In most businesses, timekeeping is an administrative chore. In federal contracting it is a compliance obligation with teeth. Labor is usually the largest cost on a government contract, and the government’s only evidence of what it bought is the record of who worked, on what, for how long. Auditors treat timekeeping as the foundation of a contractor’s accounting system, and weaknesses there call every labor charge into question.
Why the government cares so much
Unlike materials, labor leaves no physical trace. An hour charged to a contract cannot be inspected after the fact; it can only be documented. That makes labor charging the area where errors and abuse are hardest to detect and where the government’s exposure is greatest. Mischarging labor, whether by charging one contract for work done on another, billing hours not worked or shifting costs from a fixed-price job to a cost-reimbursement one, is treated as a serious offense. The expectations around timekeeping exist to make such problems unlikely and detectable.
What a compliant system looks like
The requirements are not written in a single place; they emerge from the cost principles, accounting system criteria and audit guidance. Taken together, they describe a system with these features:
- Each employee records their own time, daily, as it is worked, not reconstructed at the end of the week
- Time is charged to the correct contract, task and labor category, with charge codes the employee understands
- All hours worked are recorded, including uncompensated overtime by salaried staff, so that labor costs are distributed accurately
- Supervisors review and approve timesheets, and employees certify them
- Corrections are documented with the reason, the date and the identity of the person making them, and the original entry remains visible
- Written procedures exist, employees are trained on them and the training is documented
- Access controls prevent one person from altering another’s time without a record
Total time accounting
A point that catches many firms is the requirement to record all hours, not just the forty that match a salary. If a salaried employee works fifty hours in a week, with thirty on a government contract and twenty on commercial work or overhead, charging the government for thirty of forty hours overstates its share. Recording all fifty and distributing the salary proportionally gives the accurate picture. The practice is called total time accounting, and auditors look for it.
Floor checks and electronic systems
Government auditors may visit a contractor’s site unannounced to verify that the people charging a contract are present, working on it and recording time correctly. These floor checks include brief interviews with employees about how they record time and what codes they use. Staff who cannot explain the process, or who say they fill in timesheets on Friday from memory, create findings. Training everyone, including new hires in their first week, prevents that.
Most contractors now use electronic timekeeping, which handles daily entry, approvals, audit trails and access controls well when configured properly. The system should preserve the history of every change, enforce the approval workflow and tie directly into payroll and job cost accounting so that labor distribution flows from the timesheets without manual re-entry. Spreadsheets and paper can comply, but they make the controls harder to demonstrate.
Making it part of the culture
Timekeeping discipline is easiest when leadership models it. Executives who record their own time daily, including overhead and business development, send a message that the rule applies to everyone. Periodic internal reviews, a short annual refresher and a simple written policy that new employees sign complete the picture. The effort is modest, and the payoff is a labor record the government can trust, which is the basis of every invoice you send.