Time & Effort Puzzle Edward Nwaba, CPA Branch Chief, Policy and Oversight Division

1. 2011 National Extension and Research Administrative Officers’ ConferenceSession #18, May 24, 2011 8:30 p.m. – 9:45 a.m.Anchorage, Alaska Time & Effort Puzzle Edward Nwaba, CPA Branch Chief, Policy and Oversight Division Office of Grants and Financial Management, NIFA-USDA

2. 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

3. 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.

4. 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 

5. 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

6. 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

7. Voluntary Committed Effort: • 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)

8. Voluntary Uncommitted 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 always equal 100% - regardless of the time assigned to the appointment.

9. Effort Reports – Certification: • 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

10. Responsibility - Who can certify effort reports? • 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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)

20. Sample Time Sheet

21. 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

22. 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 

23. 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

24. Thank you

25. Effort Reporting Current and Pending Support By Duane Alphs

26. 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

27. 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%

28. 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

29. 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

30. 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

31. 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

32. The End