Timekeeping has long been an area of focus for government auditors. With the addition of a pandemic and increased work-from-home practices by contractors, we are seeing an increase in timekeeping scrutiny. In this Q&A, we provide some answers to questions from attendees of the recent Fundamentals of Government Contracting webinar Timekeeping & the Impact of a Pandemic: What Government Contractors Need to Know.
Q. What is total time accounting?
A. Total time accounting (TTA) is where each employee enters time for all actual hours worked whether they are paid or not, whether they are billable or not, and whether there is funding remaining or not. TTA is not defined in the FAR. TTA is an expectation of government auditors.
Q. Why is TTA an expectation of DCAA?
A. Costs must be allocated to final cost objectives on a beneficial or causal basis. DCAA’s position is that all hours worked are needed to correctly determine the proper assignment of labor costs to contracts. Despite DCAA’s position, a February 2021 ASBCA Raytheon decision concluded that TTA was not required due to the company’s established policies and procedures. In January 2022, the U.S. Court of Appeals for the Federal Circuit (Fed. Cir.) reversed the ASBCA decision supporting the position that “after hours” worked should not be disregarded. We understand that the Fed. Cir.'s reversal is being appealed.
Q. Is recording time only required for employees who are hourly and not exempt from the Fair Labor Standards Act (FLSA) or is it also required for FLSA-exempt employees?
A. DCAA’s expectation is that all employees enter their time.
Q. What is uncompensated overtime?
A. Uncompensated overtime refers to hours worked without additional compensation in excess of an average of 40 hours per week by direct charge employees who are exempt (non-hourly) from the FLSA. This differs from unpaid overtime which is when an employee who qualifies for overtime (hourly) under FLSA is denied that extra pay which is owed.
Q. If I am under TTA and am asked to attend a company meeting while on paid time off (PTO), do I charge the time for the meeting to “regular” time and deduct that time from my PTO, or do I charge 8 hours for the PTO and add the meeting time on top of that? Is this my decision or a company decision?
A. Check with your company’s timekeeping policy. Generally, we see the time entered for the meeting and the amount of PTO reduced by the amount of the meeting if you are required to enter a minimum of 8 hours per day.
Q. How do you compliantly handle situations where the employee cannot sign their timesheet, e.g., for medical or other reasons?
A. In such extreme cases, a company should have a written policy that addresses such a scenario. It is common for a designated HR representative or supervisor to enter time for the employee; however, when the employee returns from medical or other leave, the employee must review, edit if appropriate, and ultimately approve of the timesheet. At the end of the day, the employee “owns” their timesheet.
Q. What is a floor check?
A. A floor check is a real-time, unannounced audit of labor charges and timekeeping practices. It includes an evaluation of timekeeping procedures/internal controls, employee interviews, a discussion of the nature of work performed with the employee, observations of the employee’s workstation, analysis of employee timekeeping practices, and reconciliation of labor charges with subsequent payroll and labor distribution records.
Q. How are contractors notified of a floor check?
A. The floor check is the only unannounced audit. DCAA will establish a point of contact with the contractor and obtain their locations for a potential floor check. Once this is established a floor check could occur the next week, the next year, or not at all. The auditor will arrive at your location and request to meet with the designated point of contact, then the auditor will request to interview employees at their assigned workstations.
Q. How long is a typical DCAA floor check interview?
A. A typical floor check interview is less than 30 minutes. Auditors will focus on verifying that employees exist and are at work, that employees are performing in assigned job classifications, that labor charges are to the appropriate cost objective, that the employee understands the corporate policy, that their current timesheet reflects corporate policy, and that their time entry is consistent with their scope of work. One of the primary motives for the floor check is to prove existence. The government believes that advance notification to contractors would present a risk of contractor manipulation.
Q. If DCAA asks for a remote employee’s home address to do a floor check, are we supposed to give it to them?
A. No. Do not provide any personal information about your employees. If an employee is not currently at the contractor site, arrangements can be made for a phone or web-meeting interview, or arrangements can be made for an interview the next time that the employee is scheduled to be at the contractor site.
Q. Isn’t timekeeping a lot riskier for remote employees than for on-site employees? How does a company reduce risk and ensure compliance?
A. Government auditors agree that remote employees present more risk than on-site employees. The best form of protection is a robust work-from-home policy that aligns with the expectations of government auditors. We recommend that contractors have a written policy that defines who is eligible to work remotely including approval forms for remote work. We recommend that contractors also clearly identify how employee performance is monitored and measured to ensure that employees are actually performing work.
Q. How does the government evaluate work-from-home policies?
A. First, government auditors will assess materiality. If they deem the work-from-home costs to be material, they will determine if adequate internal controls over the program are in place. If the contractor does not have adequate written policies and procedures, the contractor will be cited for a labor accounting system deficiency. If not material and the contractor does not have written policies and procedures, the contractor will be told that if work-from-home costs become material, the government will require evidence of an appropriate program. Second, they will assess eligibility and status. They will evaluate the reasonableness of performing this work at home. They will also evaluate the approval process for eligibility and the level of management oversight and communication to ensure that work is being performed.
This is an excerpt from the Fall GovCon Report. Download the full Report here.
If you have further questions about timekeeping or other auditing topics, please reach out to the Government Contracting professionals at FORVIS or submit the Contact Us form below.