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If your business works on federal contracts, DCAA-compliant time tracking is mandatory.
The Defense Contract Audit Agency (DCAA) sets strict timekeeping requirements that help ensure taxpayer money is used appropriately. That means every hour your team logs needs to be accurate, approved, and traceable.
Falling short of DCAA compliance standards can lead to rejected invoices, suspended payments, or even contract termination. In this guide, we’ll cover:
The rules you’re expected to follow
The most common mistakes to avoid
How the right time tracking software can help you stay compliant without drowning in admin work
Let’s get started.
Short on time and just need the essentials? Follow this checklist for better DCAA compliance.
These are the core compliance requirements the DCAA looks for when reviewing your timekeeping system.
Time must be entered daily. Logging hours at the end of the week isn’t allowed. Entries must be made each day to reflect work as it happens.
Project and task codes must be assigned. Every time entry must tie to a specific job, contract, or task. Avoid generic labels like "admin work."
Employees must certify their time. Workers must personally confirm their hours with a digital or physical sign-off. No one else can do it for them.
Supervisors must approve all entries. Timesheets need to be reviewed and approved by someone in a position to verify the work. That approval must be logged.
Retroactive edits must be documented. If someone updates a timesheet after submitting it, the system must show what changed, when, and why.
Role-based access must be enforced. Employees should only see or modify their own time, while admins and managers have limited, job-specific access.
A secure audit trail must be maintained. Your system needs to track every action with date and user info preserved. This includes entries, changes, and sign-offs.
Timesheet data must be locked after approval. Once reviewed and signed off, timesheets shouldn’t be editable without reopening the full approval process.
Records must be retained for the full audit period. Depending on contract terms, you're required to keep timekeeping records for a minimum of two to three years.
The time tracking system must meet federal IT security standards. Your time tracking software must have secure access controls and meet government-grade data protection requirements.
DCAA compliance means that a contractor's policies and systems for managing money are in accordance with the Federal Acquisition Regulations (FAR) and the DCAA's Contract Audit Manual (DCAM).
When you get a government contract, the DCAA has to ensure that your company follows all the rules (both FAR and the DCAA) regarding accounting and employee time requirements.
Doing work under a federal contract (especially cost-reimbursable ones) requires you to submit a clear, verifiable record of how every hour is spent to the government.
This involves how that time is recorded, reviewed, and locked in. The DCAA’s rules are built to prevent fraud, make labor costs more transparent, and give auditors what they need if (or when) they come knocking.
If you manage time in a spreadsheet or use a system that doesn't track changes or approvals, you may not be meeting DCAA standards.
The requirements may sound strict (and they are), but they’re clear once you know what to look for.
If your business falls under DCAA oversight, it's not enough to just track time.
You must follow a specific set of DCAA timekeeping requirements that govern how hours are recorded, reviewed, and stored.
Below are the key requirements with examples of how they appear in real-world settings.
Time must be entered daily. Employees are required to log hours each workday. Logging a week’s worth of time in one sitting isn’t allowed.
Example: A developer working on a DoD project should enter their hours at the end of each day, not Friday afternoon, for the whole week.
Each time entry must be linked to a specific project or task. General labels like “client work” or “admin” are unacceptable. You need detailed, project-specific codes.
Example: An engineer should report 3.5 hours worked for “Contract 8705 – R&D Phase 2” instead of just “engineering.”
Employees must certify their timesheets. Every person needs to review and sign off on their own time to confirm its accuracy.
Example: In a digital system, this usually means approving the submission, checking a box, entering a password, or punching in a PIN before submission.
Supervisors must approve timesheets. A manager or designated reviewer has to approve each timesheet before it’s finalized.
Example: A team lead reviews submitted time every Friday. They flag entries that look off or are misclassified.
Edits must be documented and traceable. If time entries are changed after submission, the system must log who made the change and when and provide a detailed reason why.
Example: A field technician corrects a mistakenly logged 10-hour day, and the system prompts for a reason before saving.
Timekeeping records must be locked after approval. Once approved, timesheets can’t be changed unless formally reopened through a documented process.
Example: A payroll admin cannot tweak hours (even minimal edits) on an approved sheet without creating an audit log.
Only authorized users can access time data. Employees should only access their own timesheets. Admins and supervisors have broader access, but with limits.
