In government contracting, the smallest fractions often create the biggest risks. That was the central point in the second half of a conversation between Hope Skibitsky, CEO and former Chief People Empowerment Officer, and Monica Reed, Portfolio Executive for Finance & Compliance.

In Part 1, they set the stage by explaining what a full-time equivalent (FTE) is, how partial roles are calculated, and why consistency across contracts matters. In Part 2, the conversation shifts to the harder reality: the systems and controls that determine whether partial FTEs can survive an audit.

Here are the five essentials they laid out.

1. Accurate Timekeeping Systems Are Non-Negotiable

Monica is direct about the limits of payroll software. “Some systems just don’t get as granular as GovCon requires,” she notes. That gap is why integrated accounting systems are critical.

The rules back her up. DFARS 252.242-7006 requires contractors to maintain an accounting system that tracks labor costs to specific cost objectives, while DCAA CAM 5-909 stresses daily entries, supervisory approvals, and an audit trail. Without this, dividing one employee’s hours across multiple contracts becomes guesswork, and guesswork will not pass a floor check.

2. Uncompensated Overtime Must Be Captured

Hope points to unpaid overtime as one of the biggest risks. When exempt staff put in 50 hours but are paid for 40, those 50 must still be recorded. “Unpaid overtime is real, but it lives in your G&A,” she reminds, meaning it has to flow into the fully burdened rate.

FAR 52.237-10 requires contractors to disclose how they handle uncompensated overtime and apply that method consistently. DCAA CAM 6-410 explains that failing to capture those hours distorts both direct rates and indirect pools. As Hope and Monica stress, if it is not recorded, it cannot be allocated properly.

3. Overtime Requires Prior Approval

Employees cannot decide on their own to work late and bill extra hours. Hope underlines the control point:

“Overtime has to be approved in advance, and in many cases, the customer has to sign off too.”

The principle is rooted in FAR 31.201-4, which requires costs to be charged in proportion to the benefit received. Unauthorized overtime severs that link, making costs unallowable. Monica reinforces the operational consequence: surprise overtime almost always leads to raised eyebrows and difficult conversations when the invoice arrives.

4. Accounting Systems Must Reconcile Cleanly

Monica describes the “behind the scenes” work as more than data entry. Many companies avoid partial FTEs entirely because their systems cannot support the reconciliations auditors expect.

The DCAA Incurred Cost Submission Adequacy Checklist requires contractors to reconcile labor from timesheets to payroll to the general ledger to the project ledger. Partial FTEs are often targeted because they cross multiple contracts, multiplying the risk of inconsistency. The fix is simple but demanding: integrated systems that tie labor directly to Contract Line Item Numbers (CLINs) or Work Breakdown Structures (WBS).

5. Be Ready for Floor Checks

Hope issues a reminder most teams prefer to ignore. “There is no audit window,” she says. “The government can look in whenever they want.”

That is exactly how DCAA CAM describes floor checks: unannounced visits where auditors ask employees to explain their work and verify time charges on the spot. Monica calls this one of the main reasons companies hesitate to use partial FTEs. Without the right systems and policies, even a well-intentioned employee can give the wrong answer.

The Stakes

Managing partial FTEs is not just a staffing decision. It is a compliance test. Companies with strong systems and controls can use them to bring in specialists, scale costs, and keep projects flexible. Companies without those systems often avoid them altogether.

Hope and Monica’s discussion highlights why. Part 1 explained the math behind partial FTEs. Part 2 exposes the compliance infrastructure that makes them work. For contracting teams, the message is clear: the fractions only add up if time, labor, and cost align with the rules.

• DFARS 252.242-7006 defines what an adequate system must do.

• FAR 52.237-10 requires transparency in handling uncompensated overtime.

• FAR 31.201-4 sets the standard for allocability.

• DCAA CAM 5-909 and 6-410 explain the audit tests contractors should expect.

The details may look small, but in GovCon, small details are where compliance lives or dies.

Missed Part 1?

In the first half of this series, Hope and Monica break down the foundations of FTE math — what a full-time equivalent really is, why 2,080 hours matters, and how partial FTEs shape staffing and pricing from the start. Read Part 1 here to get the full picture before diving deeper into compliance.