtime approval from the Contracting Officer.
• The contractor analyzes overtime to include uncompensated overtime and includes overtime compensation ratios in bids and proposals as appropriate.

Audit Oversight Vehicles for Timekeeping Accuracy

To emphasize the importance of current (daily) and accurate timesheet preparation, contractors and the government normally have the following areas of oversight available for review:

• Internal and Outside Audit Review (Timesheets)
• Government Audit Agency Review
• Additionally, the electronic timesheet system has an audit function which logs the date and time of every entry to your electronic timesheet. These tracking reports are maintained and are available for audit review.

After payroll period end, verify data noted on timesheets during interview to payroll and labor distribution records

Timekeeping Audits

• Risk Anaysis and Internal Controls
• Floorchecks and Employee Interviews
• Mandatory Annual Audit Requirements (MAARS)
• Common Audit Deficiencies

Required Information and Reports for an Adequate Timekeeping System

See the link; Required Information and Reports for an Adequate Timekeeping System