The DCAA Timekeeping Audit That Started Last Quarter
The DCAA labor floor check is the most discreet audit in federal contracting. The auditor walks the office at an undisclosed time, asks four or five employees what they are working on right now, what charge code they are billing to, and how they entered yesterday's time. The audit lasts twenty minutes. The findings shape the indirect rates the contractor will negotiate for the next three years.
Q1 2026 was a heavy floor-check quarter. DCAA's audit guidance for 2026 explicitly elevates labor floor checks, total time accounting verification, and audit-trail completeness on the contractor's timekeeping system. The contractors who walked into Q1 with a documented labor charging policy and an enforceable approval workflow are the contractors who passed without finding.
Total Time Accounting requires that every hour an employee works gets recorded — direct and indirect, billable and overhead, training and PTO and uncompensated overtime. Labor cost cannot be allocated correctly to a federal contract if the contractor does not capture every hour the employee actually worked. Labor mischarging is the FCA exposure the agency is most actively pursuing.
Daily time entry is the audit anchor. A timesheet submitted weekly, biweekly, or at the end of the pay period fails the DCAA daily-entry standard — because the auditor cannot test whether the employee actually entered time on the day the work was performed. The 2026 floor check explicitly asks the employee when they entered yesterday's time and whether they remember the charge code without checking notes.
DCAA expects the timekeeping system to preserve a complete record — who entered each time entry, when, what was changed, who approved the change, and what supporting documentation accompanied the correction. A contractor with a hand-edited spreadsheet timekeeping system in 2026 is a contractor the auditor is going to score as a control deficiency.
The auditor's twenty-minute walk of the office is not actually about catching a fraudulent timecard. It is about testing whether the supervisor review the contractor's policy claims to perform — actually happens. The supervisor who cannot describe what the employee is working on this week is a supervisor whose review the auditor reads as ceremonial.
Timekeeping records must be retained for at least three years after the final contract payment. The contractor whose record retention is tied to a timekeeping platform's data export schedule — and not to the contract closeout calendar — is going to discover the gap during a post-award DCMA audit, not during a floor check.
PFTN's govcon approach treats the DCAA file the way the auditor treats it. Strategic Discovery starts with the timekeeping system, the charge code library, the labor cost allocation model, and the indirect rate posture. Risk Assessment quantifies the FCA exposure inside the labor charging history. Solution Design pairs the practice management liability and the surety program with the labor compliance posture — because a floor-check finding is also an insurance event.
The DCAA auditor who walked the office in Q1 already wrote the finding. The shift starts with one conversation — and preferably before the next floor check.
— Ryan Mefford, President & Risk Advisor