Without a total time accounting policy, a Federal contractor leaves the door wide open for the possibility of DCAA disallowing labor costs, in addition to distorting the base for proper direct and indirect cost allocations.
The term “Uncompensated Overtime” refers to hours more than the standard 40-hour week worked by employees who are exempt from the Fair Labor Standards Act (FLSA). The method used to record and bill for the excess hours and their associated cost is often termed “accounting for uncompensated overtime” or “total time accounting.”
The DCAA audit manual (Chapter 6-410.3), cites that “if it is determined that Government contracts are being materially over-charged due to an inequitable allocation of labor costs because the contractor does not record all time worked, the contractor should be cited as being in noncompliance with FAR 31.201-4 and if applicable, CAS 418.”
What can a Federal Contractor do?
- Establish a consistent practice for accounting for all hours worked by salaried employees that exceed 40 hours a week.
- Ensure that estimating and billing practices are consistent.
- Record and bill all qualifying hours worked for competitively awarded T&M contracts, unless prohibited by specific contract terms.
- Use a standard billing rate to bill the Government
- Establish a written Time keeping policy and procedure
For a more detailed explanation of this topic, download the “Total Time Accounting and Uncompensated Overtime” white paper.