How to Prepare for a DCAA Floor-Check: A Self-Audit Checklist

What a DCAA Floor Check Actually Evaluates

A floor check is considered an audit. However, unlike a comprehensive audit (which performs deep financial reviews), a floor check is a targeted, unannounced site visit.

That means it focuses solely on:

• Timekeeping procedures
• Labor cost distribution
• Whether or not the employees exist

This narrow scope forms part of the Mandatory Annual Audit Requirements (MAAR 6) and aims to validate your compliance in the above areas.

What does that mean in practice?

Most floor checks involve observing and verifying the following:

1. That employees charged to the contract actually exist and are performing the required duties.
2. That employees know what their daily time entry requirements are and how to record time properly.
3. A comparison of work performed against the charged labor category. Auditors evaluate whether employees are performing duties consistent with the labor category, contractual requirements, and hours billed.
4. That timekeeping procedures are in compliance with the contract and DCAA rules.
5. That labor activity can be reconciled with timecards, payroll, and accounting records.
6. That the recorded labor costs can be traced back to the underlying contract effort to confirm they are allowable and allocable.

The Floor-Check Readiness Self-Audit Checklist

Performing a self-audit is a great strategy because it helps you spot any gaps in DCAA compliance requirements before auditors pick up on them.

So, go through this checklist, and if anything is missing, make sure you plug the gap.

Written policies and procedures

Confirm that:

• A formal timekeeping policy exists and is approved by management
• The policy mandates daily time entry by employees
• Project and task codes exist and are documented
• Rules for correcting timesheets are clearly defined
• Supervisor responsibilities and workflows for review and approval are documented
• The policy prohibits supervisors or admins from entering time on behalf of employees (except under controlled and documented circumstances)
• Employees know where to access the current policy
• The policy has been reviewed and updated within the past 12 months

Employee verification

Auditors physically observe work areas to confirm employee presence. If they show up for a site tour, you must have the following in place:

• An up-to-date and readily available employee roster by:
  
  • Site
  • Labor category
  • Contract mix
• Work areas organized to show clear contract separation

Internal controls and risk management documentation

The following controls and risk management procedures must be implemented and documented, including:

• Segregation of time entry, approvals, and payroll duties is enforced and documented
• Overtime policies are compliant with FAR requirements
• Access controls and role-based user permissions are enforced for data access and editing
• Work authorization docs (e.g., task assignments) align with charged labor
• Regular analysis of high-risk areas, like contract overruns or unusual direct/indirect ratios, is performed

Employee training and awareness

Since DCAA floor checks involve employee interviews, it’s imperative that they fully know and understand what is expected of them.

Verify that:

• Formal training is embedded in the new hire onboarding process
• Timekeeping training covers:
  
  • When and how time must be entered
  • How to apply the correct codes
  • How to correct mistakes
  • Why accuracy matters for government cost charging
• Managers receive regular training on timesheet validation and error correction
• Employees receive mock interview training that covers:
  
  • A test of knowledge around timekeeping, schedules, and work authorizations
  • Interview scripts that cover common audit questions
• Annual refresher training is carried out in all areas and documented
• Signed acknowledgments of training are retained
• Training is reviewed and refreshed regularly

Time entry controls

Next up is the actual inputting of time. We recommend using time tracking software. Not just because the DCAA prefers it, but because it creates more defensible and accurate records, plus it’s easy for workers to use (and get right).

Confirm that:

• Employees log their time daily, not after the fact
• That timecards are not pre-filled with scheduled or default hours
• Time entries are mapped to the correct clients, projects, and tasks
• Internal cost codes, job codes, and other identifiers are valid, correct, and can be applied consistently
• Direct and indirect labor are clearly separated
• Overtime hours and costs are tracked and documented
• All types of leave (vacation, sick, PTO, etc.), plus idle time are tracked and documented
• Timesheet data is locked after submission and manager approval
• System reminders or controls are in place to encourage daily timesheet completion

Supervisor review and approval

Approval is not a formality; it’s a mandated requirement. Therefore, supervisors are expected to perform a thorough review of all time data before it is submitted to payroll.

Ensure that:

• A robust approval workflow is in place
• Supervisors verify correct labor costs and reasonableness of hours worked
• Any discrepancies are given to the employee to correct, along with a documented reason as to why
• Any late approvals are visible and explainable
• Approval timestamps exist
• Delegation of approval authority is documented and controlled

Edit and correction controls

Retroactive edits without transparency are a red flag in the DCAA’s eyes. Documented audit trails must show what changed, when, and why, including who gave it the go-ahead.

Check that:

• All time entry edits are automatically logged
• Original entries are preserved in the audit log
• There is a documented reason for all edits
• Supervisors review and approve changes
• Late edits are flagged for additional checks

Record retention and audit support

Lastly, keep all documentation safe yet accessible and stored in a logical format. This way, if the DCAA knocks, you’ll be able to produce it quickly.

Make sure that:

• Timesheets are retained according to FAR and contract requirements
• Supporting project documentation aligns with the charged labor
• Records of your own internal floor checks or supervisory observations are documented and retained
• Reports are exportable in an audit-friendly format
• Access to records is controlled
• Historical approval and edit data are retrievable 
• Training records are retained

How to Close the Gaps Before You Get Surprised

The above checklist serves as a great guide for what to implement. However, you also have to make sure everything works as intended.

What we mean is that on paper, it may not look like there are gaps. Yet, when you apply it to daily work life, cracks begin to emerge.

To reduce the risk of surprise findings, remediation should also focus on operational proof, not just documentation or procedural updates.

Here are five practical actions to apply:

1. Conduct an internal mock floor check: Observe employees at work, interview them about timekeeping practices, and reconcile their charged labor to timecards and payroll. Try to mirror the MAAR 6 procedures as closely as possible to see if anything is missing.
2. Validate that daily behavior matches written policy: Confirm employees truly follow the timekeeping rules by pulling a handful of timesheets for review.
3. Reinforce employee and supervisor accountability: Provide targeted refresher training and ensure supervisors perform meaningful reviews rather than routine approvals.
4. Test reconciliation from floor to financial records: Trace a sample employee’s observed work from the timesheet to payroll, accounting records, and ultimately to the contract being billed.
5. Organize audit evidence for rapid retrieval: Training logs, approvals, time histories, and payroll support should be accessible immediately if auditors request proof during a visit. Test out your retrieval process to ensure everything is accessible and up-to-date.

Common Failure Points to Avoid

No matter the industry or contract type, there are recurring weak spots that auditors frequently pick up on. Don’t fall victim to the following issues:

• Employees reconstructing time at the end of the week: Make sure daily timesheet completion is enforced.
• Prefilled timesheets: The DCAA expects contemporaneous recordkeeping.
• Modifying time entries without justification: You have to give a good, documented reason for all edits and adjustments.
• Insufficient employee training: Workers must be able to explain their charging processes during interviews.
• Poor labor distribution: Costs have to be correctly assigned to the right contracts, projects, and tasks to create a defensible trail.
• Inconsistent separation of direct and indirect labor: Set these up within your time tracking system so they don’t get confused. Use tags to enforce the distinction on time entries.

Final Thoughts

Floor checks are not designed to trap compliant organizations. They exist to ensure that every taxpayer dollar is accounted for and used appropriately.

If you have a defensible time tracking procedure in place, you’re already halfway there. The rest comes down to robust internal controls and solid employee training.