Published 2026 | TIKC NewsWire
In government contracting, a timecard is not an administrative chore. It is a legal record that supports the money you bill the government, and misusing it is one of the most aggressively prosecuted forms of contract fraud. Labor mischarging means charging labor hours to the wrong place, and it has ended companies and put people in prison. If you bill labor to the government, this is the risk to take seriously.
What labor mischarging looks like
Mischarging is not always someone stealing. Often it starts as a shortcut or a favor that becomes a habit. Common patterns include:
- Charging the wrong contract. Booking hours to a funded contract when the work was actually done on a different, over-budget, or unfunded project.
- Charging hours not worked. Recording time that was not actually spent, or padding hours to hit a number.
- Shifting labor to hide overruns. Moving costs off a contract that is running over so it looks on budget.
- Miscategorizing labor. Billing a junior employee’s time at a senior labor category rate on a time-and-materials contract.
- Directing employees to mischarge. A supervisor telling staff which contract to charge regardless of where they actually worked. This is the version that draws criminal charges.
Why it is prosecuted so hard
Labor is the largest cost on most services contracts, so mischarging goes straight to the heart of what the government paid for. Because every mischarged hour flows into an invoice, it maps cleanly onto the False Claims Act (civil treble damages and penalties) and, where intent is clear, criminal fraud. Auditors and investigators know the patterns, they interview employees, and they compare charged hours against badge records, project activity, and emails. A single directive to charge the wrong contract, captured in a message, can unravel everything.
The rules that govern timekeeping
Sound timekeeping is a core part of an adequate accounting system. The expectations are practical: employees record their own time, they record it daily and contemporaneously, changes are documented with a reason and an audit trail, and time is charged to the actual work performed. Total time accounting, recording all hours worked including uncompensated overtime, matters too, because it affects how labor costs are distributed across contracts.
What to do now
- Train everyone who charges time. Make clear that charging follows the work, never the budget, and never a manager’s instruction that conflicts with reality.
- Record time daily. Contemporaneous entries are far more defensible than end-of-period reconstructions.
- Control corrections. Any timecard change needs a documented reason and an audit trail, never a quiet overwrite.
- Give people a way to report pressure. If a supervisor tells someone to mischarge, they need a safe channel to raise it, and protection when they do.
- Reconcile and spot-check. Compare charged labor to actual project activity so anomalies surface early.
Clean timekeeping is not bureaucracy. It is the difference between a routine audit and a fraud investigation. Treat every timecard like the legal document it is. Brick by brick.
FAQ
Is labor mischarging a crime?
It can be. Civil False Claims Act liability applies to false billings generally, and where there is intent, such as directing employees to charge the wrong contract, it can be prosecuted as criminal fraud.
What if it was an honest mistake?
Genuine errors happen and are corrected through a documented process. The danger is knowing or reckless mischarging, and a pattern of uncorrected errors can start to look like more than a mistake.
Can I move hours to keep a contract on budget?
No. Shifting labor to hide an overrun is a classic mischarging scheme. Charge the work where it was performed and manage the overrun openly.
What makes timekeeping defensible?
Employees recording their own time daily, charging to the actual work, and any change documented with a reason and an audit trail.
Sources
Defense Contract Audit Agency. (2026). Guidance on timekeeping and labor charging practices.
U.S. Department of Justice. (2026). False Claims Act enforcement in government contracting.
This article is general information, not legal advice.
About the Author
Melanie Patterson
Founder and CEO of Team Integrity Knowledge Center and creator of GovCon iSource. Former nurse turned entrepreneur with over 10 years guiding small, women-owned, and minority-owned businesses to over $10 million in government awards. Build, grow, scale, brick by brick. Contact
