Timekeeping Systems Done Right

As we work to assist clients in getting their accounting systems approved by DCAA, we are discovering that the largest hurdle seems to be contractors’ timekeeping systems.  The problems have been in a number of areas:

  • The period of the timesheets do not match the pay periods of the company.
  • The timesheets have not been signed by the employees and approved by a supervisor.
  • The contractor is using the timesheets of a prime contractor rather than having their own.
  • The timesheets do not identify the contract and tasks.
  • The timesheets do not identify the labor categories that are billed on T&M contracts.
  • The hours on the timesheets do not match payroll records or the invoice because of data entry errors – a clear internal control deficiency.

As the first five problems are policy issues that are structural in nature, these are easily remedied.  The final problem can be corrected by implementing an electronic timekeeping system that integrates electronically with your accounting system or by implementing a data entry review and editing process in your payroll procedures.

While electronic (web based) timekeeping systems are usually an improvement, the improvement is gained accomplished when the proper controls are established.  These essential controls are:

  • The timekeeping system integrates electronically with your accounting software; if using Quickbooks, ensure that the timekeeping software will populate the fields: Customer, Job, Service Item, and Payroll Item.
  • Requires employee submittal for approval at the end of each pay period.
  • Requires the supervisor’s approval.
  • Requires a unique user id’s for the employees and supervisors.
  • Allows the tracking of hours by contract, tasks, labor categories, and indirect labor charges.
  • Includes an audit trail function for tracking changes to time entries.

Also, an additional and important attribute of electronic systems is that the administrator can set them to limit the available charges for each employee. Thus, an employee who that should not charge to G&A labor will never see it as an available charge; greatly reducing charging errors.

Please be aware that your accounting system will not be approved when the timekeeping system has deficiencies. It is considered by auditors the most important part of your accounting system.

The staff at KDC will be happy to answer any questions that you may have. You can contact us here.

KDuncan & Company is dedicated to providing knowledge and support for small government contractors about concerns regarding government contracting. For questions on areas such as as cost proposals, accounting systems, DCAA compliance, and incurred cost audits, reach out to KDuncan & Company.