2011 National Extension and Research Administrative Officers’ Conference

Session #18, May 24, 2011 8:30 p.m. – 9:45 a.m.Anchorage, Alaska

Time & Effort PuzzleEdward Nwaba, CPA

Branch Chief, Policy and Oversight DivisionOffice of Grants and Financial Management, NIFA-USDA

Definitions • Effort

– Amount of time spent on a particular activity– Time spent working on a sponsored project in which

salary is directly charged or contributed (cost-shared effort)

– Percentage of the total amount of time spent on work related activities – instruction, research, administration etc – for which the university compensates an individual

Definitions Contd.:• Effort Reporting (system)

– The mandated method of certifying to the granting agencies that the effort charged or cost shared to each award has actually been completed

– Listing of actual costs expended on sponsored awards– Documents employee’s work time and allocation to funding

sources– The basis for billing funding sources for personnel costs– Implemented using employee time sheets and supplementary

records– Must be documented in the university’s policies and procedures.

Definitions Contd.:• Contributed or Cost-shared effort:

– That portion of the total project costs not paid by the sponsor (s) of the project

– Portion of project costs paid by the university or other non-federal third parties rather than the sponsor

– Financial support contributed by universities to sponsored programs – universities sometimes consider cost shared effort as a redirection of departmental resources from teaching or other departmental activities to support sponsored agreements

– Salaries that are above grantor imposed “salary cap”– Cost sharing can be required by the sponsor or volunteered by a PI– Regardless of volunteered or mandated, all cost share per the award

document or proposal must be reported, and captured in an effort reporting system 

Two Types of Effort

• Mandatory committed effort– Required by the program as a condition of the award and– Is included in the written program announcement

• Voluntary committed effort– Offered by the recipient, but not required by the sponsor

Two types:• Voluntary committed effort• Voluntary uncommitted effort

Mandatory Committed Effort:• Must be

– Reported – required by sponsor as condition of award– quantified and included in the proposed budget– Documented in the financial system and auditable

• Delineated in a written announcement, guidance or policy statement

• Must be reported. • Not required by the sponsor, but is offered by the university• Once committed in the proposal it must be treated in the same manner as

mandatory effort i.e.,– must be documented in the financial system and auditable– Must be quantified and included in the proposed budget– Must be documented in the university’s financial system

• In practice - generally discouraged by institutional policy, but may be justified in certain situations:– Sponsor may “strongly encourage” institutional support / partnership– PIs perceived Increased prospect for an acceptable proposal– Joint mission between institution and sponsor (AES and commodity groups)

Voluntary Committed Effort:

• Effort above and beyond that which is committed and budgeted for, in the award documents (donated effort)

• Treated differently from committed effort:– Does not need to be documented, tracked or certified– Should not be included in the organized research base– Excluded from effort reporting requirements in OMB A-21 section J.8

NOTE: The total number of effort reported must alwaysequal 100% - regardless of the time assigned to the

appointment.

Voluntary Uncommitted Effort:

• Must be certified within 30 days of being issued• Important that effort be certified for two reasons:

– University external auditors review effort reports for compliance with effort reporting requirements

– Sponsoring agencies – fed. and state may perform audits at any time to determine whether the effort reports are:• Timely• Accurate• Complete

Effort Reports – Certification:

• key employees paid from federal funds are required to certify their own effort• The certifier must have first-hand knowledge of the work performed• The certifier must have the ability to estimate the effort expended on each sponsored

project• Effort report for other employees must be certified by a responsible official or PI• PI should NOT certify the effort report of other faculty members, even if the faculty

member worked on one or more of the PI’s projects – must be certified by a person with first-hand knowledge of all the activities of the person for whom certification is made

Supervisory signatures are required when:

- Employee assigned to work in a lab in which multiple projects are conducted- Employee assigned to multiple labs that conduct multiple projects

• Employee with split appointment in two or more units – the responsible official or PI for each unit should certify the effort for their project

Responsibility - Who can certify effort reports?

