Direct Charges and Effort Reporting For Federally Sponsored Projects

1. presented by Steve Todd, Associate Director James Mizell, Accounting Manager Department of Finance Academic and Research Enterprise CRC Direct Charges and Effort ReportingFor Federally Sponsored Projects

2. Government Shows Growing Concern over Effort Reporting Errors and inaccuracies in effort reporting are costly and can put our research programs, as well as those of the entire institution, in jeopardy. Recent settlements between medical institutions and the US Department of Justice over alleged misuse of federal grant money:

3. Direct Charge Understanding Direct Charges Guidelines

4. Regulatory Guidelines for Direct Charges to Federally Sponsored Projects • Sections C, D and J of OMB Circular A-21 deal with direct costs, allowability, and unallowable costs. • Cost Accounting Standards (CAS) regulate consistency in reporting costs, allocating costs incurred for the same purpose in like circumstances, and accounting for unallowable costs. • In accepting a federally-sponsored grant or contract, Vanderbilt agrees to abide by certain federal rules and regulations regarding the use of the funds.

5. Direct Costs Defined • Costs that can be identified specifically with a particular sponsored project, or • That can be directly assigned to such activity relatively easily with a high degree of accuracy

6. Is the cost…

7. Reasonable “A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the amount involved therefore, reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made.” (OMB Circular A-21, Section C.3)

8. Allocable Costs incurred for the benefit of only one project or costs that can easily be assigned to multiple projects which benefit. A cost is considered allocable if the goods or services involved are assignable to the sponsored project in accordance with the relative benefits received by the project.

9. Consistent A cost charged to a federally-sponsored project should be given treatment consistent with the treatment such a charge would receive if it was charged to a non-federal funded project. It does not matter what it is, what matters is how it is used.

10. Allowable A cost is considered allowable if the cost meets the three tests – reasonable, allocable, and consistent - and is considered allowable according to the award agreement, Generally Accepted Accounting Principles (GAAP) and other applicable regulations. (See pages 12-14 of VU Guidelines for Budgeting and Charging Direct Costs for additional information.)

11. Effort Reporting

12. OMB Circular A-21“Cost Principles for Educational Institutions” The principles that govern how colleges and universities must document time and effort on federal grants and contracts appear primarily in OMB Circular A-21. Section J.10.b(2) of Circular A-21 (revised 5/10/04) sets forth six standards for payroll distribution that provide a reasonably clear outline of a compliant time and effort reporting system. Key points are: • The system of allocation of salaries based on effort must be “incorporated into the official records of the institution.” • The system must “reasonably reflect the activity for which the employee is compensated by the institution.” • The system must provide some form of “after-the-fact confirmation or determination” of the reasonableness of the salary allocations to federal grants. • Employee salary allocations must be confirmed by the employees themselves or by “responsible persons with suitable means of verification that the work was performed.” • The payroll distribution system “may reflect categories of activities expressed as a percentage distribution of total activities.” • “Significant changes in the corresponding work activity must be identified and entered into the payroll distribution system.”

13. Why This Is Important To You In accepting a federally-sponsored grant or contract, Vanderbilt agrees to abide by certain federal rules and regulations regarding the use of the funds. OMB Circular A-21 deals with direct costs, allowability, and unallowable costs and requires that charges to federal grants and contracts be: • Reasonable • Allocable • Consistent • Allowable Reference Vanderbilt University’s Allowable Cost Guidelines for more information.

14. Why This Is Important To You Through the federal mandate for effort reporting systems, institutions must obtain certifications from all individuals working on a federally sponsored project. Accurate time and Vanderbilt professional effort reporting is a federal and institutional requirement. These records are subject to audit by our: • Internal auditors, • External auditors, and/or • Federal sponsors.

15. What Goes Into VU Professional Effort • Effort percentages must be based on average of the actual amount of time spent on your VU professional work. • The number of hours each week may substantially exceed 40 hours. • VU professional time, includes, but is not limited to research, clinical, teaching, and administrative activities. It may include time spent at other locations or from home (e.g. reading journals relevant to research being performed).

16. Exclusions from Effort Reporting • Any outside activity for which compensation is paid (or would ordinarily be expected to be paid) directly to you as an individual from sources outside the University (e.g. consulting, NIH, VA, or volunteer work, such as President of AHA). • For activities deemed excluded from your VU effort, it is critical the Vanderbilt-funded staff (including administrative staff) not perform duties related to the work.

