DCAA Compliance Checklist: 3 Critical Steps to Ensure Your Business Meets All Requirements

Maintaining DCAA (Defense Contract Audit Agency) compliance is critical for any organization that works with the Department of Defense (DoD). Non-compliance can lead to serious consequences, including financial penalties, disallowed costs, and potential legal action. In this blog post, we'll explain the three areas your business must focus on to meet the necessary requirements.

Timesheet Preparation

DCAA compliance requires employees to record their time daily and accurately. Time must be allocated to the right project or contract number. All hours worked, including unpaid hours, must be recorded to ensure accurate computation of labor costs and associated overheads.

Employees must certify that their timesheets reflect the hours worked and the appropriate cost objective at the end of each work period. Any timesheet changes should identify the original and corrected times and include documentation of the employee's agreement to the change. Uncompensated overtime, which refers to unpaid hours worked, must also be recorded as it affects labor costs and overheads.

Timekeeping Policy

The policy dictates that supervisors should approve and cosign all timesheets. However, supervisors are only allowed to complete an employee's timesheet if the employee is on authorized leave or travel status. In such cases, the supervisor may prepare the timesheet, but the employee should attach their timesheet upon return. 

A crucial aspect of the policy is that the nature of the work determines the proper time allocation, not the availability of funding or the type of contract. This ensures that time is charged accurately based on the actual work rather than financial considerations.

Labor Charging System

The labor charging system emphasizes the importance of segregating responsibilities for labor-related activities. For example, the responsibilities for timekeeping and payroll accounting should be separate. The procedures for labor charging must be clear and reasonable to avoid confusion and misunderstanding regarding permissible actions. 

The system also requires that controls be verified continually, and any violations should be immediately addressed to deter future violations. This ongoing maintenance and verification of controls is crucial for ensuring the integrity of the labor charging system and maintaining DCAA compliance.

Ensuring compliance for your business

Maintaining DCAA compliance is essential for organizations that work with the DoD. By following this comprehensive checklist, you can confidently ensure your business meets all the requirements and avoids the costly consequences of non-compliance.

We created a checklist to help you start your DCAA compliance journey. Get your Free DCAA compliance checklist today, and get started!