Sanctions for Improper Effort Reporting• Violation of award terms and conditions – sponsor can take one or

more enforcement actions -• Place special conditions on awards• Preclude grantee from obtaining future awards for a specified period• Take actions designed to prevent future noncompliance – closer

monitoring• Share sanctions info with other awarding agencies – includes

debarment• University’s reputation may suffer, resulting in loss of confidence to

handle federal funds – public info

Legal Implications of Erroneous/ Fraudulent Reporting:

• Violation of federal False Claims Act (31 U.S.C. sec 3729 et seq.)• Inaccurate or fraudulent reports may give rise to –

– False Claims Act Lawsuit– Subject to civil penalties of not less than $5,000 nor more than $10,000

for each violation– Criminal sanctions if willful violations

• Imprisonment up to 5 years and fines of up to $25,000• Restitution up to three times the damages sustained to the federal

government • Individual PIs and the university are liable when involved in improper effort

reports– Institutional and individual sanctions may include –

• Payment of costly settlements• Debarment from participating in federally funded research

Recent Cases of Audit Disallowances:• Johns Hopkins University paid $2.6 million – settle a

number of overbilling issues on research grants:– Faculty effort overstated on NIH grants– Fringe benefits overstated; cost share requirements not met

• Harvard – Beth Israel paid $2.4 million – Govt. billed for salaries and exp, unrelated to federal grants– Paid PI’s/scientists who did not meet citizenship requirements– Misused federal research and training grants

• University of Minnesota paid $32 million – settle charges– for inflated billings; charges on federal grants– salaries and supplies that did not cover research projects

Recent Cases of Audit Disallowances Contd.:

• Florida Int’l University paid $27 million – settle a number of overbilling issues and violations resulting from:– Improper billing for scientists’ time, travel admin exp. From

1993-2003 • University of Connecticut paid $2.5 million –

– Settle whistleblower false claims issues – Overstated expenses on grants / salary cap issues– Payments for items not covered on federal grants– Cost share issues

• Cornell (Weill Medical College) paid $4.4 million – settle – Charges for inflated billings on NIH grants– Salaries for employees not associated with grant research

Audit Red Flags:• Late, unsigned or missing effort reports • Effort reports that appear to have been signed in batches• Retroactive adjustments or retroactive cost transfers

– Not supported by letter of justification– Not made in a timely manner – more than 90 days after the fact

• “Corrected” effort reports and unusually large number of payroll cost transfers

• “Corrected” effort reports near the end of a contract to capture unused funds

• Very small effort percentages on many grants• Research effort certifications that appear not to include accounting

for actual administrative and/or teaching effort as part of total effort

Regulatory Requirements:2 CFR Part 220 (OMB Circular A-21) – Cost Principles for Colleges, Univ. and Institutions of

Higher Education:Components of effort reporting system:Effort reporting must be incorporated into the official records of the university• Timesheets – must document time worked and the distribution of activities to funding sources• The effort reporting system should address the following:

– Description of timesheet or personnel activity report and how to complete it– Policy for vacation, sick, and leave time accruals– Policy for salary increases and bonuses (if applicable)– Process for approval of timesheets– How time and effort reporting system validates payroll– How changes in time allocation are managed and communicated to employees and

documented at the university– Retention of records – depending on funding

• Must produce equitable distribution of charges for all employee activities – payroll distribution system

Criteria for Reporting Effort – Payroll Distribution:• Must be incorporated into the official records of the university• Reasonably reflect the activity for which the employee is compensated by the university• Encompass both sponsored and all other activities on an integral basis - BUT may include

the use of subsidiary records• Total effort for all projects must equal 100% during the period per individual researcher

– Numerator is the researcher’s time/effort on the project– Denominator is both sponsored and all other activities. i.e., must include

• Research• Teaching• Administration, etc

• Must recognize the principle of after-the-fact confirmation or determination:– Ensure costs distributed represent actual costs – Estimates can be used initially – significant changes must be later identified, adjusted

and entered into the system– Must provide for independent internal evaluations – to comply with above standards

