Mistake #9: Timekeeping and uncompensated overtime issues
When you receive a Phase II SBIR, STTR, RO1, APRA-E, BARDA or BAA grant or contract, you need to comply with the Federal Acquisition Regulation (FAR) Part 31, and specifically FAR 52.216-7. Of course, there are pitfalls along the way. Improper timekeeping and uncompensated overtime issues are two examples.
With more than 30 years of government contract and grant accounting experience, we know the common mistakes government awardees make, and how to prevent them. Our “Top 10 Mistakes Government Awardees Make” blog series is designed to help you avoid trouble and protect your business.
It may be hard for a Ph.D. to stomach, but yes, you need to fill out a timesheet. In fact, it’s pivotal that you and everyone involved with your government-funded project(s) fills out timesheets correctly and accurately.
Here’s why: the timesheet is an accounting mechanism used to allocate the cost of your salary to the various billable and unbillable tasks that you perform. To be FAR compliant, you must fill out a timesheet on a daily basis (percentages are not allowed) and must record all hours worked, whether it’s on paper or electronically.
When you are audited, your timesheets and time reporting policies and procedures will be checked.
Additionally, you must have basic written procedures that state that:
- Timesheets are filled out daily in ink
- All employees who charge their time directly or indirectly to the government award will record all their time.
- Timesheets are signed by the employee and their supervisor
- There is no erasing. All changes must be crossed out and initialed.
Improper Treatment of Uncompensated Overtime.
This leads to one of the most common problems we see – lack of an uncompensated overtime policy and/or improper accounting for time. The FAR defines uncompensated overtime as “hours worked without additional compensation in excess of 40 hours per week by direct charge employees who are exempt from the Fair Labor Standards Act. (i.e. salaried employees)
An example of uncompensated overtime
Joan makes $85,000 per year and for accounting (estimating) purposes there are 2,080 hours in a year. On an hourly basis, her “cost” is $40.86/hour, which is allocated to the various projects and indirect tasks that she works on every week, and you bill the government for her time.
Now suppose at the end of the year, she works a total of 2,400 hours – which makes her actual “cost” rate $35.42/hour. How do you account for the fact that you already billed $40.86/hour?
It must be in your written accounting policies and procedures.
Know this: Simple timecard problems tend to be dealt with by a slap on the wrist. Improper accounting for uncompensated overtime usually costs in the tens of thousands of dollars.
We’re here to help.
To learn more about timesheets or to read our uncompensated overtime blog series, visit our Learning Center.
Top 10 Mistakes Government Awardees Make:
- Mistake #1: Taking The NIH Safe Rate
- Mistake #2: Not Having a Far Part 31 Compliant Accounting System
- Mistake #3: Overspending on Direct Costs
- Mistake #4: Overspending on Indirect Cost Rates
- Mistake #5: Audit Findings
- Mistake #6: Spending Too Much on Accounting Staff
- Mistake #7: Improper Allocation of Costs
- Mistake #8: Not Paying Attention To Agency-Specific Rules
- Mistake #9: Timekeeping and Uncompensated Overtime Issues
- Mistake #10: Spending Too Much on Accounting When You’re Not a CPA
Ed Jameson, CPA, Managing Member
I’ve been in practice for over 40 years helping our small business clients procure, manage, and survive audits on more than $6 billion in federal government contract and grant funding. We’ve been featured presenters and panel moderators at Tech Connect’s National SBIR/STTR conferences since 2011, and I’ve presented at the DOD’s Mentor Protégé Summit and present regularly for several state and local organizations.