CORE-DCAA Compliance

Overview

The Defense Contract Audit Agency (DCAA) performs contract audits for the Department of Defense (DoD) and other government agencies. Contractors working on the contracts or projects for these government agencies must comply with the DCAA guidelines. A prime concern of the DCAA is the Labor Charging System or timekeeping procedures adopted by contractors. Detailed labor and cost tracking is required because, unlike other cost items, labor is not supported by external documentation or physical evidence (for example, invoice, purchase order, and receipt). 

There are other DCAA compliant software in the market covering different aspects of the audit, including timekeeping and accounting. Using DCAA-compliant software is important in the audit process because it shows DCAA that your company is professional, efficient and organized. The most important factor in passing a DCAA audit is a good record-keeping system that is customizable to your business type and has all the features that meets the DCAA requirements.

CORE offers DCAA-compliant time and expense tracking, project management, and accounting capabilities. The best part is that CORE enables you to implement the DCAA compliant settings with a single click via Global Settings. When you check the DCAA complaint option in Global Settings, CORE automatically overrides the existing or default security settings of all users to ensure DCAA compliance. However, DCAA compliance does not apply to the Vendor Bills, Checks and Credit Cards screens. You can also set up CORE in compliance with the DCAA guidelines manually. Click to watch this video on making CORE DCAA compliant.

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The key link in an effective time tracking system is the individual employee. It is critical that management educates employees on their independent responsibility for accurately recording time charges. This is required by the DCAA to guard against fraud and waste in the labor charging system.

Note: For more information about the DCAA related publications, check DCAA website and DCAA Blog.

DCAA Requirements

Basic Tasks

Set Up DCAA Compliance Automatically

Advanced Tasks

Set Up DCAA Compliance Manually

DCAA Requirements

The table below summarizes the DCAA requirements and how CORE addresses them. The requirements are based on the DCAA publication, Information for Contractors.

Area

DCAA Requirements

CORE Solution

Employee Awareness Program

  1. Make employees aware of their responsibilities and train them in accurate time card preparation.
  1. CORE training programs, consulting, and documentation for managers and employees.

Separation of Responsibilities

  1. Supervisors responsible for project budgets and contracts cannot initiate employee time charges.
  2. Separate responsibilities for labor-related activities and payroll accounting. Persons independent of timekeeping must prepare payrolls.
  1. Set security profiles for employees to segregate responsibilities.
  2. CORE does not have built-in payroll capabilities. It integrates data with other accounting systems that can handle payroll. Internal procedures enhance this natural separation.

Time Card Preparation

  1. Provide detailed instructions for time card preparation through a timekeeping manual or company procedure.
  2. Record time on a daily basis by the employee who performs the task.
  3. Use a remote data entry terminal for an automated timekeeping system, if appropriate.
  4. Record all actual hours worked by a timekeeper, whether paid or not.
  5. If shared, split resource time charges across multiple projects.
  1. CORE provides detailed instructions and videos for time and expense entry. Training courses are also offered for time entry and management.
  2. Employees can record and submit time entries on a daily basis. They can be required to submit memos and detailed notes along with the time entries.
  3. CORE is a web application that can be used on any device, anywhere and also has a mobile app for remote data entry.
  4. Track all actual hours worked – billable, non-billable, overtime, extra time and personal time.
  5. Charge time to one or multiple projects or phases.

Labor Distribution

  1. Segregate direct costs from indirect costs. 
  2. Charge direct and indirect labor to appropriate cost objectives. Allocate costs to appropriate cost objectives.
  3. Track employee time by work activity. Correct distribution of time by project, contract, task, labor hours, rates and cost by category, or other identifiers.
  4. Provide a list of projects and their descriptions to employees for accurate time tracking.
  1. Set up expense items (costs) and tag them as direct or indirect costs.   
  2. By design, charge hours to specific tasks, projects, contracts and clients with direct allocation of costs to projects, contract and expense types.
  3. Track employee time by activity (task). Captured time includes date, project ID and name, activity description, hours worked, cost and bill rates, cost and bill amount, and billable or non-billable status. Support for detailed memos.
  4. Drop-downs with pre-defined Project and Activity IDs and descriptions. Project lists available as a report and PDF file. Project Assignments and Employee Control assign projects, activities and expenses to employees to ensure accurate and faster time entry.

