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StillTrucking

Salaried Executives & No Timecards

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Hello,

I work for a mid-size "large" government contractor. Our workplace policy requires all employees to record time on a daily basis. However, I have now been tasked to research if it is possible for salaried, indirect charging employees like the CEO and President, to not record their time on a timecard, period.

FAR 31.201-2(d) states "a contractor is responsible for accounting for costs appropriately and for maintaining records, including supporting documentation, adequate to demonstrate that costs claimed have been incurred, are allocable to the contractor, and comply with applicable cost principles in this subpart and agency supplements. The contracting officer may disallow all or part of a claimed cost that is inadequately supported."

However, if an employee is salaried and charging indirect, would they be required by regulation to record time daily? Obviously our internal procedure would have to be modified so they remained in compliance but I cannot find anything more that says that indirect salaried employees must record time or not.

Looking for some feedback on this.

Thanks.

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StillTrucking,

It's possible. Some of the big boys do it. But DCAA doesn't like it and you run the risk of having your timekeeping procecedures found to be inadequate.

It's a risk and you have to evaluate whether the benefit outweighs the risk. But it can be done.

H2H

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StillTrucking,

It's possible. Some of the big boys do it. But DCAA doesn't like it and you run the risk of having your timekeeping procecedures found to be inadequate.

It's a risk and you have to evaluate whether the benefit outweighs the risk. But it can be done.

H2H

H2H,

Can you expand on some of the risks aside from having our procedures found to be inadequate? What is the fuller scope of the potential pitfalls?

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Are you intending on claiming the executives' salaries in allocations to Government contracts/subcontracts?

Yes, as part of our indirect rates. Right now we are doing just that but they are completing timesheets. Does not recording time by the executives potentially harm our indirect rates come audit time?

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H2H,

Can you expand on some of the risks aside from having our procedures found to be inadequate? What is the fuller scope of the potential pitfalls?

Sure. If you have a DoD or DOE contract, and you are other than a small business (as you stated you were), then any cost reimbursement contract of sufficient size will likely contain the contract clause 252.242.7006. That clause establishes 18 criteria that define an "adequate" accounting system. Criteria Nos. 9 and 10 require:

(9) A timekeeping system that identifies employees’ labor by intermediate or final cost objectives;

(10) A labor distribution system that charges direct and indirect labor to the appropriate cost objectives;

DCAA's audit opinion as to whether a contractor complies with any (or all) of the 18 criteria is highly subjective and may often turn on the judgment of the individual auditor who is looking at your policies, procedures and practices. In my experience, certain auditors may assert that a failure to complete timesheets daily (or at all) is a noncompliance with one or both of the criteria listed above. On the other hand, your company may get a pass. You cannot predict what the auditor(s) will say.

If DCAA asserts you have policies, procedures or practices that are noncompliant with any of the 18 criteria, then they will tell your ACO that you have a "significant deficiency" in your accounting system. If the ACO agrees with DCAA (and in my experience that's the most likely course of action) then you have an inadequate accounting system and the customer may impose payment witholds up to 5% on any of your CAS-covered contracts.

More importantly, it's going to be tough for you to win any future cost-reimbursement work without an adequate accounting system.

Hope this helps.

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To add to H2H's comments, the elements he quoted from the DFARS clause are also elements that are considered in a pre-award survey of the contractors accounting system when the SF-1408 is used. Thus, they can be considered in regard to any contract, not just those subject to the DFARS.

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