For-Profit Organizations (Per DCAA Audit Manual)
The contractor should have procedures to assure that labor hours are accurately recorded and that any corrections to timekeeping records are documented, including appropriate organizations and approvals. When evaluating the contractor's timekeeping procedures, the auditor should consider whether the procedures are adequate to maintain the integrity of the timekeeping system.
While the DCAA Audit Manual provides good guidance as to how to appropriately record time and effort, for-profit organizations should consult FAR Part 31 for any additional questions regarding the applicable cost principles.
Manual Timekeeping Systems
Procedures for manual timekeeping systems shoud provide for the accurate and complete recording of labor hours, as well as appropriate controls to ensure corrections to labor records are accurate and authorized. Generally, they may be categorized as procedures which pertain to:
- Supervisory observation of employee arrival and departure to prevent improper clock-in/clock-out.
- Employee possession of timecard/timesheet.
- Employees prepare their timecards in ink, as work is performed.
- Only one card/sheet is prepared per employee per period; cards/sheets are preprinted with employee name and identification number; and cards/sheets are turned in to the designated timekeeping office or collected by an authorized person.
- Precoded data is printed on the job cards for identification purposes.
- Direct labor employees record their time no less often than daily. Sufficient formal subsidiary records are maintained, if necessary, to assure accurate time recording and allocating of labor costs to intermediate and final cost objectives when multiple jobs are worked in a day.
- Corrections are made in ink, initialed by the employee, properly authorized, and provide a sufficient and relevant explanation for the correction.
- Employees and supervisors sign the timecards/timesheets in accordance with procedures, verifying the accuracy of the recorded effort.
Automated Timekeeping Systems
Procedures for automated timekeeping systems should provide for the accurate and current recording of labor hours by authorized employees, as well as appropriate controls to ensure corrections to labor charges are accurate and authorized. Generally, they may be categorized as procedures which pertain to:
- Only the employee uses their labor charging instrument to access the labor system.
- Employee badge issuance is sufficiently controlled so that no number is duplicated and badges are not issued to unauthorized persons.
- Procedures are in place which require the employee to report lost badges promptly.
- Changes are initialed and dated by the employee and supervisor and include a description of the reason for the change.
- A verifiable audit trail process in in place that collects all initial entries and subsequent changes