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Government contractors must satisfy the demands of the Defense Contract Audit Agency (DCAA) by complying with the regulations regarding proper financial management. This agency is responsible for performing all audits for the Department of Defense (DoD) and ensures government funds are spent properly.

  • In the 2017 fiscal year, the DCAA examined over $281 billion in defense contractor costs and issued over 3500 audit reports. This means contractors are heavily scrutinized and they need to have the resources to maintain compliance.
  • Civil penalties for noncompliance: The government can recoup $5,500 to $11,000, and the contractor runs the risk of paying the government up to three times the damage.

TimeMD makes compliance with the DCAA timekeeping requirements easy. Whether it’s reporting on data obtained through our various time collection devices, audit reports or job authentication, TimeMD has all the bases covered.

TimeMD can track your labor in a simple, consistent, cost effective manner so you are compliant with all federal laws and are prepared for an audit should the need arise. Learn more about TimeMD >.

Overview of DCAA Time Keeping Requirements

DCAA 7641.90 – Information for Contractors

2-302 Labor Changing System

Timekeeping procedures and controls on labor charges are areas of utmost concern. Unlike other costs, labor is not supported by external documentation or physical evidence to provide an independent check or balance. The key link in any sound labor time charging system is the individual employee. It is critical to labor charging internal control systems that management indoctrinates employees on their independent responsibility for accurately recording time charges.

2-302.1 Timecard Preparation

Detailed instructions for timecard preparation should be established through a timekeeping pamphlet and/or company procedure.

DCAA Clause

Basic Definition

TimeMD Feature

Description of Feature


Record time on Daily Basis

Web-Clock Wall Clocks Smartphone Tracking IVR

Allows secure daily time entry for all users with a unique username and password entry as well as through biometric authentication


The correct distribution of tie by project numbers, contract number or name, or other identifiers for a particular assignment.

TimeMD Project Names/Identifiers

Contractor can name projects and use multiple fields to uniquely identify projects and/or their assigned users. TimeMD allows for detailed notes and descriptions.


Recording all hours worked whether they are paid or not.

TimeMD tracks hours worked and time off/not worked hours.

Allows employees to put in actual hours worked along with any paid or unpaid additional time.

2.302.2 Recommended Time Keeping Policy

DCAA Clause

Basic Definition

TimeMD Feature

Description of Feature

The supervisor should approve and co-sign all timecards.

TimeMD has Time and Expense Approval.

TimeMD has multiple levels of time and expense approvals with extensive audit trails.

20301.2 Detailed Provisions of SF 1408

The cost accounting system must identify what costs are considered direct, and what costs are considered indirect. Once these criteria are defined, they must be consistently applied.

DCAA Clause

Basic Definition

TimeMD Feature

Description of Feature


Proper segregation of direct costs from indirect costs.

TimeMD job categories and expense types

TimeMD allows the creation of jobs and expense classifications which include the ability to use direct and indirect costs.