Acceptable Methods of Payroll Distribution / Effort Reporting: Two types

• Plan confirmation – under this method:– Distribution of salaries and wages based upon budgeted percentages– Estimates are later updated to reflect significant changes in work distribution– At least ANNUALLY a statement will be signed by the employee or responsible official

stating:• That the work was performed and• Charges are reasonable in relation to work performed

• After-the-fact Activity Reports – under this method:– Reports must reflect after-the-fact payroll distribution activity of employees.– For professorial and professional staff - report prepared each academic term, but no

less frequently than six months– For other employees - prepared no less frequently than monthly and will coincide with

one or more pay periods– Must be signed by employee and/or responsible official

Acceptable Methods of Payroll Distribution / Effort Reporting: Two types Contd.

General Note:• Special Exception: Federal Regulations allow a special exception of the

effort reporting requirements in special circumstance and on grant specific basis:

• Smith Lever 3(b) and (c) Extension programs– Single funded employees (if 100% extension) – effort reporting not

required. – if single funded and one activity /project ONLY– In practice recommended to follow one of the two acceptable methods

• Plan confirmation OR• After-the-fact activity report

– Consistency desired for grant funded employees - since system is incorporated into the official record of the university -(See sample time sheet)

Sample Time Sheet

Acceptable Methods of Payroll Distribution /Effort Reporting: 2 CFR Part 230 (OMB A-122) – Non-Profits

• Salaries and wages must be supported by timesheets or payroll activity reports• Timesheets must be maintained for all employees charged in whole or in part

to awards• The timesheet must meet the following standards:

– Must use after-the-fact determination for all employees – budget estimates not allowable

– Account for total activity for each employee– Signed by the employee Or supervisory official having first-hand knowledge of

all activity of the employee– Prepared at least monthly and must coincide with one or more pay periods

Acceptable methods; 2 CFR Part 225 (OMB A-87) - States, Local Governments, Indian Tribal Governments)

• Single funded employees must be supported by periodic certifications – – Certification should be prepared at least semi-annually – must be signed by individual employee Or responsible supervisory official

• Split funded employees - must be supported by personnel activity reports that meet the following standards:– Reflect an after-the-fact determination of actual activity for each employee– Account for total activity of the employee– Prepared at least monthly and must coincide with one or more pay periods– Signed by the employee– Budget estimates are not allowable but may be used for interim accounting

purposes, provided that:• They produce a reasonable approximation of actual activity• They are revised at least quarterly if necessary to reflect actual 

Acceptable Methods: (OMB A-110) – General Administrative Requirements, Hospitals

• Non-professional staff must use:– After-the-fact determination - charges for salaries and wages must

be supported by daily time and attendance AND payroll distribution records

• Professional staff may complete:– At least monthly estimates of payroll distribution in the absence of

actual time records– Estimates must be prepared by individual employee Or

responsible individual having first-hand knowledge of the services performed

– Budget estimates – must later be revised to reflect actual

Thank you

Effort Reporting

Current and Pending SupportBy

Duane Alphs

Purpose of Current & Pending Support Statement

NIFA Awardees are required to submit a listing of their current and pending support

This listing captures the effort of the key personnel on the project

This effort should correspond to what is or will be in your institutional records

Purpose of Current & Pending Support Statement

(continued)• USDA requires that all key personnel

submit a listing of their current and pending projects

• The sum of all projects listed should not exceed 100%

Purpose of Current & Pending Support Statement

(continued)• Effort can be listed as a percentage or

person months• The amount of effort listed on the

budget can be greater than what is listed on the C&P, but not visa versa

Common Mistakes

• The PD or Co-PD is not clearly identified on the form

• The total effort listed on the form exceeds 100%

• The project being funded on new awards must be listed under pending

Common Mistakes(continued)

• The title of the project listed on the C&P should be the same as what is listed on the Proposal Cover Page

Common Mistakes(continued)

• The amount of funded effort on the budget cannot be greater than the amount of effort listed on the C&P form

• However, the amount of funded effort on the budget can be less than the amount of effort listed on the C&P form

The End