Effort Reporting and Institutional Base Salary

1. Effort Reporting and Institutional Base Salary Business and Fiscal Officers Meeting – 9/21/10 Presented by: Glen Jones, Director Post-Award Research and Sponsored Programs

2. Background on Effort Reporting • Effort Reporting is a complex regulatory requirement, and is routinely a focus area for sponsor audits. The following slides will help to understand: • What is Effort Reporting? • Why is Effort Reporting Necessary? • What Guidelines Govern Effort Reporting? • Why is Effort Reporting a Hot Topic?

3. Background on Effort Reporting • What is Effort Reporting? • Effort Reporting is a method by which an institution attests to the federal government that salaries charged to sponsored agreements or cost share activities represent a reasonable reflection of effort devoted to those activities.

4. Background on Effort Reporting • Why is Effort Reporting Necessary? • Effort Reporting provides assurance to the federal government that federal monies are being spent as intended with respect to payroll related costs.

5. Background on Effort Reporting • What Guidelines Govern Effort Reporting? • Colleges and Universities: Office of Management and Budget (OMB) Circular A-21 –Cost Principles for Educational Institutions

6. Background on Effort Reporting • Why is Effort Reporting a Hot Topic? • There is no precise way to measure time spent on each individual activity that comprises a faculty member’s salary • Increased emphasis on federal audits in this area by NSF and the National Institutes of Health (NIH) • Recent large settlements at prominent institutions “…It is recognized that, in an academic setting, teaching, research, service, and administration are often inextricably intermingled. A precise assessment of factors that contribute to costs is not always feasible, nor is it expected. Reliance, therefore, is placed on estimates in which a degree of tolerance is appropriate.” – OMB Circular A-21

7. Effort Reporting Requirements • What are the Requirements of Effort Reporting? • Employees’ salary or wages must be accounted for using a method that will capture all activities during the period • Direct activities must be distinguished from other, indirect or non-sponsored, activities • Direct and other activities must be confirmed with an individual with first-hand knowledge or a “suitable means of verification” that the work was performed • Significant changes in direct and other work activities must be identified and entered into the payroll distribution system • The system will provide for independent evaluations to ensure effectiveness and compliance with the standards

8. Effort Reporting Requirements • What are the Requirements of Effort Reporting? • Charges for work on sponsored agreements are to be based on the faculty member’s regular compensation that constitutes the Institutional Base Salary (IBS) • Charges to sponsored agreements may not exceed the proportionate share of the base salary for that period, based on the level of effort allocated • Proposal costs are to be treated as F&A costs

9. Definition-Institutional Base Salary (IBS) • The annual compensation paid by an organization for an employee’s appointment, whether that individual’s time is spent on research, teaching, administrative, or other activities.

10. Institutional Base Salary Includes • Full workload/IBS includes: • Instruction • Research • Administration, including appointments as dean, chair, and/or center director

11. Challenges with IBS and Effort • Base salary and commitment/effort calculation in proposal • Base salary rate should be consistent between proposal and effort certification • Estimating base salary for multiple appointments with different contract periods? • Example: 9-month faculty appointment + 12-month chair appointment

12. Challenges with IBS and Effort • Salary paid 9 over 12 months • 9-month appointment but salary is paid over 12 months • Charges to non-sponsored accounts on a 9 over 12 basis? • Charges to sponsored accounts at the “earned” rate (9 over 9)? • Salary should be restated to the 9-month appointment basis for effort reporting • Summer salary rate should be based on the restated 9-over-9 academic salary rate

13. IBS Examples • Fiscal Faculty – FY10 • 12/12 Faculty Appointment - $90K • 12/12 Stipend for being Director of a Center - $10K • Overload for teaching - $5K (Excluded from IBS) • 25% Effort on a grant • Institutional Base Salary - $100K • Spring Effort Report • Instruction $16,250 or 65% • Administration 2,500 or 10% • Research (Grant) 6,250 or 25% • Total $25,000 or 100%

14. IBS Examples • Academic Faculty – FY10 • 9/12 Faculty Appointment - $90K • 12/12 Stipend for being Director of a Center - $10K • Overload for teaching - $5K (Excluded from IBS) • 25% Effort on a grant • Institutional Base Salary - $100K • Spring Effort Report • Instruction $21,875 or 67.3% • Administration 2,500 or 7.7% • Research (Grant) 8,125 or 25% • Total $32,500 or 100%