Effort ReportingEffort Reporting

Understanding the Effort Understanding the Effort Certification ProcessCertification Process

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Why Do We Have to DoWhy Do We Have to Do Effort Certifications? Effort Certifications?

• OMB Circular A-21OMB Circular A-21• State of Arkansas Series 22 reportState of Arkansas Series 22 report• DHHS Indirect Cost ProposalDHHS Indirect Cost Proposal• Other Federal, State, and Other Federal, State, and

Accreditation reportsAccreditation reports

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OMB Circular A-21OMB Circular A-21

• Section J. General provisions for Section J. General provisions for selected items of costselected items of cost

• Item #10Item #10

Compensation for personal servicesCompensation for personal services

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OMB A-21 Section J.10 OMB A-21 Section J.10 General RuleGeneral Rule

• Compensation for personal services Compensation for personal services (salaries, wages, and fringe benefits) paid (salaries, wages, and fringe benefits) paid for services of employees rendered during for services of employees rendered during the period of performance under sponsored the period of performance under sponsored agreements… are agreements… are allowable allowable to the extent to the extent that the total compensation conforms to that the total compensation conforms to established policies of the institution, established policies of the institution, consistently applied, and provided that the consistently applied, and provided that the charges for work performed directly on the charges for work performed directly on the sponsored agreements are determined… sponsored agreements are determined… and are supported by an acceptable method and are supported by an acceptable method of payroll distribution.of payroll distribution.

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What?What?

• Salaries, wages, and fringe benefits Salaries, wages, and fringe benefits are allowable expenses on a grant, are allowable expenses on a grant, only if you have a system in place only if you have a system in place that supports an acceptable method that supports an acceptable method of distributing payroll expenses to a of distributing payroll expenses to a grant. grant.

• The government recognizes 3 The government recognizes 3 acceptable methods of payroll acceptable methods of payroll distribution.distribution.

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3 Methods of Payroll 3 Methods of Payroll DistributionDistribution

• Plan-ConfirmationPlan-Confirmation• After-the-Fact Activity RecordsAfter-the-Fact Activity Records• Multiple Confirmation RecordsMultiple Confirmation Records

• The effort reporting system at UAMS The effort reporting system at UAMS meets the requirements of the Plan-meets the requirements of the Plan-Confirmation method.Confirmation method.

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What is Plan-ConfirmationWhat is Plan-Confirmation

• The plan-confirmation method of The plan-confirmation method of payroll distribution mandates that a payroll distribution mandates that a grant is charged personnel costs for grant is charged personnel costs for an individual, based on a plan, and an individual, based on a plan, and then the individual certifies then the individual certifies (confirms) that the amount charged (confirms) that the amount charged is correct.is correct.

• This is what our payroll and effort This is what our payroll and effort certification systems do.certification systems do.

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UAMS Effort DefinitionsUAMS Effort Definitions

• 100% Effort100% Effort – Total University-compensated – Total University-compensated effort. Includes teaching, research, public effort. Includes teaching, research, public service, administrative, and other University-service, administrative, and other University-related activities. related activities. 100% effort does not 100% effort does not equate to any set number of hours.equate to any set number of hours. Expense Expense associated with effort is based on institutional associated with effort is based on institutional base salary.base salary.

• Institutional Base SalaryInstitutional Base Salary – The guaranteed – The guaranteed salary paid to the employee in 1/12salary paid to the employee in 1/12thth increments for the 12 months of the fiscal increments for the 12 months of the fiscal year.year.

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How does the effort system How does the effort system support the expenses on the support the expenses on the

grant?grant?• Every employee has an institutional Every employee has an institutional

base salary that supports 100% of base salary that supports 100% of their University compensated time.their University compensated time.

• The effort reporting system The effort reporting system identifies the portion of that 100% identifies the portion of that 100% that was contributed to a grant.that was contributed to a grant.