17. What You Must Know • If you are charged to federally sponsored projects, you must certify your effort each time your federal sources of salary change or if no changes, you must certify at least yearly. • Vanderbilt requires the Effort Report to be certified by the individual performing the work (rare exceptions). • The system used at Vanderbilt for salaried employees to certify effort is ePAC–electronic Personnel Action Change. • Hourly employees certify every two weeks when signing their timesheets. • You are responsible for the accuracy of your effort report and should be comfortable with explaining it to an auditor.

18. Common Effort Reporting Compliance Problems • Failure to include all institutional effort in the effort percentage calculation (teaching, administrative, clinical, grant writing) • Inaccurate statements of effort on federal projects • Faculty charged 100% to sponsored research • Failure to account for unfunded effort • Failure to adjust for significant changes in effort levels between effort reports • Use of a “normal” 40-hour work week as the basis for the effort percentage calculation

19. Example Assume that Dr. Jones works an average of 50 hours each week performing the following activities: • 20 hours federal research (including evenings and weekends) • 10 hours seeing patients (including evenings and weekends) • 10 hours teaching medical students • 5 hours attending departmental, institutional, committee and other general meetings. • 5 hours teaching fellows new laboratory techniques on T-32 grant

20. Assume that Dr. Jones works an average of 50 hours each week performing the following activities: • 20 hours federal research (including evenings and weekends) • 10 hours seeing patients (including evenings and weekends) • 10 hours teaching medical students • 5 hours attending departmental, institutional, committee, other general meetings. • 5 hours teaching fellows new laboratory techniques on T-32 grant Example Based on above, what is the allocation of effort? • Dr. Jones’ Vanderbilt denominator is ? hours 50 hours = 100%

21. Assume that Dr. Jones works an average of 50 hours each week performing the following activities: • 20 hours federal research (including evenings and weekends) • 10 hours seeing patients (including evenings and weekends) • 10 hours teaching medical students • 5 hours attending departmental, institutional, committee, other general meetings. • 5 hours teaching fellows new laboratory techniques on T-32 grant Example Based on above, what is the allocation of effort? • Dr. Jones’ Vanderbilt denominator is 50 hours • Research: 20 hours = • Patient care: 10 hours = • Instruction (non-grant related): 10 hours = • Administrative (non-grant related): 5 hours = • Sponsored research training: 5 hours = 10% 10% 40% 20% 20%

22. Assume that Dr. Jones works an average of 50 hours each week performing the following activities: • 20 hours federal research (including evenings and weekends) • 10 hours seeing patients (including evenings and weekends) • 10 hours teaching medical students • 5 hours attending departmental, institutional, committee, other general meetings. • 5 hours teaching fellows new laboratory techniques on T-32 grant Example Based on above, what is the allocation of effort? • Dr. Jones’ Vanderbilt denominator is 50 hours • Research: 20 hours = 40% • Patient care: 10 hours = 20% • Instruction (non-grant related): 10 hours = 20% • Administrative (non-grant related): 5 hours = 10% • Sponsored research training: 5 hours = 10% 10% 10% 40% 20% 20%

23. Example for Discussion Assume that Dr. Jones works an average of 55 hours each week performing the following activities: • 45 hours federal research (3 ROIs) • 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) • The remainder on teaching and administrative activities for Vanderbilt

24. Assume that Dr. Jones works an average of 55 hours each week performing the following activities: • 45 hours federal research (3 ROIs) • 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) • The remainder on teaching and administrative activities for Vanderbilt Example Based on above, what is the allocation of effort? • Excluded Time is ? Hours

25. Assume that Dr. Jones works an average of 55 hours each week performing the following activities: • 45 hours federal research (3 ROIs) • 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) • The remainder on teaching and administrative activities for Vanderbilt Example Based on above, what is the allocation of effort? • Excluded Time is Hours • Dr. Jones’ Vanderbilt denominator is ? Hours 5 50 hours = 100%

26. Assume that Dr. Jones works an average of 55 hours each week performing the following activities: • 45 hours federal research (3 ROIs) • 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) • The remainder on teaching and administrative activities for Vanderbilt Example Based on above, what is the allocation of effort? • Excluded Time is Hours • Dr. Jones’ Vanderbilt denominator is Hours 5 50 50 hours = 100%