Labor Authorization and Approval

  1. Supervisory approval of employee time sheets. Multi-level approval process. Reportable audit trail of changes and approvals.
  2. Employees must sign the timesheet and it must be approved by the employee’s supervisor at the end of the timekeeping period.
  3. Corrections to time sheets by employees only, then documented, authorized, and approved by supervisor.
  1. Requires approval of time sheets for billing. Support for multi-level and automated submission-approval workflow. Audit Trail feature coming up soon!
  2. There is an option to set a disclaimer for employees, which they have to certify before submitting time and expenses for approval. Employee managers can get notified about the submissions and approve/reject the entries, as needed. 
  3. Who can add and edit entries is controlled by security. Employees record and edit time entries, and supervisors approve or reject them. After being approved, entries cannot be changed.

Rates

  1. Define rates for employees and override with specific task-based rates. Capture changes in an audit trail.
  1. Support for standard bill and cost rates for employees and activity items as well as special rates defined in a fee schedule. Rates can also be set up on employee classification, title or labor category. Audit Trail feature coming up soon!

Cost Accounting

  1. Comply with Cost Accounting Standards, Generally Accepted Accounting Principles, and contract terms and financial clauses (like the Limitation of Costs/Funds and Progress Payments).
  2. Segregate direct/ project costs from indirect/overhead costs.
  3. Substantiate costs by retaining records for 3 years after final contract billing. This provides reliable historical accounting data for follow-on procurements.
  4. Exclude unallowable costs from billings, claims and proposals.
  5. Capture pre-contract costs separately.
  6. Track costs by contract line item.
  1. Captures required cost accounting details and allows you to define administrative settings at company, project and individual levels.
  2. Segregates project and overhead costs based on contract type and identifies them by item or unit. Set up Chart of Accounts and cost pools to segregate direct and indirect costs.
  3. Stores data on a safe and secure cloud server with periodic and automatic backup. Your CORE database saves and retains all data entered into the system unless deleted. You can run reports on any historical data or view it on screen. You can, however, make records inactive or void transactions, as needed.
  4. Exclude expenses from the contract amount or make unallowable time and expense non-billable.
  5. CORE offers the Marketing contract type that can be used to log pre-contract, non-billable time and expenses on a project.
  6. CORE allows you to track expenses (costs), vendor bills and invoices by line items.

Security

  1. Monitor overall integrity of timekeeping system--password security, audit trail of logins and logouts, documentation and approval of labor transfers, adjustments of labor distribution, review and correction of labor errors, edits to time sheet, and so on.
  1. Security monitors overall integrity of timekeeping system—secure login, strong passwords, role-based security permissions for screens and reports, confidentiality of sensitive information with Employee Control, documentation of actions or decisions using project notes, messages and memos, submission-approval workflow for time, authorized review and editing of time data, and adjustments to time sheets using negative hours. Audit Trail feature coming up soon!

 

Set Up DCAA Compliance Automatically

You can provide default settings for DCAA compliance here and implement this security feature with a single click. For security reasons, this setting is password-protected and hence you must set a DCAA password for it so that no one turns it off accidentally. However, DCAA compliance does not apply to the Vendor Bills, Checks and Credit Cards screens.

To do so, watch this video or follow these steps:

  1. Open the Global Settings screen from your company menu > Settings > Global Settings.

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  2. Click Security on the left.
  3. On the Security panel, select the option: Make this application DCAA complaint (Government contractors and agencies require their time tracking systems to be DCAA compliant. CORE provides a single-click option that makes the program comply with their requirements.).
  4. On the Change DCAA Password dialog, enter the new password and click Save.
  5. You can also select other security options that help in complying with the DCAA requirements:
    • Password required when closing date is changed
    • Users must agree to the disclaimer when submitting time and expense...
  6. Click Save.