• That portion of time, multiplied by That portion of time, multiplied by the institutional base salary, the institutional base salary, determines the allowable charge to determines the allowable charge to the grant.the grant.

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How does that work?How does that work?

• Employee John Smith has an annual Employee John Smith has an annual salary of $100,000. His salary salary of $100,000. His salary distribution shows that 25% of his distribution shows that 25% of his time should be assigned to grant G1-time should be assigned to grant G1-10001-01. 10001-01.

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Allowable Cost ExampleAllowable Cost Example

• Therefore, the payroll system will Therefore, the payroll system will have charged $12,500 to the grant have charged $12,500 to the grant for the six month period.for the six month period.

Inst. Base Salary (6 mos)Inst. Base Salary (6 mos) $50,000 $50,000

% effort % effort .25 .25 Amount to charge grant Amount to charge grant $12,500$12,500

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Allowable Cost Example Allowable Cost Example (cont.)(cont.)

• However, if John Smith certifies on However, if John Smith certifies on his effort reporting form that he only his effort reporting form that he only worked 15% on the grant, then the worked 15% on the grant, then the payroll charges to the grant cannot payroll charges to the grant cannot be supported.be supported.

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Allowable Cost Example Allowable Cost Example (cont.)(cont.)

• Amount charged to grant - $12,500Amount charged to grant - $12,500• Effort contributed by John Smith:Effort contributed by John Smith:

Institutional Base SalaryInstitutional Base Salary $50,000$50,000

% effort spent on grant% effort spent on grant .15 .15

Allowable charges to grantAllowable charges to grant $ 7,500 $ 7,500

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Allowable Cost Example Allowable Cost Example (cont.)(cont.)

• The grant was charged $12,500 for The grant was charged $12,500 for the six month period, however, there the six month period, however, there is only supporting documentation for is only supporting documentation for $7,500.$7,500.

• The institution will have to make The institution will have to make payroll corrections to reduce the payroll corrections to reduce the charges on the grant.charges on the grant.

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What if the effort changes What if the effort changes during the six month period?during the six month period?

• Our effort certification forms are Our effort certification forms are based on a six month reporting based on a six month reporting period. If the percentage of effort period. If the percentage of effort changes during the six months, the changes during the six months, the effort certification form will show an effort certification form will show an average percentage for the six average percentage for the six month period.month period.

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Change in % exampleChange in % example

• Investigator A works on a project at Investigator A works on a project at 20% for January and February. On 20% for January and February. On March 1, he changes his effort to 50%. March 1, he changes his effort to 50%. For the six month reporting period For the six month reporting period ending in June, his effort to certify will ending in June, his effort to certify will be 40%.be 40%.

(Jan+Feb+Mar+Apr+May+Jun)(Jan+Feb+Mar+Apr+May+Jun)(.20+.20+.50+.50+.50+.50)/6 months(.20+.20+.50+.50+.50+.50)/6 months 2.40/6 = .402.40/6 = .40

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Change in % example Change in % example (cont.)(cont.)

• To show how this works with the To show how this works with the allowability of the expense, let’s allowability of the expense, let’s assume Investigator A’s annual salary assume Investigator A’s annual salary is $120,000.is $120,000.

• For January & February the grant was For January & February the grant was charged $2,000 each month. charged $2,000 each month. ($120,000/12)*.20 ($120,000/12)*.20

• For March-June the grant was charged For March-June the grant was charged $5,000 each month. ($120,000/12)*.50 $5,000 each month. ($120,000/12)*.50

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Change in % example Change in % example (cont.)(cont.)

• The total expenses charged to the The total expenses charged to the project for the six month period were project for the six month period were $24,000.$24,000.

• The certification period is for six The certification period is for six months, (1/2 of a year) so the six months, (1/2 of a year) so the six month institutional base salary month institutional base salary calculation is $120,000*1/2 = calculation is $120,000*1/2 = $60,000.$60,000.

• $24,000 / $60,000 = .40.$24,000 / $60,000 = .40.