Key Details: Navigating the compliance maze in the government contracting industry can be a daunting task. Understanding the fundamental compliance requirements is essential for any government contractor looking to succeed in this highly regulated industry.
In this 6-part series, we break down some of the most critical compliance areas that every government contractor should be aware of. This article series covers the following topics:
- General compliance considerations
- Accounting system compliance
- DCAA and SF 1408 compliance
- Payroll and timekeeping compliance
- Labor law compliance
- Other compliance considerations
Every government contractor’s compliance requirement may vary significantly depending on their company size, the nature of contracts, and the specific government agencies they work with. As such, it is critical to consult with a trusted advisor to understand the requirements specific to your company. Note that the items included in this article are not wholly exhaustive but are intended to be used as a guide as you build your compliance program.
At Ryan & Wetmore, we work closely with contractors to ensure they meet relevant requirements and avoid potential pitfalls. To assist in this process, we offer a detailed compliance questionnaire designed to help you assess your unique compliance needs. Speak with a Ryan & Wetmore advisor today to learn more.
Payroll and Timekeeping Compliance
Ryan & Wetmore’s payroll and timekeeping section of the compliance questionnaire encompasses a wide range of responsibilities and requirements that contractors must manage to ensure they meet federal regulations and contractual obligations. The following list is not exhaustive; contact Ryan & Wetmore for a more exhaustive list.
- Ensure your timekeeping policies and procedures are up to date and provide regular employee training on best practices.
- Employees must be notified of any changes to policies.
- Employees are required to record time daily and ensure accurate coding of time to projects or indirect accounts.
- Employees must record their time daily and ensure that it is accurately coded to the appropriate project or indirect account. This includes all time worked, such as regular hours, overtime, vacation, sick leave, and holidays.
- Regularly review the project codes available to employees. The finance, accounting, or system administrator teams should restrict access to certain project codes, ensuring only authorized employees can code time to specific projects.
- Time entry corrections are appropriately approved and documented.
- Review your timekeeping system and check that it adheres to Standard Form (SF) 1408 standards. This includes the following:
- Identification of employee labor by intermediate or final cost objectives. The system must properly allocate labor to projects both directly and indirectly. As such, total employee labor hours and dollars must be tracked by job and account.
- The accounting system must also provide for a labor distribution system that charges direct and indirect labor to the appropriate cost objectives.
- Ensure your timekeeping system can maintain an audit trail for handling any time entry corrections that were made.
- Periodically monitor your timekeeping system and perform reconciliations of records to ensure accuracy.
- Conduct regular internal payroll audits to review employee data, hours worked, withholdings, and reconciliations. Maintain detailed records in a secure location.
- Implement password protection requirements in your system.
- Review payroll related expenses and ensure they are accurately recorded to correct accounts in the accounting system.
- Ensure compliance with state-specific payroll regulations, including minimum wage laws and state-specific insurance requirements.
- Accurately calculate state apportionment and other tax-related considerations, especially if employees work in multiple states.
- Ensure I-9 compliance for all employees and keep accurate records for foreign employees with appropriate work permits or visas.
- Verify that all employee data is correct, including tax forms (W-4) and classification of independent contractors and employees.
Conclusion and Action Plan
Navigating the complexities of government contracting requires a rigorous and proactive approach. From adhering to FAR requirements and ensuring proper accounting practices to maintaining ethical standards and labor law compliance, government contractors must remain vigilant in meeting all federal requirements.
To learn more about your compliance requirements or to discuss our compliance questionnaire, contact Ryan & Wetmore today.
To learn more about your compliance requirements or to discuss our compliance questionnaire, contact Ryan & Wetmore today.
Today’s Thought Leaders
About Peter Ryan
Partner, Co-founder, & CPA
Peter T. Ryan co-founded Ryan & Wetmore in 1988 with business partner Michael J. Wetmore. Peter provides clients with the best strategies for success. His expertise extends across various industries. Peter obtained a Master of Business Administration in Finance from the University of Baltimore and a Bachelor of Arts in Accounting from the Catholic University of America.
About Rosie Cheng
Finance Consultant
Rosie Cheng is a Finance Consultant at Ryan & Wetmore. She focuses on government contracting services and produces many of the firm’s government contracting newsletters. Rosie graduated from Georgetown University with a Master of Science in Management and from William and Mary with a Bachelor of Business Administration.
