DCAA Compliance· · 8 min read
Timesheet and Labor Corrections DCAA Will Accept: Who Approves, How It Is Documented, How Labor Follows
Timesheet mistakes are normal. What DCAA checks is how they are fixed: the original charge kept, the corrected charge, the employee's concurrence, the supervisor's approval and a labor distribution that follows. Here is the process for each case.
Every company that records time daily will have timesheet mistakes: an hour on the wrong contract, a day entered twice, a vacation day logged as work. Auditors expect that. What they look at is how the mistake was fixed, who fixed it, and whether the labor cost charged to each contract changed with it. This guide is for owners, approvers and bookkeepers who handle those corrections. It is part of our series from payroll to job cost.
The short answer
A correction DCAA will accept has five parts:
- The original charge can still be found. The timesheet shows the corrected hours, and the audit trail keeps the original value, who changed it and when.
- The corrected charge is recorded with the date and the person who made it.
- The employee makes the change or agrees to it, and the reason is written down.
- The approving supervisor reviews and approves the corrected timesheet.
- Labor cost follows. If the period's labor distribution was already posted, it is reversed and posted again from the corrected timesheet.
A correction is a documented change that keeps the original charge on record.
What DCAA says
DCAA's guide for contractors, Information for Contractors (DCAA Manual 7641.90), lists changes to the timesheet among the things the employee is personally responsible for:
"Changes to the timesheet. Procedures should be in place that identify the original time charge, the corrected time charge, and documentation from the employee indicating his/her concurrence with the change."
DCAA Manual 7641.90, Information for Contractors
The floor check audit program DCAA uses for smaller contractors asks the auditor to determine "whether the procedures provide that all changes are properly initialed/approved by the employee and the designated approving supervisor." The same guide sets the test for any change of where time is charged: "the nature of the work determines the proper distribution of time, not availability of funding, type of contract, or other factors."
That last sentence is the one that separates a correction from mischarging. Moving hours because they were recorded on the wrong contract is a correction. Moving hours because one contract ran out of budget is not, and DCAA's guide notes that manipulating charges to a contract may be subject to criminal charges under 18 U.S.C. 1001.
Who does what, case by case
| When the error is found | Who corrects it | What happens next |
|---|---|---|
| Before the timesheet is submitted | The employee | The employee fixes the entry; the system keeps the history of the change |
| After submission, before approval | The employee | The approver rejects the timesheet with a comment, or the employee withdraws it; the employee corrects and resubmits |
| The approver spots the error | The employee, not the approver | The approver rejects and explains; the employee corrects and re-certifies; the approver reviews the corrected charge |
| After approval, before labor distribution | The employee | The timesheet is reopened under a documented process, corrected, re-certified and approved again |
| After labor distribution was posted | The employee, with accounting | The payroll period is reopened, the posted labor entry is reversed, the timesheet is corrected and re-approved, and labor distribution runs again |
| The employee has left the company | Accounting | The correction is made with written authorization and the reason recorded |
The supervisor's role is to approve, not to rewrite. DCAA's guide says the supervisor should not complete an employee's timesheet except during a prolonged authorized absence. These rules match the corrections section of our free Timekeeping Policy Generator, which a former DCAA auditor reviewed.
Leave and time that is not worked yet
Employees do not enter time for days not yet worked. Paid leave is recorded under its leave category, like any other time entry. When an employee is away for a prolonged authorized absence, a supervisor may enter the leave on their behalf as a documented exception, and the employee certifies the period when they return. A question from the audience in our DCAA Ready webinar touched on this, and Paul Calabrese, a former DCAA auditor, explained the supervisor's part:
"You have a policy that says the supervisor can sign on behalf of the employee, because the employee doesn't... but when the employee gets back, they will sign, too."
Paul Calabrese, former DCAA auditor
He was just as clear about the rest: "Future charges, the government will not accept that." The full answer:
How labor distribution follows a correction
Once a period's labor cost is posted to QuickBooks Online, correcting the timesheet is not enough. The ledger still shows the old split until the labor entry is corrected too.