Set up DCAA Compliance Manually

You can manually set up CORE in compliance with the DCAA requirements. CORE allows you to set up rules and options that support DCAA compliance. Some of them are required for DCAA compliance while others are optional.

  1. In the Global Settings screen, you can specify options that support DCAA requirements, such as time and expenses, their approval, processing and billing. These global settings apply company-wide to all CORE users. See Global Settings for more.

Setting

Description

Location

Standard Employee Hours: Per Day/Per Week

If you want CORE to track overtime or comp time automatically, enter the standard number of hours employees work per day and per week. This default value carries to each new employee record. You can also enter this information in the Employees screen.

Global Settings > Master Information

Smallest time increment for time entry/start and stop time

Government contracts might define a minimum time increment, or you can choose to define one for all timekeepers. Enter that increment here (e.g., 15 minutes). You can apply the increment to Hours, Client Hours, or both.

Global Settings > Time & Expenses

Time entry should not be saved/deleted if older/newer than

Enter the desired number of days in the past or future for the date of a time entry. This applies to new and existing entries. This setting ensures that employees enter or edit their time within the days specified by you, e.g., 7 days before or after the current day.

 

The past or future period should be consistent with your company policy for recording, submitting, reviewing, editing and approving time entries. A timekeeper cannot edit a rejected entry outside the past or future period without temporarily disabling this option. We recommend that you allow for normal delays that might occur to avoid extraordinary procedures.

Global Settings > Time & Expenses

Allow negative time entries

Check this option to allow recording of negative hours for time entry. Combined with security permissions, this creates an audit trail for all time entry edits.

Global Settings > Time & Expenses

Auto approve time entries for projects

Uncheck this option so that time entries are not approved automatically for all projects. Before they can be billed, entries must be submitted and approved.

Global Settings > Time & Expenses

Auto approve time entries for employees

Uncheck this option so that time entries are not approved automatically for all employees. Before they can be billed, entries must be submitted and approved.

Global Settings > Time & Expenses

Time/expense entry memo required

Check these options for Time Entry and Expense Entry so that all timekeepers add memos to track details about the entries.

Global Settings > Time & Expenses

    1. To ensure DCAA compliance, you can customize the default security settings from the Security screen. If needed, you can even copy these settings to other similar users. You can use the information below to fine-tune the permissions for a security profile, user, or a group of users by checking or unchecking the permissions according to the level of control required. See Security for more.
Module Name Permissions
Time Entry

Turn off or uncheck the following permissions for timekeepers:

Allow Delete

Allow Access to Entries of all Employees

Allow to Approve Entry

Allow Change Billable/Non-Billable

Allow Batch Change

Allow Adjust Date Beyond Global Setting Restriction

Allow Edit Billed Entry

Allow Edit Memo

Show Bill Rate and Cost Rates

Allow Edit Approved Entry

Allow Access to Employees I Manage

Allow Approve My Entries

Show WUD

Show Amount

Show Cost Rate

Turn on or check the following permission for timekeepers:

Limit Editing to Self Only

    1. For companies requiring DCAA compliance, note the following option in the Company Profile screen.

Setting

Description

Location

Closing Date Enter a closing date for the last accounting period. This prevents untimely editing of data in CORE after the financial year closing date. This option can be password-protected.

Company Profile > General

    1. To increase productivity associated with timekeeping activities, you can activate appropriate User Preferences. These preferences apply to the individual user only and override Global Settings.

Setting

Description

Location

My time or expenses are approved/rejected

When checked, CORE automatically sends an email or notification to you when your time and expense entries are approved or rejected.

User Preferences > Notifications & Reminders > Notification Settings

Time or expenses are submitted to me for approval

When checked, CORE automatically sends an email or notification to you (reviewer) when time and expense entries are submitted to you for approval.

User Preferences > Notifications & Reminders > Notification Settings

Time/expenses require my review Check these options to receive reminders to review time and expenses submitted to you for approval. User Preferences > Notifications & Reminders > Reminder Settings
My time/expenses need to be submitted Check these options to receive reminders to submit your time and expenses for approval. User Preferences > Notifications & Reminders > Reminder Settings
    1. Employees and vendors can sign up for CORE and be added as CORE users to enter their time and expenses. On the Employees or Vendors screen, you should consider the settings mentioned below. These settings take precedence over the Global Settings and User Preferences.

