Timekeeping Systems - Regulatory Requirements

This isn't exactly a re-post but it might seem like one because we have discussed timekeeping systems many times in this blog. Today we want to answer the question about where, in FAR (Federal Acquisition Regulations), is there a definition of what constitutes an "adequate" timekeeping system for Government contracting purposes.

Well, the short answer is there isn't a definition in FAR. The criteria for what constitutes an adequate timekeeping system has been subordinated to DCAA (Defense Contract Audit Agency). FAR provides kind a generic requirement in FAR 31.201-2(d):

A contractor is responsible for accounting for costs appropriately and for maintaining records, including supporting documentation, adequate to demonstrate that costs claimed have been incurred, are allocable to the contract, and comply with applicable cost principles."

The Standard Form (SF) 1408, Preaward Survey of Prospective Contractor - Accounting System, used by the Government to assess the adequacy of a contractor's accounting system, provides a little more specificity on what constitutes an adequate timekeeping system:

Does the accounting system provide for a timekeeping system that identifies employees' labor by intermediate or final cost objective?

Still, not too helpful. So, we have to turn to the DCAA Contract Audit Manual (CAM) for the most detailed definition of an adequate timekeeping system. There are standards for manual timekeeping systems and automated timekeeping systems. The automated system is the only way to go, in our opinion. There are so many cost-effective and DCAA compliant systems on the market today that no contractor should be on a manual system. The DCAA standards for automated systems include

• Only the employee uses their labor charging instrument to access the labor system. 
• Employee records his/her time at least once a day.
• Employee and supervisor electronically sign certifying accuracy
• 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, authorized, and dated by the employee and supervisor and include a description of the reason for the change. This may be done electronically. 
• A verifiable audit trail process is in place that collects all initial entries and subsequent 

There are more but these are the main criteria. Since these are not "regulatory" requirements, there is some flexibility on the part of contractors to convince the Government that their particular system can ensure the propriety of labor charges to Government contracts.