Example: A junior analyst shouldn’t be able to see or edit a coworker’s entries or submit time on their behalf.
A complete audit trail must be maintained. Every step (entry, edit, approval) needs to be logged and retrievable. Businesses must retain these records for at least three years after the end of a contract.
Example: During an audit, your system should be able to show when a time entry was added, changed, approved, and by whom.
Follow applicable FAR clauses. Certain FAR (Federal Acquisition Regulation) clauses will apply depending on your contract type — especially around labor charging and recordkeeping. Be sure to distinguish between direct (billable) and indirect (non-billable) hours for better compliance and better cost allocation.
Example: FAR 52.232-7 governs time-and-materials contracts and reinforces many of these requirements.
A DCAA-compliant timesheet is a structured document that proves work was done, by whom, when, and for what purpose. Auditors expect to see specific fields, clear approvals, and a traceable record of how the timesheet moved from entry to final sign-off.
Here’s a breakdown of what a compliant timesheet typically includes:
| Field | What It Captures |
|---|---|
Employee Name | Identifies who is logging the time. |
Date | Shows the specific day the hours were worked. |
Project/Task | Indicates which contract, job, or task the time was spent on. |
Hours Worked | Specifies how many hours were worked on each task for that day. |
Employee Signature | Certifies that the entry is accurate and truthful. |
Supervisor Approval | Confirms that the time was reviewed and approved by management. |
When a timesheet doesn’t meet DCAA standards, it usually fails in predictable ways.
Here are issues that raise red flags during a DCAA timecard audit:
Missing project codes. Vague time entries like “work” or “miscellaneous” won’t pass inspection.
Time entered late or in bulk. Timesheets filled out days after the fact often appear unreliable.
No employee sign-off. Timesheets must be certified by the person who worked the hours, not just approved by a supervisor.
Supervisor sign-off missing. Without management review, the timesheet is considered incomplete.
No record of edits. If entries change and there’s no log of who made the change or why, that’s a compliance issue.
Inconsistent formatting. Timesheets with irregular formats, skipped fields, or handwritten corrections are harder to audit and more likely to be rejected.
If you’re unsure, run your current template against the checklist above.
Or better yet, use a system that enforces these standards automatically.
Finding the right DCAA-compliant time tracking software can be the difference between passing an audit and scrambling to explain missing records.
Not every tool is built with federal oversight in mind, so when you're dealing with cost-reimbursable contracts or T&M billing, there’s little room for error.
At a minimum, any software you choose should support the key mechanics of DCAA compliance:
Daily entries
Approval flows
Secure logs
Audit-ready exports.
Some systems make these features easy to manage, while others bury them behind clunky workflows or lack them altogether. The details matter.
If you’re evaluating options, here are the features that matter most:
Audit trail. You need a system that logs every action (time entries, edits, approvals) along with who made them and when. If someone changes a timesheet after submission, the tool should capture that change and require a reason for it to create a better audit trail.
Supervisor approvals. Timesheets should move through a defined approval process before being finalized. That review step (where a manager reviews and signs off on time entries) is a core part of DCAA's expectations.
Daily entry support and reminders. If employees are entering time once a week (or forgetting altogether), that’s a problem. Good software encourages or enforces daily entries, often with built-in reminders to keep things on track. The best tools generate timesheets in real-time.
Secure access controls. You don't want employees viewing or editing other timesheets. A DCAA-compliant system will offer role-based permissions so each user only has access to the timesheets for which they're responsible.
Easy reporting and exports. If you get audited, you'll need to hand over clean records. The system should let you export reports in PDF or spreadsheet formats with all approvals, timestamps, and edit logs included.
A few other features can help, like time period locks (to prevent edits after approval) or restrictions around manual time entry. These aren't strictly required, but can reduce risk.
Hubstaff checks all the boxes above. It tracks time in real-time, allows for daily logs, and keeps a secure audit trail that shows every change — including who made it and why.
Employees certify their hours, supervisors approve them, and the system retains records for as long as needed. You can also set user permissions, restrict manual edits, and generate detailed time reports that stand up to scrutiny.
While no software can guarantee compliance on its own, tools like Hubstaff can make it much easier to build and maintain a process that stays within DCAA’s lines.
A DCAA timecard audit isn’t something most teams look forward to, but it’s also not something you can afford to ignore.