Take the employee from our pillar example: $6,000 for 80 hours, $75.00 an hour. After posting, they notice that 8 hours recorded on Contract A were work on Contract B.
| Charged to | Original entry | Reversal | Corrected entry | Net change |
|---|---|---|---|---|
| Contract A | 32 hours: $2,400.00 | −$2,400.00 | 24 hours: $1,800.00 | −$600.00 |
| Contract B | 24 hours: $1,800.00 | −$1,800.00 | 32 hours: $2,400.00 | +$600.00 |
| Overhead | 16 hours: $1,200.00 | −$1,200.00 | 16 hours: $1,200.00 | $0.00 |
| G&A | 8 hours: $600.00 | −$600.00 | 8 hours: $600.00 | $0.00 |
| Total | $6,000.00 | −$6,000.00 | $6,000.00 | $0.00 |
The employee's total cost does not change; only where it is charged does. The three entries stay in the ledger, so an auditor can follow the original, the reversal and the correction back to the corrected, re-approved timesheet.
Two things to avoid:
- Editing the posted journal entry by hand in QuickBooks Online, or deleting it to fix a timesheet. The ledger would no longer show what was reported or billed for that period. Deleting a posted entry is meant for posting errors, such as an entry posted to the wrong period, and the deletion has to stay on record in the audit trail.
- A correcting entry with no timesheet behind it. Whatever form the accounting entry takes, it has to trace to a corrected timesheet that the employee agreed to and the supervisor approved.
If the corrected period was already billed on a cost-type or T&M contract, ask your CPA how to reflect the difference under the contract's billing terms.
Patterns that invite questions
These follow from the rules above. Each one makes a correction look like something other than fixing an honest mistake:
- Corrections clustered at period end or just before an invoice.
- Hours moved off a contract near its ceiling to one with room left.
- Changes made by someone other than the employee with no documented concurrence.
- Deleted time entries, or a system that keeps only the latest value.
- Work hours entered in advance for days not yet worked.
For how auditors test timesheets in person, see what to expect during a DCAA floor check.
How WiseCost handles corrections
WiseCost is a QuickBooks Online add-on for DCAA timekeeping and labor distribution. QuickBooks Online stays your accounting system.
- Rejection with a comment. An approver who finds an error rejects the timesheet and leaves a comment explaining what needs to change. The employee is notified, corrects it and resubmits, which is their certification.
- Reopen an approved timesheet. Whoever can approve a timesheet can reopen it. The original submission and the changes remain in the Audit Trail.
- Reopen a posted period with a reversal. If labor distribution was already posted, the timesheet is locked. An administrator reopens the payroll period with "Re-open with Reversal," and WiseCost posts a reversal journal entry to QuickBooks Online on the date you choose. After the corrected timesheet is approved, you run labor distribution again and the corrected entry posts. The Journal Entries page shows all three.
- Delete only for posting errors. "Re-open with Delete" removes the posted entry from QuickBooks Online instead of reversing it. It is meant for a posting error, such as an entry posted to the wrong period, not for fixing a timesheet, and the action is recorded in the Audit Trail.
- An immutable Audit Trail. Every change to time entries, timesheets, labor distribution and compliance settings is recorded with the old and new value, and can be exported to CSV for an auditor.
- Entries made on someone's behalf are marked. If your company allows an approver to enter time for an employee, the entry needs a reason, the timesheet shows a "Contains delegated entries" badge, and the DCAA preset requires a different approver.
FAQ
The Bottom Line
Mistakes on timesheets are expected. What has to hold up is the correction: the employee's change or concurrence, the reason, the supervisor's approval, the original still visible, and a labor entry that is reversed and posted again so the ledger matches the corrected time. Put the process in your written timekeeping policy and run every correction through it, including the small ones.
Need the policy in writing? Use the free DCAA Timekeeping Policy Generator to get a policy with a corrections section, or start a 14-day free trial of WiseCost on your QuickBooks Online.