27. Assume that Dr. Jones works an average of 55 hours each week performing the following activities: • 45 hours federal research (3 ROIs) • 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) • The remainder on teaching and administrative activities for Vanderbilt Example Based on above, what is the allocation of effort? • Excluded Time is Hours • Dr. Jones’ Vanderbilt denominator is Hours • Research: 45 hours = • Teaching/Administrative: 5 hours = 5 50 10% 90%

28. Assume that Dr. Jones works an average of 55 hours each week performing the following activities: • 45 hours federal research (3 ROIs) • 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) • The remainder on teaching and administrative activities for Vanderbilt Example Based on above, what is the allocation of effort? • Excluded Time is Hours • Dr. Jones’ Vanderbilt denominator is Hours • Research: 45 hours = 90% • Teaching/Administrative: 5 hours = 10% 5 50 10% 90%

29. Effort Certification – Non-exempt • Non-exempt staff must certify their effort on each timesheet for which time is spent working on a federally sponsored project. The effort certification statement is included immediately above the employee’s signature on the timesheet. • The effort certification statement reads as follows: “I certify that I have first hand knowledge of (or have used suitable means of verifying) work performed by this individual and that the salary distribution for the period covered is reasonable in relation to the work performed.”

30. The time allocation should reflect an accurate representation of the time and effort for the period indicated. • Properly fill in the Time In Time out section of each timesheet. • If you take vacation, sick, and/or personal time, you must write in your allocation according to your current distribution. • Please ask your administrator if you have any questions.

31. Effort Certification - Exempt • For exempt employees, certifications are made using ePAC (the electronic Personnel Action Change application). Simply click the appropriate button to approve the certification. • The effort certification statement reads as follows: “I certify that I have first hand knowledge of (or have used suitable means of verifying) work performed by this individual and that the salary distribution for the period covered is reasonable in relation to the work performed.”

32. Research Compliance Experts (RCEs)Clinical Departments As of November 2011 Anesthesiology – Stephen Bruehl Emergency Medicine – Alan Storrow Hearing and Speech – Wesley Grantham Medicine – Blackwell, Su, Biaggioni, Andl, May, Shrubsole, Wilson, George, Brandt, Hulgan, Elasy, Pozzi, Aune Neurology – Subramaniam Sriram Ob-Gyn – Kaylon Bruner Tran Ophthalmology – John Kuchtey Ortho – Ginger Holt Otolaryngology – David Zealear Pathology – Larry Swift Psychiatry – Ron Cowan Pediatrics – Miki Aschner, John Phillips, Lawrence Prince, Lynn Walker, Louis Muglia Radiology – Bruce Damon Radiation Oncology – Michael Freeman Section of Surgical Sciences – James Goldenring

33. Research Compliance Experts (RCEs)Basic Departments As of November 2011 Biochemistry – Michael Waterman Biostatistics – Chun Li Cell Biology – Steve Hann Cancer Biology – Fiona Yull Informatics – Paul Harris Microbiology – Chris Aiken Molecular Physiology – David Piston Pharmacology – Brian Wadzinski

34. Useful Links OMB Circular A-21 http://www.whitehouse.gov/omb/circulars/a021/a21_2004.html OMB Circular A-110 http://www.whitehouse.gov/omb/circulars/a110/a110.html OMB Circular A-133 http://www.whitehouse.gov/omb/circulars/a133/a133.html Administrator’s Resource (Online Reference Guide) https://medschool.mc.vanderbilt.edu/dept_managers/ VU Policies for Post-Award Management & Compliance http://finweb.mc.vanderbilt.edu/AcadRes/GiftsGrantsCont/Policy.asp VU Faculty Research Effort Reporting and Certification Online Training https://medschool.vanderbilt.edu/foto/ VU Staff Effort Reporting and Certification Online Training http://vanderbilt.mzinga.com/app/servlet/goTo?Page=CourseInfo&DirectLinkID=223619 Medical Center Compliance Office http://www.mc.vanderbilt.edu/compliance NIH Grants Policy Statement http://grants.nih.gov/grants/policy/nihgps_2010/index.htm • Includes “Who to Contact” section for • Finance: Academic & Research Enterprise

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