If your business works on federal contracts, you should assume your timekeeping practices could be reviewed at any point.
Audits may be scheduled, but they’re often triggered by red flags like:
Inconsistent billing
Timesheet inaccuracies
Contractor performance concerns
Excessive or unusual overtime patterns
Random spot checks as part of broader agency oversight
In some cases, even a routine contract renewal can prompt a closer look at how time is being tracked and reported.
During an audit, DCAA reviewers focus on a few key areas:
Traceability. Can they see when each time entry was created, who created it, and what project it was tied to?
Approval records. Are timesheets certified by employees and approved by supervisors? Is there evidence of that review?
Consistency and control. Is your system set up to prevent errors, backdated entries, or unauthorized changes?
If your system is loose or informal, the audit won’t go well.
Unsure how your current system stacks up? The DCAA offers a contractor guide to DCAA audits that outlines their expectations and process in more detail.
Not every contractor working with the government has to follow DCAA timekeeping requirements, but many do — and more than you'd think. DCAA applies to more than just defense contractors. The agency audits all kinds of federal spending across agencies and industries.
Whether you’re required to follow DCAA compliance time tracking depends largely on your contract type and funding source. Here’s who typically falls under the rules:
Cost-reimbursable contractors. If the government agrees to cover your actual expenses rather than paying a flat rate, DCAA compliance is usually required. They’ll want to verify how those labor costs are calculated.
Time-and-materials (T&M) contracts with oversight. T&M contracts are a mix of hourly billing and fixed material costs. These often come with added scrutiny because the government’s paying based on time worked and T&M often leads to an increased risk for inflated hours.
Subcontractors working under prime federal contractors. Even if you’re not dealing with the government directly, DCAA rules may still apply if the prime contractor is required to follow them. Their oversight often extends to subs.
Grantees, cooperative agreements, and research institutions. Universities, labs, and nonprofits that receive federal funding from grants, cooperative agreements, or for research and development may also be subject to DCAA audits, especially if the funding involves labor reimbursement.
It’s important to review your contract terms carefully. Even a fixed-price contract can come with DCAA expectations if the agency has reason to audit labor costs or indirect rates.
So if you're handling federal funds and tracking time against that work, it's safest to assume the DCAA timekeeping requirements apply (or will at some point in the contract’s lifecycle).
When compliance matters, Hubstaff can help your team follow DCAA timekeeping requirements more reliably without turning every process into busywork.
Here’s how it supports audit-ready time tracking:
Daily Reminders prompt employees to log hours at the end of each workday. This helps ensure consistent entries and reduces reliance on batch logging (a known audit risk).
Supervisor approval workflows require managers to formally review and sign off on each timesheet before it’s finalized.
Immutable logs & audit trails record every manual edit, showing who made changes, when, and why. These logs can't be erased, making the system resilient in an audit.
Secure, role-based access controls limit viewing and editing permissions by role. Employees only see what they’re allowed to, which prevents unauthorized changes.
Exportable reports let you pull timesheet approvals, manual edits, audit logs, and time & activity summaries into PDF or CSV formats for long-term retention and audit review.
Want to see these in action? Reach out for a demo that walks you through all of Hubstaff’s audit‑ready features.
DCAA timekeeping rules can seem overwhelming if you're starting from scratch. But once you understand what’s required, the picture gets a lot simpler.
The challenge isn’t the rules themselves. It’s building a system your team can actually stick to day after day.
That’s where DCAA compliant payroll software makes a real difference.
Hubstaff is built to support DCAA compliance out of the box. It helps your team log time daily, route timesheets for approval, lock records after submission, and maintain a clean audit trail without adding layers of manual work.
You get the structure DCAA expects, and your team gets a workflow that feels natural.
Important Notice: The information in this article is general in nature, and you should consider whether the information is appropriate to your needs. Legal and other matters referred to in this article are of a general nature only and are based on Hubstaff's interpretation of laws existing at the time. They should not be relied on in place of professional advice. Hubstaff is not responsible for the content of any site owned by a third party that may be linked to this article, and no warranty is made by us concerning the suitability, accuracy, or timeliness of the content of any site that may be linked to this article. Hubstaff disclaims all liability (except for any liability which by law cannot be excluded) for any error, inaccuracy, or omission from the information contained in this article and any loss or damage suffered by any person directly or indirectly through relying on this information.
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