Setting

Description

Location

Submit To

Select to whom employees (or vendors) should submit their time and expense entries for approval. If your company has a chain of approvers, this is the first person in the chain.

Employees > General > Rates & Options

Vendors > General > Rates & Options

Security

Select a standard security profile for the employee (or vendor).

Employees > General > Details

Vendors > General > Details

Bill Rate

Pay Rate

Enter the default bill rate and cost rate for the employee (or vendor). Pay Rate and Overhead Multiplier combine for the Cost Rate.

Employees > General > Rates & Options

Vendors > General > Rates & Options

Standard Hours: Per Day/Per Week

Enter the number of hours employees (or vendors) are required to work per day and per week (these carry from Global Settings).

If you turn on Automatic Overtime and Comp Time , CORE determines when all or a part of a time entry is overtime. It applies the overtime rates to those hours. Comp time is accumulated as banked hours.

Employees > General > Dates & Hours

Vendors > General > Dates & Hours

Auto approve time/Expenses

Uncheck these options so that a designated manager reviews and then approves all the time and expense entries submitted by an employee (or vendor).

Employees > General > Rates & Options

Vendors > General > Rates & Options

    1. For effective job costing and profitability reporting, both billable and non-billable activities should be charged to the projects. In CORE, you can set up default bill and cost rates by activity in the Activity Items screen. These rates apply to all employees who charge an activity to a project while entering time. Usage of activity rates is set on a project-by-project basis. For DCAA compliance, the following settings are important:

Setting

Description

Location

Cost Rate

Bill Rate

Enter the default cost rate and bill rate for the activity item. To activate this rate for a project, check that rule on the Projects screen.

Activity Items

Billable

Check or uncheck the billable status for each activity item (billable or non-billable).

Activity Items

    1. In CORE, employees log activities and charge their time (hours worked) to a project or project phase. Each has its own contract type, contract amount, and so on. This ensures a correct distribution of time by project name or other identifiers as required by the DCAA. You can set some rules in the Projects screen that ensure DCAA compliance. These settings get precedence over Global Settings and User Preferences.

Setting

Description

Location

Project ID

Project Name

Enter a unique project ID and name. A timekeeper selects a Project ID or Name to charge hours.

Projects

Contract Type

Enter the appropriate contract type (billing arrangement) for the project. Fixed Fee and Hourly Not To Exceed contracts require a contract amount. In addition, CORE automatically checks that time and expenses do not exceed the contract amount for these types.

Projects

Memo

Click Show Memo and enter project issues, events, billing decisions, change orders, and so on to track actions related to the project.

Projects > General > Details

Fee Schedule

Assign a fee schedule with special rates to the project, if required.

Projects > General > Billing Options

Auto approve expense/time entries

Make sure these options are unchecked. DCAA requirements do not allow automatic approval of time and expense entries.

Projects > General > Assignment

Memo is required for expense/time entry

Check these options so that timekeepers are required to add memos to track all the details related to their time and expense entries.

Projects > General > Assignment

Use bill rates from Activity Items screen

To apply activity rates to a project, check this option. These rates will be used if a fee schedule is not assigned to a project or there is no match in the schedule for the employee-activity combination.

Projects > General > Assignment

    1. In CORE, features like Project Assignments and Employee Control restrict who can charge time and expenses to what activities on which projects. This makes drop-down lists shorter, thus improving the speed and accuracy of entry by timekeepers. It also reduces the review time.

Setting

Description

Location

Add Team Member/ Activity Item / Expense Item Select the employees along with the activity and expense items that you want to assign to a project. Project Assignments
Add Project/Activity Items/Expense Items Select the projects along with the activity and expense items that you want to assign to an employee. When you have finished, make sure to uncheck the Disable Employee Control permission in the Security screen for the relevant employees and screens. Employee Control > Detail Security > Edit Profile

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